MODELLING OF ECONOMIC RISK AND UNCERTAINTY IN LARGE INFRASTRUCTURE PROJECTS

The Danish Ministry of Transportation has formulated new requirements to budgeting and risk and uncertainty management of large infrastructure projects. This paper proposes an approach that complies with some of the central requirements. An appropriate cost model is developed that allows for tracking of uncertain impacts caused by risk events in terms of unit prices, quantities, and resulting cost change of activities as well as the total project cost. Uncertainty is modelled in accordance with the two basic principles of possibility and probability, methods of calculation are proposed, and computational evidence is produced based on a numerical example.