Article ID: | iaor20083006 |
Country: | United Kingdom |
Volume: | 27 |
Issue: | 4 |
Start Page Number: | 961 |
End Page Number: | 978 |
Publication Date: | Aug 2007 |
Journal: | Risk Analysis |
Authors: | Insua David Rios, Ruggeri Fabrizio, Palomo Jesus |
Keywords: | risk |
To ascertain the viability of a project, undertake resource allocation, take part in bidding processes, and other related decisions, modern project management requires forecasting techniques for cost, duration, and performance of a project, not only under normal circumstances, but also under external events that might abruptly change the status quo. We provide a Bayesian framework that provides a global forecast of a project's performance. We aim at predicting the probabilities and impacts of a set of potential scenarios caused by combinations of disruptive events, and using this information to deal with project management issues. To introduce the methodology, we focus on a project's cost, but the ideas equally apply to project duration or performance forecasting. We illustrate our approach with an example based on a real case study involving estimation of the uncertainty in project cost while bidding for a contract.