Cost Risk Analysis "Made Simple"

Abstract

The purpose of this paper is to inspire cost authorities to establish a true standardized cost risk analysis process. Both NASA and Air Force Cost Analysis Agency (AFCAA) are currently expending resources to define the standard for their communities. We have drawn on 30 years of experience in all aspects of cost risk analysis to propose the key steps of a successful ri sk analysis process and identify where further standardization decisions are required. Additionally, we use several, already published case studies (with analytical results) as the basis to demonstrate that Crystal Ball, @Risk and ACEIT, if used correctly , will generate the answer. We use the same cost studies to demonstrate that a few decrees by those with the authority to do so can demystify cost risk analysis and go a long way to making the process more repeatable, defendable and dependable. In the end, it is not appropriate that there are only a few folks capable of building a useful cost risk analysis. In the end, there needs to be a risk analysis process suitable for the majority of cost analysts. To accomplish that goal, all that is needed are a few decisions.