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Significance and Use
Measuring cost risk enables owners of buildings and other constructed projects, architects, engineers, and contractors to measure and evaluate the cost risk exposures of their construction projects. Specifically, cost risk analysis (CRA) helps answer the following questions:
What are the probabilities for the construction contract to be bid above or below the estimated value?
How low or high can the total project cost be?
What is the appropriate amount of contingency to use?
What cost elements have the greatest impact on the project’s cost risk exposure?
CRA can be applied to a project's contract cost, construction cost (contract cost plus construction change orders), and project cost (construction cost plus owner's cost), depending on the users' perspectives and needs. This practice shall refer to these different terms generally as “project cost.”
1.1 This practice covers a procedure for measuring cost risk for buildings and building systems and other constructed projects, using the Monte Carlo simulation technique as described in Guide E1369.
1.2 A computer program is required for the Monte Carlo simulation. This can be one of the commercially available software programs for cost risk analysis, or one constructed by the user.
2. Referenced Documents (purchase separately) The documents listed below are referenced within the subject standard but are not provided as part of the standard.
E631 Terminology of Building Constructions
E833 Terminology of Building Economics
E1369 Guide for Selecting Techniques for Treating Uncertainty and Risk in the Economic Evaluation of Buildings and Building Systems
E1557 Classification for Building Elements and Related Sitework--UNIFORMAT II
E2103 Classification for Bridge Elements--UNIFORMAT II
E2168 Classification for Allowance, Contingency, and Reserve Sums in Building Construction Estimating
ICS Number Code 91.010.20 (Contractual aspects)