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.
