Monte Carlo Simulation Practicum
Monte Carlo analysis is commonly used to predict the cost of future activity by acknowledging the uncertainty of the assumptions that contribute to the cost estimate and enabling the expression of those uncertainties in clever ways that bring forth and capture the subtle information that does exist.
This paper will empower those not familiar with Monte Carlo simulation with the knowledge of how the mechanics of the Monte Carlo simulation works and how to use this valuable tool effectively and with confidence. The approach in the presentation is to lead the audience through some simple yet powerful examples that clearly convey the principals and applications of Monte Carlo simulation.
The paper avoids the use of fancy words and transfers the gist of the knowledge to the audience. This presentation is designed for those just now introduced to the concept of Monte Carlo analysis applied to cost estimation and is quite useful to those who wish to have the means to explain the analysis to others such as co-workers, supervisors or clients. The materials distributed in the presentation are suitable for use as a reference and for instruction to others; the materials may be copied freely as long as the presenter’s information remains in the footer of the document. The objective of the presenter is to empower all with the knowledge and skill to use this analysis technique effectively and with confidence.
Mr. S. David Alley, is a Professional Engineer with decades of electric power plant design, construction and operating power plant experience. Almost all engineering designs require some estimation of costs—either as a requirement of the assignment or simply because the fundamental mission of engineering is delivering a cost-effective design. Mr. Alley has performed thousands of cost estimations from back-of-the envelope style to elaborate cost estimating models using Monte Carlo simulation techniques. Mr. Alley is founder and president of ANNA, Inc, an Annapolis-based electrical generation consulting company, which won the award for the fastest growing consulting firm on the INC 5000 list in 2007. See www.annainc.com for more information about ANNA, Inc and David Alley.