Guidance on project estimation

I often hear the statement that "people don't know how to estimate".
This is sometimes said because elements are omitted through oversight or lack of understanding, producing an estimate that is seen as too low. Alternatively, too much contingency is included, or is included as a lump sum without attribution to any one particular element of the project, thereby resulting in an estimate that is seen as too high.
I see many project estimates cut back from a cost and time perspective based on a perception that they won't get approved in their initial form. It is unsurprising then that some projects go over budget and over time when both of these were reduced before the project began.
Everyone wants their project to get approved, but it is counter-productive to go in with a low cost and time estimate only to have to ask for more money and time half way into the project. Generally these requests bring about stress, are met with resistance and often another project will need to be slowed or stopped to make the money available.
On the other hand, although projects have multiple risks, it is uncommon for every risk to materialise. If significant contingency is included for each and every perceived risk then the estimate in all likelihood will be too high and is likely not to be approved.
So, what is the answer?
The way to overcome this dilemma is to prepare the estimate with contingency to cover only the key risks and highlight the remaining risks plus the costs to mitigate them.
The project is more likely to be approved, funding won't be tied up where it ultimately won't be needed and there will be less surprise when additional money or time are requested.
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