The cone of uncertainty is a graphic depiction of the increasing accuracy that is possible for estimates as the details of a project become more known over time. Project managers and developers use the cone of uncertainty to guide estimates manage expectations.
During the development process a project starts out with a large degree of variability. An estimate may be accurate but that cannot be assumed. Generally, any estimates will be very loose and may be wildly inaccurate. As decisions are made, research is conducted and more of the project is completed, the degree of variability decreases. This is why project might start out with estimates varying by plus or minus 40 percent at the start but see that variance decrease over time. Understanding this variability is key to developing realistic project plans.
The most common representation of the cone of uncertainty is in the form of a graph with time on the horizontal axis and estimate variance on the vertical. As the graph is followed to the right with the progress of time, the lines representing the range of overestimation converge to near zero. The large end of the cone – where uncertainty is greatest – is at the start of the project timeline and the small end of the cone at the end, where all details are known.
The cone of uncertainty was originally created by the American Association of Cost Engineers to assist estimations for engineering and construction. The tool is applied to a variety of phenomena such as hurricanes, for example, in which the system’s course is less certain when predicted further into the future and more certain as time goes on and the system gets closer.