---
id:
aliases: []
title: Uncertainty in Construction Estimating
tags: []
---
# Uncertainty in Construction Estimating

Cross-topic of [[uncertainty]] and [[construction-estimating]].

This note is intended to be purely descriptive.
See [[actuarial-science-for-construction-estimating]]
and [[risk-management-for-construction-estimating]]
for strategy based on such uncertainty.

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## TALK

What do I mean that project cost is uncertain until the last invoice?

What distributions exist
which are known,
which can never be known and must be estimated?

[[bid-price-modeling]]

***

With perfect information all outcomes are certain.

There exists some distribution representing the range of possible costs for a project.
The remaining uncertainty represents ignorance of information an estimator can not feasibly obtain.

***

Suppose the estimator has spent years on the bid,
running simulations, consulting experts, etc.

Suppose the estimator has received a message from a time traveler
which details significant news events and commodity markets
for the duration of the project.

Suppose the estimator is prescient and has observed the final cost of the project
as reported in the winning contractor's historicals.

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## Expected Value of Perfect Information

[[uncertainty#Expected Value of Perfect Information]]

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an organization pays in estimator hours.
These hours have a direct cost in salary and benefits,
however the greater cost is the **opportunity cost**
of tying up an estimator who could otherwise be starting a new project.

In many cases, the [[utility]] of doubled throughput
far outweighs the increased risk of individual bids.

%%