Why projects often fail even with high cost contingencies

Kujawski, Edouard

Lawrence Berkeley National Laboratory

关键词: Probability;    Management;    Cost Overruns;    99 General And Miscellaneous//Mathematics, Computing, And Information Science;   

DOI  :  10.2172/802046
RP-ID  :  LBNL--51349
RP-ID  :  AC03-76SF00098
RP-ID  :  802046

美国|英语

来源: UNT Digital Library

【 摘 要 】

In this note we assume that the individual risks have been adequately quantified and the total project cost contingency adequately computed to ensure an agreed-to probability or confidence level that the total project cost estimate will not be exceeded. But even projects that implement such a process are likely to result in significant cost overruns and/or project failure if the project manager allocates the contingencies to the individual subsystems. The intuitive and mathematically valid solution is to maintain a project-wide contingency and to distribute it to the individual risks on an as-needed basis. Such an approach ensures cost-efficient risk management, and projects that implement it are more likely to succeed and to cost less. We illustrate these ideas using a simplified project with two independent risks. The formulation can readily be extended to multiple risks.