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Risk, Opportunity, Uncertainty and Other Random Models [Minkštas viršelis]

  • Formatas: Paperback / softback, 316 pages, aukštis x plotis: 234x156 mm, weight: 480 g
  • Serija: Working Guides to Estimating & Forecasting
  • Išleidimo metai: 24-Jun-2024
  • Leidėjas: Routledge
  • ISBN-10: 1032838795
  • ISBN-13: 9781032838793
  • Formatas: Paperback / softback, 316 pages, aukštis x plotis: 234x156 mm, weight: 480 g
  • Serija: Working Guides to Estimating & Forecasting
  • Išleidimo metai: 24-Jun-2024
  • Leidėjas: Routledge
  • ISBN-10: 1032838795
  • ISBN-13: 9781032838793

This volume considers risk and uncertainty and how to model them, including the ubiquitous Monte Carlo Simulation. This book forms the backdrop for the guidance on Monte Carlo Simulation, and provides advice on the do’s and don’ts. It can also be used to test other assumptions in a more general modelling sense.



Risk, Opportunity, Uncertainty and Other Random Models (Volume V in the Working Guides to Estimating and Forecasting series) goes part way to debunking the myth that research and development cost are somewhat random, as under certain conditions they can be observed to follow a pattern of behaviour referred to as a Norden-Rayleigh Curve, which unfortunately has to be truncated to stop the myth from becoming a reality! However, there is a practical alternative in relation to a particular form of PERT-Beta Curve.





However, the major emphasis of this volume is the use of Monte Carlo Simulation as a general technique for narrowing down potential outcomes of multiple interacting variables or cost drivers. Perhaps the most common of these in the evaluation of Risk, Opportunity and Uncertainty. The trouble is that many Monte Carlo Simulation tools are ‘black boxes’ and too few estimators and forecasters really appreciate what is happening inside the ‘black box’. This volume aims to resolve that and offers tips into things that might need to be considered to remove some of the uninformed random input that often creates a misinformed misconception of ‘it must be right!’





Monte Carlo Simulation can be used to model variable determine Critical Paths in a schedule, and is key to modelling Waiting Times and cues with random arisings. Supported by a wealth of figures and tables, this is a valuable resource for estimators, engineers, accountants, project risk specialists as well as students of cost engineering.

Recenzijos

"In the Working Guides to Estimating and Forecasting Alan has managed to capture the full spectrum of relevant topics with simple explanations, practical examples and academic rigor, while injecting humour into the narrative." Dale Shermon, Chairman, Society of Cost Analysis and Forecasting (SCAF).

"If estimating has always baffled you, this innovative well illustrated and user friendly book will prove a revelation to its mysteries. To confidently forecast, minimise risk and reduce uncertainty we need full disclosure into the science and art of estimating. Thankfully, and at long last the "Working Guides to Estimating & Forecasting" are exactly that, full of practical examples giving clarity, understanding and validity to the techniques. These are comprehensive step by step guides in understanding the principles of estimating using experientially based models to analyse the most appropriate, repeatable, transparent and credible outcomes. Each of the five volumes affords a valuable tool for both corporate reference and an outstanding practical resource for the teaching and training of this elusive and complex subject. I wish I had access to such a thorough reference when I started in this discipline over 15 years ago, I am looking forward to adding this to my library and using it with my team." - Tracey L Clavell, Head of Estimating & Pricing, BAE Systems Australia

"At last, a comprehensive compendium on these engineering math subjects, essential to both the new and established "cost engineer"! As expected the subjects are presented with the authors usual wit and humour on complex and daunting "mathematically challenging" subjects. As a professional trainer within the MOD Cost Engineering community trying to embed this into my students, I will be recommending this series of books as essential bedtime reading." - Steve Baker, Senior Cost Engineer, DE&S MOD

"Alan has been a highly regarded member of the Cost Estimating and forecasting profession for several years. He is well known for an ability to reduce difficult topics and cost estimating methods down to something that is easily digested. As a master of this communication he would most often be found providing training across the cost estimating and forecasting tools and at all levels of expertise. With this 5-volume set, Working Guides to Estimating and Forecasting, Alan has brought his normal verbal training method into a written form. Within their covers Alan steers away from the usual dry academic script into establishing an almost 1:1 relationship with the reader. For my money a recommendable read for all levels of the Cost Estimating and forecasting profession and those who simply want to understand what is in the blackbox just a bit more." - Prof Robert Mills, Margin Engineering, Birmingham City University. MACOSTE, SCAF, ICEAA.

"Finally, a book to fill the gap in cost estimating and forecasting! Although other publications exist in this field, they tend to be light on detail whilst also failing to cover many of the essential aspects of estimating and forecasting. Jones covers all this and more from both a theoretical and practical point of view, regularly drawing on his considerable experience in the defence industry to provide many practical examples to support his comments. Heavily illustrated throughout, and often presented in a humorous fashion, this is a must read for those who want to understand the importance of cost estimating within the broader field of project management." - Dr Paul Blackwell, Lecturer in Management of Projects, The University of Manchester, UK.

"Alan Jones provides a useful guidebook and navigation aid for those entering the field of estimating as well as an overview for more experienced practitioners. His humorous asides supplement a thorough explanation of techniques to liven up and illuminate an area which has little attention in the literature, yet is the basis of robust project planning and successful delivery. Alans talent for explaining the complicated science and art of estimating in practical terms is testament to his knowledge of the subject and to his experience in teaching and training." - Therese Lawlor-Wright, Principal Lecturer in Project Management at the University of Cumbria

"Alan Jones has created an in depth guide to estimating and forecasting that I have not seen historically. Anyone wishing to improve their awareness in this field should read this and learn from the best." Richard Robinson, Technical Principal for Estimating, Mott MacDonald

"The book series of Working Guides to Estimating and Forecasting is an essential read for students, academics and practitioners who interested in developing a good understanding of cost estimating and forecasting from real-life perspectives". Professor Essam Shehab, Professor of Digital Manufacturing and Head of Cost Engineering, Cranfield University, UK.

"In creating the Working Guides to Estimating and Forecasting, Alan has captured the core approaches and techniques required to deliver robust and reliable estimates in a single series. Some of the concepts can be challenging, however, Alan has delivered them to the reader in a very accessible way that supports lifelong learning. Whether you are an apprentice, academic or a seasoned professional, these working guides will enhance your ability to understand the alternative approaches to generating a well-executed, defensible estimate, increasing your ability to support competitive advantage in your organisation." - Professor Andrew Langridge, Royal Academy of Engineering Visiting Professor in Whole Life Cost Engineering and Cost Data Management, University of Bath, UK.

"Alan Joness "Working Guides to Estimating and Forecasting" provides an excellent guide for all levels of cost estimators from the new to the highly experienced. Not only does he cover the underpinning good practice for the field, his books will take you on a journey from cost estimating basics through to how estimating should be used in manufacturing the future reflecting on a whole life cycle approach. He has written a must-read book for anyone starting cost estimating as well as for those who have been doing estimates for years. Read this book and learn from one of the best." - Linda Newnes, Professor of Cost Engineering, University of Bath, UK.

List of Figures

List of Tables

Foreword






Introduction and objectives





Why write this book? Who might find it useful? Why five volumes?





Why write this series? Who might find it useful?



Why five volumes?




Features youll find in this book and others in this series





Chapter context



The lighter side (humour)



Quotations



Definitions



Discussions and explanations with a mathematical
slant for Formula-philes




Discussions and explanations without a mathematical
slant for Formula-phobes




Caveat augur



Worked examples



Useful Microsoft Excel functions and facilities



References to authoritative sources



Chapter reviews




Overview of chapters in this volume



Elsewhere in the Working Guide to Estimating & Forecasting series





Volume I: Principles, Process and Practice of Professional
Number Juggling




Volume II: Probability, Statistics and Other Frightening Stuff



Volume III: Best Fit Lines and Curves, and
Some Mathe-Magical Transformations




Volume IV: Learning, Unlearning and Re-Learning Curves



Volume V: Risk, Opportunity, Uncertainty and Other

Random Models




Final thoughts and musings on this volume and series

References




Norden-Rayleigh Curves for solution development





Norden-Rayleigh Curves:Who, what, where, when and why?





Probability Density Function and Cumulative Distribution Function



Truncation options



How does a Norden-Rayleigh Curve differ from the
Rayleigh Distribution?




Some practical limitations of the Norden-Rayleigh Curve




Breaking the Norden-Rayleigh Rules





Additional objectives: Phased development (or the camelling)



Correcting an overly optimistic view of the problem
complexity:The Square Rule




Schedule slippage due to resource ramp-up delays:
The Pro Rata Product Rule




Schedule slippage due to premature resource reduction




Beta Distribution: A practical alternative to Norden-Rayleigh





PERT-Beta Distribution: A viable alternative to Norden-Rayleigh?



Resource profiles with Norden-Rayleigh Curves

and Beta Distribution PDFs




Triangular Distribution: Another alternative to Norden-Rayleigh



Truncated Weibull Distributions and their Beta equivalents





Truncated Weibull Distributions for solution development



General Beta Distributions for solution development




Estimates to Completion with Norden-Rayleigh Curves





Guess and Iterate Technique



Norden-Rayleigh Curve fitting with Microsoft Excel Solver



Linear transformation and regression



Exploiting Weibull Distributions double log linearisation constraint



Estimates to Completion Review and conclusion




Chapter review



References






Monte Carlo Simulation and other random thoughts





Monte Carlo Simulation:Who, what, why, where,
when and how






Origins of Monte Carlo Simulation: Myth and mirth



Relevance to estimators and planners



Key principle: Input variables with an uncertain future



Common pitfalls to avoid



Is our Monte Carlo output normal?



Monte Carlo Simulation: A model of accurate imprecision



What if we dont know what the true Input Distribution

Functions are?




Monte Carlo Simulation and correlation





Independent random uncertain events How real is that?



Modelling semi-independent uncertain events
(bees and hedgehogs)




Chain-Linked Correlation models



Hub-Linked Correlation models



Using a Hub-Linked model to drive a background
isometric correlation




Which way should we go?



A word of warning about negative correlation in Monte Carlo Simulation




Modelling and analysis of Risk, Opportunity and Uncertainty





Sorting the wheat from the chaff



Modelling Risk Opportunity and Uncertainty in a single model



Mitigating Risks, realising Opportunities and contingency planning



Getting our Risks, Opportunities and Uncertainties in a tangle



Dealing with High Probability Risks



Beware of False Prophets: Dealing with Low Probability
High Impact Risks




Using Risk or Opportunity to model extreme values
of Uncertainty




Modelling Probabilities of Occurrence



Other random techniques for evaluating Risk, Opportunity and Uncertainty




ROU Analysis: Choosing appropriate values with confidence





Monte Carlo Risk and Opportunity Analysis is

fundamentally flawed!




Chapter review



References






Risk, Opportunity and Uncertainty: A holistic perspective





Top-down Approach to Risk, Opportunity and Uncertainty





Top-down metrics



Marching Army Technique: Cost-schedule related variability



Assumption Uplift Factors: Cost variability independent
of schedule variability




Lateral Shift Factors: Schedule variability independent
of cost variability




An integrated Top-down Approach




Bridging into the unknown: Slipping and
Sliding Technique




Using an Estimate Maturity Assessment as a guide to ROU maturity



Chapter review

References




Factored Value Technique for Risks and Opportunities





The wrong way



A slightly better way



The best way



Chapter review

Reference




Introduction to Critical Path and Schedule Risk Analysis





What is Critical Path Analysis?



Finding a Critical Path using Binary Activity Paths in Microsoft Excel



Using Binary Paths to find the latest start and finish times, and float



Using a Critical Path to Manage Cost and Schedule



Modelling variable Critical Paths using Monte Carlo Simulation



Chapter review

References




Finally, after a long wait Queueing Theory





Types of queues and service discipline



Memoryless queues



Simple single channel queues (M/M/1 and M/G/1)





Example of Queueing Theory in action M/M/1 or M/G/1




Multiple channel queues (M/M/c)





Example of Queueing Theory in action M/M/c or M/G/c




How do we spot a Poisson Process?



When is Weibull viable?



Can we have a Poisson Process with an increasing/decreasing trend?



Chapter review



References

Epilogue

Glossary of estimating and forecasting terms

Legend for Microsoft Excel Worked Example Tables in Greyscale

Index
Alan R. Jones is Principal Consultant at Estimata Limited, aconsultancy service specialising in Estimating Skills Training. He is a Certified Cost Estimator/Analyst (US) and Certified Cost Engineer (CCE) (UK). Prior to setting up his own business, he enjoyed a 40-year career in the UK aerospace and defence industry as an estimatorAlan is a Fellow of the Association of Cost Engineers and a member of the International Cost Estimating and Analysis Association. Historically (some four decades ago), Alan was a graduate in Mathematics from Imperial College of Science and Technology in London, and was an MBA Prize-winner at the Henley Management College.