Stanford University Researcher Has Provided New Study Findings on Risk Management (A Review of Management Reserves in U.S. Government Construction Cost Estimation): Insurance – Risk Management

2026 JUN 08 (NewsRx) -- By a News Reporter-Staff News Editor at Insurance Daily News -- Current study results on risk management have been published. According to news reporting from Stanford, California, by NewsRx journalists, research stated, “While there is some agreement on estimating construction cost contingency for ‘known unknowns,’ there is little consensus on estimating management reserves for ‘unknown unknowns.’ Definitions of risk and uncertainty also differ between the economics and finance literature and the cost engineering literature.”

Our news journalists obtained a quote from the research from Stanford University: “This paper examines how cost engineering guidance on estimating management reserves is applied in government-sponsored project cost estimates. This lack of consensus is evident in a specific program: the management, treatment, and disposal of 212,000 cubic meters of mixed radioactive and hazardous chemical waste generated by plutonium production at the Hanford Nuclear Site. Over $30 billion has been invested in treatment facilities, vitrification plants, and laboratories analyzing gases, liquids, sludges, and salt cake from 177 aging storage tanks. The remaining construction and operating costs are highly uncertain, with estimates ranging from $300 billion to $640 billion. Analyses of alternatives for constructing Hanford waste treatment facilities assume 15% contingencies and 40% management reserves. A method is presented to compute the implicit moments of Extreme Value distributions of cost estimates for different options, helping determine whether one alternative’s cost estimate stochastically dominates others.”

According to the news reporters, the research concluded: “Adopting industry definitions of contingency and management reserves by federal government agencies could improve construction cost estimation in government-financed programs.”

For more information on this research see: A Review of Management Reserves in U.S. Government Construction Cost Estimation. Risks, 2026,14(5):118. (Risks - http://www.mdpi.com/journal/risks). The publisher for Risks is MDPI AG.

A free version of this journal article is available at https://doi.org/10.3390/risks14050118.

Our news editors report that additional information may be obtained by contacting Geoffrey Rothwell, Department of Economics, Stanford University, Stanford, CA 94305, United States.

(Our reports deliver fact-based news of research and discoveries from around the world.)