Woodward, David G.
Use of sensitivity analysis in build-own-operate-transfer project evaluation
International Journal of Project Management, 13, (4), . (doi:10.1016/0263-7863(95)00016-J).
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Sensitivity analysis has long been recognised as a useful analytical procedure when applied to the financial evaluation of capital projects. Whilst the technique cannot evaluate risk per se, it is nevertheless considered useful in identifying those variables which contribute most to the overall riskiness of an investment, and in respect of which most attempts at control must therefore be directed. The paper presents findings from a survey of the use of sensitivity analysis by the various parties involved in build-own-operate-transfer contracts to illustrate the application of the technique at the practical level to assist in the risk-management process associated with major projects. Both the usefulness and limitations of the technique are thereby identified.
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