Details of the AACE RPs at the date of June 10, 2012

COST ENGINEERING TERMINOLOGY (Rev. May 3, 2012) AACE International Recommended Practice No. 10S-90 TCM Framework:

General Reference

REQUIRED SKILLS AND KNOWLEDGE OF COST ENGINEERING (Rev. May 11, 2012) AACE International Recommended Practice No. 11R-88 TCM Framework:

General Reference

MODEL MASTER'S DEGREE PROGRAM WITH EMPHASIS IN COST ENGINEERING (Rev. November 1990) AACE International Recommended Practice No. 12R-89 TCM Framework:

General Reference

RECOMMENDED METHOD FOR DETERMINING BUILDING AREA (Rev. November 1990) AACE International Recommended Practice No. 13S-90 TCM Framework:

7.3: Cost Estimating and Budgeting

RESPONSIBILITY AND REQUIRED SKILLS FOR A PROJECT PLANNING AND SCHEDULING PROFESSIONAL (Rev. September 19, 2006) AACE International Recommended Practice No. 14R-90 TCM Framework:

7.2: Schedule Planning and Development

PROFITABILITY METHODS (Rev. July 16, 2008) AACE International Recommended Practice No. 15R-81 TCM Framework:

3.3: Investment Decision Making 6.1: Asset Performance Assessment

Scope This Recommended Practice (RP) of AACE International defines specific practices for determining the profitability of investments. The methods offered are general, since not all profitability techniques can or should be included in an RP. In its broadest sense, profitability is a measure of value added. Increased profitability thus reflects greater economic good for society. There is no economic progress without profitability. Purpose This RP is intended to provide broad guidelines, not standards, for profitability methods

that most seasoned practitioners in most industries would consider to be reliable and would generally endorse. Profitability methods with less general applicability, e.g., the revenue requirement technique used by electrical utilities or the benefit-cost ratio used in the public sector, are not included in this RP. Background Profitability methods are critical tools for assessing asset performance and making effective investment decisions. These processes are central to portfolio and program management in that selecting the right capital or maintenance projects can be as important to enterprise success as effectively executing any particular project.

CONDUCTING TECHNICAL AND ECONOMIC EVALUATIONS: AS APPLIED FOR THE PROCESS AND UTILITY INDUSTRIES (Rev. April 1991) AACE International Recommended Practice No. 16R-90 TCM Framework:

3.2: Asset Planning 3.3: Investment Decision Making

COST ESTIMATE CLASSIFICATION SYSTEM (Rev. November 29, 2011) AACE International Recommended Practice No. 17R-97 TCM Framework:

7.3: Cost Estimating and Budgeting

COST ESTIMATE CLASSIFICATION SYSTEM: AS APPLIED IN ENGINEERING, PROCUREMENT, AND CONSTRUCTION FOR THE PROCESS INDUSTRIES (Rev. November 29, 2011) AACE International Recommended Practice No. 18R-97 TCM Framework:

7.3: Cost Estimating and Budgeting

The Cost Estimate Classification System provides guidelines for applying the general principles of estimate classification to asset project cost estimates. Asset project cost estimates typically involve estimates for capital investment, and exclude operating and life-cycle evaluations. The Cost Estimate Classification System maps the phases and stages of asset cost estimating together with a generic maturity and quality matrix that can be applied across a wide variety of industries. 17R-97 provides a generic methodology for the classification of project cost estimates in any industry, while 18R-97 provides extensions and additional detail for applying the principles of estimate classification specifically to project estimates for engineering, procurement, and construction (EPC) work for the process industries. An intent of the guidelines is to improve communication among all of the stakeholders involved with preparing, evaluating, and using project cost estimates.

ESTIMATE PREPARATION COSTS: AS APPLIED FOR THE PROCESS

INDUSTRIES (Rev. June 19, 1998) AACE International Recommended Practice No. 19R-97 TCM Framework:

7.3: Cost Estimating and Budgeting

This recommended practice presents benchmark information on the costs to prepare cost estimates (for engineering, procurement, and construction) in the process industries. It includes qualitative and quantitative lessons that cost engineers and estimators can use to benchmark their cost estimating experiences against. The data on preparation costs was used to develop a parametric cost model that can be used to estimate the cost of preparing estimates. The effort or cost to prepare a cost estimate is a secondary characteristic of a cost estimate classification. This Recommended Practice supports AACE Internationals Recommended Practice 18R-97 Cost Estimate Classification System - as Applied in Engineering, Procurement, and Construction for the Process Industries.

PROJECT CODE OF ACCOUNTS (Rev. January 27, 2003) AACE International Recommended Practice No. 20R-98 TCM Framework:

7.1: Project Scope and Execution Strategy Development 7.2: Schedule Planning and Development 7.3: Cost Estimating and Budgeting

This guideline establishes the basic principles of codes of accounts (COA) for projects in any industry. It examines key characteristics including usage, content, structure and format and describes benefits of establishing standard COAs. Topics such as activity-based costing and work breakdown structures as they relate to COAs are addressed. The issues of properly defining a WBS and how it should be structured are outside the scope of this guideline. COAs are applicable to all phases of the asset life cycle, however, this guideline specifically addresses the project execution phases of asset design development through to start of normal operation. A project code of accounts is a coded index of project cost, resource and activity categories. A complete COA includes definitions of the content of each account code and is methodically structured to facilitate finding, sorting, compiling, summarizing, defining and otherwise managing information the code is linked to. The information is used to support total cost management practices such as cost estimating, cost accounting, cost reporting, cost control, planning and scheduling. Other names used for COAs are coding matrices, coding structures, charge accounts, asset or material classification accounts, value categories, cost elements, work breakdown structures, resource breakdown structures and activity breakdown structures.

PROJECT CODE OF ACCOUNTS: AS APPLIED IN ENGINEERING, PROCUREMENT, AND CONSTRUCTION FOR THE PROCESS INDUSTRIES (Rev. January 27, 2003) AACE International Recommended Practice No. 21R-98 TCM 7.1: Project Scope and Execution Strategy Development

Framework: 7.2: Schedule Planning and Development 7.3: Cost Estimating and Budgeting

This guideline is an industry-specific addendum to AACE International's generic guideline for project code of accounts (Recommended Practice No. 20R-98). This document describes recommended practices for codes of accounts (COA) as applied to engineering, procurement, and construction (EPC) projects in the process industries. "Process industries" are those with facilities whose main function is to perform a process. This includes chemical, petrochemical, hydrocarbon, pulp and paper, pharmaceutical, power generation, thermal, metallurgical, assembly, fabrication, and other processing. The primary characteristic of these industries, as it relates to codes of accounts, is that process or manufacturing equipment is the core or primary physical component of the facility. Equipment differentiates these projects from commercial construction and infrastructure where the core component is a structure, from software development projects where the core component is programming code, and so on. COAs are applicable to all phases of the asset life cycle, but this guideline specifically addresses the EPC for creation, modification, or termination of a process facility. This guideline does not apply to code of accounts to support ongoing operations of process facilities. Properly defining a work breakdown structure (WBS), and other project structures, and deciding how they should be structured are outside the scope of this document. A project code of accounts is a coded index of project cost, resource, and activity categories. A complete COA includes definitions of the content of each account code and is methodically structured to facilitate finding, sorting, compiling, summarizing, defining and otherwise managing the project information that is linked to the code. The information is used to support total cost management practices such as cost estimating, cost reporting, cost accounting, planning, and scheduling. Refer to 20R-98 for a more complete description of the principles of COAs.

DIRECT LABOR PRODUCTIVITY MEASUREMENT: AS APPLIED IN CONSTRUCTION AND MAJOR MAINTENANCE PROJECTS (Rev. April 26, 2004) AACE International Recommended Practice No. 22R-01 TCM Framework:

9.2: Progress and Performance Measurement

This recommended practice of AACE International describes a direct method to measure, monitor and optimize construction and maintenance project labor productivity. The method described is statistical sampling of the work process, or: work sampling. The work process is made up of steps and activities that take input resources, add value, and produce the completed project. Understanding the capability of the process, or 'management system,' to produce efficiently is important for project planning and control. Sampling is a cost-effective way to provide information about the performance of the work process, i.e., about 'how' the work is done, and how to do it better. Work sampling complements conventional project management methodology, which typically tracks

'what' work is done. Sampling provides project managers, supervisors, and the workforce with objective feedback re: the efficiency of the work process (not of individual workers, which is part of the foreman's job): and the ability to respond quickly to adjust. In addition, it provides a measure of management's ability to effectively plan, coordinate, and control project execution. Analysis of the sampling data allows for prompt removal or reduction of roadblocks, optimizing the construction work process through redesign and innovation. Streamlining the work process ensures that performing productive work is made more convenient for the workforce, ensuring that, at all times, crafts and technicians have all the necessary tools, materials, parts, supplies, information, supervisory support and personal needs readily available. Work sampling, properly applied, recognizes that productivity results from an optimal work process, i.e., from 'managing smarter,' not from people working harder. Construction labor productivity is a measure of work process efficiency. It can be defined as the ratio of the value labor produces to the value invested in labor. Productivity increases as needed labor resources are minimized and wasted efforts eliminated from the work process. This definition and the practice covered here treats productivity as a direct, absolute measure to be optimized.

IDENTIFICATION OF ACTIVITIES (Rev. May 3, 2007) AACE International Recommended Practice No. 23R-02 TCM Framework:

7.2: Schedule Planning and Development

This recommended practice is for use by the project team members involved in the schedule planning process for any project type and in any industry. Many individuals contribute in the identification of activities, and having an experienced planner coordinate the process improves final quality and adds value to the planning process. As a recommended practice of AACE International, identification of activities in schedule planning and development provides guidelines for the conversion of scope definition to specific activities and tasks required to complete a program or project. Identification of activities is a key planning step that takes place early in the schedule planning and development process which also includes estimating durations, determining and defining resources, and identifying external project constraints. The scope definition of a program or project is generally described in various planning and technical documents, databases, or other deliverables. To begin the planning process, information in the scope documents must first be translated into manageable activities. For example, the scope may include the installation of a length of pipeline. Installing that pipeline may require designing, procuring, cutting, welding, erecting, and inspection activities. This process of expanding the high level scope or functional definition into the detailed work required for completion is the practice of "identification of activities".

DEVELOPING ACTIVITY LOGIC (Rev. March 26, 2004) AACE International Recommended Practice No. 24R-03 TCM Framework:

7.2 Schedule Planning and Development

As a recommended practice of AACE International, development of activity logic (also called network logic) in planning and scheduling provides guidelines for the sequencing of activities in a logical way generally before duration estimating can be performed. Logic is generally determined before durations are considered. Logic development methods include precedence diagramming, or arrow diagramming methods. Logic is the set of activities and dependency relationships between them. Logic dictates the planned sequencing of activities. A network diagram is often used to illustrate the logic. Planning and scheduling are not the same. Planning is determining how the work will be done, while scheduling is the analysis and calculation of start and finish dates. Logic enables the combination of activities to be arranged in one of the aforementioned formats so that a completion date can be established. Logic also enables backward passes to arrive at optimal overall schedule duration. This recommended practice is for use by project team members involved in planning process, a continuation of activity identification process (reference TCM Framework section 8.2). As in identification of activities, many individuals contribute to the development of activity logic. Having an experienced planner coordinate the process improves final quality, and adds value to the planning process.

ESTIMATING LOST LABOR PRODUCTIVITY IN CONSTRUCTION CLAIMS (Rev. April 13, 2004) AACE International Recommended Practice No. 25R-03 TCM Framework:

6.4 Forensic Performance Assessment

This Recommended Practice focuses on identification of various methods for estimating lost labor productivity in construction claims. Often the claim is the result of one or more change order requests that cannot be fully resolved to capture their full and final effect on the entire project cost and schedule. Specifically, this Recommended Practice examines the issue in terms of claims for cost recovery of lost productivity. Therefore, the purpose of the Recommended Practice is to

Identify Lost Productivity Estimating Methodologies: That is, survey as many of the various methodologies employed in litigation throughout North America as can be identified;

Rank Order the Methodologies: That is, based on reliability, professional acceptance, case law and construction claims literature, rank the identified methodologies from most to least reliable with respect to documenting estimating damages in claim situations. While it may not be possible to state with certainty which methods are absolutely most or least reliable, it can be stated that under

certain sets of circumstances some methods are generally considered more reliable than others. (CAUTION: This Recommended Practice was prepared on the basis of the author's understanding of Canadian and U.S. case law. It is recommended that anyone preparing a lost productivity claim seek appropriate legal advice on the methodology to be used. This is especially true if the claim is being pursued under national law other than Canada or the United States.)

Define and Discuss Each Methodology: That is, discuss the method and how it is employed. Also, when possible, discuss the strong and weak points of each method;

Identify Selected Studies Applicable to Each Methodology: Herein, identify as many studies and professional or technical papers as possible which will help the practitioner in learning more about and/or employing a particular method.

It needs to be noted that this Recommended Practice does not define in detail how one should properly perform the various analytical methods identified herein. The Recommended Practice gives a brief description of each method only in an effort to help claimants properly identify the method. That is, different claimants may have differing nomenclature for the same methodology. In this case, the brief description of each method is intended to help overcome this situation.

SCHEDULE CLASSIFICATION SYSTEM (Rev. November 12, 2010) AACE International Recommended Practice No. 27R-03 TCM Framework:

7.2 Schedule Planning and Development

This recommended practice (RP) is intended to serve as a guideline, not a standard. As a recommended practice of AACE International, the intent of the guideline is to improve the understanding and the communication among stakeholders involved with preparing, evaluating, and using project schedules. Various enterprises often misinterpret the quality and value of the information available to prepare schedules and the various methods employed during the scheduling process. It is understood that each enterprise may have its own project scheduling processes and terminology, and may classify schedules in their own particular ways. This guideline provides a generic and generally acceptable classification system that can be used as a basis of comparison. If an enterprise or organization has not formally documented its own schedule classification system, then this RP guideline can be used to provide an acceptable basis. This recommended practice introduces a schedule classification system, which provides the guidelines for applying the general principles of schedule classification to project schedules. A schedule classification system maps the phases and stages of scheduling with a generic maturity and quality matrix that can be applied across a wide variety of industries. It is intended to be applied to any schedule in any industry, and across all stakeholders including government and academia. A separate recommended practice provides a guideline for describing the specific use of schedule levels to project schedules. Schedule levels provide the details necessary to

recognize the characteristics of each of the schedule levels for the purposes of communicating, executing (controlling and monitoring) and reporting the specific details of the project. Schedule levels consider reporting requirements for each of the stakeholders and the appropriate amount of information necessary for effective communication and decisions. This recommended practice has been developed such that it:

Provides common understanding of the concepts involved with classifying project schedules regardless of the type of enterprise or industry

Fully defines and correlates the major characteristics used in classifying schedules so that enterprises may determine how their practices compare to these guidelines

Uses degree of project definition as the primary characteristic to categorize schedule classes

Reflects generally accepted practices in the cost engineering profession

This classification guideline is intended to help those involved with project schedules to avoid misinterpretation of the various classes of schedules and to avoid their misapplication and misrepresentation. Improving communications about schedule classifications reduces business costs and project cycle times by avoiding inappropriate business and financial decisions, actions, delays, or disputes caused by misunderstandings of schedules and what they are expected to represent.

DEVELOPING LOCATION FACTORS BY FACTORING: AS APPLIED IN ARCHITECTURE, ENGINEERING, PROCUREMENT AND CONSTRUCTION (Rev. October 19, 2006) AACE International Recommended Practice No. 28R-03 TCM Framework:

7.3: Cost Estimating and Budgeting 10.4: Project Historical Database Management

This recommended practice provides a generic method of developing location factors in support of the Total Cost Management (TCM) cost estimating and budgeting and database management processes for construction related projects. The method applies to construction projects of all types including buildings, infrastructure, utilities, process plants, and so on. This generic method provides a basis for users to tailor their own detailed process around their own needs and computing capabilities. Location factors are used during preliminary project evaluations (i.e., Class 5 or 4 estimates). They are not intended to be used when preparing appropriation-quality estimates (i.e., Class 3 or better estimates).

FORENSIC SCHEDULE ANALYSIS (Rev. April 25, 2011) AACE International Recommended Practice No. 29R-03 TCM Framework:

6.4: Forensic Performance Assessment

The purpose of the AACE International Recommended Practice 29R-03 Forensic

Schedule Analysis is to provide a unifying reference of basic technical principles and guidelines for the application of critical path method (CPM) scheduling in forensic schedule analysis. In providing this reference, the RP will foster competent schedule analysis and furnish the industry as whole with the necessary technical information to categorize and evaluate the varying forensic schedule analysis methods. The RP discusses certain methods of schedule delay analysis, irrespective of whether these methods have been deemed acceptable or unacceptable by courts or government boards in various countries around the globe. This RP is not intended to establish a standard of practice, nor is it intended to be a prescriptive document applied without exception. Therefore, a departure from the recommended protocols should not be automatically treated as an error or a deficiency as long as such departure is based on a conscious and sound application of schedule analysis principles. As with any other recommended practice, the RP should be used in conjunction with professional judgment and knowledge of the subject matter. While the recommended protocols contained herein are intended to aid the practitioner in creating a competent work product it may, in some cases, require additional or fewer steps.

IMPLEMENTING PROJECT CONSTRUCTABILITY (Rev. May 20, 2009) AACE International Recommended Practice No. 30R-03 TCM Framework:

11.5: Value Management and Value Improving Practices (VIPs)

Constructability is the integration of construction expertise into all phases of the project to benefit cost, schedule, quality, and overall project objectives. The successful use of construction knowledge and expertise improves for and probability of project success. Constructability reviews (CRs) should be conducted at key points in the project life cycle: in the planning phase, early in the design phase, prior to the procurement phase and again prior to the mobilization phase for construction. CRs should hold true to the designer's intent, and the design concept is easiest molded to good constructability early in the design phase. Constructability, as addressed in this RP, is applicable to projects in any industry in any location (e.g., architectural, process plant, transportation, utilities, offshore, etc.) that include construction work of any scope. In total cost management (TCM), constructability is one of many value improving practices (VIPs) such as manufacturability analysis; reliability, availability and maintainability (RAM) analysis; and so on.[9] Constructability is also useful as a risk management practice that supports risk mitigation. However, these other VIPs and risk management practices are not directly included in this RP. AACE is not the sole or even primary steward of recommended constructability practice; there are several leading organizations included in the reference section. However, constructability is a skill and knowledge area of cost engineering because, as a VIP, constructability practices require the assessment of cost, schedule, risks and other project attributes for which AACE is the leading organization. This RP highlights the role of cost

engineering in the practice. This RP will discuss how to implement a constructability program in order to maximize the positive impact on the project. It also provides project examples illustrating the success of those properly implemented efforts. Integrating constructability into project plans can result in better safety, lower costs, better productivity, earlier completion and start-ups for ultimately better projects.

REVIEWING, VALIDATING, AND DOCUMENTING THE ESTIMATE (Rev. May 12, 2009) AACE International Recommended Practice No. 31R-03 TCM Framework:

7.3: Cost Estimating and Budgeting

Scope This Recommended Practice (RP) of AACE International defines the basic elements of and provides broad guidelines for the cost estimate review, validation and documentation process. Estimate review and documentation is a step in the cost estimating and budgeting process of the Total Cost Management (TCM) Framework. This RP is applicable to all estimate types for any industry and is intended for those responsible for and/or participating in an estimate review. Expert knowledge is not required to understand or use this RP. Purpose This RP is intended to provide guidelines (i.e., not a standard) for reviewing, validating and documenting estimates. Most practitioners would consider these guidelines as good and reliable practices. It is recommended to consider using these guidelines where applicable. Background Cost estimates typically represent a complex compilation and analysis of input from many project stakeholders. To ensure the quality of an estimate, budget or bid, a review process is required to ensure that the estimate meets project and organization requirements. The project plan typically requires that the cost estimate:

Reflect the project strategy, objectives, scope and risks Be suitable for a given purpose (e.g., cost analysis, decision making, control,

bidding, etc.) Address the stakeholders financial and performance requirements Ensure that all parties agree on and understand the estimates basis, content and

outcome, including the estimates probabilistic characteristics (e.g., range, cost distribution, etc.).

DETERMINING ACTIVITY DURATIONS (Rev. January 14, 2012) AACE International Recommended Practice No. 32R-04

TCM Framework:

7.2: Schedule Planning and Development

This recommended practice (RP) for Determining Activity Durations is intended to provide a guideline and a resource, not to establish a standard. As a recommended practice of AACE International, it provides guidelines for the project scheduler to determine schedule activity durations and understand the limitations and assumptions involved in such determination as part of the total cost management (TCM) project planning, scheduling forecasting, and change management processes (7.2). This recommended practice provides information about determining the original durations for activities for developing the project schedule and general considerations related to the establishment of remaining durations while updating the project schedule. Specific considerations regarding the topic of establishing the activities remaining durations for schedule performance assessment are not within the scope of this RP. Therefore the information presented here generally applies to determining original activity durations; and general considerations for the establishment of remaining durations be provided only as appropriate. This recommended practice offers methods for determining original activity durations through the analysis of past project data with anticipated future performance data. It also incorporates an iterative effect-analysis of constraints on activity duration.

BASIS OF ESTIMATE (Rev. July 28, 2010) AACE International Recommended Practice No. 34R-05 TCM Framework:

7.3: Cost Estimating and Budgeting

AACE Internationals Total Cost Management (TCM) Framework identifies a basis of estimate (BOE) document as a required component of a cost estimate. As a Recommended Practice (RP) of AACE International, the template outlined in the following sections provides guidelines for the structure and content of a cost basis of estimate. In the TCM Framework, the BOE is characterized as the one deliverable that defines the scope of the project, and ultimately becomes the basis for change management. When prepared correctly, any person with capital project experience can use the BOE to understand and assess the estimate, independent of any other supporting documentation. A well-written BOE achieves those goals by clearly and concisely stating the purpose of the estimate being prepared (i.e. cost study, project options, funding, etc.), the project scope, pricing basis, allowances, assumptions, exclusions, cost risks and opportunities, and any deviations from standard practices. In addition the BOE is a documented record of pertinent communications that have occurred and agreements that have been made between the estimator and other project stakeholders.

DEVELOPMENT OF COST ESTIMATE PLANS AS APPLIED IN

ENGINEERING, PROCUREMENT, AND CONSTRUCTION FOR THE PROCESS INDUSTRIES (Rev. June 12, 2009) AACE International Recommended Practice No. 36R-08 TCM Framework:

7.3: Cost Estimating and Budgeting

Purpose This recommended practice (RP) of AACE International (AACE) is a guideline for development of cost estimate preparation plans for engineering, procurement and construction (EPC) projects in the process industries. The purpose of a cost estimate preparation plan (herein referred to as estimate plan) is to establish and communicate how the preparation, development, review and approval of the estimate will be completed. Background AACE Internationals Total Cost Management (TCM) Framework section 7.3.2.1 Plan for Cost Estimating and Budgeting highlights the need to develop estimate plans. This RP delineates industry specific practices for development of an estimate plan as they are applied to EPC projects in the process industries. (A future AACE International RP will provide a guideline for development of a generic cost estimate plan.) Cost estimating in the hydrocarbon processing industries (e.g.; chemical, refining, petroleum production facilities, etc.) has evolved to a relatively advanced state over more than four decades of application. These industries have developed many common practices and identified industry-specific best practices through benchmarking and knowledge-sharing. The practices reflected in this document are a result of compiling notes made by industry practitioners, lessons learned and publicly available documents. Scope With reference to the TCM Framework, this document addresses the steps before and after the Plan for Estimating and Budgeting step to the extent necessary for an effective estimate plan. This document is primarily focused on estimates prepared for project sanction purposes of land-based facilities. Typically, project sanction is based on a Class 3 estimate. Estimate plans for other classes of estimates may be adapted from this document. The basic principles are applicable to all contracting strategies and asset owner (herein referred to as owner) configurations. For example, contracting strategies may be in the form of reimbursable engineering with fixed price procurement and construction and/or EPC alliances, etc. Owner configurations may include self-perform, partnerships with a named operating company or consortiums responsible for managingthe project/program and so on. Some key principles are:

Preparation of an estimate plan helps to ensure successful estimate completion in an effective and timely manner.

Engaging key stakeholders in the estimate planning process prior to the start of the estimate development process, improves the likelihood of meeting estimate objectives.

The estimate plan defines what information is required from who and when. An approved estimate plan provides a duly authorized basis to proceed with the

estimating effort, clarifies requirements and responsibilities.

SCHEDULE LEVELS OF DETAIL -- AS APPLIED IN ENGINEERING, PROCUREMENT AND CONSTRUCTION (Rev. March 20, 2010) AACE International Recommended Practice No. 37R-06 TCM Framework:

7.2: Schedule Planning and Development

Purpose This recommended practice (RP) is intended to serve as a guideline, not a standard for owners and contractors to establish a common frame of reference and understanding when describing the level of detail for any construction project schedule. This RP identifies four schedule formats based on level of detail, and provides descriptions of schedule levels and the intended use of these schedules by project participants. Background This recommended practice provides descriptions of the schedule levels methods with the intent to improve the understanding and communication among project participants and stakeholders involved with preparing and using project schedules. This recommended practice (RP) describes the schedule level methods that are prevalent in the construction industry today for reporting and communicating project schedule plans, results and forecast or "to-go" data to respective stakeholders. This RP excludes "turn-around projects", and does not necessarily apply to line of balance or linear scheduling applications.

DOCUMENTING THE SCHEDULE BASIS (Rev. June 18, 2009) AACE International Recommended Practice No. 38R-06 TCM Framework:

7.2: Schedule Planning and Development

Scope This recommended practice (RP) provides an outline and describes a format for the various elements of information that may be included in the schedule basis document. This RP describes the important elements of schedule information that may be included to document the basis and assumptions of this project management tool. This recommended practice includes a checklist in the appendix that can be used to confirm that all elements of the basis document have been considered. The schedule basis is a document that defines the basis for the development of the project schedule and assists the project team and stakeholders in identifying any key elements, issues and special considerations (assumptions, exclusions, risks/ opportunities, etc.). The project schedule represents the complete logical time-phased representation of the project plan. The

schedule basis document may accompany the submittal of the project baseline schedule. The schedule basis further substantiates the confidence and degree of completeness of the project schedule in order to support change management, reconciliation, and analysis. This document also doubles as a tool for assisting any personnel who are transitioning into the project and may be used in claims situations to illustrate a change of scope. Purpose This AACE International recommended practice is intended to provide a guideline, not to establish a standard for documenting the schedule basis for the planning of projects. This recommended practice is written and intended primarily for use on construction projects by the project team members and stakeholders involved in the planning and scheduling of the project work activities. These RP guidelines may be applicable to many other types of projects. The focus of this recommended practice is on documenting the necessary elements of the schedule basis. Many project individuals and groups contribute to the planning and development of the project schedule. By documenting the schedule basis, the project team captures the coordinated project schedule development process, which is by nature unique for most construction projects. This improves the final quality and adds value to the project baseline schedule, which serves as the time management navigation tool to guide the project team toward successful project completion. The schedule basis also is an important document used to identify changes during the schedule change management process. Background The requirement to document the basis of the schedule has been an established procedure for several years with many large corporations, and some federal agencies. This recommended practice describes the important elements of schedule information that may be included to document the basis and assumptions of this project management tool.

PROJECT PLANNING - AS APPLIED IN ENGINEERING AND CONSTRUCTION FOR CAPITAL PROJECTS (Rev. December 8, 2011) AACE International Recommended Practice No. 39R-06 TCM Framework:

3.1 Requirements Elicitation and Analysis 3.2 Asset Planning 4.1 Project Implementation 7.1 Project Scope and Execution Strategy Development 7.2 Schedule Planning and Development 7.3 Cost Estimating and Budgeting 7.4 Resource Planning 7.5 Value Analysis and Engineering 7.6 Risk Management 7.7 Procurement Planning 8.1 Project Control Plan Implementation

This recommended practice (RP) to project planning provides guidelines developed primarily for engineering and capital construction projects.

AACE International Recommended Practices are intended to provide guidelines, not to establish standards. This recommended practice is intended to be a guide for the many project team members involved in the planning and scheduling of their work process and can be adapted for any type of project or program where planning is required. This recommended practice is intended to focus on the elements of project planning: who, what, where, when, and how. It also focuses on the actions required by members of the project team in order to translate that planning effort into a useful project plan that will serve as a management navigation tool to guide the project team to successful project completion. This RP will focus on the actions required by the engineering and construction project team AFTER the development of the clients business requirements, business case, alternatives and assumptions.

CONTINGENCY ESTIMATING: GENERAL PRINCIPLES (Rev. June 25, 2008) AACE International Recommended Practice No. 40R-08 TCM Framework:

7.6: Risk Management

Scope This Recommended Practice (RP) of AACE International defines the expectations, requirements, and general principles of practice for estimating contingency, reserves and similar risk funds (as defined in RP 10S-90) and time allowances for project cost and schedule as part of the overall risk management process (as defined in TCM Framework Section 7.6). The RP provides a categorization framework and provides a foundation for, but does not define specific contingency estimating methods that will be covered by other RPs. This RP does not address the general risk management "quantification" steps as might be used for screening or ranking risks in terms of their probability or impact. While the quantification methods of contingency estimating may be similar to those used for screening, the application often differs. Purpose This RP is intended to provide guidelines (i.e., not a standard) for contingency estimating that most practitioners would consider to be good practices that can be relied on and that they would recommend be considered for use where applicable. There is a broad range of contingency estimating methodologies; this RP will help guide practitioners in developing or selecting appropriate methods for their situation. Background This RP is new. It is based on discussions of the AACE Decision and Risk Management committee. There is no one best way to quantify risks or to estimate contingency; each method has its advocates. However, there is general agreement that any recommended practice should be in accordance with first principles of decision and risk management as described here.

RISK ANALYSIS AND CONTINGENCY DETERMINATION USING RANGE ESTIMATING (Rev. October 27, 2008) AACE International Recommended Practice No. 41R-08 TCM Framework:

7.6: Risk Management

Scope This Recommended Practice (RP) of AACE International describes the process known as range estimating, a methodology to determine the probability of a cost overrun (or profit underrun) for any level of estimate and determine the required contingency needed in the estimate to achieve any desired level of confidence. The process uses range estimating and Monte Carlo analysis techniques (as defined in RP 10S-90). The RP provides the necessary guidelines for properly applying range estimating and Monte Carlo analysis to determine probabilities and contingency in a reliable manner using any of a number of commercially available risk analysis software packages. The RP does not recommend any particular software. Rather it describes the factors that the analyst must consider when using risk analysis software for probability and contingency determination. Purpose This RP is intended to provide guidelines (i.e., not a standard) for risk analysis using range estimating that most practitioners would consider to be a good practice that can be relied on and that they would recommend be considered for use where applicable. This RP is also intended to improve communication as to what the practice called "range estimating" is. Many of the methods found in industry that are being called this are not in accordance with this RP. Practitioners should always make sure that when someone uses the term "range estimating", that they are talking about the same practice recommended here. Background This RP is new. It is based upon the successful efforts of many companies to evaluate project risk and contingency using the range estimating techniques originally developed by Michael W. Curran[1,2,3]. Users should be aware that the principles outlined in this RP must be rigorously followed in order to achieve the desired results. Failure to follow the RP's recommendations will likely lead to significant misstatements of risk and opportunities and of the amount of required contingency. In the great majority of cases, contingency and bottom line uncertainty are understated when the RP's recommendations are not followed. It is AACE's recommended practice that whenever the term "risk" is used, that the term's meaning be clearly defined for the purposes at hand. In range estimating practice as described in this RP, risk means "an undesirable potential outcome and/or its probability of occurrence", i.e. "downside uncertainty (a.k.a. threats)." Opportunity, on the other

hand is "a desirable potential outcome and/or its probability of occurrence", i.e, "upside uncertainty." The range estimating process for risk analysis quantifies the impact of uncertainty, i.e. "risks + opportunities".

RISK ANALYSIS AND CONTINGENCY DETERMINATION USING PARAMETRIC ESTIMATING (May 26, 2011) AACE International Recommended Practice No. 42R-08 TCM Framework:

7.6 Risk Management

This recommended practice (RP) of AACE International (AACE) defines general practices and considerations for risk analysis and estimating cost contingency using parametric methods. Parametric methods are commonly associated with estimating cost based on design parameters (e.g., capacity, weight, etc.); in this case, the method is used to estimate contingency based on risk parameters (e.g. level of scope definition, process complexity, etc.). This RP includes practices for developing the parametric methods and models (generally empirically-based). Recommended practice 43R-08 provides example process industry parametric models (including software) [12]. For scheduling applications, there is less research and reference material available; therefore schedule duration risk and contingency will be covered in future revisions of the RP.

RISK ANALYSIS AND CONTINGENCY DETERMINATION USING PARAMETRIC ESTIMATING EXAMPLE MODELS AS APPLIED FOR THE PROCESS INDUSTRIES (Rev. December 28, 2011) AACE International Recommended Practice No. 43R-08 TCM Framework:

7.6 Risk Management

Click here for Microsoft Excel Example Models for 43R-08 This recommended practice (RP) is an addendum to the RP 42R-08 titled Risk Analysis and Contingency Determination Using Parametric Estimating. It provides three working (Microsoft Excel) examples of established, empirically-based process industry models of the type covered by the base RP; two for cost and one for construction schedule. The example models are intended as educational and developmental resources; prior to their use for actual risk analysis and contingency estimating, users must study the reference source documentation and calibrate and validate the models against their own experience. This RP summarizes three landmark empirically-based models; the Hackney model, first presented in John Hackneys 1965 text Control and Management of Capital Projects (later expanded on in 1992, and now an AACE publication-reprinted 2002), and the later two RAND models. The RAND cost model is from 1981 research by Edward Merrow et al. for which Mr. Hackney was a consultant. The RAND construction schedule model is from 1986 research by Christopher Myers et al. building on the 1981 cost research.

These models posit plausible causal relationships between cost growth (i.e., contingency usage) and schedule slip and various risk systemic drivers such as the levels of development of process and project scope information and the level of process technology. They present similar empirical and quantitative analysis of the reasons for inaccurate estimates of capital costs and schedule duration and provide tools to improve assessment of the commercial prospects of projects at early stages of scope development and/or using advancing technologies. Prior to these models, the literature on the causes of cost and schedule growth for process plants provided little consensus about the relative contribution of various risk factors. Therefore, the authors of the source documents measured the factors and statistically assessed their relative influence on cost and schedule growth for process plant projects undertaken in North America. The results of their work had a significant impact on the practice of cost engineering and the evolution of project management phase-gate scope development systems (i.e., these studies are a basis of AACEs RP on classification of cost estimates; RP 18R-98). While this document attempts to summarize the basis of the models, it is highly recommended that users review the source documents before using the tools as a basis for their own study or development. Instructions for using the tools themselves are included in worksheets.

RISK ANALYSIS AND CONTINGENCY DETERMINATION USING EXPECTED VALUE (Rev. January 26, 2009) AACE International Recommended Practice No. 44R-08 TCM Framework:

7.6 Risk Management

This recommended practice (RP) of AACE International (AACE) defines general practices and considerations for risk analysis and estimating cost contingency using expected value methods. This RP applies specifically to using the expected value method for contingency estimating in the risk management "control" step (i.e., after the risk mitigation step), not in the earlier risk assessment step where it is used in a somewhat different manner for risk screening.

SCHEDULING CLAIMS PROTECTION METHODS (Rev. June 1, 2009) AACE International Recommended Practice No. 45R-08 TCM Framework:

6.4: Forensic Performance Assessment 7.2: Schedule Planning and Development 8.1: Project Control Plan Implementation

Purpose This recommended practice (RP) is intended to serve as a guideline, not establish a standard for schedule claims protection. The RP is intended to provide the scheduling practitioner with an overview of topics related to schedule delays as well as the various schedule practices and procedures that should be considered when developing and managing the project schedule. This RP will explain items to consider when creating and

maintaining a critical path method (CPM) schedule in order to be prepared for potential delay claims. This RP begins by describing schedule delay terminology and outlining potential causes and required actions related to schedule delays. The sections following are related to some of the planning considerations recommended when developing a project schedule, plus good practices related to the management and control of the schedule throughout the project.

SCHEDULE CONSTRUCTABILITY REVIEW (Rev. August 28, 2009) AACE International Recommended Practice No. 48R-06 TCM Framework:

7.2: Schedule Planning and Development 11.5: Value Management and Value Improving Practices (VIPs)

Purpose This recommended practice (RP) is intended to serve as a guideline, not establish a standard for schedule constructability reviews. This recommended practice describes the schedule constructability review (SCR) process and some of the recommended planning that should be considered when developing a construction project execution-phase schedule. This recommended practice includes a suggested review process for the construction project schedule. This RP was written as a stand alone document however it can be used as a companion guideline with the AACE Recommended Practice 30R-03 Implementing Project Constructability.

IDENTIFYING THE CRITICAL PATH (Rev. March 5, 2010) AACE International Recommended Practice No. 49R-06 TCM Framework:

7.2: Schedule Planning and Development 9.2: Progress and Performance Measurement 10.1: Project Performance Assessment 10.2: Forecasting

Purpose This recommended practice (RP) for Identifying the Critical Path is intended to serve as a guideline and a resource, not to establish a standard. As a recommended practice of AACE International it provides guidelines for the project scheduler when reviewing a network schedule to be able to determine the critical path and to understand the limitations and assumptions involved in a critical path assessment. Such a determination is a part of the total cost management (TCM) project planning, scheduling forecasting, and change management processes.

TIME IMPACT ANALYSIS: AS APPLIED IN CONSTRUCTION (Rev. October 19, 2006) AACE International Recommended Practice No. 52R-06 TCM Framework:

6.4: Forensic Performance Assessment 7.2: Schedule Planning and Development 10.2: Forecasting 10.3: Change Management

This Recommended Practice for Time Impact Analysis (TIA) is intended to provide a

guideline, not to establish a standard. This recommended practice of AACE International on TIA provides guidelines for the project scheduler to assess and quantify the effects of an unplanned event or events on current project completion. While TIAs are usually performed by a project scheduler and can be applied on a variety of project types, the practice is generally used as part of the Total Cost Management (TCM) change management and forecasting processes on construction projects.

SCHEDULE UPDATE REVIEW: AS APPLIED IN ENGINEERING, PROCUREMENT, AND CONSTRUCTION (Rev. August 14, 2008) AACE International Recommended Practice No. 53R-08 TCM Framework:

9.2: Progress and Performance Measurement 10.3: Change Management

This Recommended Practice for Schedule Update Review is intended to provide a guideline, not to establish a standard. As a recommended practice of AACE International, this document provides guidelines for the project scheduler to create a professional schedule update or assess the reasonableness of changes to be made in a schedule due to a change of project status and progress. This recommended practice is associated with the Total Cost Management (TCM) progress and performance measurement, and change management processes on construction projects.

RECOVERY SCHEDULING - AS APPLIED IN ENGINEERING, PROCUREMENT, AND CONSTRUCTION (Rev. November 19, 2010) AACE International Recommended Practice No. 54R-07 TCM Framework:

10.2: Forecasting 10.3: Change Management

This recommended practice (RP) for recovery scheduling is intended to provide a guideline, not to establish a standard. As a recommended practice of AACE International, this document provides guidelines for the project scheduler to create a professional recovery schedule or assess the reasonableness of a recovery schedule necessary due to a change of project status and progress that forecasts late completion.

ANALYZING S-CURVES (Rev. November 10, 2010) AACE International Recommended Practice No. 55R-09 TCM Framework:

10.1: Project Performance Assessment

This recommended practice (RP) for analyzing S-curves is intended to serve as a guideline, not to establish a standard. As a recommended practice of AACE International, analyzing S-curves provides guidelines for stakeholders of a project to evaluate the current status and trends of a project in a simple graphical format. S-curves are usually developed by a project scheduler or cost engineer and can be applied on a variety of project types. The product is generally used as a project management

and/or total cost management (TCM) tool for graphic representation of project performance. The RP provides descriptions of S-curves with the intent to improve understanding and communication among project participants and stakeholders when preparing and analyzing graphics based upon project schedule information. The RP describes different types of S-curves that may be generated from a schedule provided the proper information is loaded into the schedule and the status of the information is maintained throughout the duration of the project.

COST ESTIMATE CLASSIFICATION SYSTEM - AS APPLIED FOR THE BUILDING AND GENERAL CONSTRUCTION INDUSTRIES (Rev. December 13, 2011) AACE International Recommended Practice No. 56R-08 TCM Framework:

7.3 Cost Estimating and Budgeting

As a recommended practice of AACE International, the Cost Estimate Classification System provides guidelines for applying the general principles of estimate classification to project cost estimates (i.e., cost estimates that are used to evaluate, approve, and/or fund projects). The Cost Estimate Classification System maps the phases and stages of project cost estimating together with a generic project scope definition maturity and quality matrix, which can be applied across a wide variety of construction industries. This addendum to the generic recommended practice (17R-97) provides guidelines for applying the principles of estimate classification specifically to project estimates for the building and general construction industries. It supplements 17R-97 by providing:

a section that further defines classification concepts as they apply to the building and general construction industries;

a chart that maps the extent and maturity of estimate input information (project definition deliverables) against the class of estimate.

As with the generic recommended practice, the intent of this addendum is to improve communications among all of the stakeholders involved with preparing, evaluating, and using project cost estimates specifically for the building and general construction industries. The overall purpose of this recommended practice is to provide the building and general construction industry definition deliverable maturity matrix which is not provided in 17R-97. It also provides an approximate representation of the relationship of specific design input data and design deliverable maturity to the estimate accuracy and methodology used to produce the cost estimate. The estimate accuracy range is driven by many other variables and risks, so the maturity and quality of the scope definition available at the time of the estimate is not the sole determinate of accuracy; risk analysis is required for that purpose.

This document is intended to provide a guideline, not a standard. It is understood that each enterprise may have its own project and estimating processes and terminology, and may classify estimates in particular ways. This guideline provides a generic and generally acceptable classification system for the building and general construction industries that can be used as a basis to compare against. This addendum should allow each user to better assess, define, and communicate their own processes and standards in the light of generally-accepted cost engineering practice.

INTEGRATED COST AND SCHEDULE RISK ANALYSIS USING MONTE CARLO SIMULATION OF A CPM MODEL (Rev. June 18, 2011) AACE International Recommended Practice No. 57R-09 TCM Framework:

7.6 Risk Management

This recommended practice (RP) of AACE International defines the integrated analysis of schedule and cost risk to estimate the appropriate level of cost and schedule contingency reserve on projects. The main contribution of this RP is to include the impact of schedule risk on cost risk and hence on the need for cost contingency reserves. Additional benefits include the prioritizing of the risks to cost, some of which are risks to schedule, so that risk mitigation may be conducted in a cost-effective way, scatter diagrams of time-cost pairs for developing joint targets of time and cost, and probabilistic cash flow which shows cash flow at different levels of certainty. The methods presented in the RP are based on integrating the cost estimate with the project schedule by resource-loading and costing the schedule's activities. The probability and impact of risks/uncertainties are specified and the risks/uncertainties are linked to the activities and costs that they affect. Using Monte Carlo techniques one can simulate both time and cost, permitting the impacts of schedule risk on cost risk to be calculated. These methods can be used both by the contractor and the owner. The contractor usually has a more detailed schedule and understanding of resource allocations used to put the costs into the schedule. The owner may use a more summary schedule and summary notion of resources, but still is able to put the costs into the schedule at a summary level. In fact there are many risks to the owner that do not affect the contractor as risks. Also, the contractor will not know about some of the owner's risk, such as having insufficient resources. In the case of joint venture owners the JV is often a marriage of convenience of disparate organizations with risks arising from different goals and methods. This RP is consistent with the Total Cost Management (TCM) Framework Section 7.6 Risk Management. In particular, the entry in the TCM Section 7.6.2.2 Identify and Assess Risk Factors, highlights the fundamental "risk factors (or drivers) are events and conditions that may influence or drive uncertainty (i.e., either opportunities or threats) in asset or project performance." This RP uses the same approach, starting with the RP section Simulating Using Risks as Drivers and illustrating the method in the case study.

ESCALATION ESTIMATING PRINCIPLES AND METHODS USING INDICES

(Rev. May 25, 2011) AACE International Recommended Practice No. 58R-10 TCM Framework:

7.3 Cost Estimating and Budgeting 7.6 Risk Management

This recommended practice (RP) of AACE International defines basic principles and methodological building blocks for estimating escalation costs using forecasted price or cost indices. There is a range of definitions of escalation and escalation estimating methodologies; this RP will help guide practitioners in developing or selecting appropriate methods for their definitions and situation. Other RPs are expected to cover methods that do not involve indices, that cover specific examples of fully elaborated methodologies for specific project situations, technologies, industries, and probabilistic applications. Also, while the RP discusses the relationships of escalation estimating to other risk cost accounts (namely contingency and currency exchange), dealing with those costs is not this RPs focus. Escalation estimating is an element of both the cost estimating and risk management processes. Like other risks escalation is amenable to mitigation, control, etc. However, this RP is focused on quantification, not on escalation treatment (i.e., how it is addressed through contracting, bidding, schedule acceleration, hedging, etc.) or control. In terms of cost estimating, this RP covers practices applicable to all classification of estimates. The examples in the RP emphasize capital cost estimating, but the principles apply equally to operating, maintenance and other cost.

DEVELOPMENT OF FACTORED COST ESTIMATES - AS APPLIED IN ENGINEERING, PROCUREMENT, AND CONSTRUCTION FOR THE PROCESS INDUSTRIES (Rev. June 18, 2011) AACE International Recommended Practice No. 59R-10 TCM Framework:

7.3 Cost Estimating and Budgeting

As identified in the AACE International Recommended Practice No. 18R-97 Cost Estimate Classification System As Applied in Engineering, Procurement, and Construction for the Process Industries, the estimating methodology tends to progress from stochastic or factored to deterministic methods with increase in the level of project definition. Factored estimating techniques are proven to be reliable methods in the preparation of conceptual estimates (Class 5 or 4 based on block flow diagrams (BFDs) or process flow diagrams (PFDs)) during the feasibility stage in the process industries, and generally involves simple or complex modeling (or factoring) based on inferred or statistical relationships between costs and other, usually design related, parameters. The process industry being equipment-centric and process equipment being the cost driver serves as the key independent variable in applicable cost estimating relationships.

This recommended practice outlines the common methodologies, techniques and data used to prepare factored capital cost estimates in the process industries using estimating techniques such as: capacity factored estimates (CFE), equipment factored estimates (EFE), and parametric cost estimates. However, it does not cover the development of cost data and cost estimating relationships used in the estimating process. All data presented in this document is only for illustrative purposes to demonstrate principles. Although the data has been derived from industry sources, it is not intended to be used for commercial purposes. The user of this document should use current data derived from other commercial data subscription services or their own project data.

DEVELOPING THE PROJECT CONTROLS PLAN (Rev. December 21, 2011) AACE International Recommended Practice No. 60R-10 TCM Framework:

8.1 Project Control Plan Implementation

This recommended practice is intended to serve as a guideline, not a standard. As a recommended practice of AACE International, the intent of the guideline is to improve the communication among stakeholders involved with preparing, evaluating, and using project controls information. This recommended practice (RP) of AACE International defines the overall development, implementation and management of a project controls plan. This deliverable can be included as part of an overall project execution plan (PEP), or considered a stand alone document that describes specific approaches that each functional entity will use (engineering, procurement, construction, safety, quality, etc.). The project controls plan describes specific processes, procedures, tools and systems that guide and support effective project control. The plan is a narrative or qualitative representation of the project control process, while the estimate, budget, schedule, etc. represent the quantitative aspects. Organizations may use this RP to develop a fit-for-use template as a model document, which is further customized for each specific project.

IDENTIFICATION AND QUALITATIVE ANALYSIS (Rev. May 11, 2012) AACE International Recommended Practice No. 62R-11 TCM Framework:

7.6 Risk Management

This recommended practice (RP) of AACE International defines the expectations, requirements, and practices for identifying and qualitatively analyzing risk drivers as part of the overall risk management process. It expands on TCM Framework section 7.6.2.2 Risk Assessment, sections a) Risk Identification and b) Qualitative Risk Analysis, covering common practices and tools such as brainstorming, interviews, and checklists. It also covers documentation for and the deliverables from the process step (e.g., risk register). It does not cover quantification of risks or risk treatment planning.

In TCM, the risk management process is applied in the strategic asset management and project control processes. In the strategic arena, the risk focus tends to be on the state of the current asset, the business environment, and other issues that differentiate alternative asset solutions (e.g. varying levels of scope definition). In project control, the risk focus expands to more specific project conditions, plans, deliverables, and events affecting a defined project scope while strategic risks remain. This RP is intended to be generic to either any focus area and any project scope. Risk identification may require skills and knowledge of behavioral psychology because methods such as brainstorming and Delphi must deal with participant biases. This RP is intended to provide guidelines, not a standard, for developing a process to identify project risks and perform qualitative risk analysis that most practitioners would consider to be practices that can be relied upon and that they would recommend be considered for use. It provides a foundation for developing risk treatment plans as described in RP 63R-11, Risk Treatment. Ideally, the risk management process provides an opportunity for all stakeholders and contracting parties to work together and manage project risk for their collective benefit. The implementation of all or part of this RP will depend on the size and complexity of the project but the basic processes described should be used in all cases. This RP outlines the processes and practices but is not a detailed "how-to" in each case. In that respect it will most benefit those that are new to risk management or to decision and risk management professionals who want to refresh their knowledge of recommended practices.

CPM SCHEDULE RISK MODELING AND ANALYSIS: SPECIAL CONSIDERATIONS (May 2, 2012) AACE International Recommended Practice No. 64R-11 TCM Framework:

7.6 Risk Management

This recommended practice (RP) of AACE International defines general practices and considerations for the various aspects of conducting a project schedule risk analysis using a critical path method (CPM) network of activities and Monte Carlo methods to estimate contingency and/or to understand the projects behavior in consideration of risk. This RP does not present a standalone methodology, but is an extension of other RPs that present CPM-based approaches to schedule risk analysis and contingency estimating. This RP discusses key procedural, analytical and interpretive considerations in preparation and application of a CPM model; considerations that were not covered in the broader methodological RPs. A quantitative schedule risk analysis is an important aspect of risk management on a project. It can help project teams understand how project risks and uncertainty may impact the project schedule and when key milestones will be achieved. The analysis

should be conducted by a skilled risk analyst. This analysis is typically performed during project development prior to key approval points, but can also be used during project execution to assess the current status of the project schedule risks. Most schedule risk analyses utilize a CPM network as the base tool for conducting a Monte Carlo type simulation of project schedule variability. The CPM model for risk analysis must be properly constructed and realistically reflect how the identified risks may impact the project activities and overall duration. The identified schedule risks may be linked to the activities in the model in a variety of ways, depending on the software used and user preference. Regardless of how the risks are linked to activities in the software, the analysis needs to be based on a comprehensive list of schedule risks and an understanding of how they may impact the project. Understanding the compromises, assumptions and basis of the analytical methods and what the resulting schedule risk analysis means are key to developing appropriate risk treatment plans, contingency estimates, and making well supported value adding project decisions. This RP is applicable to any industry or project where the CPM approach is used. It addresses considerations for risk analysis as they relate to the CPM model and not to any integration with cost risk analysis.

INTEGRATED COST AND SCHEDULE RISK ANALYSIS AND CONTINGENCY DETERMINATION USING EXPECTED VALUE (May 2, 2012) AACE International Recommended Practice No. 65R-11 TCM Framework:

7.6 Risk Management

This recommended practice (RP) of AACE International (AACE) defines general practices and considerations for integrated cost and schedule risk analysis and estimating contingency using expected value methods. This RP is intended to provide guidelines, not standards, for contingency estimating that most practitioners would consider to be good practices that can be relied upon and that would be recommend for use where applicable. There is a range of useful risk analysis and contingency estimating methodologies; this RP will help guide practitioners in developing or selecting appropriate methods for their situation. This RP is an extension of 44R08, Risk Analysis and Contingency Determination Using Expected Value, that addresses using expected value methods only for cost. However, integrated cost and schedule methods are generally recommended; this RP for expected value methods, or 57R09, Integrated Cost and Schedule Risk Analysis Using MonteCarlo Simulation of a CPM Model, for CPMbased methods.

ESCALATION ESTIMATING USING INDICES AND MONTE CARLO SIMULATION (May 2, 2012) AACE International Recommended Practice No. 68R-11

TCM Framework:

7.6 Risk Management

This recommended practice (RP) of AACE International defines basic principles and methodological building blocks for estimating escalation using forecasted price or cost indices while also addressing uncertainty using Monte Carlo simulation. The methods in this RP are an extension of the principles and methods in RP 58R-10, Escalation Estimating Principles and Methods Using Indices, from a probabilistic and scenario/sensitivity viewpoint. This RP will guide practitioners in developing or selecting appropriate methods for their definitions and situation. While this RP discusses the relationships of escalation estimating to other risk cost and schedule accounts (namely contingency), dealing with those cost types is not the focus of this RP. This RP assumes that practitioners are already familiar with Monte Carlo simulation as typically applied in spreadsheet applications. Escalation estimating is an element of both the cost estimating and risk management processes. Like other risks, escalation is amenable to mitigation, control, etc. However, this RP is focused on escalation quantification, not on treatment (i.e., how it is addressed through contracting, bidding, schedule acceleration, hedging, etc.) or control. In terms of cost estimating, this RP covers practices applicable to all classes of estimates. Escalation uncertainty is partly driven by schedule risk; therefore this RP also references AACEs RPs on integrated cost and schedule risk analysis and contingency estimating. The examples in this RP emphasize capital cost estimating and scheduling, but the principles apply equally to operating, maintenance and other cost and time evaluations. While a model such as that covered in this RP could be used for schedule optimization in consideration of escalation, optimization is not covered here. As with RP 58R-10, Escalation Estimating Principles and Methods Using Indices, this RP recommends segregating escalation versus exchange rate impacts and their estimation for projects with resources priced in currencies other than the base currency.