Abbott Project Management Playbook

Figure 4.4A - Summary of Cost Estimate

Figure 4.4B - Simulation Results, Cost In this example the Base capital cost is $2.07 MM. There is a 70% to 90% Probability that your cost will be at or under that estimate as seen in Figure 4.4B. Using this probability Abbott estimates the Base cost must have a contingency of between 10% and 14% per Figure 4.4A. Results of the quantitative analysis will be compared to the project plan (baseline or current) to provide the project teams an estimate of the overall project risk and will answer important questions such as: • How much contingency in time and cost is needed to provide the organization with its desired degree of confidence in the results? • What are the individual risks that seem to be the most important in determining the overall project risk? Estimating overall project risk using quantitative methods helps distinguish those projects where quantified risks threaten objectives beyond the tolerance of the stakeholders, from those for which the objectives are within acceptable tolerances even when risk is considered. The former may be targeted for vigorous risk responses aimed at protecting those objectives most important to the stakeholders. 4.5 P LAN R ISK R ESPONSE (M ITIGATION ) S TRATEGIES The project manager should develop risk response strategies for individual risks, sets of risks, and project level risks. The affected stakeholders should be involved in determining the strategies. There are generally four widely recognized strategies which address individual risks for threats and opportunities. • • How likely is the project to complete on the schedule date or earlier? How likely is the project actual cost to be the budgeted cost or less?

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