Fundamentals of Risk, Economics & Cost in Capital Projects

Fundamentals of Cost Management in Capital Projects

• What is cost and how it is created by Assets and Activities

• Categorization & Process Overview

• Cost Estimation

  • Concepts, Methods & Utility

  • AACE Estimation Classification and Accuracy

  • Capital Project Delivery Scope Development Rating systems

  • Relationship of AACE Estimate Accuracy Classification and Scope Development

  • Economic Analysis and Concept of Equivalence

  • Interest Rate and types

  • Cashflows

  • Economic Metrics of Interest.

  • Sample Evaluation Model : Economic Evaluation of a Novel 7MW Power Plant.

• Budgeting & Cost Baseline

• Forecasting and Control

  • Value of Work Done and Contract Types

  • Value of Work done Practices

  • Cost control and Earned Value

  • Expected Final Cost and Importance for Owners

Risk Quantification in Capital Projects

• Introduction and Background

• Importance of Risk Quantification in Phase Gate Capital Project Delivery System

• Enabling knowledge and Practice for Risk Quantification

• Build Model & Perform Model Quality Check

  • Bias in Quantification and its Types

  • Merge Hotspot

• Incorporate Uncertainty & Risk

  • Enabling knowledge and Common practices

  • Types of Probability Distribution

  • Types of Probability Distribution, required inputs and Usage

  • Example: Comparison of Risk Profile with Lognormal distribution versus Triangular distribution

• Perform Analysis and Analyze Results

  • Monte Carlo Simulation

  • Measures of Interest

  • Range

  • Mean

  • Probability

  • Probability Density Chart

  • Sensitivity Chart (Tornado Chart)

  • Joint Confidence Level (JCL)