What happens to the reserve when costs rise together?
Cost packages share drivers: steel, labor and diesel arrive together. Correlated Monte Carlo prices what that does to the tail, and returns the probability your contingency is exhausted as one number.
Construction Intermediate Monte Carlo Pro engine
After you install, this is the model to open.
Will the Contingency Last?
- In your spreadsheet, click the Sortia icon in the strip of icons down the right-hand edge. No strip? Click the arrow at the bottom-right to open it. You can also use Extensions, then Sortia, then Open Sortia.
- Click Start from a template and put that name in the search box.
- Pick the card with that name and click Load this template. It arrives on a new tab with real numbers already in it.
This one runs on a Pro engine, and every free install includes five full-quality runs on your own numbers, shared across all five Pro engines rather than five for each. After that, Pro is $199/year.
The answer
On 20,000 trials:
- Total cost mean
- $7.41M
- Total cost P95
- $8.07M
- Contingency exhausted
- 13% of trials
The contingency survives 87 runs in 100, which is a defensible reserve, and the correlations are doing real work: delete the six pairs and the exhaustion probability drops, which is exactly the optimism uncorrelated estimates smuggle in. This is the number a PMO review actually wants on one slide.
The model
Four packages estimated as PERT ranges, six +0.5 correlation pairs for the shared drivers, a $7.2M base budget and $650K of contingency. A flag cell turns on in any trial where the overrun exceeds the contingency.
| Four cost packages | PERT ranges from the estimators |
| Correlations | six pairs at +0.5 |
| Contingency | $650,000 |
| P(contingency exhausted) | simulated |
Once it is in your sheet
- The model arrives with real numbers in it and runs as it stands, so you can press the button first and understand it second.
- Change the numbers to yours. The sheet marks which cells are inputs and which hold formulas, and most labels carry a note explaining the row.
- Press the run button at the bottom of the panel. It is labeled for the tool you are in, and the result lands on its own tab, with a written reading of it beside the figures.
Never used Google Sheets? Start here goes the whole way, in seven steps, and assumes nothing.
Next question
- Which finish date can you put in the contract?The P80 Construction Schedule
- What are the odds the rain costs you the date?Will the Weather Blow the Deadline?
- What is finishing on time actually worth?What Do Late Days Really Cost?
- When does the punch list actually finish?Is Closeout on Track?
- What do the lean, normal and cautious bids each look like?Three Ways to Price This Bid
- Cheapest crew per site, or cheapest week?Which Crew Goes to Which Site?
Every model like this one, and the method behind them: Monte Carlo simulation.