What’s the Risk?

Implementation Resource 280-3

LEVEL 1: LEVEL 2: LEVEL 3:
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PROBABILISTIC
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Impact Distribution for Cost to Completion ($ million)
 Interpreting Probabilistic Outputs
What is the range of cost or schedule? What risks have the greatest impact, and
Cost/Time Probability Mass Function where should I focus mitigation efforts?
Sensitivity Analysis
Distribution for Total Project Costs Distribution for Project Schedule
(Current $million) (Year) Tornado Diagram
0.025
Mean = 3.6 Years
0.025 Mean = $22.5
Unmitigated Mean Severity
80% Confidence
0.020 0.020 = 3.8 Years Risk Event 0.00 .1 0.20 .3 0.40 .5 0.60 .7

Probability
Probability

80% Confidence Historic site

0.015 = $26 0.015
Replaced culvert over
Wandering Creek
0.010 0.010
Delaying request for proposal

0.005 0.005 Change in pavement section

and/or type

0.000 0.000 Ground improvement required

15 20 25 30 3.0 3.54 4.0 in interchange
80% 20% 80% 20% Embankment delays

Total Cost ($ million) Year Completion

What it means: Illustrates a range of project cost from $15–30 million, with a mean cost What it means: Illustrates that the risk events “Historic site” and “Replaced culvert over
of $22.5 million. Illustrates a range of project schedule from 2.7–4.2 years, with a mean Wandering Creek” have the greatest impact on cost uncertainty. Mitigation efforts should
duration of 3.6 years. focus on these two risk events.

What is my confidence in cost or schedule? How much contingency do I need and

Cumulative Mass Function when can I release it?
Cumulative Total Project Costs Cumulative Total Project Schedule
Contingency Drawdown
(Current $million) (Year)
Risk Resolution
80% Confidence 80% Confidence
= $26 = 3.8 Years

Total Risk/Contingency ($mil)

1.00 4
1.00 Historic site
Cumulative Probability
Cumulative Probability

approval
0.80 0.80
3
Mean = $22.5 Mean = 3.6 Years RFP delay
0.60 0.60 resolved
0.40
2
0.40

0.20 0.20 Contingency

1
0.00 0.00
15 20 25 30 3.0 3.54 4.0 0
0 1 2 3 4
80% 20% 80% 20%
Time (Years)
Total Cost ($ million) Year Completion

What it means: Illustrates that the project’s cost and schedule will not exceed $26 million What it means: Illustrates that the “Historic site” risk event will be resolved after
or 3.8 years (at an 80-percent confidence level). approximately one year, at which time its contingency can be released.