underestimates

Underestimates are estimations that assign a value lower than the actual value. They can refer to quantities, costs, durations, risks, or probabilities. In common usage, the term describes systematic or random errors where the predicted figure is too low.

Causes include optimistic bias, cognitive biases, incompleteness of information, model simplifications, uncertain future conditions, and incentives to present favorable results. Underestimation can be deliberate or unintentional.

In project management and construction, underestimation of time and cost is common; in economics and sales forecasting, demand may be underestimated; in software development, effort estimates may be too optimistic. In risk assessment, underestimating probability or impact of events is dangerous.

Leads to overruns, resource shortages, missed milestones, reduced credibility, and strategic misalignment. It may also trigger risk responses after the fact.

Mitigation strategies include reference class forecasting, probabilistic estimates, three-point estimation, and the inclusion of contingency reserves. Practices such as separating estimation from budgeting, conducting formal reviews, using historical data, and performing sensitivity analysis help reduce underestimation.

Related concepts include the planning fallacy, optimistic bias, calibration, and estimation error. Understanding when underestimation is likely and applying structured estimation methods can improve accuracy across fields.