Risk Management, 5th Edition

21

Estimating Relationships

The estimating relationship method enables project personnel to evaluate a project, and based on that evaluation, to apply an equation to determine an appropriate contingency or risk funds budget. When using this method, the contingency fund represents the amount of funding (above that determined by cost analysis alone) required for work associated with unanticipated risks within the scale and scope of the project. The contingency fund requirement computed is usually expressed as a percentage of the baseline cost estimate. The technique is called an estimating relationship method because it uses some of the same techniques associated with cost estimating relationships (CERs) used in parametric cost estimating.