Estimating Inherent ContingencyGavin Halling
Clients are often concerned about the accuracy of estimates and the derivation of contingency. The only 100% certainty is that the estimate and actual outturn costs will not be the same! The nature of an estimate often comprises items where the amount of information known is very good through to a complete guess. Similarly, contingency has ranged from a standard 10% or 15% (say) bottom line allowance to more complex line by line assessments.
In the past we have been engaged to assess this uncertainty, build a model and then run a Monte Carlo Simulation. The process has proved beneficial in that it gives visibility into how the contingency was derived and improves confidence in the amount allowed. However, it has meant that a Client has to commit to some Consultancy expenditure, as the available modelling toolsets were quite cumbersome and needed expertise to build the model as well as interpret the results.
With this in mind we developed ContingencyEstimator so this key process can be readily carried out in house. The estimate is first imported from a spread sheet, you can then hold an “inquisitorial” workshop with the core team (eg Client, Estimator, Designer and Project Manager) to assess a range of quantities and rates, run a Monte Carlo simulation with one click and immediately access three key management reports. More information is available in our brochure ContingencyEstimator. A free download with a “playpen” project is also available from the demo page.