Project cost estimation in the sales phase: Implementing project uncertainty estimation practices

There is an endless list of management horror stories, and it is called a list of projects that overrun their original cost estimate. There are plenty of examples of overrun projects from the wide variety of different industries, and there is no evidence that developments in project simulation models or utilisation of data are going to solve the fundamental difficulty of cost estimation in the near future. In fact, there seems to be a significant gap between the complex algorithms and estimation methods that currently exist in the literature and methods that the companies actually use for cost estimation. The objective of this thesis is therefore to advance knowledge about communicating and sense making of uncertainty in the project cost estimation phase. This is done by exploring implications and changes that the implementation of uncertainty estimation practises causes in the case company of this thesis. Uncertainty estimation for project front-end, in the sales phase, was something new for the case company. The implementation was therefore very rare opportunity to witness a situation where organization has realized that they are unable to correctly manage and estimate the uncertainty that is present in their project environment. Findings of this thesis suggest that it is beneficiary to include multiple organizational functions into the estimation process and translate their analyses and feelings about uncertainty into boundary object, through which uncertainty can be communicated. In this thesis boundary object was cost contingency, which concretized for the organization that uncertainty has inevitable cost implications for the project. Through this communication organization can form organizational view on uncertainty of the project, instead of all the different organizational units trying to analyze and manage the uncertainty separately