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(RISK-1522) Construction Risk Estimating and Management

Primary Author: Mr. Daniel Holzman CCP

Audience Focus: Advanced
Application Type: Application
Venue: 2014 AACE International Annual Meeting, New Orleans, LA, USA

Abstract: Construction risk estimation and management should be a critical part of every project, integral to project controls. The author’s experience in government and private practice indicates that comprehensive risk analysis and management is unfortunately rarely undertaken. Risk is often ignored, or handled on an ad hoc basis, because of the perceived difficulty in estimating risk, and widespread confusion about how to understand and utilize the results of risk analysis.

This paper presents a graded series of approaches to estimating project risk, ranging from a simple method appropriate for small projects, to a complex probabilistic method appropriate for the largest projects. The methods are illustrated on a general example derived from the author’s experience on projects for the Department of Energy, Duke Energy, and the Army Corps of Engineers. Benefits and limitations of each risk approach are presented, and a framework for understanding and applying the results of the risk analysis to cost estimating and risk mitigation is presented.