TWO IMPROVEMENTS IN RISK ANALYSIS FOR PROJECT COST USING MONTE CARLO METHODS

摘要

Two improvements in risk analysis for project cost using Monte Carlo methods are presented in this paper. The computation of project cost usually begins with the cost breakdown structure and uses the simulation method to estimate the variance of the project cost. However, the execution of a project is based on the work breakdown structure, not on the cost breakdown structure. To overcome the limitation, this paper calculates the project cost and its variance on the base of work breakdown structure. On the other hand, one serious methodological flaw of most Monte Carlo methods is the assumption of statistical independence of cost ingredients or calculating the correlations inefficiently. To win through this problem, common factors are used in this paper to evaluate the correlations of the cost ingredients.