zmVault/risk-management-for-construction-estimating.md

title, tags

title	tags
Risk Management for Construction Estimating	topic/construction topic/estimating topic/risk type/cross-topic

Risk Management for Construction Estimating

Cross-topic of risk-management and construction-estimating.

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TALK

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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")