Wetting Risk Premiums in EPC Bid Value Using Monte Carlo Simulation

Abstract

P. Srivastava · Wetting Risk Premiums in EPC Bid Value Using Monte Carlo Simulation · pp 227-242 IntRoDUCtIon The strength of an EPC bid lies, primarily in competitive strategies and secondly in competitive estimates, which may or may not consider all risks associated to execution strategies. A robust bid would probabilistically estimate risks premiums associated to project execution strategies and consider in the bid costs, schedule and Project Value, thus resulting into robust project execution as project can absorb uncertainties. Depending on the complexities and size of EPC project, Bid level business risk evaluation may consider the range of stochastic variations on key business drivers and cost determinants, which may further be refined after Project award and during execution. Higher the amount of investment, higher the economic risks and therefore higher the quality of analysis required. As EPC costs determinants and schedules precipitate, risk analysis infuses maximum and minimum limits on key project activities. Note that these are the probable range of variation and not the conditioned maxima and minima’s, hence the need for dynamic analysis to generate a balanced and probabilistic estimate of overall cost and schedule EPC Risk Management, EPC Risk characterization, EPC Bidding Strategies, Wetting Risk Premium, Probabilistic Risk Estimation, Monte Carlo Simulations, Bidding.