Why projects often fail, even with high cost-contingencies

摘要

In this note we assume that the individual risks have been adequately quantified and the total project cost contingency adequately computed to ensure an agreed-to probability or confidence level that the total project cost estimate will not be exceeded. But even projects that implement such a process are likely to result in significant cost overruns and/or project failure if the project manager allocates the contingencies to the individual subsystems. The intuitive and mathematically valid solution is to maintain a project-wide contingency and to distribute it to the individual risks on an as-needed basis.