Roads and Maritime Services use both deterministic and probabilistic approaches to calculate contingency requirements for projects depending on the phase of the investment lifecycle. Deterministic methods are applied to projects prior to reaching the Detailed Business Case phase, after which contingency requirements are calculated using probabilistic analysis methods.
Deterministic Approach
• Percentage based allowance made on Base Cost Estimate
• Standard contingency percentage ranges for Strategic, Concept and Detailed phases
• The percentage allowances are based upon an extensive database of tender prices and rates, and project out turn costs over the last decade.
Probabilistic Approach
• Probability distribution assigned to elements of Base Estimate and risk analysis performed
• Monte Carlo based analysis to determine 'most likely' outcome
• Both a P50 and P90 figure is calculated which informs a range of outcomes
• Contingency requirements taken as the value 90% likely not to be exceeded (P90).