Contingency Estimation Research Articles

Risks, Classification of Estimates, and Contingency Management

Risks of cost overruns are invariably present in major projects. Cost risks can be managed. The management of cost risks begins with a systematic risk evaluation and appropriate allocation of contingency. This paper proposes and discusses an enhanced capital‐cost and contingency‐estimating concept and system. The proposed estimating system combines aspects of the conventional “classes of estimate” approach with a statistical method. The latter uses range estimates and applies the theory of probability for risk assessment and contingency estimation. By using the range estimates, the experience of an expert estimator and his level of confidence on the estimates can be expressed. A two‐tiered contingency‐allocation system using an engineering allowance and a management contingency are discussed. This system is suitable for both major project promoters and contractors involved in preproject planning and cost estimation.

Contributions of specific cell information to judgments of interevent contingency.

College students considered the possible effect of an experimental drug on a skin rash. The information came from a 2 x 2 contingency table involving receipt or nonreceipt of the drug and improvement or nonimprovement of the rash: Cell A = receipt-improvement; Cell B = receipt-nonimprovement; Cell C = nonreceipt-improvement; Cell D = nonreceipt-nonimprovement. Without numerical information. Ss judged cells to be ordered A greater than B greater than C greater than D. The same order held when the contribution of each cell was derived from the contingency judgments of other subjects given numerical information. No such consistency was seen when one group of Ss made both judgments: whether individual Ss equally or unequally assessed the importance of the four cells, their contingency estimates showed cell use to be ordered A greater than B greater than C greater than D. These findings may result from strong biases that Ss harbor in processing contingency information.