Integrating Estimates at Completion with Cost Contingency Management

Forecasting the final cost based on Earned Value Management (EVM) data and managing cost contingency consumption in ongoing projects are typically considered by scholars and practitioners as two distinct duties of the project team. However, the managerial approach to cost contingency management may significantly impact on final cost performance. To this end, this paper proposes a theoretical model that considers different behaviors of cost contingency (CC) consumption to help forecast risk adjusted cost estimates at completion (CEAC). Three possible S-shaped growth profiles are proposed to represent three main categories of managerial attitudes in responding to project risk, namely: aggressive, neutral or passive CC consumption rates. Then, these curves are integrated into schedule-based CEAC prediction models, using nonlinear regression. An earned value management (EVM) dataset is used to show applicability and viability of the methodology. The paper is a contribution to bridging the gap between EVM and CC management. It provides project managers with a model to estimate the range of possible CEACs based on different risk attitudes.