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(EST-3391) Risk Analysis Approach to Contingency From the Perspective of an Owner Estimator

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Level: Advanced
TCM Section(s):
7.6. Risk Management
7.3. Cost Estimating and Budgeting
Venue: 2020 AACE International Conference & Expo

Abstract: When investing capital in projects, every plant owner has the right to know what they are buying, how much they are paying for what they are buying, is that a reasonable cost, and what are the risks. The optimal chance of success is for the project development team to “think like an owner”.

A simplified approach, process, and tool are identified in this paper for owners and their internal and/or external resources to use during the early stages of industrial plant project development to answer these questions.
This process supports a high-level snapshot confirmation of the owner and project team understanding, application, and resolution of the issues, risks, and opportunities necessary to accommodate today’s changing and aggressive business climate.

This approach:
  • identifies and communicates owner expectations in the early stages of project development
  • helps to confirm the owner and project team understanding of the risks the owner will or will not accept,[1]
  • entices the project team to identify the level of potential for change in five major areas of project development during FEL
  • captures and communicates the best professional judgement of the project team leaders at a single point in time occurring immediately prior to requesting full funding decisions,
  • facilitates identification of previously unspoken, unresolved, or forgotten significant issues and opportunities,
  • minimally confirms the level of completeness of the capital funding request,
  • supports final contingency recommendation,
  • is performed using a sustainable globally available tool, and
  • identifies how owners define and use contingency verses the range of accuracy in project funding decisions