Eli5: why are estimated budgets for big construction projects always wrong and end up spending more than expected? Why can’t we get better at these estimates?
In: Economics
1. People are bidding on incomplete information a lot of the time. The design process changes throughout the bid and even during the building phase.
2. Bids are time sensitive. So you can’t realistically invest an infinite amount of time into putting bids together (also the firm has to pay for their estimators time anyways so they aren’t incentivized to invest too much time)
3. Budgets are often roughly estimated before the project is fully designed or whatever. So whoever is in charge of the development says “we have $10M for this project, it’s a $10M building” they may have a loose sketch of the building for pitching investors but haven’t consulted architects about detail complexity, haven’t consulted engineers to see if there’s anything particularly challenging, etc, etc
4. The cost of building materials is fairly volatile over the time span of large construction projects. Steel in particular
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