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Monte Carlo analysis: simulation of cost risks
AINS Group’s Monte Carlo method combines the results of academic research with hands-on experience from hundreds of realisation and cost accounting projects. With the Monte Carlo method, we can identify, analyse and illustrate the cost risks pertaining to the main areas of a building project. And when you know the risks, you can control them better.
The Monte Carlo simulation utilises the cost accounting expertise of various project partners, gathered via interviews and workshop processes. This gives us a good idea of the overall uncertainty of the project, the likelihood of the realisation of the cost estimate, and the main sources of uncertainty. The simulation generates an easy-to-understand presentation of the main cost risks and their impact on the estimate of total costs.
We recommend performing the analysis in conjunction with the estimation of target costs and building components. In the project, the cost stimulation results can be used as an efficient project management tool.
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Examples of analysis results:
The Monte Carlo simulation produces the following data:
- The likelihood that the costs exceed/remain below the estimate
- The overall cost estimate’s minimum and maximum values
- Reasonable target costs and contingencies if the target is, for example, a 90% likelihood of meeting the cost estimate
- The central cost risk factors that must be controlled via cost management measures
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Head of Business Unit, Cost and volume calculation
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