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Question 98

The risk manager evaluates two contractors, contractor A and contractor B, for a project with a finish date of 15 December. The contractors' bids are the same, including the cost. After performing a Monte Carlo assessment on the contractors' schedules, the risk manager returns the following information:

In order for contractor A to meet the finish date of 15 December, it will cost an additional US$750,000, and will not change the confidence level. In order for contractor B to meet the finish date of 15 December, it will cost an additional US$600,000, and will increase the confidence level by 10%.

Which contractor should the risk manager select?

Contractor A, based on the probability and confidence levels, as there is a higher cumulative probability of completion by 15 December.

Contractor B, based on the probability and confidence levels, as there is a higher cumulative probability of completion by 15 December.

Contractor B, based on costing US$150,000 less than contractor A.

Contractor A, based on the confidence level.

Correct Answer: B

Contractor B should be selected based on the probability and confidence levels. Despite costing an additional US$600,000, Contractor B offers a 65% probability of completion by 31 December and a potential increase in confidence level by 10% if required to meet the 15 December date. This makes Contractor B more reliable in meeting the project's deadline compared to Contractor A.

Discussion

MikeMarloOption: B

Contractor B has both a higher probability of completion and a higher confidence level, making it the preferred choice. Additionally, the additional cost of US$600,000 seems justified given the improvement in confidence level.

AKB968Option: C

Additional Cost is main factor here, 750-600 = 150 lesser for project B. So choose option C. All other details are just time taking and of no use.