Spotlight on Recommended Practice 123R-22: Integrated Cost and Schedule Risk Analysis and Contingency Determination Using Estimate Ranging and Expected Value with Monte Carlo Simulation

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Description

About Recommended Practice 123R-22:
This recommended practice defines general practices and considerations for integrated cost and schedule risk analysis and estimating contingency using a combination or hybrid of estimate ranging and integrated cost and schedule expected value analysis with Monte Carlo simulation methods. R+EV is used as a shorthand designation for this quantitative risk analysis (QRA) combination.

The R+EV method is a fit-for-use, practical, risk-driven method intended to support management’s need for integrated distributions of bottom-line project cost and schedule outcomes. It is intended to support investment or tender decision making for well-defined, relatively simple, low-technology projects at the sanction or tender phase (i.e., Class 3 or better-defined estimates).

This method is not recommended for projects with significant systemic risks including projects at early scope definition phases (Class 10, 5 or 4) or with significant complexity, and/or with significant levels of technology. While this method can provide limited insight of risks to some activities or milestones, this method is not recommended for projects needing to understand schedule risk at a detailed level such as the impact of risk on specific schedule activities or on intermediate milestones. This exclusion from usage results from expected value method limitations regarding schedule. The method also excludes quantification of escalation risks.

About AACE Recommended Practices:
The AACE International Recommended Practices (RPs) are a series of documents that contain valuable reference information that has been subject to a rigorous review process and recommended for use by the Technical Board. RPs are intended to be the main technical foundation of AACE educational, and certification products and services. All RPs are available to AACE members free of charge.

NOTE: The webinar is free, but registration is required. CEUs will be available for both members and nonmembers. You will need to create an AACE International account prior to registering if you do not already have one. Click here to create an AACE account.