Probability Methods for Cost Uncertainty Analysis, 2nd Edition

423 Cost Uncertainty Analysis Practice Points

(refer to Figures 9.3 and 9.4). Pearson correlations implied by logically

dened functional relationships, which determine a WBS element’s cost,

are more intuitive for reviewers of the analysis than debating the merits of

subjectively assigned correlations between some or all WBS cost element

pairs.

Do not introduce rank correlation into cost uncertainty analysis, whether

using Monte Carlo simulation or method of moments approaches.

∗

If rank

correlations are introduced into an analysis that is already capturing Pearson

product-moment correlations (e.g., from the presence of