Probabilistic Approach to Estimating and Cost Control

The probabilistic nature of estimating and cost control is presented. An approach for selecting the operations within a project that can advantageously be estimated more precisely is analyzed. This approach compares the expected values of the optimal bids based on estimates of varying precision. Increased expected value of an estimate is used to indicate that the cost of a more precise estimate has been well invested. Using the methods outlined it is possible not only to monitor changes in expected cost but variation in risk of a project as it progresses.