Dynamic cost risk assessment for controlling the cost of Naval vessels
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Authors
Kujawski, Edouard
Angelis, Diana
Subjects
Probabilistic Cost Risk Analysis (PCRA)
Planning
Programmatic
Budgeting, and Execution System (PPBES)
Cumulative probability Distribution Functions (CDF)
Risk Reduction Activities (RRA)
Monte Carlo simulation
Planning
Programmatic
Budgeting, and Execution System (PPBES)
Cumulative probability Distribution Functions (CDF)
Risk Reduction Activities (RRA)
Monte Carlo simulation
Advisors
Date of Issue
2009
Date
2009
Publisher
Monterey, California. Naval Postgraduate School
Language
Abstract
Naval vessels, like most large-capital projects/programs, have a long history of cost growth and overruns. To get a handle on this problem, NAVSEA's Cost Engineering and Industrial Division, NAVSEA 05C, has introduced Probabilistic Cost Risk Analysis (PCRA) into the Department of Defense (DoD) Planning, Programmatic, Budgeting, and Execution System (PPBES). The quantification of cost in terms of Cumulative probability Distribution Functions (CDF) or "S-curves" provides a macroscopic view of project/program risk. Risk curves alone do not provide adequate visibility into the individual project risk drivers; therefore, they are insufficient for planning and managing Risk Reduction Activities (RRA). Complex projects typically involve a set of high-consequence, project-specific risks that require detailed analysis and for which risk response actions need to be developed and implemented. The analysis of specific risks and RRAs requires a microscopic view. We present a practical and mathematically sound approach using scenarios and Monte Carlo simulation within the framework of decision trees and risk curves. The approach is detailed using a realistic but simplified case of a project with three technical risks.
Type
Technical Report
Description
Series/Report No
Department
Graduate School of Business & Public Policy (GSBPP)
Organization
Graduate School of Business & Public Policy (GSBPP)
Identifiers
NPS Report Number
NPS-GSBPP-09-023
Sponsors
Funder
Format
x, 33 p.: ill.;28 cm.
Citation
Distribution Statement
Approved for public release; distribution is unlimited.
Rights
This publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.