39 lines
984 B
Markdown
39 lines
984 B
Markdown
---
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title: Risk Management for Construction Estimating
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tags:
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- topic/construction
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- topic/estimating
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- topic/risk
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- type/cross-topic
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---
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# Risk Management for Construction Estimating
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Cross-topic of [[risk-management]] and [[construction-estimating]].
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## TALK
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## Bid Risk
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**Bid risk** is not only risk of project overrun given award,
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but also includes the risk of wasted estimation effort due to bid loss,
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and the opportunity cost of excluding other opportunities.
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## Estimating as Risk Mitigation
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Estimating resources should be allocated
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according to Return on Mitigation (RoM),
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that is, their contribution to _cost certainty_.
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$\text{Efficiency} = -1 \times \frac{d\sigma}{dt}$
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But the RoM of estimating effort has a steep drop off,
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and cost will obviously never be entirely certain.
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It is not foolhardy to tolerate imprecision in an estimate
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when the effort to increase precision
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will not decrease bid risk at least equivalently
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(stigmatizing "assumptions") |