62 lines
1.6 KiB
Markdown
62 lines
1.6 KiB
Markdown
---
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id:
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aliases: []
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title: Uncertainty in Construction Estimating
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tags: []
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---
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# Uncertainty in Construction Estimating
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Cross-topic of [[uncertainty]] and [[construction-estimating]].
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This note is intended to be purely descriptive.
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See [[actuarial-science-for-construction-estimating]]
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and [[risk-management-for-construction-estimating]]
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for strategy based on such uncertainty.
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%%
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## TALK
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What do I mean that project cost is uncertain until the last invoice?
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What distributions exist
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which are known,
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which can never be known and must be estimated?
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[[bid-price-modeling]]
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***
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With perfect information all outcomes are certain.
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There exists some distribution representing the range of possible costs for a project.
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The remaining uncertainty represents ignorance of information an estimator can not feasibly obtain.
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***
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Suppose the estimator has spent years on the bid,
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running simulations, consulting experts, etc.
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Suppose the estimator has received a message from a time traveler
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which details significant news events and commodity markets
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for the duration of the project.
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Suppose the estimator is prescient and has observed the final cost of the project
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as reported in the winning contractor's historicals.
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%%
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## Expected Value of Perfect Information
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[[uncertainty#Expected Value of Perfect Information]]
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%%
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an organization pays in estimator hours.
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These hours have a direct cost in salary and benefits,
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however the greater cost is the opportunity cost
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of tying up an estimator who could otherwise be starting a new project.
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In many cases, the utility of doubled throughput
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far outweighs the increased risk of individual bids.
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%% |