1350. Risk Analysis – The True Meaning of an Estimate

Paper

Abstract

In today’s cost-conscious environment, cost estimates are becoming more and more visible to corporate management. The uncertainties in all conceptual design cost estimating techniques (from parametric models to grass roots estimates) must be understood and evaluated in a form which gives management an understanding of the risks involved in the estimated value.
This paper sets forth a methodology for determining the risks in parametric and grass roots cost estimates. It shows how to evaluate the total program risk from the risk in individual cost categories, and it explains the significance of these values and how to interpret the results. In addition, the manner in which these same techniques can be used in developing a schedule risk analysis is described.