Estimating reference
Know what the number means.
Definitions, formulas and a useful next step for the terms that appear in a project estimate. These definitions also power the machine-readable glossary.
34 terms. All definitions are available without JavaScript.
Beta-PERT distribution
A smooth probability distribution built from three estimates: optimistic, most likely, and pessimistic. With lambda = 4 its mean equals the classic PERT weighted average (O + 4M + P) / 6.
mean = (O + 4M + P) / 6
Billable utilization
The share of available working hours that earns client revenue. It excludes nonbillable sales, administration and other work under the chosen definition.
billable utilization = billable hours / available working hours
Billing rate
The selling price per billable hour or other unit. It can already include overhead recovery and profit; it is not automatically a delivery cost rate.
Contingency
Money or time reserved for uncertainty relative to a named baseline. The gap between P50 and P80/P90 is one possible reserve; do not add it again to a percentile that already includes it.
DAG (directed acyclic graph)
The task dependency graph. 'Acyclic' means no circular chains (A after B after A), which would make scheduling impossible. BidVariance rejects cycles before simulating.
Daily burn rate
Cost per day while a task runs: fully-loaded people cost, tools, travel. Task cost = fixed cost + duration × burn rate.
Deadline confidence
The share of simulation runs that finish on or before the promised completion date.
deadlineConfidence = runs finishing <= promised date / total runs
Deterministic task
A task whose optimistic, most likely, and pessimistic values are identical. It contributes no uncertainty — it always takes exactly that value.
Discrete risk event
A named event that either happens or does not (client approval delay, vendor API limitation), with a probability and cost/schedule impacts sampled when it fires. Separate from ordinary estimate uncertainty.
Expected monetary value
A probability-weighted average of monetary outcomes. For one event with a fixed conditional impact, it equals event probability times impact. It is not a confidence reserve.
expected event cost = probability * conditional impact
Finish-to-Start dependency
A task starts only after all of its predecessor tasks finish. The only dependency type in the MVP.
Fixed cost
A one-off cost charged to a task or project regardless of duration: licences, hardware, subcontractor minimums.
Funding gap
The additional cash needed when the lowest modeled balance is negative under the entered cost and collection sequence. It depends on starting cash and timing, separately from final profit.
additional funding = max(0, -minimum cash balance)
Gross margin
(Contract price − total cost) / contract price. This is margin, not markup.
grossMargin = (price - cost) / price
Joint deadline and no-loss confidence
The share of paired simulation outcomes that both finish by the trial deadline and cost no more than the contract price. It counts the intersection of both events, not the product of their separate probabilities.
Loaded cost rate
The internal cost per unit of work including the cost components explicitly assigned to it. Document what is included so overhead is not counted again. It is different from a client billing rate.
Markup
Cost multiplied up to set a price. Different from margin: a 25% markup on cost is only a 20% margin on price. BidVariance works in margin.
markup = (price - cost) / cost
Minimum defensible quote
The price at which the target margin is achieved with the chosen confidence.
requiredPrice = costQuantile(confidence) / (1 - targetMargin)
Monte Carlo simulation
Running the same project model thousands of times, drawing plausible values for every uncertain input each run, and measuring the spread of results (cost, duration, profit) instead of trusting one fixed estimate.
Most likely (M)
The single most plausible value for a task's duration or cost if you had to pick one number.
Optimistic (O)
The best realistic case for a task's duration or cost — everything goes right, but it is still a real outcome, not a fantasy.
Overhead
A fixed allocation of company overhead to a project. Entered as an absolute amount to avoid double-counting; BidVariance never applies percentage overhead automatically.
P50
The median. Half of simulated outcomes are at or below it. Quoting the P50 cost with no margin gives roughly 50% modeled loss probability for a continuous distribution; applying a positive target margin changes that loss probability.
P80
The value 80% of simulated outcomes fall at or below. A common commercial reference level for bids and deadlines.
P90
The 90% level — more conservative, appropriate when the downside of overrun is expensive.
Percentile (P50, P80, P90)
A value that a given share of simulated outcomes falls at or below. P80 cost means 80% of simulated runs cost that amount or less.
Pessimistic (P)
The genuinely bad-but-possible case. The width of the O–P range is where estimation risk lives.
Probability of loss
The share of simulations where total project cost exceeds the contract price — the bid loses money.
P(loss) = P(total cost > contract price)
Project capacity
The work hours available for a project after accounting for people, working time and availability. Sufficient capacity does not prove that dependencies or skill constraints allow a deadline.
capacity = people * working days * hours per day * availability
Residual risk
The risk that remains after an action. A mitigation can change event probability, conditional severity or both, while adding its own cost.
Reverse pricing
Working backwards from a margin and confidence target to the price required, rather than forecasting outcomes for a price already chosen.
Scope change
A change to the defined deliverables, acceptance criteria or other agreed work boundary. Estimate its incremental cost and effects on the whole plan before treating it as a simple price adjustment.
Seed
A number that starts the pseudo-random generator. The same project inputs, distribution, iteration count, seed and engine version reproduce the same simulation.
Target margin probability
The share of simulations where gross margin is at least the target the user sets.
P(margin >= target) = P(cost <= price * (1 - target))
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