4 ms·
While this is likely true, the problem is W2 labor tends to be compensated on a more or less fixed price per unit of time basis, and to cover that cost, you nee
by nonameiguess 5y ago
While this is likely true, the problem is W2 labor tends to be compensated on a more or less fixed price per unit of time basis, and to cover that cost, you need to bill clients roughly in proportion to total labor time spent, and most clients aren't going to purchase something for an unknown price to be named later. So you need to estimate to give them a price.
From the perspective of the seller, these estimates don't even need to be "accurate" as long as you're making many of them and the errors are symmetrically distributed. There's even math theory behind this called Fermi estimation. The problem is, from the client perspective, they can't average out the errors over many estimates if they're only buying one thing, and from the seller perspective, I don't think our errors are symmetrically distributed. Instead, we consistently underestimate how long something will take.
It's not even unique to software. There's a huge housing boom going on where I live, with condo developments all over the place, and not a single one is actually ready to open by the season their sign out front claims they'll be open. Defense acquisition. Highway construction. Everything takes longer than budget forecasts claim.
- kqr 5y agoPart of the problem, especially when it comes construction and defense, is awarding contracts to the lowest bidder with effectively no punishment for exceeding the initial estimate. This pretty much guarantees underestimation, both for statistical and behavioural reasons.
- halpert 5y agoI believe when awarding construction contracts, some of the deciders look at past projects, which could discount underbidding. Often, other engineers are deciding on the contracts, so they also have a general idea of how much it should cost.
- withinboredom 5y agoI somehow don't believe the "lowest bidder" thing, otherwise everyone would just be putting out contracts for <= $1. However, IIRC from working with people in the government contracting business, the "punishment" is that you don't very easily get more money if you go over budget. If your contract is $100, you get $100 and if you need another $100 you will spend $400 on lawyers and renegotiation.
- nonameiguess 5y agoAs far as I understand, the actual "punishment" is government agencies keep track of how badly particular contractors underbid and will simply add that amount to their bids when considering, so they're going for "lowest bid," but the bid they're considering isn't necessarily the bid the contractor puts forward. So theoretically, that provides an incentive to be more accurate, but it only works if there is sufficient competition in the first place and at least some of the competitors are even capable of being accurate.