A Critique of Estimating Future Costs Using Most Likely Value
The article, A Critique of Estimating Future Costs Using Most Likely Value appears in the Autumn 2015 issue of the Remediation Journal. It notes that ASTM E2137 (Standard Guide for Estimating Monetary Costs and Liability for Environmental Matters, or E2137) is the guidance for developing estimates of future environmental costs. E2137 provides a hierarchy of cost estimation approaches, and expresses an explicit preference for the use of probabilistic cost analysis to develop expected values for environmental costs. Dr. Ram and his colleagues have published an article (Remediation Journal, Autumn 2013) which rejects the use of EV analysis, arguing that while “good in principle” it has little practical value because it is nearly impossible to develop supportable probabilities. The E2137 principles and processes have been used for more than a decade in the context of addressing future environmental costs, yet their view of E2137 renders the standard meaningless. The authors conclude that the deficiency is not in the ASTM standard, and that when properly constructed, probabilistic analyses can be used to develop expected values with supportable probabilities.
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