Achieving ‘best value’ for the community by deployment of risk based cost estimation using Monte-Carlo Simulation to rate-payer-funded capital intensive road projects.

Mahender Rao; Harshavardhan Vijay Ranade

doi:10.5130/opm.v1i1.4112

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Published: Sep 14, 2014

DOI: https://doi.org/10.5130/opm.v1i1.4112

Keywords:

Risk- based cost estimation, road projects, Monte Carlo simulation, budget forecasting, infrastructure capital projects

Mahender Rao

Maribyrnong City Council

Harshavardhan Vijay Ranade

Maribyrnong City Council

Abstract

This paper presents the application and validation of a new tool developed by the first author for accurate risk-based estimation of project budgets. Typical capital intensive projects to which this tool can be applied include road reconstruction, road resheet and road rehabilitation projects. Quantitative risk analysis and stochastic modeling using Monte -Carlo simulation is embedded in the algorithms of the computer code. The tool forecasts a range of possible project costs and the probability of the occurrence of those costs by taking into account uncertainties and associated risks. Application of the tool to capital intensive road projects designed by the second author and constructed in 2011 & 2012 demonstrates its validity and utility. Comparisons of forecasted estimates using this tool with actual costs and with traditional deterministic methods of cost estimation (such as --point base-case estimates inclusive of contingency) provide valuable insights that can aid management in evaluating alternatives and in making informed decisions when estimating and allocating budgets to a portfolio of road projects.

Issue

Vol 1 No 1 (2014)

Section

Practice Papers

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Author Biographies

Mahender Rao, Maribyrnong City Council

Mahender Rao graduated as a Civil Engineer from Osmania University in India. He worked both as a construction and contracts engineer for Larsen & Toubro (L&T), one of the largest engineering firms in India having a turn-over of 13.5 billion US$. He specialized in activity based costing, tendering, contract management, etc. and won several prestigious residential, industrial and infrastructure contracts for the organisation. With a view to drive-in efficiencies in estimation practices he teamed up with private software experts and with their help, developed innovative Invoice Management, Project Finance Management and Risk Based Estimation Systems. Currently he is working for Maribyrnong City Council (MCC) as a Construction Engineer. He is now involved in testing those products by customizing them for MCC.

Harshavardhan Vijay Ranade, Maribyrnong City Council

Harshavardhan V. Ranade holds a PhD in Structural Engineering from RMIT, Australia. He has a Master’s degree in Information Technology from Edith Cowan University in Perth, Western Australia and a Bachelors Degree in Civil Engineering from the University of Pune, India. He is a professional engineer with more than eight years of international experience in civil design of road and related infrastructure and structural design/analysis of buildings and bridges. He has worked in the public and private sectors in Australia and in the private sector in India. He currently holds the position of Design/Project Engineer at Maribyrnong City Council since 2009. He has developed new and innovative tools during and after his PhD which involved significant applied research, software development and finite element analysis of multi-storey buildings. The tools were validated on building designs for projects.

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Mahender Rao, Maribyrnong City Council

Harshavardhan Vijay Ranade, Maribyrnong City Council

References