How do you estimate costs with incomplete information?

There are a number of ways this can be done, I tend to use the following: 1. Use similar past projects and use their costs per m2 as a reference. This is known as analogous or top-down estimation, remember to adjust the reference costs based on the differences in scope, size, complexity, and other relevant factors. 2. Consult with experts in the field who have experience with similar projects. Gather insights from professionals who have a deep understanding of the industry and can provide informed opinions.

One thing I've found helpful is to differentiate between general contingencies and specific contingencies. While a general contingency might cover overall project uncertainties, specific contingencies can be assigned to known but undefined risks, like potential site issues or delays in material supply. By breaking down your contingencies in this manner, you can provide a more transparent and justified breakdown of your estimated costs.

Using contingency factor in conjunction with expert judgement (expert team/group) is more accurate technique. This method involves consulting experts or experienced professionals who have knowledge and expertise in the field of the project. They can provide insights, opinions, or recommendations on how to estimate the costs of a project. Expert judgment is valuable when there is a lack of data or information, but it can also be influenced by personal preferences or biases. Therefore, multiple expert opinions can be gathered and statistically averaged, with documenting clear assumptions and transparency of judgement values.

I would add that you should be as specific and overt in the development of any contingencies. Input formulas and notes to define how the contingency was developed. This will allow you to revisit these as more information is made available and they can be refined. (i.e. not just a blanket percentage, but rather a formulaic approach with notes to define the assumptions made during its development. )

Incorporate a contingency factor to account for uncertainties and unexpected changes. Identify potential risks associated with incomplete information and allocate contingency accordingly.

Rely on historical data from similar projects to draw parallels and estimate costs. Compare current project components to industry benchmarks for a preliminary cost assessment.

Make sure that the flow of information is two-way and any historical data or benchmarks are measured continuously against actual costs. The refinement of that information should be a practice of continuous improvement.

An example I've seen from a past project involved underestimating the labor costs because the historical data was from a project in a region with lower wage standards. It's essential to adjust historical data for local conditions, inflation, and any changes in work practices or standards. Always verify the relevance and currency of the data before using it as a benchmark.

Another crusial condition that must be considered is about inflation in economy . In some country such as IRAN , We have high inflation so you must adjust your estimate with this assumption.

Actually, I disagree with solely relying on parametric estimating for complex projects. While it's a useful technique for standardized or repetitive tasks, it might not capture the unique challenges and variations of every project. I've witnessed projects where over-reliance on parametric estimating led to significant budget overruns. It's always a good idea to validate parametric estimates with other techniques or expert judgment.

Apply statistical relationships between known variables and project parameters to estimate costs. Use adjustable parameters based on the available information to refine cost estimates.

One thing I've found helpful when using range estimating is to involve a multidisciplinary team in the estimation process. By getting inputs from different experts - from engineers to procurement specialists - you can ensure that the range captures the full spectrum of potential outcomes and is not overly optimistic or pessimistic.

Provide a range of cost estimates, indicating the best and worst-case scenarios. Identify key variables affecting costs and assess their impact on the overall estimate.

One major point to be noted,the estimator should be clear with basic scope of work and should be ready with Assumptions and exclusions list during the final submission to the client. A&E helps contractor to be more clear with scope of work/considerations and exclusions. A&E list brings more transparency between both the parties.

Actually, I disagree with waiting until the end of the estimation process to communicate results. Regularly engaging stakeholders throughout the estimation phase can help catch assumptions or misunderstandings early on. By fostering a culture of open communication, you can ensure alignment and buy-in from all parties involved.

Iterative Approach: Adopt an iterative estimation process, refining estimates as more information becomes available. Expert Judgment: Seek input from subject matter experts who can provide insights and assumptions based on their experience. Stakeholder Involvement: Engage stakeholders to gather additional information and insights that can contribute to more accurate estimates. Scenario Planning: Develop different scenarios based on varying assumptions to understand the range of possible cost outcomes. Continuous Monitoring: Continuously monitor and update estimates as more information is acquired throughout the project lifecycle.

In my experience, always be prepared to revisit and revise your estimates as more information becomes available. An estimate made with incomplete information is, by nature, a dynamic figure. As the project progresses, new details can and should be incorporated into the estimate to ensure it remains accurate and relevant.