Stochastic method for forecasting project time and cost

This paper presents a new method for forecasting time and cost of construction projects at completion and/or at any intermediate time horizon. The method is designed to overcome limitations of current applications of earned value method in forecasting project cost and durations. The method adopts recently introduced extensions to EVM and the project ratios technique for progress reporting. It introduces modifications and developments that allow more accurate and practical results. Unlike the current applications of EVM method, the proposed method uses simulation to generate stochastic S-curves based on past performance achieved by contractors. The method enables the user to assess the uncertainty associated with forecasted project cost and duration at completion so that appropriate corrective actions can be taken, when needed. A numerical example is presented to demonstrate the use of the proposed method and to illustrate its improved forecasting accuracy over current methods. The results obtained by the developed method demonstrate the effectiveness of (1) using project ratios technique in forecasting project time and cost comparing to that obtained by traditional EVM method; (2) measuring the status of critical activities only, is particularly useful in forecasting project durations; and (3) accounting for uncertainties involved in the forecasting process provides flexibility in modelling forecasted project time and cost.