scholarly journals Using Risk Simulation to Reduce the Capital Cost Requirement for a Programme of Capital Projects

2017 ◽  
Vol 15 (1) ◽  
pp. 1-13
Author(s):  
Francois Joubert ◽  
Leon Pretorius
Keyword(s):  
Monte Carlo Simulation ◽  
Monte Carlo ◽  
Cost Estimation ◽  
Research Result ◽  
Simulation Software ◽  
Capital Projects ◽  
Risk Simulation ◽  
The Individual ◽  
The Relationship

This paper combines various concepts related to (i) project risk management, (ii) Monte Carlo simulation, (iii) project contingency cost estimation, and (iv) the relationship between project and programme risks, to illustrate that the contingency requirements are lower when simulating all the risks in the programme when comparing it with the individual project contingency requirement. A case study organisation provided 86 quantified risk registers related to port and rail capital projects. For each of these risk registers, the project contingency was estimated using a prescribed risk register template and Monte Carlo simulation software. The same 86 quantified risk registers were then used to simulate the programme contingency. The simulation results indicated that the programme contingency requirement was approximately 8% points lower than that of the sum of the individual projects. The first implication of this research result is that, should borrowed capital be used to fund the projects, the interest bill would be higher when calculating project contingency on a project-by-project basis. The second is that regularly appearing low probability, high impact risks, should be identified and these risks should be quantified not in the projects themselves, but in a centrally managed, programme cost contingency fund.

Electricity supplier selection by a household in the Czech Republic in 2017 and 2018 – Monte Carlo simulation approach

2019 ◽  
Author(s):  
Martina Kuncova
Keyword(s):  
Monte Carlo Simulation ◽  
Monte Carlo ◽  
Czech Republic ◽  
Electricity Market ◽  
Electricity Consumption ◽  
Point Of View ◽  
The Czech Republic ◽  
Extra Effort ◽  
The Individual ◽  
Monte Carlo Simulation Model

The situation on the electricity retail market in the Czech Republic is not clear because of the number of suppliers and its products. Although the information about the prices for the electricity consumption for households is available on the web and each household can change the supplier nearly with no extra effort and cost, households are still often not familiar with the individual price items of the products. In this article the analysis of the Czech electricity market from the distribution rate D25d point of view is made for the years 2017-2018 when the household annual consumption is simulated via Monte Carlo simulation model. The aim of this paper is to select such a supplier and product that minimizes the total costs of the electricity for a household for the selected distribution rate and compare it with the results from the previous years.

Risk Based Contingency in Project Cost Estimates

2017 ◽  
pp. 130-138
Author(s):  
Mohammed Shafique Malik
Keyword(s):  
Monte Carlo ◽  
Cost Estimation ◽  
Investment Decisions ◽  
Senior Management ◽  
Cost Estimate ◽  
Project Cost ◽  
Final Project ◽  
Calculation Methodology ◽  
Project Risks

Project Cost estimation is carried out for making investment decisions. Cost estimation is carried out during different phases of the project. Contingency in cost estimation is an important factor before releasing final cost estimate for formal approval of the project by senior management. Major Petrochemical companies use risk-based contingency calculation instead of following a standard practice of adding a certain fixed percentage to the final project cost estimate. In this chapter, cost contingency calculation methodology has been elaborated by conducting case study of a sample project. The methodology described here uses famous tool of Monte Carlo for simulation. It is pragmatic approach to calculate required cost contingency in the project cost estimate, based upon the particular project risks as compared to simply following rule of adding fixed percentage of the estimate as cost contingency in overall project cost estimate.

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