Risk management, risk analysis, and uncertainty analysis are still-growing trends in cost and schedule estimating. Engineers and managers alike have been lead to believe that correct application of best practices will ensure that operations achieve their objectives on time and within budget.
Unfortunately, a number of misapplications, misunderstandings, and mistakes have threatened to endanger the continued useful growth of this trend. Insufficient tools and / or incorrect use of the available tools have allowed creation of a false sense of security which is shattered by loss of objectives and time / cost overruns. It is very important that the industry understands and chooses the correct applications, and has realistic expectations.
This paper will present best practices for applying risk management, risk analysis and uncertainty analysis to capital expenditure cost and schedule estimates. In addition to outlining our recommended process, we will highlight current misapplications that, in our opinion, are potential barriers to the continued growth of this valuable management tool.