Over the past 20 years, processes have been developed to identify and manage risks in complex projects to implement risk-based approaches for better cost and schedule estimation. However, these processes generally treat cost and schedule separately instead of integrating them in one model. Integrating cost and schedule is highly relevant as schedule delays are often the root cause of severe cost overruns.
The process used for developing an integrated cost and schedule model is:
- The base cost estimate is reviewed, subjected to uncertainties and integrated into the Work Breakdown Structure (WBS)
- Identified risks are assessed (probable cost & time impact) and integrated into the WBS and construction schedule
- Risks are assigned to tasks in the project’s schedule. Subsequently, completion date, critical paths and delays due to risks are simulated (using Monte Carlo simulation)
- Cost impacts due to time delays are calculated with time-related costs and integrated into the WBS
- Project Cost including uncertainty is available at all WBS levels and for all cost components.
This process is summarised in the diagram below.
Diagram courtesy of Taylor Burns, RiskConsult, GmbH
The information on this page was primarily sourced from:
- Text provided by Taylor Burns, Project Engineer, RiskConsult, GmbH
- Peer review conducted by Pedram DaneshMand, Director, Project Risk Consulting, Audit, Assurance & Risk Consulting, KPMG
- CEVP-RIAAT Process—Application of an Integrated Cost and Schedule Analysis by Philip Sander and Martin Entacher from RiskConsult and John Reilly from John Reilly International.