Application of probabilistic cost and schedule risk assessment and risk management to large infrastructure projects

Historically, engineers and planners worldwide have not adequately estimated the ultimate costs and schedules for infrastructure projects, with unidentified biases and problems sometimes causing large budget and schedule overruns. Many government agencies now recognize these issues and require probabilistic risk assessment and risk management for large projects to better estimate and control cost and schedule. Others have attempted to address these problems, but many of these attempts have significant limitations (e.g., no direct link between cost and schedule). This paper briefly describes an innovative and cost-effective approach for cost and schedule risk assessment/management and its application to a large tunnel project and a large bridge project. The approach helps mitigate historical estimating and budgeting problems by: (1) quantifying uncertainty in ultimate actual project cost and schedule within a probabilistic, risk-based, integrated cost and schedule model, in which the uncertainties in inputs are explicitly de-biased and assessed (through elicitation of technical experts) and incorporated; (2) identifying and prioritizing critical cost and schedule risks and opportunities, as well as quantifying the costs and benefits of proposed mitigation strategies to address critical risks/opportunities; and (3) improving communication and decision-making (including funding requirements).