In 2008, the AACE International Decision and Risk Management (DRM) Technical Subcommittee launched an effort to greatly expand the repertoire of recommended practices (RPs) on risk management with a particular focus on quantitative risk analysis (QRA). A goal was to create a robust “toolbox” of fit-for-use, probabilistic QRA methods to support investment and commercial decision-making and contingency determination for projects of all types, sizes, and levels of scope definition, as well as to optimally quantify risks of all types.

That goal has now largely been achieved. PGD-02 and linked RPs, if printed, would comprise a major (but living) book. PGD-02 is free to AACE members and members are encouraged to link to and review this new Professional Guidance Document now. It links to and summarizes about 30 RPs, as well as proposed RPs. It includes QRA method RPs, as well as related RPs such as project historical database development. At the heart of the PGD are two figures: a roadmap to the QRA RP toolbox and an application guide.

The toolbox now includes a QRA maturity model. It is hoped that PGD-02 will be a go to online document for anyone needing information about QRA methods and guidance on developing a toolbox to address all their needs.

Anyone can view the basic version here. However, to gain access to any of the resources that PGD-02 refers to, users will need to be an AACE member. AACE members need to be logged in at the AACE website, using their username and password, to have the full functionality of the links embedded within PGD-02.

PGD-02 QRA covers a broad set of practices used primarily to quantify uncertainty and risks in a way that supports asset planning and investment decision analysis. These are outlined in the AACE Total Cost Management Framework, Chapters 3.2 and 3.3. Change management decisions are covered in Chapter 10.3 of the TCM Framework while cost and schedule contingency, reserves, escalation and other phased project funding and control basis determinations are covered in TCM Chapter 8.1. However, the focus of this PGD is TCM Chapter 7.6 which summarizes the QRA step as: “For each risk selected by the team for quantitative risk analysis, a probabilistic estimate of its impact will be prepared. The chosen methodology will have been specified during the risk planning phase.”

This PGD also covers fundamental QRA RPs, such as for selecting probability density functions as well as highlighting key QRA terms as defined in AACE Recommended Practice  RP 10S-90, Cost Engineering Terminology. QRA practices intersect with (and may be part of) base cost estimating and scheduling practices upstream of the QRA (e.g., historical data analysis and estimate and schedule validation to quantify bias) as well as control of the risk funds and contingency durations downstream of the QRA (e.g., contingency drawdown assessment). These related RPs will be highlighted where applicable. Check out this important new AACE Professional Guidance Document today.