Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Company ABC is doing a pipeline construction project. For simplicity sake, let's assume that ve risks were identied for this project which will have impact
Company ABC is doing a pipeline construction project. For simplicity sake, let's assume that ve risks were identied for this project which will have impact of the cost. Probability of happening of each of the risk is 100% (I understand an event with 100% probability of happening, does not qualify as risk, but let's ignore this fact for this exercise). But there is no certainty around the cost impact of risks. Following Table shows the range of cost impacts of the risks based on the expert opinion. Costlmpact Risle Description Most Likely Foundation design is based on desktop geotechnical studies. There will be design changes when on site geotechnical data will be 1 obtained $150,000 $200,000 $300,000 All the regulatory permits will not be obtained in time. Construction may not start in time 2 resulting in claims from the contactor. $50,000 $100,000 $150,000 Engineering design will not be finished in time. Vendor will charge premium to expedite the 3 material orders $200,000 $275,000 $500,000 Land acquisition will not be finished in time leading to conflict with construction schedule 4 and hence stand by charges $100,000 $200,000 $400,000 There is certain probability of archeological findings in the right of way. Cost and schedule 5 impact may vary. $50,000 $175,000 $300,000 You want to decide contingency for the project based on the costs impacts of these risks. Assume that these 5 risks are only source of uncertainty in the project and no other risks exist in the project. Build a model in the excel sheet to calculate the contingency for the project. Use @Risk software to perform the probabilistic analysis. Model should be formulated with the aim to answer the following questions. 1. How much contingency you will recommend for the project so that you 90% condent that contingency will be enough to cover the cost impacts of above listed risks
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started