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Estimating
Training Seminars
Estimating A-to-Z for the
Process Industries
Total Cost Management
(TCM)
Capital Project Cost Control
Using Total Cost Management
Project Decision Analysis and
Risk Management
Project Cost Uncertainty:
Contingency, Reserves, and Escalation
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Project
Cost Uncertainty: Contingency, Escalation, and Reserves
Overview
At the time of project authorization
decisions, cost uncertainty is generally expressed in funds allocated as
contingency, escalation, and reserves. This 2-day course will clearly
contrast these three types of cost allocations for uncertainty, and
provide practical methods for determining their value to support the
investment decision-making process. Practical group exercises will
reinforce the concepts introduced throughout the course.
Who Should Attend
This seminar will be beneficial
to project team members involved both with investment decision-making
regarding project alternatives, as well as those involved in one or more functions related to managing and
controlling capital projects; including project
management, project controls, cost engineering, estimating, scheduling, etc.
Learning
Objectives
The objective of
the course is for each participant in the capital project process to
develop an understanding of the related project cost uncertainties of
estimate contingency, escalation, and reserves. The course begins with
developing an understanding of fundamental statistics and probability
theory required to effectively assess uncertainty. This leads to
discussions on identifying the risks and uncertainties that affect our
project estimates; and developing models to quantify the contingency
required to achieve a stated level of confidence in our project estimates.
Next, we focus on the related risk element in our project estimates
of potential price increases over time. We will develop an understanding
of the contributions of inflation and market conditions to escalation. We
will discuss how to utilize economic price indices and knowledge of our
capital projects to effectively assess the escalation values required in
our estimates to address price increases over the project lifecycle. We
conclude with a discussion of reserves as a separate account for discrete
risk events that are not under the control of the project team.
Typical Course Outline
Day 1
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Introduction to Assessing
Uncertainty
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Concepts
in Uncertainty
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Probability
and Statistics
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Understanding
Probability Distributions
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Monte
Carlo Simulations
Contingency Determination Risk
Identification Systemic
Risks Project-Specific
Risks Root
Cause Determination Risk
Correlations Building
Risk Analysis Models Parametric
Models Range
Estimating Using Monte-Carlo Analysis Expected
Value Analysis Using Monte-Carlo Analysis Understanding
Risk Model Results Contingency
Determination to Support Risk Management
Day 2
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Escalation
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Definitions
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Inflation
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Escalation
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Price
Index
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Market
Condition
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The
Limitations of Price Indices
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Developing
Composite Price Indices
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Adjusting
for Market Conditions
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Determining
Cash Flow
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Calculating
Escalation
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Applying
Probability Analysis to Escalation Models
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Reserves
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Reserves
versus Contingency
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Discrete
Risk Events
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Reserve
Determination to Support Risk Management
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Project
versus Portfolio Issues
The Project Cost Uncertainty seminar can be
customized to meet your needs.
Please contact Larry
Dysert for additional information.
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