Written by John K. Hollmann, PE CCE
(AACE Technical Board Member)
In your career, you have probably
asked or been asked, “What is cost engineering? What does a cost engineer do?
What is total cost management (TCM)?”, and so on. AACE International's Recommended
Practice 11R-88, Required Skills and Knowledge of Cost Engineering,
provides some answers which are excerpted here. Beyond being a guiding document
for AACE International’s education and certification developments, 11R-88 is an
excellent reference for industry core competency and career model development.
What are Cost Engineering and TCM?
The AACE International Constitution
and Bylaws defines cost engineering and total cost management as follows:
Section 2. The Association 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.
Section 3. Total cost management is
that area of engineering practice where engineering judgment and experience are
used 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; cost and schedule performance measurement, and change control.
In summary, the list of practice
areas in Section 3 are collectively called cost engineering; while the
"process" through which these practices are applied is called total
cost management or TCM.
How is cost and schedule management
an “engineering” function?
Most people would agree that
"engineers" and engineering (or more generally, the “application of
scientific principles and techniques”) are most often responsible for creating
functional things (or strategic assets as we call them in TCM).
However, engineering has multiple
dimensions. The most obvious is the dimension of physical design and the
calculation and analysis tasks done to support that design (e.g., design a
bridge or develop software). However, beyond the physical dimension of design
(e.g., the bridge structure), there are other important dimensions of money,
time, and other resources that are invested in the creation of the designed
asset.
We refer to these investments
collectively as costs. Using the above example, someone must estimate what the
bridge might cost, determine the activities needed to design and build it,
estimate how long these activities will take, and so on. Furthermore, someone
needs to monitor and assess the progress of the bridge design and construction
(in relation to the expenditure of money and time) to ensure that the completed
bridge meets the owner's and other stakeholder's requirements. Someone must
also monitor and assess the cost of operating and maintaining the bridge during
its life cycle.
Returning to the AACE International
Constitution and Bylaws definition, understanding and managing the cost
dimensions requires skills and knowledge in, “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.”
No significant asset has ever been
built without dealing with these cost dimensions in some way, and the more
systematically and professionally these dimensions are addressed, the more successful
the asset performance is likely to be. Therefore, cost engineering recognizes
that cost is a necessary extension of traditional engineering (and other
creative functions such as systems analysis, etc.), and that there is an
intimate connection between the physical and cost dimensions of the asset.
Do cost engineering practitioners
need to have a traditional “engineering” background?
The skills and knowledge required
to deal with costs (e.g., cost estimating, planning and scheduling, etc.) are quite
different from those required to deal with the physical design dimension. From
that difference, the field of cost engineering was born. Cost engineering
practitioners work alongside of and are peers with engineers, software
analysts, play producers, architects, and other creative career fields to
handle the cost dimension, but they do not necessarily have the same
background. Whether they have technical, operations, finance and accounting, or
other backgrounds, cost engineering practitioners need to share a common
understanding, based on “scientific principles and techniques,” with the
engineering or other creative career functions.
Do cost engineering practitioners
all have the same function?
Cost engineering practitioners tend
to be:
- specialized in function
(e.g., cost estimating, planning and scheduling, etc.);
- focused on either the asset
management or project control side of the TCM process; and
- 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 have titles such as cost
estimator, quantity surveyor, parametric analyst, strategic planner,
planner/scheduler, value engineer, cost/schedule engineer, claims consultant,
project manager, or project control lead.
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).
But, no matter what their job title or business environment, a general
knowledge of, and skills in, all areas of cost engineering are required to
perform their job effectively.
This story taken in AACE Website.
