@RISK helps structural engineering consulting firm to determine project cost uncertainty and define budget for the construction of Fleet Maintenance Facility
February 16th, 2010 London; Consulting engineering specialists, ENGCOMP (
www.engcomp.ca) has enabled the Canadian Department of National Defence (DND) to define the budget and secure funding for the construction of its ongoing Fleet Maintenance Facility Cape Breton (FMF CB) project, from the Federal Government. Using Palisade Corp's (
www.palisade.com) Monte Carlo simulation tool, @RISK, ENGCOMP was able to quantify the project cost and construction schedule uncertainty to determine the budget for the FMF CB project, located at the Canadian Forces Base Esquimalt, Victoria, BC.
ENGCOMP used @RISK, a quantitative statistical modelling tool, to help reduce budget uncertainty and greatly increase the likelihood of achieving project success for the DND.
As the first component of the risk analysis, ENGCOMP determined the amount of contingency that would be required to be applied to the project budget with a reasonable level of confidence that the final approved budget for the FMF CB project would not be exceeded. Using @RISK, ENGCOMP quantified the potential variability of factors such as labour rates, material and equipment costs and productivity, to ascertain the amount of contingency that should be allocated to the overall project budget. Contingency is the amount of money that needs to be added to a project budget to account for all the unexpected construction costs that haven't been itemised at the time of budgeting.
The results of the @RISK contingency analysis showed that the bulk of the budget uncertainty was due to volatility in the West Coast construction market and to unknown site conditions related primarily to the historic use of the site for relatively ‘unregulated' industrial functions.
In the next phase of its risk analysis, ENGCOMP used @RISK to determine the project risk, quantifying the effects of all reasonable risks and uncertainties on the project. This accounted for those items that typically did not fall under constructions costs of the project, but should they occur, DND would need to incur expenses. For instance, the @RISK simulation quantified the uncertainty posed by unforeseen developments such as weather conditions preventing construction, labour strikes, delays in environmental approval, labour shortages, currency fluctuations and safety to name a few. Such occurrences can affect both the project cost and schedule.
The findings of the complete risk analysis enabled DND to secure approval from Federal Government's Treasury Board, that included a comparatively high contingency allowance to address the identified areas of cost uncertainty.
Jason Mewis, President, ENGCOMP, says, "We were able to help the DND define the budget as well as give them the tools to defend it. Based on our quantitative risk analysis, DND was able to clearly justify to the Federal Government's Treasury Board why it should be allowed to get the capital appropriation for the project despite the level of uncertainty. This may not have been possible without the detailed and comprehensive analysis enabled by @RISK."
