---
title: Risk Management for Construction Estimating
tags:
  - topic/construction
  - topic/estimating
  - topic/risk
  - type/cross-topic
---
# Risk Management for Construction Estimating

Cross-topic of [[risk-management]] and [[construction-estimating]].

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## TALK

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## Bid Risk

**Bid risk** is not only risk of project overrun given award,
but also includes the risk of wasted estimation effort due to bid loss,
and the opportunity cost of excluding other opportunities.

## Estimating as Risk Mitigation

Estimating resources should be allocated
according to Return on Mitigation (RoM),
that is, their contribution to _cost certainty_.

$\text{Efficiency} = -1 \times \frac{d\sigma}{dt}$

But the RoM of estimating effort has a steep drop off,
and cost will obviously never be entirely certain.

It is not foolhardy to tolerate imprecision in an estimate
when the effort to increase precision
will not decrease bid risk at least equivalently

(stigmatizing "assumptions")