Contingency is often a vital element of capex management as it mitigates the risk of unforeseen events and their impact on the overall success of a project.
Key Concepts
If required, Stratex can be configured to automate Contingency calculation. If Contingency calculation is activated by the administrator, users may be able to optionally calculate contingency, or the administrator may enforce contingency calculations.
Stratex offers two contingency optionswhich are PERT and percentage.
PERT (Program Evaluation and Review Technique): PERT is an algorithm that is used in project management areas such as scheduling and risk management and considers an array of varying factors in its calculation. This calculation will be automatically applied to a project in Stratex if configured accorded accordingly.
PERT is a simplified Beta Distribution where:
Estimate = (Low + Mid x 4 + High) / 6
Std Deviation = (High - Low ) / 6
Max with 95% confidence = Estimate + 2 * std deviations
PERT Contingency = Max - Estimate
Percentage: Stratex offers the option to manually input a percentage to use for the contingency calculations for a project instead of the automated PERT formula. This is simply a contingency value that is a percentage of the total investment.
Stratex contingency is calculated for information only and is not considered in the determination of required approvers.
Instructions
When estimating the cost of an initiative Option, under Costs/Dates, there will be an add contingency option which can be selected (only if contingency calculations have been enabled by the administrator).
If PERT is configured, a contingency value will automatically be calculated.
If Percentage is configured, and automatic calculation is configured, the contingency will be calculated at the configured percentage.
If Percentage is configured with manual calculation enabled, the percentage can be adjusted as required.
