New RP - 123R-22: Integrated Cost and Schedule Risk Analysis and Contingency Determination Using Estimate Ranging and Expected Value with Monte Carlo Simulation
This recommended practice defines general practices and considerations for integrated cost and schedule risk analysis and estimating contingency using a combination or hybrid of estimate ranging and integrated cost and schedule expected value analysis with Monte Carlo simulation methods. R+EV is used as a shorthand designation for this quantitative risk analysis (QRA) combination.
The R+EV method is a fit-for-use, practical, risk-driven method intended to support management’s need for integrated distributions of bottom-line project cost and schedule outcomes. It is intended to support investment or tender decision making for well-defined, relatively simple, low-technology projects at the sanction or tender phase (i.e., Class 3 or better-defined estimates).
This method is not recommended for projects with significant systemic risks including projects at early scope definition phases (Class 10, 5 or 4) or with significant complexity, and/or with significant levels of technology. While this method can provide limited insight of risks to some activities or milestones, this method is not recommended for projects needing to understand schedule risk at a detailed level such as the impact of risk on specific schedule activities or on intermediate milestones. This exclusion from usage results from expected value method limitations regarding schedule. The method also excludes quantification of escalation risks.
Contributors:
John K. Hollmann, PE CCP CEP DRMP FAACE Hon. Life (Primary Contributor)
May Chetty, CEP
Larry R. Dysert, CCP CEP DRMP FAACE Hon. Life
Hossam Hefnawy
About John:
John K. Hollmann, PE CCP CEP DRMP FAACE Hon. Life (Primary Contributor)
John joined AACE in 1986 and is a passionate leader in the cost engineering field, holding multiple certifications from AACE (CCP, CEP, and DRMP). He has authored and contributed to numerous AACE recommended practices plus many papers and led development of AACE’s Decision and Risk Management Professional (DRMP) certification. He was the principal author of the first edition of AACE’s 2006 landmark publication The Total Cost Management Framework: An Integrated Approach to Portfolio, Program, and Project Management and also authored the publication Project Risk Quantification: A Practitioners Guide to Realistic Cost and Schedule Risk Management in 2016.
John has served AACE in various roles including chairs of multiple technical subcommittees. He was elected to and served on AACE’s Board of Directors for one year (1996-1997) where he was instrumental in the reorganization of the Board to create three Associate Boards (Technical/Education/Certification). John was a member of the Technical Board for several years where he served as Director of Recommended Practices and Director of Total Cost Management.
He has previously been recognized by AACE with the Outstanding Technical Committee Chair Award (1994, 1996), O.T. Zimmerman Founder’s Award (2005), Fellow (2006), Award of Merit (2008), Technical Excellence (2010), Honorary Life Membership (2011), the Lifetime Achievement Award (2018), and the TCM Excellence Award (2022).
John helps companies improve their cost engineering competencies and capabilities by evaluating processes, organization, tools and practices for cost engineering related functionality; assisting in implementing practice improvements; validating and reviewing major project estimates; performing risk analyses, contingency and escalation estimates; and by developing and conducting training.
He is currently the owner of Validation Estimating, LLC and alliance partner in ValidRisk.
You can find the new RP here: 123R-22: Integrated Cost and Schedule Risk Analysis and Contingency Determination Using Estimate Ranging and Expected Value with Monte Carlo Simulation
Great job