Which statement best describes the impact of inaccuracies in cost estimating on project profitability and bid competitiveness?

Which statement best describes the impact of inaccuracies in cost estimating on project profitability and bid competitiveness?

• A. Low estimates decrease profits and high estimates decrease volume.
• B. Overestimating costs always improves competitiveness.
• C. Estimates have no effect on profitability.
• D. Only the engineer needs to worry about estimates.

Answer: (A)

Getting cost estimates right is essential because bids must balance making a profit with remaining attractive to win. If costs are underestimated, the bid appears favorable, but the actual project will eat into margins or lose money once work begins, hurting profitability. If costs are overestimated, the bid will look expensive, pushing it out of the competition and reducing bid volume, even if the estimate could be accurate in some respects. This natural trade-off means inaccuracies on the low side hurt profits, while inaccuracies on the high side hurt competitiveness and the number of opportunities won. So the statement that best reflects this balance is that low estimates decrease profits and high estimates decrease volume. Overestimating costs does not improve competitiveness, estimates do affect profitability, and it’s a concern for the whole team, not just the engineer.