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Risk management - Multiple variables

Multiple variables

Multiple variablesMultiple variables

In some industries it is accepted that some WORK PACKAGES have a direct relationship to others in terms of their cost.
For example:

WORK PACKAGE A = 10 man weeks

It is known that work package B has a direct relationship with work package A. In fact, it always take twice as long to complete.
This is an example of ‘conditional correlation’ (at 100%) that we saw earlier.

So,

WORK PACKAGE B = 20 man weeks.

These relationships are quite common.

Another situation which may occur is when dealing with QUANTITIES of materials which do not have a fixed UNIT COST.
See the example below.

In this case, the exact quantities are unknown and are represented by a 3 point estimate.
Also, the unit cost is unknown and represented by a 3 point estimate.

The software will calculate a CONTRIBUTION for both the quantity and the Unit cost. The overall contribution is calculated by multiplying together the individual contributions.

Note: In this case, had we just multiplied together the totals of the likely values we would have got 19 x 26 = 494! A lot larger than 109.7. The latter reflects the weighting of the likely values within the ranges.