Risk Analysis & Value Engineering Flashcards

In value engineering function analysis, a 'basic function' is defined as:

Answer: The primary purpose that makes the item worth having

The basic function is the essential purpose of the item—removing it would make the item worthless or defeat its design intent.

Which correlation coefficient value indicates that two risk variables are perfectly positively correlated in a Monte Carlo model?

Answer: +1.0

A correlation coefficient of +1.0 means the two variables move perfectly in the same direction, maximizing combined variance.

A contingency reserve addresses which type of risk?

Answer: Known unknowns (identified risks)

Contingency reserve covers identified but uncertain risk events (known unknowns), while management reserve covers unknown unknowns.

The FAST diagram in value engineering is used to:

Answer: Map the logical relationships between functions

A Function Analysis System Technique (FAST) diagram shows how and why functions relate to each other in a hierarchical logic map.

When a risk analysis uses a triangular distribution with values of $100K (optimistic), $200K (most likely), and $500K (pessimistic), the mean is approximately:

Answer: $267K

For a triangular distribution, mean = (optimistic + most likely + pessimistic) / 3 = ($100K + $200K + $500K) / 3 ≈ $267K.

Which of the following best describes a 'risk attitude' of risk-averse in project cost estimating?

Answer: Preferring a certain outcome over a gamble with higher expected value

A risk-averse decision-maker prefers certainty and will sacrifice some expected value to avoid variability.

In value engineering, the 'evaluation phase' of the job plan involves:

Answer: Ranking and screening creative alternatives based on feasibility and cost

The evaluation phase applies criteria to narrow the creative alternatives down to the most promising candidates for further development.