Touran, A and Wiser, E P (1992) Monte Carlo technique with correlated random variables. Journal of Construction Engineering and Management, 118(2), pp. 258-272. ISSN 0733-9364
Abstract
In this paper the impact of correlation among cost components on the total cost variance of a construction project is analyzed. The Monte Carlo simulation approach for project risk analysis is reviewed and the problems with implementing this technique is described. Specifically, issues related to the type of the underlying cost distributions and existing correlations between cost items are explored. One suggested methodology for generating correlated random numbers in a simulation environment is reviewed. A multivariate lognormal distribution is used to generate correlated random numbers for various construction cost components. A large, real-life data set is used to show the implementation of the suggested method and the results of the analysis are analyzed. It is shown that the proposed method is capable of predicting the variance of the total cost with good accuracy. Some guidelines for future research in this area are presented.
| Item Type: | Article |
|---|---|
| Index terms: | accuracy, construction project, methodology, variance, Monte Carlo simulation, construction cost, project risk analysis, implementation, cost variance |
| Subjects: | financial and cost management, contractual arrangements, modelling and simulation, professional development, financial risk, production management, research methods, financial analysis, measurement and scaling |
| Topics: | Procurement, Cost Management, Information Management, Research Practice, Project Management |
| Descriptive scope: | 4 PCTA |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here