Correlation between Time and Cost in a Quantitative Risk Analysis of Construction Projects

Abstract

The increasing constraints that construction companies face due to the prolonged financial crisis and the contracting construction market necessitate the need for more and more realistic and efficient approaches to the planning, scheduling and monitoring of their projects.A deterministic approach to project management that has preset parameters of time and cost and in which decisions are taken based on independent analyses of time or cost, even if they are interrelated, has a low likelihood to be successful. Construction projects are typically confronted with delays and additional costs, which reduce a company's profit and can lead to its bankruptcy. Therefore, a more efficient approach should take into account the risk of these events, the uncertainties and resources limitations in construction project planning, scheduling and monitoring and also the correlation between the time, cost and resource limitation parameters.This paper provides a practical approach to quantitative risk analysis using the Monte Carlo Method and highlights the correlation between the parameters of time, cost and resource limitation in construction projects. The project execution is analyzed not only by the probability of the parameters of time and cost together but also by the trends of them together. This approach integrates the scope, time, cost, resources and risks of a project and provides a better tool for decision-making. To demonstrate the advantages of this approach, a case study of a construction project is analyzed using Spider Project software.