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Cost estimation and risk analysis in projects

This is the study programme for 2019/2020. It is subject to change.

The purpose of this course is to provide students with a theoretical and practical approach to the field of cost estimation. The subject is intended as a supplement to subjects such as contract strategy, contract completion and implementation, and project management. Cost estimation is relevant to all types of businesses and organizations and is an essential theme through all phases of the life cycle of a project. Estimate of investment costs is an important element in the decision whether a company will sanction a potential project. Cost estimation is part of the project budgeting process, the control phase of the project, implementation and is decisive for contracting in relation to procurement. The course aims to provide students with insights into various forms of cost estimates, different methods of cost estimation, and analysis and management of uncertainty and risk associated with cost estimates. Fundamental underlying drivers behind cost overruns are also a key issue.

Learning outcome

After completing the course, the student should be able to:
  • Apply techniques, models and methods that are relevant for performing different cost estimates.
  • Perform sensitivity analyses and use Monte Carlo simulations in Excel to analyse risk and uncertainty associated with cost estimates.
  • Have knowledge of and be aware of various factors that lead to cost overruns.


The course provides an introduction to different methods for cost estimation and handling uncertainty related to the estimate.

Required prerequisite knowledge


Recommended previous knowledge

Basic knowledge of contract completion and implementation, project management, mathematics, statistics and use of spreadsheets.


Weight Duration Marks Aid
Home exam1/1 A - F
Digital exam (Inspera)

Course teacher(s)

Course coordinator
Sindre Lorentzen

Method of work

  • Voluntary group work, group discussion and presentations during lecture
  • Voluntary assignments and case preparation outside lecture
  • Voluntary exercises in Excel and VBA during lecture
  • Voluntary tests on Canvas without assessment

Open to

Admission to Single Courses at the Faculty of Science and Technology
Industrial economics - Master's Degree Programme
Industrial economics - Master's Degree Programme - 5 year

Course assessment

Usually occurs through survey forms and / or conversation according to current guidelines.


Curriculum literature available on canvas.
Selected chapters and sections from the following:
  • Clark, F. and A. B. Lorenzoni (1996). Applied cost engineering. CRC Press.
  • Mislick, G. K. and D. A. Nussbaum (2015). Cost estimation: methods and tools. John Wiley & Sons.
  • NASA, N. (2008). Cost estimating handbook. Washington, DC.
  • Rose, K. H. (2013). A guide to the project management body of knowledge (pmbokR©guide) - fifth edition.
  • Stephenson, H. (2015). AACE International Total Cost Management Frame-work: An Integrated Approach to Portfolio, Program, and Project Manage-ment. CreateSpace Independent Publishing Platform.

Collection of articles, reports and news articles.
Additional (voluntary) reading material:
  • Kahneman, D. and P. Egan (2011). Thinking, fast and slow, Volume 1. Farrar, Straus and Giroux New York.
  • Surowiecki, J. (2005). The wisdom of crowds. Anchor.
  • Taleb, N. N. (2007). The black swan: The impact of the highly improbable, Volume 2. Random house.
  • Tetlock, P. E. and D. Gardner (2016). Superforecasting: The art and science of prediction. Random House.

This is the study programme for 2019/2020. It is subject to change.

Sist oppdatert: 27.05.2020