Copyright 2009 AACE, Inc.
AACE International Recommended Practices
AACE International Recommended Practice No. 44R-08
RISK ANALYSIS AND CONTINGENCY DETERMINATION
USING EXPECTED VALUE
TCM Framework: 7.6 Risk Management
Acknowledgments:
John K. Hollmann, PE CCE CEP (Author)
Ricardo Accioly
Rodney B. Adams CCE
Dr. Said Boukendour
Dr. Ovidiu Cretu, PE
Michael Portigal
John G. Zhao
Copyright 2009 AACE International, Inc.
AACE International Recommended Practices
AACE International Recommended Practice No. 44R-08
RISK ANALYSIS AND CONTINGENCY DETERMINATION
USING EXPECTED VALUE
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 expected value methods. This RP
applies specifically to using the expected value method for contingency estimating in the risk
management "control" step (i.e., after the risk mitigation step), not in the earlier risk assessment step
where it is used in a somewhat different manner for risk screening.
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 they would recommend
be considered for use where applicable. There is a range of useful contingency estimating
methodologies; this RP will help guide practitioners in developing or selecting appropriate methods for
their situation. This RP is limited to estimating cost contingency.
Background
This RP is new. However, it is based on a method that has been in common use for both decision and
risk management for many decades. Expected value in its most basic form ca