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Contingency calculations
Published in Johansen Agnar, Nils O. E. Olsson, Jergeas George, Rolstadås Asbjørn, Project Risk and Opportunity Management, 2019
Johansen Agnar, Nils O. E. Olsson, Jergeas George, Rolstadås Asbjørn
Prasad (2008) more precisely defines cost contingency as “the amount to be added to the competitive base estimate as per historical experience so that the final project cost estimate has an equal chance of falling above/below the actual cost of the initial quantifiable estimate.”
Stochastic Optimization of the Jansen Potash Production and Logistics Chain
Published in Mineral Processing and Extractive Metallurgy Review, 2019
Sylvie C. Bouffard, Peter Boggis
Insight 8: The difference between the mean of the range of integrated capacity values and the designed integrated capacity can be thought of as a production capacity contingency. Risks and opportunities during the Jansen construction would not be the same as those during its operation. Nonetheless, the principle of range analysis is applicable to both construction and operation. During construction, focus is on capital costs and date of first production. During operations, focus is on production capacity and operating costs. The project team calculated a range for each of these four NPV drivers, and from that range, the mean of each was calculated. The difference between the mean of the range and the designed value is called contingency. Readers will be very familiar with the concept of contingency as it relates to cost. Simply put, the cost contingency is additional money set aside in case of unplanned events. Addressing such unplanned events will take more time than planned. This extra time is accounted for in the schedule contingency. Rarely though do we hear project professionals speak of production capacity contingency. The concept is nonetheless very similar to capital cost contingency, schedule contingency, and operating cost contingency. Capacity contingency is the difference between the mean of the range of integrated capacity values and the designed integrated capacity. The production capacity contingency is an important consideration for the Board.
Time and cost contingency management using Monte Carlo simulation
Published in Australian Journal of Civil Engineering, 2019
Bradd A. Traynor, Mojtaba Mahmoodian
Time and cost contingency can be a practice utilised in project management to manage the economic risks of probable time and cost increase during the life of a project. This practice can be done by assigning a calculated contingency dollar value and extended duration of days to each task. An accurate time and cost performance evaluation will ensure mitigating the possibility of time overrun (TO) and cost overrun (CO). This budget estimation process must be controlled in real time to protect the expenditure and duration of a project. Figure 1 demonstrates the proposed time and cost contingency process.