There are two different sources that cause uncertainty regarding effort usage in software development projects: (i) The inherent uncertainty regarding cost usage in a software project, and (ii) The uncertainty caused by lack of knowledge about the project. However, uncertainty can be reduced by flexibility of outcome and software development process.

Accurate assessment of the uncertainty of software development effort estimates is an important part of software estimation, e.g., when deciding whether or not to embark up a project, to support the bidding process, to support decisions about how large the project’s contingency budget should be.

Clearly, the use of cost uncertainty assessments that reflect the underlying uncertainty will improve the budgeting process. Unfortunately uncertainty assessments are usually over-confident about the accuracy of cost estimates.

Papers on uncertainty assessments. (Link not currently supported.)

See also Assessing Uncertainty in Principles of Forecasting: A Handbook for Researchers and Practitioners.