Application of risk analysis techniques in proposal assessment

This paper provides an introduction to contract proposal assessment risk analysis techniques used by the Accountancy Estimating and Pricing Service of the Ministry of Defence (Procurement Executive). The approach used, benefits of such techniques and the appropriateness of various tools are explained. Models discussed range for simple procedures to more complex Monte Carlo simulation technqiues. The choice of risk assessment technique depends on the definition, scale and phase of the project. All techniques, however, require a systematic approach, so a generalized methodology for the risk analysis of cost, schedule and technical performance is proposed. Whilst risk analysis methods and models are valuable tools, the right answers still depend upon judgement and specialist expertise.