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Quantitative Risk Management

The intent of quantitative risk management is to predict, using simulation techniques such as Monte Carlo, a project’s likely duration and cost considering risks and uncertainty anticipated on the project. MBP provides clients with quantitative risk analyses in various forms in order to address their specific questions and concerns:

  • What cost contingencies should be set for my project? Cost Risk Analysis
  • Will my project complete within budget? Cost Risk Analysis
  • What is an appropriate project duration to establish for my project? Schedule Risk Analysis
  • Will my project complete on time? Schedule Risk Analysis
  • All of the above – Integrated Cost-Schedule Risk Analysis

Cost Risk Analysis

Through the use of cost risk analysis, MBP can determine appropriate cost contingencies to allocate for a project during its planning and design stages as well as determine the likely projected cost of the project during construction. Through a collaborative process with our clients, we:

  • Identify risks and their anticipated probabilities and effects to determine cost drivers
  • Model risk and uncertainty with simulation tools
  • Predict likely project cost
  • Assist clients to prioritize risks, establish mitigation plans, and track risks

Schedule Risk Analysis

MBP utilizes schedule risk analysis throughout the project life cycle to assess project duration. We assist our clients in:

  • Determining an appropriate project duration during planning and design
  • Predicting a level of confidence in meeting planned completion dates once construction is underway
  • Recommending an appropriate schedule time contingency needed to address high priority risks
  • Identifying top schedule risk drivers to be monitored

Our support does not end once we have provided clients with these important metrics. We assist our clients by facilitating risk mitigation workshops, where project teams can identify mitigation strategies to lower the probability and impact of identified risks. We also assist our clients in implementing project risk management protocols to monitor risks, such as consistent and focused risk register updates and workshops.

The U.S. Government Accountability Office (GAO) considers cost and schedule risk analysis an essential element of developing and maintaining reliable schedules. See Schedule Assessment Guide, Best Practices for Project Schedules, GAO-16-89G, December 2015. For GAO, cost and schedule risk analysis allows its auditors to assess the reliability of program plans and reported dates through an assessment of project schedules.

Valid and reliable scope, schedule, and cost estimates are essential for project success and delivery, and for the integrity of the transit industry, which includes the Federal Transit Administration (FTA). As such, FTA requires its Project Sponsors to develop a Risk and Contingency Management Plan (RCMP) that demonstrates the Sponsor’s project scope, cost estimate, and schedule are reliable over the duration of the project. The FTA has oversight procedures (OP 40b and OP 40c) that its project management oversight (PMO) contractors utilize in reviewing and validating the reliability of the Sponsor’s plan for mitigating and managing project risks.

Integrated Cost Schedule Risk Analysis

The integration of cost risk analysis and schedule risk analysis yields powerful data that our clients use to fully assess the combined cost and schedule impact of risks on their projects. We know that there is a correlation between time and cost. Using cost-loaded project schedules, we can quantify how schedule risk impacts cost risk. MBP works collaboratively with our clients to:

  • Collect risk data – through interviews with project team members and project risk registers
  • Model schedule and cost risk and uncertainty with simulation tools
  • Prioritize schedule and cost risks, noting those with the greatest potential impact
  • Facilitate risk mitigation workshops to address the high priority risks and compile mitigated risk data
  • Model schedule and cost risk using mitigated risk data

Integrated cost risk analysis is an interative process that provides our clients the opportunity to not only identify the high risks but develop mitigation strategies and then predict how those mitigation strategies could improve cost and schedule outcomes.