vault backup: 2026-01-11 12:50:45

risk-management-for-construction-estimating.md

@@ -15,15 +15,31 @@ tags:
 
 Cross-topic of [[risk-management]] and [[construction-estimating]].
 
-## Estimating as Risk Mitigation
+%%
+## TALK
 
-* reduce risk of wasted estimation effort due to bid loss
-  (prefer lower bid)
-* reduce risk of project overrun
-  (prefer higher bid)
+
+%%
+
+## 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")