Live Chat ×
Skip to main content

(RISK-2511) Role of Project Novelty, Execution and Bias in Risk Quantification

Level: Intermediate
Author(s): Dr. Yuri Raydugin, P.Eng.
Venue: 2017 AACE International Annual Meeting, Orlando, FL

Abstract: The selection of the most accurate and efficient cost and schedule risk quantification and contingency estimating methodology is undertaken. It is based on the review of existing methodologies against their capability to adequately handle fundamental project uncertainties, project novelty, features of execution strategy, and various realizations of psychological and organizational bias. A notion of ‘methodology’s distance to project reality’ is introduced to facilitate a selection process.

It is highlighted that risk quantification is one of several important project risk management process steps that provide the required inputs to quantification.

The fundamental mission of contingency estimating is redefined from ‘prognostication’ to development of achievable stretched targets.

Primary accuracy ranges of base estimates are introduced; their relations with AACE® International classes are established. The introduction of primary accuracy ranges points to a shift from parametric and other deterministic methodologies to probabilistic ones that are coming of age.

Specification of a most accurate and efficient hybrid risk quantification methodology is proposed. A practical example illustrates this methodology’s application.

Possible unification of risk quantification methodologies under the auspices of AACE® International is pointed to.