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Calculating Cost Contingency
Posted: Wed Aug 07, 2019 11:09 am
Can you set RiskyProject to automatically calculate cost contingency?
Re: Calculating Cost Contingency
Posted: Wed Aug 07, 2019 11:13 am
In our methodology, cost contingency is calculated as the difference between the base estimate and a calculated percentile that is calculated from the simulation. This is referred to as “risk adjusted” cost contigency. A very common value used is P80 which means that 8 out of 10 times the cost of the project or activity will not exceed that value. Contingency is calculated (P80 – Base Estimate = Contingency). As long as your schedule is resource loaded with rates or has fixed costs, cost ranges with percentiles will be generated for every activity.
Contingency is not automatically calculated, but you can set up your results so that the High results equal the percentile level that you want to use contingency. In the example below, in the Options > Calculations, we have set the High results to P80.
In the Simulations Results report, you can set up the view to display the Base (Original Costs) and High (p80). For simplicity, the activities have been collapsed to show only those activities to which contingency will be applied and measured. To quickly calculate the contingency, copy and paste the results to Excel. In version 7.1, you can export the view to Excel.