BUFFALO DISTRICT

BACKGROUND

Accurately estimating the cost and schedule for projects is complicated by the significant uncertainties inherent to known and unknown risks when planning a project from design through completion of construction.  Attempting to address these uncertainties by applying a pre-determined contingency percentage can either underestimate project specific risks or inflate project estimates to a point where defensibility is compromised. The Cost and Schedule Risk Analysis (CSRA) process allows the U.S. Army Corps of Engineers (USACE), Buffalo District to identify, analyze, and account for project specific risks in project cost and schedule estimates.

CSRA PROCESS

The CSRA process assesses the likelihood and impact of a wide range of potential project risks and uses statistical analysis to model and apply risk-based contingencies to project cost and schedule estimates.  The result is a range of project costs representing different confidence levels.  When considerable uncertainties are identified, cost risk analysis can establish the areas of high cost uncertainty and the probability that the estimated project cost will or will not be exceeded. This gives the management team an effective additional tool to assist in the decision making process associated with project planning and design.

Inputs: A baseline estimate of cost and duration is prepared by the USACE project team, using the most current site specific information. The multidisciplinary project team then develops the project risk register, identifying known and suspected risks across several risk categories.  The team completes the risk register by qualitatively evaluating the likelihood and impact of each of each risk on cost and schedule.

Statistical Model: The baseline cost and schedule estimates, along with the risk register, are used as inputs to the statistical model.  The risk analyst uses these inputs and a statistical software package, Crystal Ball®, to quantify the potential project impacts of each of the identified risks. The output from the CSRA is a range of estimated project costs and durations, each corresponding to a percent confidence level.  The CSRA also identifies the project risks that contribute the most to the overall project contingency, allowing for proactive risk management.

Annual Updates: To fully realize its benefits, the CSRA should be considered an ongoing process conducted concurrent to, and iteratively with, other important project processes. The CSRA should be updated as the project progresses to account for changes in project conditions over time. The baseline cost estimate, schedule, and risk register are revised with the most current information, and the CSRA is repeated with these revised inputs.  As site knowledge increases and project risks are managed, the range of cost and schedule uncertainty progressively decreases. 

BENEFITS OF CSRA

For the USACE, Buffalo District, the CSRA has proven a valuable tool in estimating cost and schedule for projects.  It has been adopted as a primary tool to support planning and budgeting for Programs within the USACE Great Lakes and Ohio River Division. By quantifying the potential impacts from project risks, the CSRA provides a defensible process to inform development of cost and schedule contingency. Proactive use of the CSRA process allows project and program leadership to identify and effectively manage those risks with the greatest potential to impact project cost and schedule. 

Risk Matrix  

After categorizing project risks in regard to likelihood of occurrence and impact, a risk matrix was used to prioritize individual risks for inclusion in quantitative analysis.   This analysis feeds into the CSRA process providing the defensibility to develop contingencies in project cost and schedule. 

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