BACKGROUND

Parametric cost risk is a statistical phenomena. One first assumes that the cost is defined by C = h(p1,..., pm) where h is a function of the parameters p1,..., pm. Second, one assumes that each of the parameters is a random variable. This applies to a single cost estimating relationship (CER) which might be in the typical Cobb-Douglas form C = p1 q1... pm qm where the qi are the elasticities, or to the sum of n work breakdown structure (WBS) elements pi in the form C = p1 +... + pn. In a complete cost risk simulation the cost of each WBS element would be a function hi of parameters p1,..., pm with the form C = h1(p) +... + hn(p)- 2-where p is the vector p = º