Copyright 2009 AACE, Inc.
AACE International Recommended Practices
AACE International Recommended Practice No. 42R-08
RISK ANALYSIS AND CONTINGENCY DETERMINATION
USING PARAMETRIC ESTIMATING
TCM Framework: 7.6 Risk Management
Acknowledgments:
John K. Hollmann, PE CCE CEP (Author)
Rodney B. Adams, CCE
Hubertus M.T. Brandts, CCE
Alan J. Chilcott, CCT CCE
Dr. Ovidiu Cretu, PE
Charles J. Pospisil
Chinnadurai Ramachandran
Dr. Maarten S.A. Vrijland
Robert F. Wells, CEP
Copyright 2009 AACE International, Inc.
AACE International Recommended Practices
AACE International Recommended Practice No. 42R-08
RISK ANALYSIS AND CONTINGENCY DETERMINATION
USING PARAMETRIC ESTIMATING
TCM Framework: 7.6 Risk Management
January 26, 2009
INTRODUCTION
Scope
This recommended practice (RP) of AACE International (AACE) defines general practices and
considerations for risk analysis and estimating cost contingency using parametric methods. Parametric
methods are commonly associated with estimating cost based on design parameters (e.g., capacity,
weight, etc.); in this case, the method is used to estimate contingency based on risk parameters (e.g.
level of scope definition, process complexity, etc.). This RP includes practices for developing the
parametric methods and models (generally empirically-based). Recommended practice 43R-08 provides
example process industry parametric models (including software) [12]. For scheduling applications, there is
less research and reference material available; therefore schedule duration risk and contingency will be
covered in future revisions of the RP.
Purpose
This RP is intended to provide guidelines (i.e., not a standard) for contingency estimating that most
practitioners would consider to be good practices that can be relied on and that the