How Cost Estimators Develop Estimates: Experiences from the Indian Context

Shubham Bajaj and Ashwin Mahalingam

Chapter 17 in Building a Body of Knowledge in Project Management in Developing Countries, 2023, pp 552-581 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Cost estimates in construction projects are often incorrect, leading to the well-known phenomenon of cost overruns. The literature suggests that estimation is a process that is mildly chaotic, infused with randomness, and not completely organized. While a number of behavioral, cognitive, and structural explanations are given for cost estimates not matching up to final project costs, the voice of estimators is rarely heard. Our goal is to understand the underlying micro-dynamics of construction cost estimating in the developing country context as well as to understand how we might restructure and eliminate biases that lead to incorrect estimates that then contribute to cost overruns. This chapter describes how project costs are estimated in the context of construction projects in India — one of the world’s largest developing economies — through studying the experiences of the people involved in estimating projects. We find that several practices of estimation are pursued by different stakeholders who occupy different positions in the project value chain. While we did not find evidence of strategic misrepresentation, we did find some evidence of optimism bias in the estimates prepared. We conclude by recommending the creation of separate standards and practices for different types of firms and different levels of estimates.

Keywords: Project Management; Developing Countries; Project Integration Management; Project Scope and Schedule Management; Project Cost and Quality Management; Project Resource and Risk Management; Communications Management; Project Procurement Management; Project Stakeholder Management; Industry Development; Operating Environment of the Industry; Supply Chain Management; Project Leadership; Operating and Facilities Management (search for similar items in EconPapers)
JEL-codes: L74 O2 (search for similar items in EconPapers)
Date: 2023
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