Cost engineering

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Cost engineering is "the engineering practice devoted to the management of project cost, involving such activities as estimating, cost control, cost forecasting, investment appraisal and risk analysis". [1] "Cost Engineers budget, plan and monitor investment projects. They seek the optimum balance between cost, quality and time requirements." [2]

Contents

Skills and knowledge of cost engineers are similar to those of quantity surveyors. In many industries, cost engineering is synonymous with project controls. As the title "engineer" has legal requirements in many jurisdictions (e.g. Canada, [3] Texas[ not verified in body ]), the cost engineering discipline is often renamed to project controls. [4]

A cost engineer is "an engineer whose judgment and experience are utilized in the application of scientific principles and techniques to problems of estimation; cost control; business planning and management science; profitability analysis; project management; and planning and scheduling". [5]

Overview

One key objective of cost engineering is to arrive at accurate cost estimates and schedules, and to avoid cost overruns and schedule slips. Cost engineering goes beyond preparing cost estimates and schedules by helping manage resources and supporting assessment and decision-making. "The discipline of ‘cost engineering’ can be considered to encompass a wide range of cost-related aspects of engineering and programme management, but in particular cost estimating, cost analysis/cost assessment, design-to-cost, schedule analysis/planning and risk assessment." [6] The broad array of cost engineering topics represent the intersection of the fields of project management, business management, and engineering. Most people have a limited view of what engineering encompasses. The most obvious perception is that engineering addresses technical issues, such as the physical design of a structure or system. However, beyond the physical manifestation of a design of a structure or system (for example, a building), there are other dimensions to consider such as the money, time, and other resources that were invested in the creation of the building. Cost engineers refer to these investments collectively as "costs".

Cost engineering, then, can be considered an adjunct of traditional engineering. It recognizes and focuses on the relationships between the physical and cost dimensions of whatever is being "engineered". Cost engineering is most often taught at universities as part of construction engineering, engineering management, civil engineering, and related curricula because it is most often practiced on engineering and construction capital projects. Engineering economics is a core skill and knowledge area of cost engineering.

Associations, considered non-profit organizations--one example, is AACE International "is dedicated to the tenets of furthering the concepts of Total Cost Management and Cost Engineering. Total Cost Management is the effective application of professional and technical expertise to plan and control resources, costs, profitability and risk. Simply stated, it is a systematic approach to managing cost throughout the life cycle of any enterprise, program, facility, project, product or service. This is accomplished through the application of cost engineering and cost management principles, proven methodologies and the latest technology in support of the management process. ... Total Cost Management is that area of engineering practice where engineering judgment and experience are utilized in the application of scientific principles and techniques to problems of business and program planning; cost estimating; economic and financial analysis; cost engineering; program and project management; planning and scheduling; and cost and schedule performance measurement and change control. In summary, the list of practice areas ... are collectively called cost engineering; while the “process” through which these practices are applied is called total cost management or TCM. [7]

History

Cost engineering is a field of engineering practice that began in the 1950s (AACE International was founded in 1956). The skills and knowledge areas of cost engineers are similar to those of quantity surveyors. AACE International is one of many international engineering organizations representing practitioners in these fields. The International Cost Engineering Congress (ICEC) was founded in 1976 as a Worldwide Confederation of Cost Engineering, Quantity Surveying and Project Management Societies.

In 2006, AACE published the Total Cost Management (TCM) Framework, which outlines an integrated process for applying the skills and knowledge of cost engineering (see References). This has also been called the world's first process for portfolio, program and project management.

Cost Engineering Techniques

Cost engineers use software and other industry tools and resources to collect, analyze, and share cost data.

Tools aside, choosing the appropriate cost engineering technique is critical. Techniques and methodologies can vary depending on several factors, including:

Importantly, cost engineering incorporates lessons learned from previous project experience and data-driven insights to provide an early understanding of design and construction decisions and risks. With these insights, mitigative actions can be recommended to ensure successful project outcomes. For this reason, choosing a cost estimation method also depends on the skills and experience of the cost engineer.

Skills and Qualities of a Successful Cost Engineer To be successful, a cost engineer must have strong analytical abilities, industry-specific knowledge, experience with cost estimating systems, and excellent communication skills. An understanding of professional engineering principles is also desired and many cost engineers have significant prior engineering experience.

Professional titles or positions in cost engineering

"Cost engineering practitioners tend to be: a) specialized in function (e.g., cost estimating, planning and scheduling, etc.); b) focused on either the asset management or project control side of the TCM process; and c) focused on a particular industry (e.g., engineering and construction, manufacturing, information technology, etc) or asset type (e.g., chemical process, buildings, software, etc.)... They may work for the business that owns and operates the asset (emphasis on economics and analysis), or they may work for the contractor that executes the projects (emphasis on planning and control)." [8]

Some titles or positions in the Cost Engineering practice include:

See also

Related Research Articles

Project management is the process of supervising the work of a team to achieve all project goals within the given constraints. This information is usually described in project documentation, created at the beginning of the development process. The primary constraints are scope, time and budget. The secondary challenge is to optimize the allocation of necessary inputs and apply them to meet predefined objectives.

Construction engineering, also known as construction operations, is a professional subdiscipline of civil engineering that deals with the designing, planning, construction, and operations management of infrastructure such as roadways, tunnels, bridges, airports, railroads, facilities, buildings, dams, utilities and other projects. Construction engineers learn some of the design aspects similar to civil engineers as well as project management aspects.

Project management software are computer programs that help plan, organize, and manage resources.

The rational unified process (RUP) is an iterative software development process framework created by the Rational Software Corporation, a division of IBM since 2003. RUP is not a single concrete prescriptive process, but rather an adaptable process framework, intended to be tailored by the development organizations and software project teams that will select the elements of the process that are appropriate for their needs. RUP is a specific implementation of the Unified Process.

<span class="mw-page-title-main">Project manager</span> Professional in the field of project management

A project manager is a professional in the field of project management. Project managers have the responsibility of the planning, procurement and execution of a project, in any undertaking that has a defined scope, defined start and a defined finish; regardless of industry. Project managers are first point of contact for any issues or discrepancies arising from within the heads of various departments in an organization before the problem escalates to higher authorities, as project representative.

A quantity surveyor (QS) is a construction industry professional with expert knowledge on construction costs and contracts. Qualified professional quantity surveyors can be known as Chartered Surveyors in the UK and Certified Quantity Surveyors in Australia and other countries. In some countries such as Canada, South Africa, Kenya and Mauritius, qualified quantity surveyors are known as Professional Quantity Surveyors, a title protected by law. Due to a shift in the Construction industry and the increased demand for Quantity Surveying expertise, today less importance is being placed on Charterships, with a large % of working Quantity Surveyors practising with College / University degrees and without membership or fellowship to professional associations.

Cost escalation can be defined as changes in the cost or price of specific goods or services in a given economy over a period. This is similar to the concepts of inflation and deflation except that escalation is specific to an item or class of items, it is often not primarily driven by changes in the money supply, and it tends to be less sustained. While escalation includes general inflation related to the money supply, it is also driven by changes in technology, practices, and particularly supply-demand imbalances that are specific to a good or service in a given economy. For example, while general inflation in the US was less than 5% in the 2003-2007 time period, steel prices increased (escalated) by over 50% because of supply-demand imbalance. Cost escalation may contribute to a project cost overrun but it is not synonymous with it.

A cost estimate is the approximation of the cost of a program, project, or operation. The cost estimate is the product of the cost estimating process. The cost estimate has a single total value and may have identifiable component values.

AACE International was founded in 1956 by 59 cost estimators and cost engineers during the organizational meeting of the American Association of Cost Engineering at the University of New Hampshire in Durham, New Hampshire. AACE International Headquarters is located in Morgantown, West Virginia, USA. AACE is a 501(c)(3) non-profit professional association. AACE International is a member of the Board of the Council of Engineering and Scientific Specialty Boards (CESB).

Indirect costs are costs that are not directly accountable to a cost object. Like direct costs, indirect costs may be either fixed or variable. Indirect costs include administration, personnel and security costs. These are those costs which are not directly related to production. Some indirect costs may be overhead, but other overhead costs can be directly attributed to a project and are direct costs.

A building estimator or cost estimator is an individual that quantifies the materials, labor, and equipment needed to complete a construction project. Building cost estimating can concern diverse forms of construction from residential properties to hi-rise and civil works. Both estimators and quantity surveyors must have a background education in the construction industry. Representative professional bodies which regulate property professionals:

<span class="mw-page-title-main">Building engineer</span> Construction profession

A building engineer is recognised as being expert in the use of technology for the design, construction, assessment and maintenance of the built environment. Commercial Building Engineers are concerned with the planning, design, construction, operation, renovation, and maintenance of buildings, as well as with their impacts on the surrounding environment.

Total cost management (TCM) is the name given by AACE International to a process for applying the skills and knowledge of cost engineering. It is also the first integrated process or methodology for portfolio, program and project management. It was initially conceived by Thomas D. Fromm and John Nunnemaker of Perkins & Will, architects, in 1990 to apply to the design of the University of Illinois Life and Science Building and was presented as a concept to the Society of University and College Planners (SCUP) the following year. AACE first introduced the concept in the 1990s and published the full presentation of the process in the "Total Cost Management Framework" in 2006.

When estimating the cost for a project, product or other item or investment, there is always uncertainty as to the precise content of all items in the estimate, how work will be performed, what work conditions will be like when the project is executed and so on. These uncertainties are risks to the project. Some refer to these risks as "known-unknowns" because the estimator is aware of them, and based on past experience, can even estimate their probable costs. The estimated costs of the known-unknowns is referred to by cost estimators as cost contingency.

A glossary of terms relating to project management and consulting.

Operational bills are a tendering document for estimating costs prepared by architects that describes a construction project in terms of the operations needed to build it. This form of document contrasts with that of bills of quantities in which such tendering and estimation is limited to the materials in the completed work. Operational bills have the advantages of enhancing communication between design and production, enabling realistic tender pricing, and making the preparation of critical-path analysis easy for the contractor.

Edward Skoyles was the first quantity surveyor employed in the UK to research costs and practices in the construction industry. He did his research from 1960 until 1984 at the Building Research Establishment. Among his research projects was developing a new type of tendering for construction projects called operational bills. He also started the study of the actual amount of waste in the construction industry, and investigated the varying methods of cost estimation practices used in different countries. His contributions are still widely discussed in the academic literature particularly upon operational bills, and building waste

The International Cost Engineering Council(ICEC) is a nonpolitical, nonprofit organization. ICEC’s objective is to promote cooperation between cost engineering, quantity surveying, and project management organizations. This is a global and local initiative to ensure the shared well-being of the organization and that of its members.

The following outline is provided as an overview of and topical guide to project management:

The following is a glossary of terms relating to construction cost estimating.

References

  1. ↑ "Provoc - Glossary of Common Project Control Terms," The Association of Cost Engineers (ACostE), http://www.acoste.org.uk Archived 2008-05-30 at the Wayback Machine
  2. ↑ "Home - DACE," Dutch Association of Cost Engineers, http://www.dace.nl/ Archived 2012-04-15 at the Wayback Machine
  3. ↑ "AACE International - About Us - News Archive - 2013 - Page Title". www.aacei.org. Archived from the original on 2016-07-11. Retrieved 2016-07-11.
  4. ↑ "Definition and Importance of Project Controls". www.projectcontrolsonline.com. Archived from the original on 2016-07-19. Retrieved 2016-07-11.
  5. ↑ AACE International Recommended Practice No. 10S-90, COST ENGINEERING TERMINOLOGY, TCM Framework: General Reference, AACE, 2010, pg 24
  6. ↑ David Greves & Herve Joumier, "Cost Engineering for Cost-Effective Space Programmes," esa bulletin 115 - august 2003, pg1
  7. ↑ John K. Hollmann, PE CCE, AACE International Recommended Practice No. 11R-88, REQUIRED SKILLS AND KNOWLEDGE OF COST ENGINEERING, TCM Framework: General Reference, AACE, 2010, pg 2
  8. ↑ John K. Hollmann, PE CCE, AACE International Recommended Practice No. 11R-88, REQUIRED SKILLS AND KNOWLEDGE OF COST ENGINEERING, TCM Framework: General Reference, AACE, 2010, pg 3

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