Enhancing Risk Calibration Methods

By Christian B. Smart, Ph.D., CCEA
Chief Scientist, Galorath Federal

Calibration methods such as the Enhanced Scenario-Based Method allow analysts to establish cost risk analyses that are based on objective data. Some methods currently in use rely on the normal and two-parameter lognormal distributions. Empirical data, however, indicates that a three-parameter lognormal is more appropriate for modeling cost risk. We discuss three-parameter lognormal distributions and how to calibrate cost risk using this distribution. We compare the results with traditional calibration to two-parameter normal and lognormal distributions. Calibration methods that have been published to date typically deal with only the …