A risk-based cost control methodology for constructing complex structures with the mobile offshore base as a case study

The civil engineering profession has long recognized the need for cost control on projects. Cost control and prevention of cost escalation may be considered the most important function of project managers. Several techniques have been established to control construction costs, unfortunately all of these techniques rely on controlling line items which have already experienced cost escalation. This research presents an alternative to these established methods by presenting a risk-based cost control system that employs a simulation technique for cost forecasting And combines risk analysis with earned value. Utilizing the presented approach project managers will be able to anticipate potential cost concerns, forecast costs at completion, and proactively prevent cost variances. Existing cost control methodologies are described in some detail. Most notable is the earned value technique which is currently used by the construction industry. Its disadvantage is that it does not aggressively forecast potential cost issues. There is a recognized benefit to performing a risk analysis when developing a project's strategy, cost estimate, and schedule. The maximum benefit from a risk analysis is achieved when project managers actively manage the risk identified and quantified in a risk analysis. Risk analysis techniques as applied to construction are presented, expanded upon, and combined with cost control to present a proposed methodology. A risk-based methodology is presented that provides an early warning and accounts for potential negative and positive cost impacts. The proposed methodology is applied to the planning and execution phases of a project. In the planning phase risk assessment matrix tables are used to quantify risks and simulation is used to develop target costs and schedule that accounts for uncertainty. The execution phase applies similar techniques and earned value is used to help control cost. Decision analysis techniques are used in both phases to assist project managers to make timely and appropriate decisions. A case study that applies the proposed methodology is demonstrated as it applies to building the proposed Mobile Offshore Base (MOB). The MOB is estimated, scheduled and all of the steps in the proposed methodology are demonstrated.