Modeling scheduling uncertainty in capital construction projects

Capital infrastructure projects with long-term implementation time frames are generally uncertain in nature. Engineers and planners attempting to estimate the costs of such projects often resort to using contingencies based on their experience without proper modeling of the uncertainty of costs, durations, or economic conditions. This paper presents a simulation-based model for assessing uncertainty associated with these projects. In particular the model accounts for expected fluctuations in the costs and durations of various work packages and, most significantly, it accounts for the inflation of costs over time based on when the work packages occur. The model uses Monte Carlo simulation techniques to account for time and cost and uses non-stationary time series modeling techniques to predict inflation rates. The model is implemented as a special purpose simulation template available in the public domain.