Level:
Advanced
TCM Section(s):
3.3. Investment Decision Making
7.6. Risk Management
Venue: 2022 AACE International Conference & Expo
Abstract: This technical paper will examine, assess, and validate an essential key deliverable that has a significant importance to project control practitioners, such as project budget cost baseline. Thus, a baseline has to be realistic, accurate, and able to reflect correctly future monthly expenditures in which cost performance measures are evaluated against it, and changes can be tracked [1, p15]. The development of such critical outcome can be achieved in two steps: Traditional approach which can be categorized as a qualitative analysis, where expert judgment’s inputs play crucial role in defining high-level baseline based on historical project’s data availability, and any relevant information that may exist at the initial project planning stage. The second step is the subject of the underlying technical paper, which is simply a quantitative analysis approach.
Given the monthly planned cost as described in step one, may not be the perfect cost distribution for project control practitioners to rely-on. Thus, this technical paper, proposes an advance methodology, using mathematical modeling, and exhibit a new way on how to substantiate a cost distribution baseline based on, two main cornerstones theory:
TCM Section(s):
3.3. Investment Decision Making
7.6. Risk Management
Venue: 2022 AACE International Conference & Expo
Abstract: This technical paper will examine, assess, and validate an essential key deliverable that has a significant importance to project control practitioners, such as project budget cost baseline. Thus, a baseline has to be realistic, accurate, and able to reflect correctly future monthly expenditures in which cost performance measures are evaluated against it, and changes can be tracked [1, p15]. The development of such critical outcome can be achieved in two steps: Traditional approach which can be categorized as a qualitative analysis, where expert judgment’s inputs play crucial role in defining high-level baseline based on historical project’s data availability, and any relevant information that may exist at the initial project planning stage. The second step is the subject of the underlying technical paper, which is simply a quantitative analysis approach.
Given the monthly planned cost as described in step one, may not be the perfect cost distribution for project control practitioners to rely-on. Thus, this technical paper, proposes an advance methodology, using mathematical modeling, and exhibit a new way on how to substantiate a cost distribution baseline based on, two main cornerstones theory:
- Decision-making under uncertainty, using Von Neumann-Morgenstern (VNM)’s expected utility function concept, which has its origin back in 1700 during Nicolas Bernoulli’s era.
- Portfolio optimization, using Harry Markowitz, mean-variance portfolio analysis.