P50 vs P80: choose the confidence behind your quote

First say what the percentile refers to

P50 cost is the median modeled cost. P80 cost is a value at or below which approximately 80% of simulated costs fall. These describe your cost assumptions, not your probability of winning the contract.

Quoting exactly the P50 cost with no margin gives roughly a 50% modeled chance of a loss for a continuous cost distribution. Quoting a price derived from P50 cost with a positive target margin instead gives roughly 50% confidence of meeting that margin. Those are different statements.

One project, two quote bases

Assume an illustrative project has P50 cost of $36,000 and P80 cost of $44,000. Choose a 20% gross margin, measured against revenue. Divide cost by 0.80; do not multiply it by 1.20.

At the $55,000 quote, a $48,000 outcome misses the 20% target but still earns $7,000, or about 12.7% of revenue. A loss requires cost above $55,000. We cannot calculate that probability from just the P50 and P80 costs; we need the distribution at the actual selling price.

Confidence does not remove the downside

A P80-based quote can still miss its target. It also says nothing by itself about the size of the worst plausible loss. Review higher cost percentiles, severe explicit risks and the funds you can commit to delivery. One very large overrun may matter more than several small misses.

Higher pricing may affect customer acceptance, but this simulation contains no demand or competitor model. It cannot establish a win rate or select the profit-maximizing quote. Use commercial judgment alongside the cost model.

Make the choice explicit

1. Define the margin target separately from the confidence target.
2. Compare the prices implied by more than one percentile.
3. At the actual quote, inspect loss probability and deadline confidence.
4. Record scope exclusions and which assumptions would change the decision.

Use the minimum bid price calculator to calculate the price, or compare concepts in the P50 vs P80 tool. Read margin versus markup before adding a percentage to a cost estimate. If you build a quote from several task estimates, adding task P80s does not give the project P80, and the cone of uncertainty shows how much wider the range should be at an early stage.