The terms P10, P50, and P90 are commonly used in statistics, project management, finance, and engineering to describe different confidence levels for estimates or forecasts. These terms are advantageous when dealing with uncertain variables, such as costs, schedules, or resource reserves. Here's a breakdown of what each term generally means:
P10
- Meaning: Optimistic estimate
- Interpretation: There is a 10% chance that the actual outcome will be less favourable than the P10 estimate. Conversely, there is a 90% probability that the outcome will be equal to or better than the P10 estimate.
- Usage: Often used in scenarios where a more optimistic outlook is beneficial, such as in initial project proposals or when trying to secure funding.
P50
- Meaning: Median or most likely estimate
- Interpretation: There is a 50% chance that the actual outcome will be less favourable and a 50% chance that it will be more favourable than the P50 estimate.
- Usage: Commonly used as a baseline for planning and budgeting, as it represents a balanced view of risk and opportunity.
P90
- Meaning: Conservative estimate
- Interpretation: There is a 90% chance that the actual outcome will be equal to or better than the P90 estimate. There's only a 10% chance that the outcome will be less favourable.
- Usage: Often used in risk-averse scenarios, such as when a high level of certainty is required for project approval or when setting aside contingency reserves.
"P" Terms
- P1, P5, P20, etc.: These are other percentiles that can describe various levels of confidence or risk. The lower the number, the more optimistic the estimate; the higher the number, the more conservative the estimate.
For example, a P20 estimate would be more optimistic than a P50 but less optimistic than a P10. Similarly, a P80 estimate would be more conservative than a P50 but less conservative than a P90.
These terms help stakeholders understand the range of possible outcomes and make informed decisions based on their risk tolerance and objectives.
Source:
https://www.dnv.com/article/terminology-explained-p10-p50-and-p90-202611
https://solargis.com/blog/best-practices/how-to-calculate-p90-or-other-pxx-pv-energy-yield-estimates
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