Risk-Based Cost Estimation

ost estimation for an engineering project traditionally involves development of an “engineer’s estimate” of the project cost to which contingency is added to develop the “total project cost.” Contingency is used to reflect the fact that regardless of the diligence and competence of the estimator, there is uncertainty in the final cost of the project. Material costs change over time, markups and markdowns vary from job to job, field conditions arise that were unforeseen during design, and other factors add to the uncertain nature of cost estimating.