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Article: Analytical and approximate variance of total project cost

TitleAnalytical and approximate variance of total project cost
Authors
KeywordsConstruction
Correlation
Costs
Simulation
Issue Date2002
PublisherAmerican Society of Civil Engineers. The Journal's web site is located at http://www.pubs.asce.org/journals/co.html
Citation
Journal Of Construction Engineering And Management, 2002, v. 128 n. 5, p. 456-460 How to Cite?
AbstractThe statistical variance of total project cost is usually estimated by means of Monte Carlo simulation on the assumption that exact analytic approaches are too difficult. This paper tests that assumption and shows that, contrary to expectations, the analytic solution is relatively straightforward. It is also shown that the coefficient of variation is unaffected by the size (floor area) of the project when using standardized component costs. A case study is provided in which actual component costs are analyzed to obtain the required total cost variance. The results confirm previous work in showing that the approximation of the second moment (variance) under the assumption of independence considerably underestimates the exact value. The analysis then continues to examine the effects of professional judgment, and, with the simulated data used, the approximation is shown to be reasonably accurate - the professional judgment absorbing most of the intercorrelations involved. An example is also given in which the component unit quantities are priced by their average unit costs and which again shows the approximation to be close to the true value. Finally, this is extended to show how the exact total project cost variances may be obtained for each project.
Persistent Identifierhttp://hdl.handle.net/10722/70656
ISSN
2015 Impact Factor: 1.152
2015 SCImago Journal Rankings: 1.219
ISI Accession Number ID
References

 

DC FieldValueLanguage
dc.contributor.authorSkitmore, Men_HK
dc.contributor.authorNg, STen_HK
dc.date.accessioned2010-09-06T06:24:56Z-
dc.date.available2010-09-06T06:24:56Z-
dc.date.issued2002en_HK
dc.identifier.citationJournal Of Construction Engineering And Management, 2002, v. 128 n. 5, p. 456-460en_HK
dc.identifier.issn0733-9364en_HK
dc.identifier.urihttp://hdl.handle.net/10722/70656-
dc.description.abstractThe statistical variance of total project cost is usually estimated by means of Monte Carlo simulation on the assumption that exact analytic approaches are too difficult. This paper tests that assumption and shows that, contrary to expectations, the analytic solution is relatively straightforward. It is also shown that the coefficient of variation is unaffected by the size (floor area) of the project when using standardized component costs. A case study is provided in which actual component costs are analyzed to obtain the required total cost variance. The results confirm previous work in showing that the approximation of the second moment (variance) under the assumption of independence considerably underestimates the exact value. The analysis then continues to examine the effects of professional judgment, and, with the simulated data used, the approximation is shown to be reasonably accurate - the professional judgment absorbing most of the intercorrelations involved. An example is also given in which the component unit quantities are priced by their average unit costs and which again shows the approximation to be close to the true value. Finally, this is extended to show how the exact total project cost variances may be obtained for each project.en_HK
dc.languageengen_HK
dc.publisherAmerican Society of Civil Engineers. The Journal's web site is located at http://www.pubs.asce.org/journals/co.htmlen_HK
dc.relation.ispartofJournal of Construction Engineering and Managementen_HK
dc.subjectConstructionen_HK
dc.subjectCorrelationen_HK
dc.subjectCostsen_HK
dc.subjectSimulationen_HK
dc.titleAnalytical and approximate variance of total project costen_HK
dc.typeArticleen_HK
dc.identifier.emailNg, ST:tstng@hkucc.hku.hken_HK
dc.identifier.authorityNg, ST=rp00158en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1061/(ASCE)0733-9364(2002)128:5(456)en_HK
dc.identifier.scopuseid_2-s2.0-13944263949en_HK
dc.identifier.hkuros75952en_HK
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-13944263949&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume128en_HK
dc.identifier.issue5en_HK
dc.identifier.spage456en_HK
dc.identifier.epage460en_HK
dc.identifier.isiWOS:000178294000011-
dc.publisher.placeUnited Statesen_HK
dc.identifier.scopusauthoridSkitmore, M=7003387239en_HK
dc.identifier.scopusauthoridNg, ST=7403358853en_HK

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