When we are given a comprehensive brief and a detailed level of requirements, we can be more confident in providing an accurate estimation. This is especially tempting when the project is related to work that has been done in the past. However, even in such cases, a safety margin is a mandatory part of the final quote.
What I recommend in situations when you are quite confident in your estimation is to increase the lower margin, rather than decrease the upper margin. This way you are still managing expectations and allowing room in case of an unexpected drawback, while providing high customer satisfaction in case everything goes to plan.
In the survey we conducted last year, we found that safety margins are widely used by estimators. In fact, only 12% of respondents said they don’t use safety margins. Most respondents said their safety margin is usually 20%, and goes up to 30% for larger projects. It is safe to assume that 30% is a relatively safe margin. So whatever number you receive from an expert about an expected cost, multiply it by 1.3.
Note that the lower margin does not need to match the proportion of the upper margin – you don’t have to go 15% in either direction, for example. It is even acceptable to leave the lower margin as just the original guess, without subtracting anything, to remove any overly optimistic expectations.
When working with safety margins, it is always important to remember that the greater the requirements, the greater the risk is when estimating.
Piotr Pozniak