adding value to the organisation through
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Adding Value To the Organisation through. Cost Engineering. Dave Lewis - Cost Engineering Solutions Dale Shermon - PriceSystems. The Problem. Cost Engineers are under funded, not appreciated capabilities are not being recognised by their companies. - PowerPoint PPT PresentationTRANSCRIPT
Adding Value To the Organisation through
Cost Engineering
Dave Lewis - Cost Engineering Solutions Dale Shermon - PriceSystems
The Problem
Cost Engineers are
• under funded,
• not appreciated
• capabilities are not being recognised
by their companies
• This presentation is provided, through the EACE, and aims to address this problem by assisting you in presenting the capabilities of the Cost Engineering Process and how it adds value to your organisation.
• Take these slides as a starting point for a presentation to “sell” the capabilities of Cost Engineering.
• Select Format, Apply Design Template from the menu to customise the presentation within your organisation
• Delete this slide and add, where appropriate information relating to your own organisation.
Adding Value To the Organisation through the Application of The Skills &
Process For
Cost Engineering
Agenda # Part 1• Definition Of Cost Engineering
• The Cost Engineer– Profile– Primary Skills– Qualifications
• Requirements– Cost Data– Cost Models– Process & Procedures
Definition Of Cost Engineering
Association of Cost Engineers
• A Cost Engineer is, by education, training and experience competent to develop and make practical use of the principles of engineering cost management which embraces activities such as estimating, cost control, value engineering, planning, construction management, investment appraisal and risk analysis.
Definition Of Cost EngineeringCost Engineering Capability Improvement Model
• Cost Estimating• Cost Modelling• Cost Control &
Analysis• VA/VE & Cost
Reduction• Planning(Schedule)• Risk Management• Cost Allocation
• DTC & CAIV• Supply Chain Support• Knowledge
Management• Capital Asset &
Resource Management• Business Analysis• Business Case
Development• Audit
Why you should have Estimators ?
Accurately forecasting the cost of future work is vital to the survival of any business. Estimators develop cost related information for managers to use in determination of resource and material requirements, making bids, and assessment of the profitability of new products. To do this estimators compile and analyse data on all the factors that can influence costs such as materials, labour, machinery, past performance, commercial conditions etc.
Meeting The Need * 1 > Experience
Profile
Technical Knowledge
Commercial Awareness
Financial Awareness
Understanding The Business
Communications & Interpersonal Skills
Principles Of Project Management, Tasks relate to PMBOK
Meeting The Need *1A > Capabilities
Primary Skills
Elements Of CostCBS/WBS
Costing & Pricing
Estimating Methods
Types & Purpose Of EstimatesOperating & Manufacture Costs
Cost Indices & Escalation Factors
Risk Analysis/ContingencyBudgeting & Cash Flow
HSE
Meeting The Need * 2 > Cost Data
Cost Data
Historical Project Cost Data
Estimate To Complete Data
Inflation / Cost Trend Indices
Meeting The Need * 3 > Cost Models
Cost Models
Proprietary Cost Models
Spreadsheets
Rule Of Thumb
Appropriate to the Organisation and Application
Cost Improvement Models
Economic Models
Meeting The Need * 4 > Process & Procedures
Process &
Procedures
Client Specifies
In House
Meeting The Need * 5 > Qualifications
• NVQ/SVQ – Project Control
• Certified Cost Engineer – SCEA/ACostE ?
• Incorporated, Chartered or European Engineer thro’ Engineering Council or Federation Of National Engineering associations.
• Certified Parametrician - ISPA
Agenda # Part 2 Approach
• Scope/Definitions
• Project Execution Strategy
• Estimating Strategy
• Information Requirements
Scope / Definitions
Scope / Definitions
Breakdown Structures
WBS OBSCBS
Scope & Boundaries ExclusionsSchedule
Project Execution Strategy
Project
Execution
Strategy
Commercial & Financial
Contracting Arrangements
Local Issues
Supply Chain Considerations
Competition
Alternative Strategies
SWOT Analysis
Estimating Strategy
Estimating
Strategy
Degree Of Definition
Schedule
Adopt AppropriateTechnique
Information Requirements - 1
• Purpose/Use• Project Stage• Level & quality Of Project scope• Level & quality Of data• Time for preparation• Resource Level/Availability• companies Risk Culture
TypeOfCostEstimateProduced
Information Requirements - 2
– Project scope
– Project Specification
– Quantity
– Rates
– Schedule data
– Local factors/Performance data
– Escalation norms
Estimating Techniques vary - individual constituent parts need to be available
Information Requirements - 3
Minimal Project Scope
Or Design Definition
Top Down/Parametric
Deign Definition Or Project Scope Advanced
Bottoms Up/Detailed
Estimating Techniques Fall Into 2 Categories
AccuracyEst
imate
Acc
ura
cy
Completeness of Design0% 100%
Conceptual
Front End StudyDetail Design
+
_
Accuracy improves through course of the project as scope & definition firm up as costs move from estimated to actual.
Information Requirements - 4
Actual Labour Hours & Norms
Statistics
Estimating Manuals
Technical Data
Perfomance data
Procurement data
Indices/Escalation
Database
Typical Cost / Technical Trend Chart
Mass Versus Total Cost
y = 44.319x - 2088.6
0
20,000
40,000
60,000
80,000
100,000
120,000
0 500 1000 1500 2000 2500 3000Mass Kg
Cos
t
Typical Cost Improvement Chart
Cost Per Kg of Mass Against Year of Production
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
1 2 3 4 5 6 7 8 9 10 11 12 13
Year Of Production
Co
st
Pe
r K
g
Breakdown Of Cost by Element
0
100000
200000
300000
400000
500000
600000
700000
800000
900000
ItemA
ItemB
ItemC
ItemD
ItemE
ItemF
ItemG
ItemH
Breakdown Of Cost Per Item in Estimate
5% Reduction = £40 K
5% Reduction = £5K
Supplier Comparison Graph
Supplier Comparison
0
10
20
30
40
50
1 2 3 4 5 6
Item Number
Co
st P
er K
g O
f M
ass
Supplier A Supplier B
Supplier B is Cheaper Than A
Next Steps
Financial benefit Of CE Department
4%24%
24%24%
12%12% Cost Of Estimating Department
Value Of Bids Produced
Value Of Suppliers ASSessed
WLC Estimates Compiled
Value Engineering Tasks Completed
Others
Provide your own inputs on areas of financial saving and benefits achieved.
Please also provide data to me for collation & presentation in Part 2
Next Steps # 2•Need to Collect Best Practice Data to include in Part 2
• CECIM / Benchmarking Workshops
•Expand Into Cost Analysis(EVA etc) For Part 2.
•Need to generate Strengths & Key Benefits slides(Competences & Training Sub Group)
•Need to generate Financial Benefits•Cost Of CE relative to Value Of work•Cost Of CE relative to savings generated.
