Risk Management for Construction Estimating

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

Prioritizing Tasks

ROE prioritizes estimating tasks by their contribution to cost certainty.

Estimating as Risk Mitigation

reduce risk of wasted estimation effort due to bid loss (prefer lower bid)
reduce risk of project overrun (prefer higher bid)

Estimating resources are allocated by Return on Mitigation (RoM)

Determining Necessary Detail

ROE determines the appropriate level of estimating-detail given an organization's risk#Risk Tolerance.

EVI Takeoff

Expected value of information (EVI)

Takeoff Optimization

For systems where EVI analysis determines manual takeoff is still necessary, optimizations can be made to decrease the required effort of takeoff, and thus the opportunity cost of takeoff.

See optimal-estimating-patterns for more.

Estimating Detail

The acceptable level of detail of an estimate in construction-estimating is a contentious subject. What's worse, estimators often disagree on what makes an estimate more detailed than another.

The commonly repeated answer is this:

As detailed as possible, given required turnaround and available estimating resources.

This analysis is flawed because it implies more time always ought to be preferred, when the reality is that when considering larger organizational factors, ideal estimate certainty is likely far lower than most expect.

The correct answer involves optimizing for these factors:

value of increased bid certainty
value of increased estimate volume

An estimate's detail is irrelevant to its quality. A less detailed estimate is a more risk bid, but it is not the role of the estimator to determine acceptable risk.

Experiment

Perform a system takeoff (lighting for example) in exacting detail, the maximum amount you would ever consider using, and measure the time required to do so, as well as the cost of the scope.

Have another estimator takeoff the same scope using the proposed time saving strategy.

Repeat the test on additional projects.

Treat the detailed takeoff as the true value and find the error of the time saving strategy.

\frac{d\sigma}{dt}

Expectation

Time-saving strategies will overestimate or underestimate detailed takeoff depending on the assumptions used in their creation.

Human Error

It is commonly understood that a "detailed takeoff" is more "accurate" than a square foot estimate.

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