SUNConferences, Computers and Industrial Engineering 42

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Developing a project contingency estimation tool for Eskom Distribution Western Operating Unit
Mariette van Niekerk, James Bekker

Last modified: 2012-06-07


Construction projects are risky by nature, with many variables affecting their outcome. A contingency cost and duration are allocated to the budget and schedule of a project to provide for the possible impact of risks. This presentation discusses the development of a contingency estimation tool for network asset construction projects in the Eskom Distribution Western Operating Unit. It is essential that potential risk impact be transparent on portfolio as well as project level, as each portfolio comprises hundreds of projects. To enable this, contingency estimation must be performed consistently and objectively. The required tool must be applicable at all levels of project definition to address the impact of both systemic and project-specific risks, and also be usable without expert knowledge on project risk management. The design of a hybrid tool incorporating both parametric modelling of systemic risks and expected value analysis of project-specific risks, is presented. Parametric modelling, as achieved through a neural network that is trained using historical project information supported with interviews of project managers, is illustrated. Proposed guidelines are provided regarding the points in the project lifecycle at which the contingency estimation tool should be applied.