Dynamic Cost Risk Assessment for Controlling the Cost of Naval Vessels
Rept. for 1 Oct 2007-30 Sep 2008
NAVAL POSTGRADUATE SCHOOL MONTEREY CA GRADUATE SCHOOL OF BUSINESS AND PUBLIC POLICY
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Naval vessels, like most large-capital projectsprograms, have a long history of cost growth and overruns. To get a handle on this problem, NAVSEAs 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 projectprogram 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.
- Administration and Management
- Marine Engineering
- Logistics, Military Facilities and Supplies