Risk analysis of a construction cost estimate

Abstract

A risk analysis of a construction cost estimate for a large hydroelectric project is discussed. The purpose of the study was to provide an independent check on the reliability of the estimate and the adequacy of the contingency allowance. The paper describes the basecost estimate, the risk analysis approach, the sources of risk considered, the details of the risk analysis method and the implementation of the risk analysis. The relationship between this form of risk analysis and the cost estimating process is discussed in some detail. It is concluded that a combined approach may be possible and that the benefits could be substantial. © 1985.