Integrated cost and schedule project risk analysis

Project costs often exceed their estimates because those estimates do not take into consideration the uncertainties in the estimates of duration of project activities. Cost risk can be most accurately estimated and completely understood if it explicitly takes into consideration schedule risk. This paper presents a method of incorporating the uncertainty in activities' durations from a schedule risk analysis into the assessment of cost risk. In this method, a Monte Carlo simulation of the schedule provides uncertainty in time. Incorporating the schedule risk results into the cost risk model provides the linkage between schedule and cost risk. Then equivalence must be established between the schedule and network concepts. Uncertainty in costs is then represented by uncertainty in "time independent costs" (costs that do not depend on time) and "time dependent costs" (costs that depend on uncertain time and cost per unit time or "burn rate" and rate of labour compensation.) Simulation of the cost model combines t
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