Time efficiency estimates depend on what we define to be a step. For the analysis to correspond usefully to the actual execution time, the time required to perform a step must be guaranteed to be bounded above by a constant. One must be careful here; for instance, some analyses count an addition of two numbers as one step. This assumption may not be warranted in certain contexts. For example, if the numbers involved in a computation may be arbitrarily large, the time required by a single addition can no longer be assumed to be constant.
Since a cost estimate is the approximation of the cost of a project or operation, then estimate accuracy is a measure of how closely the estimate is able to predict the actual expenditures for the project or operation. This can only be known after the project is completed. If, for example, a project estimate was for a specific scope and conditions, and at completion the records showed that was expended, the estimate was 6.8% too high. If the project ended up having a different scope or conditions, an unadjusted computation does not fairly assess the estimate accuracy. Predictions of the estimate accuracy may accompany the estimate.
Typically this is expressed as a range higher or lower as compared with the point estimate with an expected probability that the actual cost will fall in the range. An example for a definitive estimate might be that the estimate has a range of accuracy with a 90% confidence that the final value will fall in that range. The accuracy of an early estimate relates to the estimate quality. Factors affecting the quality of the estimate include the people who prepared the estimate, how the estimate was prepared, and what was known about the project. For the same project, the range of uncertainty about the total estimate decreases over time, as illustrated in the cone of uncertainty diagram.
A contingency may be included in an estimate to provide for unknown costs which are indicated as likely to occur by experience, but are not identifiable. When using an estimate which has no contingency to set a budget or to set aside funding, a contingency is often added to improve the probability that the budget or funding will be adequate to complete the project. See cost contingency for more information. The estimate or budget contingency is not intended to compensate for poor estimate quality, and is not intended to fund design growth, owner changes, or anything else unrelated to delivering the scope as defined in the estimate documentation. Generally more contingency is needed for earlier estimates due to the higher uncertainty of estimate accuracy.
