Cost and Schedule Risk Analysis

& Contingency Estimating

10 percent of large projects overrun their budget by >70%; research has shown that traditional risk quantification methods are not working. This toolset includes two integrated cost and schedule risk analysis and contingency estimating Excel-based tools. One tool is a tailored parametric model designed to address systemic cost and schedule risks such as the level of scope definition, process technology, complexity, and so on. The parametric tool is designed for early estimates and schedules (AACE Class 5 and 4). The project-specific risk tool uses risk-register supported expected value methods in a Monte-Carlo simulation model (typically using Palisade @Risk) and is designed for more definitive estimates (AACE Class 3). The tools integrate cost and schedule based on specific consideration of assumed risk responses. The hybrid method results in single distributions for cost and schedule outcomes from which management can select contingency based on their risk appetite. The tools also feed information to the escalation toolset to produce the industry's first "universal" cost risk analysis outcome. Validation Estimating customizes the tools to align with your company's processes; when complete, it is your tool! Example implementation for an EPC firm. Ref AACE RPs: 42R-08, 44R-08 & 65R-08 Ref Papers: see Library

Escalation Estimating &

Exchange Rate Analysis

Price and exchange rate volatility has increased project cost uncertainty enormously (up and down!). Plus, published price indices do not address costs in your EPC markets. VE has developed a unique integrated suite of Excel-based tools for escalation estimating, incurred escalation, cost normalization, and exchange rate impact analysis. The tools use a database of historical and forecast price and FX indices obtained from IHS Global Insight (not affiliated with VE). The tools use an empirically tested method to adjust the economist’s indices for EPC capital demand in your markets and region. Further, the escalation tool generates account cash flows for you. Finally, it uses Monte-Carlo simulation to generate probabilistic outputs, including outputs from the allied contingency toolset (i.e., it produces the industry's first "universal" capital cost risk output; escalation being highly sensitive to schedule risk). Validation Estimating customizes the tools to align with your company's project types, locations, and cost coding. When complete, it is your tool! Example implementation for an owner firm (see pgs 31-35) Ref AACE RPs: 58R-10 & 68R-11 Ref Papers: see Library IHS Global Insight Cost Indices (test basis)

products

Validation Estimating LLC does not sell products; however, it has developed state-of-the-art, probabilistic integrated methods for risk analysis, cost and schedule contingency estimating, escalation estimating, and currency exchange analysis for capital projects. These are all covered in his new book Project Risk Quantification ”. The escalation method is designed to work with price, capex and currency indices from IHS Global Insight (not affiliated with VE). All these methods are consistent with AACE International Recommended Practices (some authored by the consultant). VE’s implements the methodologies in an Excel-based application customized to the client’s needs (see the “ Services ” page for consulting services).
© Validation Estimating LLC
© Validation Estimating LLC

Cost and Schedule Risk Analysis

& Contingency Estimating

10 percent of large projects overrun their budget by >70%; research has shown that traditional risk quantification methods are not working. This toolset includes two integrated cost and schedule risk analysis and contingency estimating Excel-based tools. One tool is a tailored parametric model designed to address systemic cost and schedule risks such as the level of scope definition, process technology, complexity, and so on. The parametric tool is designed for early estimates and schedules (AACE Class 5 and 4). The project-specific risk tool uses risk-register supported expected value methods in a Monte-Carlo simulation model (typically using Palisade @Risk) and is designed for more definitive estimates (AACE Class 3). The tools integrate cost and schedule based on specific consideration of assumed risk responses. The hybrid method results in single distributions for cost and schedule outcomes from which management can select contingency based on their risk appetite. The tools also feed information to the escalation toolset to produce the industry's first "universal" cost risk analysis outcome. Validation Estimating customizes the tools to align with your company's processes; when complete, it is your tool! Example implementation for an EPC firm. Ref AACE RPs: 42R-08, 44R-08 & 65R-08 Ref Papers: see Library

Escalation Estimating &

Exchange Rate Analysis

Price and exchange rate volatility has increased project cost uncertainty enormously (up and down!). Plus, published price indices do not address costs in your EPC markets. VE has developed a unique integrated suite of Excel-based tools for escalation estimating, incurred escalation, cost normalization, and exchange rate impact analysis. The tools use a database of historical and forecast price and FX indices obtained from IHS Global Insight (not affiliated with VE). The tools use an empirically tested method to adjust the economist’s indices for EPC capital demand in your markets and region. Further, the escalation tool generates account cash flows for you. Finally, it uses Monte-Carlo simulation to generate probabilistic outputs, including outputs from the allied contingency toolset (i.e., it produces the industry's first "universal" capital cost risk output; escalation being highly sensitive to schedule risk). Validation Estimating customizes the tools to align with your company's project types, locations, and cost coding. When complete, it is your tool! Example implementation for an owner firm (see pgs 31-35) Ref AACE RPs: 58R-10 & 68R-11 Ref Papers: see Library IHS Global Insight Cost Indices (test basis)

products

Validation Estimating LLC does not sell products; however, it has developed state-of-the-art, probabilistic integrated methods for risk analysis, cost and schedule contingency estimating, escalation estimating, and currency exchange analysis for capital projects. These are all covered in his new book Project Risk Quantification ”. The escalation method is designed to work with price, capex and currency indices from IHS Global Insight (not affiliated with VE). All these methods are consistent with AACE International Recommended Practices (some authored by the consultant). VE’s implements the methodologies in an Excel-based application customized to the client’s needs (see the Services page for consulting services).