Handling Unknowns in Cost Engineering When Time Is Short

In cost engineering, working with incomplete information is a constant challenge. Often, cost engineers are tasked with estimating costs for parts or assemblies when critical design details are missing – such as part size, weight, tolerances, material specifications, or manufacturing processes. When time is limited, making accurate, justifiable cost estimates requires a structured approach to handle these unknowns
effectively.

Here’s a practical strategy to estimate costs when engineering details are incomplete:

1. Leverage Analogous Costing (Historical Data & Benchmarking)
   Why ?
   When detailed design data is unavailable, past projects and industry benchmarks provide a reliable starting point.
   How ?
   • Identify similar previous parts with known costs.
   • Adjust based on differences in application, function, and expected complexity.
   • Use cost databases to establish baseline estimates.
   For Example:
   If you need to estimate the cost of a new bracket, but the weight and dimensions are unknown, compare it with similar brackets in past projects and apply scaling factors based on function and expected usage.
2. Use Parametric Cost Models & Scaling Techniques
   Why ?
   These models allow you to estimate costs mathematically based on known relationships
   between cost drivers (e.g., material, size, weight, and complexity).
   How ?
   • Develop regression-based cost equations using historical data.
   • Apply cost-per-unit weight, cost-per-unit length, or cost-per-unit volume as a reference.
   • Factor in manufacturing complexity multipliers (e.g., additional machining, tighter
   tolerances).
   For Example:
   If a similar aluminum housing cost $100 per kg in the past, but new design details are missing, apply weight scaling based on an approximate range to generate a cost estimate range.
3. Collaborate with Suppliers for Cost Proxies
   Why ?
   Suppliers have hands-on experience with manufacturing feasibility, tooling costs, and process efficiencies.
   How ?
   • Request should-cost insights from trusted suppliers using comparable parts.
   • Ask about cost impact of potential manufacturing changes (e.g., casting vs. machining).
   • Use supplier quotes as a reference to cross-check internal estimates.
   For Example:
   If estimating the cost of a plastic injection-molded component, but key details are missing, a supplier can provide a cost estimate based on cavity count, material type, and expected part volume.
4. Make Conservative Assumptions & Document Uncertainties
   Why ?
   Transparent assumptions help mitigate risk and make estimates defensible.
   How ?
   • Assume worst-case tolerances, material costs, and process complexities.
   • Clearly state assumptions for missing parameters (e.g., estimated material thickness,
   expected machining features).
   • Provide cost bands (min-max estimates) rather than a single-point estimate.
   For Example:
   If a part’s machining requirements are unknown, assume higher machining time per unit and document it as a conservative assumption.
5. Utilize Manufacturing Process Heuristics
   Why ?
   Even without exact specifications, broad manufacturing process knowledge allows for
   reasonable cost approximations.
   How ?
   • Use rules of thumb for process cost estimation (e.g., die casting vs. sand casting cost
   differences).
   • Apply labor-hour estimates based on similar production environments.
   • Factor in scrap rates and yield based on material type.
   For Example:
   If a sheet metal component’s bending operations are unclear, estimate using standard cost-per-bend assumptions from previous projects.
6. Build a Quick Sensitivity Analysis to Highlight Cost Risks
   Why ?
   A sensitivity analysis shows how much cost fluctuates based on various input values, helping
   decision-makers understand cost risks.
   How ?
   • Identify key cost drivers (material, weight, machining, etc.).
   • Vary assumptions for missing parameters (+/- 10%, 20%, or more).
   • Present costs as a range instead of a fixed number.
   For Example:
   If part weight is unknown, provide cost estimates for different weights to help stakeholders assess the impact.

Conclusion: Speed vs. Accuracy in Cost Engineering
When time is short and design details are missing, cost engineers must strike a balance between speed and accuracy. Using historical data, parametric models, supplier insights, and transparent assumptions, you can create reasonable cost estimates without waiting for final design details.

Question to consider: How do you handle cost estimation with incomplete data ? Do you rely more on historical pricing, supplier inputs, or parametric models ?

Vijay Hemgude is a highly experienced cost engineering professional with advanced degrees in Mechanical Engineering and an MBA in Finance. With over 11 years of expertise in cost modeling, supplier negotiations, and financial analysis, Vijay has worked with leading organizations like General Motors, Stellantis, and Magna International. Passionate about the cost engineering profession, Vijay focuses on driving innovation in cost engineering, purchasing, and sourcing while sharing knowledge through articles and training initiatives.

Copyright © 2025 – Society of Product Cost Engineering & Analytics. All rights reserved.