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New Year, New Challenges: 5 Cost Estimation Trends to Watch in 2025

As we enter 2025, businesses in Aerospace & Defense, professional services, complex manufacturing, and capital projects face a rapidly evolving landscape. Project cost estimating, a critical function in these industries, is under significant transformation due to technological advancements, economic shifts, and increased stakeholder expectations. At Twenty5, we believe that staying ahead of industry trends is essential to maintaining competitive advantage and delivering value to clients.


Here are five project cost estimation trends to watch in 2025 that leaders should be prepared to navigate:



1. Increased Adoption of Predictive Analytics and AI

Project cost estimating is a very data rich environment, using historical information such as hours booked to prior similar tasks, bill rate history in professional services, and purchased price history for material components or hardware in the project bill of material over a range of suppliers, years and quantities. The integration of predictive analytics and artificial intelligence (AI) will completely reshape project cost estimating over the next few years. These tools enhance forecasting accuracy by analyzing historical data patterns and identifying potential cost drivers and their impact on future project costs. In 2025, more firms are expected to invest in AI-driven cost estimating software to reduce bid cycle times and improve confidence and cost precision. For firms in Aerospace & Defense, where AI will gain a foot-hold initially in the maintenance, repair and overhaul or after-service market which is has mature tool-support compared to scaled production, this means gaining a strategic edge in the competitive contracting processes.


Key takeaway: Companies that adopt predictive analytics and integrate machine learning algorithms into their project cost estimation workflows will be better equipped to handle complex and large-scale projects, with fewer cost and schedule overruns compared to the initial estimate or to a recent forecast.



2. Refocused Approach to Risks including Supply Chain Resilience

Supply chain volatility has been a dominant concern over the past few years, and it will continue to impact project delivery throughout 2025 and beyond. Rising material costs, transportation disruptions, and geopolitical instability, require estimators to incorporate more robust risk buffers and contingency planning. At the same time, improvements in technology and reductions in technology infrastructure costs like CPU or storage will continue. A key part of project cost estimation relates to risks and contingencies and many large companies already create risk registers or add contingencies for things such as project complexity, deployment strategy, tools available and so on. Forward-thinking organizations will increasingly create risks and contingencies around supply chain uncertainties and their likely impact on project delivery and cost estimating, as well as enhancing their supplier collaboration to mitigate these uncertainties.


Key takeaway: Risks and contingencies for supply chain risks, backed up by supply chain cost management and cross-departmental collaboration, will become a necessity rather than a competitive advantage only adopted by the largest firms.




3. Evolving Regulatory and Compliance Requirements

Government regulations and compliance protocols are becoming more complex each year. Not only does compliance impact a company's competitive standing to win future Government contracts - the fines can add up rapidly, with more than $1B in compliance related fines over the last two years across the industry. With evolving cost-reporting mandates and increased oversight, estimators must ensure their project cost estimating methodologies meet the latest standards. This growing emphasis on transparency and accountability in cost proposals places added pressure on pricing professionals and on their tools. The new normal will be to provide full traceability for each cost component (such as a labor hour or sub-component material requirement)back to the cost source history in your enterprise resource planning (ERP) system, and a complete rationale for factors used, such as for escalation, quantity or learning curves.


Key takeaway: Companies, especially in Aerospace & Defense bidding on large Government contracts, must provide full traceability back to cost history for every cost, factor and assumption. Staying up to date on regulations and compliance frameworks will be essential for maintaining trust.



4. More Science and Less Art

We often talk about project cost estimating in its purest form combining the 'art and science' of cost estimating. A key trend, powered by technological advances both in terms of reductions in processing power and data storage, and advanced in machine learning and AI, will be the pendulum swinging towards more "science" and correspondingly abit less "art" in estimating. The days of Joe from engineering opening a spreadsheet and using his tribal knowledge to let sales know how many hours it will take to overhaul a complex assembly or write a software module, are numbered. Project cost estimators will still rely on Joe, but increasingly the emphasis will be on crunching vast datasets of cost history for similar parts or projects to allow the system to come up with an initial estimate, with full traceability back to the cost source(s). Then Joe's art or expertise will get applied on top, either as an independent assessment or to apply factors such as complexity or efficiency factors.


Key takeaway: Firms that can get a handle on their rich database of cost history, and join together information from multiple disparate systems such as ERP, MES, PLM and CRM toolsets to gain new insights into their costing and pricing history, will have the first mover advantage of benefiting from new data science-based cost estimating.



5. Demand for Real-Time Collaboration Tools

As workforces remain distributed and projects grow in complexity and global reach, the demand for real-time collaboration tools will continue to rise. Cost estimators and project managers need platforms that facilitate seamless data sharing, version control, and cross-functional input in real time, to break down the silos between departments and functions. Integrated and cloud-based software systems are becoming more common, providing teams with a single source of truth for cost-related insights. At the same time, project cost estimating has traditionally been left behind in terms of integrated systems or software, with even the largest firms globally reliant on complicated Excel spreadsheets to calculate their project costs and prices. There will be an increased focus on project cost estimating web-based tool adoption in the coming years, as companies review or upgrade their project and portfolio management and enterprise resource planning systems at the same time.


Key takeaway: Investing in collaborative digital platforms will enable organizations to streamline communication, reduce rework, and enhance the accuracy of cost estimates. Tools which simultaneously provide the rich analysis of cost source history and data-science outlined in the other trends above will win out in the longer term.


Looking Ahead

Project cost estimating in 2025 is poised for significant advancements and challenges. Organizations that stay ahead of these trends by embracing AI and data-science, innovating with leading toolset suppliers, strengthening their regulatory knowledge and cost source traceability, and prioritizing collaboration, will be well-positioned for success. At Twenty5, we’re dedicated to supporting firms in project-based industries as they navigate project planning, costing and pricing for both commercial and capital projects with confidence and precision.

As you plan for the year ahead, consider how your project costing and pricing processes for large bids and proposals align with these trends. Are you leveraging the latest tools and strategies to ensure accurate, competitive, and compliant costs and prices? Reach out to Twenty5 to learn how we can help you thrive in 2025 and beyond.


 

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