What is the problem with making cost estimates too conservative or too aggressive?
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The cost estimates need to be a balance of agression and conservative approach to strike a balance between two conflicting factors, to increase the chances of winning the contract through low prices, and to keep it viable and profitable for the company. The Conservative approach of cost estimation might lead the company to place bids which are higher than the customer's expectations and subseuently reducing the chances of being competittive and successful. On the other hand, an agressive estimate which offers an unrealstically lower cost to win the deal might force the company to work on very tight margins. This might also make it vulnerable to a number of risks / uncertainties arising out of unforeseen events, which might affect the costs in unexpected manner, making it difficult for the company to meet the demand at that cost.
Keeping in mind, the issues related to the two extremes, the decision should be realstic and should strike balance between the competitiveness and feasibility.
What is the problem with making cost estimates too conservative or too aggressive? - Don't copy...
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