Simulation-facilitated model for assessing cost correlations

Abstract

Project cost becomes increasingly variable if many cost items for a construction project are correlated, and this can increase the uncertainty of completing a project within a target budget. This work presents a factor based computer simulation model (COSTCOR) for evaluating project costs given correlations among cost items. Uncertainty in the total cost distribution of an item (grandparent) is transferred to several factor cost distributions (parents) according to qualitative estimates of the sensitivity of each cost item to each factor Each cost distribution is then decomposed further into a family of distributions (children; costs given factor conditions), with each child corresponding to a factor condition. Correlations are retrieved by sampling from the child distributions with the same condition for a given iteration of the simulation. COSTCOR integrates the uncertainty effects caused by each factor at the project cost level, thus making it easier for management to determine what parts of the project need to be controlled.