Quantitative Method for Updating Cost Contingency throughout Project Execution

This paper presents a method for project cost contingency forecasting and updating based on Value at Risk at a certain confidence level during project execution. The method is applied and demonstrated through an ongoing tunnel construction project lasting for several years. The method makes use of newly available information as the project progresses, and project daily cost and daily progress are analyzed and used as inputs for the quantitative model. The forecasts compare favorably with actual contingencies. The method provides opportunities to update contingencies at project milestones and to allocate appropriate contingencies at different project phases. This is beneficial for major companies which run multiple projects lasting for years, allowing them to set appropriate contingencies on certain timelines and to improve resource utilization.