vault backup: 2026-05-25 19:35:02

2026-05-25 19:35:02 -04:00
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@@ -85,8 +85,7 @@ Would I be better of keeping my mouth shut about it?
 #### Incentives

 Bonuses based on awarded profit
-incentivize problematic behavior
-([[game-theory#Stag Hunt|hare-hunting]]).
+incentivize problematic [[stag-hunt|hare-hunting]] behavior.
 Has such behavior been observed,
 or has chief strategy been organization-aligned
 in spite of the incentive to defect?
@@ -0,0 +1,98 @@
+---
+id: 2026-05-25T15:02:03-0400
+title: 2026-05-25 15:02:03
+tags: []
+daily: "[[2026-05-25]]"
+---
+# 2026-05-25 15:02:03
+
+The perceived value of detailed takeoff is baffling
+because its single advantage over reference class forecasting
+(which offers innumerable advantages over detailed takeoff)
+is in itemized pricing,
+but this advantage is nullified
+by the known phenomenon that the precise
+selection of particular items and their quantities 
+can not be trusted to be exactly accurate
+due to uncertainty of project conditions,
+and by the observation that material pricing at the time of bid
+is not representative of the cost of buyout.
+
+The inevitable retort is
+"It's an *est*imate, not an *exact*imate,"
+or some other such reductive dismissal.
+True enough, this method is _a_ way
+of getting close to the true answer of project cost and schedule,
+but it's not an intuitive one.
+
+For an organizational process to be economical
+it must contribute value greater than its cost.
+Reduction of loss (risk mitigation) is a form of value,
+and is the vector by which detailed takeoff is expected to be economical:
+a more confident estimate (a narrower high-confidence interval)
+allows the organization to bid more aggressively (bid lower)
+without increasing their assumed risk in project execution.
+A lower bid increases the probability of award,
+decreasing the risk that estimating resources will have been wasted.
+We can assume that this is not the vector by which _[[conest|ConEst]]_
+is expected to generate value,
+both because it does not appear to be effective in this regard[^1]
+and because the ConEst estimate is not used as basis to decrease the bid.[^2]
+
+[^1]: See [[2026-05-22_11-57-18]].
+
+[^2]: This may be missed opportunity.
+    My baseless (and perhaps naive) speculation
+    is that a "Hey, we took a closer look and got our price down a bit more"
+    may indicate to the customer a [[stag-hunt|stag hunting]] behavior
+    that is more valuable than the real decrease in expected profit.
+
+As an estimating method,
+detailed takeoff is not more _precise_
+(its use does not significantly decrease our certainty),
+but it is more _granular_.
+An estimate based on detailed takeoff can be easily[^3] subdivided
+for use in [[earned-value-management]],
+but its most immediate use is in identifying variation
+from the expected case.
+In other words,
+deciding when overruns can be blamed on mismanagement,
+and when they are simply bad luck.
+
+[^3]: Depending on the takeoff software.
+
+The last case is where I'd bet the perceived value of ConEst is found.[^4]
+I can't help but feel that this effort is misplaced.
+If project management is like estimating,
+I have no doubt that they could _all_ benefit from training.
+Identifying who exactly needs it more, then, is pointless.
+As well to identify which cases of great project success
+can actually be attributed to exceptional management
+and not simply [[the-failure-of-risk-management#Red Baron Effect|the Red Baron effect]].
+
+[^4]: Crew loading and schedule are important points in estimating,
+    and EVM is a fine solution there,
+    but it would be straightforward to apply the same RCF principles
+    that we use for Bid estimates for these as well.
+    That we use detailed takeoff in lieu of such methods
+    suggests that it is believed necessary for other reasons.
+
+***
+
+Working exclusively in multifamily for this time
+has lead me to spend a lot of time thinking about the question
+of how estimating resources are best allocated.
+My understanding of the industry is that,
+despite the apparent focus on cost,
+executive focus is usually on maintaining a consistent volume of work.
+Because as contractors we are thinly-capitalized,[^5]
+failing to do so seems to represent a larger risk
+than a low-margin contract.
+Under these conditions,
+estimating has very little to do with the project itself,
+so we can make assumptions about it
+that might not normally seem appropriate.
+It is because of our narrow market
+that we get to have these much more interesting discussions.
+
+[^5]: See [[merrow_2022_contract-strategies]].