Why projects go over estimates

A couple of days ago I mentioned the story of a project (not mine) that went more than 6 times over estimate.

How is this even possible?

As with everything, there's not just one reason. But I'll tell you one reason that really matters:

In a competitive marketplace, where one provider looks pretty much like the next, providers are heavily incentivized —whether they know it or not — to present the lowest estimate they can.

And because it's “just an estimate,” there's very little risk to them when it turns out their estimate was too low. ”Sorry, we’re almost done, we promise.”

In other words: low estimates sound competitive, while putting very little risk on the provider.

But the risk is still there. The unknowns are still unknown.

And if the risk isn’t being carried by the provider, would you care to guess who carries it?

All the best,
A.