DAVION

SYSTEMS

Expected Behavior

 

There are two different ways you can expect a cost item to behave when the project is implemented: closed and open-ended.

 

Closed Behavior

If you choose this option you are indicating that the cost to completion for that item is expected to remain within the limits you have set. For example, if you have assigned limits of -10% / +20% to a $1000 cost item, selecting closed behavior expresses a belief that under no circumstances will the incurred cost be less than $900 or greater than $1200.

Closed behavior is typically assigned to items that will be the subject of fixed-price subcontracts, or are well-understood, routine tasks.

 

Open-Ended Behavior

If you choose this option you are indicating that the cost to completion for that item is not guaranteed to remain within the range you have set. You must therefore assign an overrun probability, which is the probability that the incurred cost will exceed the upper limit you have specified.

The higher the overrun probability, the lower the confidence you feel in that cost estimate. 0% overrun probability is equivalent to closed behavior, whereas assigning an overrun probability of 50% expresses a belief that your estimate is just a guess.