TCMFramework_SM.gif (5258 bytes)TCM Framework: An Integrated Approach to Portfolio, Program and Project Management
(Rev. 2012-01-09)
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FOOTNOTES

[1] Sik-Wah Fung, Patrick, and Dodo Ka-Yan Ip, “Cost Engineering as an Academic Discipline,” AACE International Transactions, 1998.

[2] International Organization for Standardization ISO 9000 and its family of related standards is focused on an enterprise having, maintaining, and following documented process and procedures.

[3] Many of these experts provided early outlines or draft chapters for the cancelled Guide. They are listed in the Acknowledgement section. Some of these experts are also acknowledged as author/key contributors for Framework.

[4] Individuals that commented at that time are included among the contributors listed in the Acknowledgement section.

[5] John K. Hollmann, PE CCE, President, Validation Estimating LLC; jhollmann@validest.com

[6] AACE’s website provides links to organizations related to cost engineering and TCM (www.aacei.org or www.cost.org).

[7] See the Further Reading and Sources section for references to the organizations that are primary caretakers for the project management, resource management, and management accounting bodies of knowledge.

[8] AACE’s Constitution defines the areas of association focus as follows: “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.” Furthermore, AACE’s Recommended Practice 11R-88, “Required Skills and Knowledge of a Cost Engineer” specifies cost engineering knowledge that is “core” (i.e., recommended that professional cost engineers know) and identifies skills that are recommended for individuals to put that core knowledge into practice. Recommended Practice 11R-88 is included in the Appendix.

[9] Where concept definitions are provided, they are consistent with AACE’s primary terminology reference: Recommended Practice 10S-90, “Cost Engineering Terminology.”

[10] APICS Dictionary, 9th ed., James F. Cox and John H. Blackstone (www.apics.org).

[11] The SAM process assumes that the enterprise has developed its strategic objectives through a strategy formation process that is not part of TCM. TCM is focused on business strategy deployment in respect to cost management of its assets.

[12] Return on assets (ROA) or return on net assets (RONA) are common financial measures.

[13] Asset planning and investment decision making employ the planning processes covered in Chapter 7.

[14] Texts on product design tend to focus on users or customers; this section uses the term “stakeholders” to represent all users, customers, and others affected by a problem or its potential solution (which may include society at large).

[15] The business strategy development process, which covers all aspects of business management, is not included in the TCM Framework. However, in regard to asset investments, business strategy implementation or deployment uses the strategic asset management process to plan assets and implement projects, and to measure and assess the performance of the enterprise’s asset portfolio.

[16] See Section 11.1 concerning societal values and ethics and 11.6 concerning the environment, health, safety, and security for which identifying stakeholders and eliciting and analyzing their wants and needs is particularly challenging.

[17] While the goals of these concepts are similar, the specifics of each methodology differ. Target costing has generally been applied in commercial industry while DTC and CAIV have been applied in government programs. The term “target costs or costing” is used here generically to apply to all methods in which costs are established as a requirement.

[18] See Sections 4.1 and 7.1 regarding phased project scope development.

[19] The business strategy development process, which covers all aspects of business management, is not included in the TCM Framework. However, in regard to asset investments, that process uses the strategic asset management process to plan assets and implement projects, and to measure and assess the performance of the enterprise’s asset portfolio.

[20] SAVE International, Value Methodology Standard (Glossary), 2003.

[21] These four phases were identified by AACE International’s Risk Management Committee and published in the AACE International Risk Management Dictionary (Cost Engineering, Vol. 37, No. 10, 1995).

[22] A Guide to the Project Management Body of Knowledge, 3rd ed., Project Management Institute, Upper Darby, PA, 2004.

[23] Key input variables in a model may be either discrete or have a continuous range of possible values. Most often, discrete variables (especially the binary type) are called risks and each outcome is assigned a probability of occurrence. Continuous drivers are most-often called uncertainties and judged as continuous probability density functions. However, in TCM, risk is defined as being the same as uncertainty (see Section 7.6).

[24] Risk adjustments per risk policy are not the same as uncertainty weightings for alternatives in a decision tree or similar analysis. These weightings are generally important to decision analysis.

[25] Simply calling this “expected cost” invites misinterpretation as “the cost we expect.” This implies an exaggerated precision in forecasting ability. It is important to ensure that the information recipient understands there is a range of possible outcomes and expected value refers to the probability-weighting calculation.

[26] The term requirements is sometimes considered synonymous with objectives plus constraints, but the term is most often used in reference to products (as in Section 3.1: Requirements Elicitation and Analysis) and not projects.

[27] The Project Management Institute (PMI) refers to this as the project scope statement. The phrase project implementation basis is used here to recognize that the deliverables of this process (including objectives, constraints, and assumptions, and other guidance) are more than project scope that PMI defines as the “work that must be performed to deliver a product, service, or result…” At initial implementation, the project scope has not been developed, only the asset investment option physical and functional scope.

[28] Again, project implementation goes by many names such as the project charter, project scope statement, project scope, and objectives statement, and so on. If the party managing the project is a supplier or contractor, the documentation may actually be part of a legal contract.

[29] IMA, the Institute of Management Accounting, is a key resource for accounting process knowledge, which extends to general practices in the areas of business or financial planning, measurement, and control.

[30] It is important because an investment that does not meet a return on investment requirement will rarely be considered a success. However, if the investment fails to meet some other requirements (e.g., functional, quality, etc.) but still has an excellent return, it may still be considered a success.

[31] APICS, the Association for Operations Management (www.apics.org), is a key resource for asset performance measurement knowledge.

[32] It is important because an investment that does not meet a return on investment requirement will rarely be considered a success. However, if the investment fails to meet some other requirements (e.g., functional, quality, etc.) but still has an excellent return, it may still be considered a success.

[33] For many assets and processes, cycle time (and its components) is often one of the most important performance measures driving ROI.

[34] Baldridge National Quality Program, Criteria for Performance Excellence. Gaithersburg, MD: National Institute of Standards and Technology, 2006.

[35] When assessing project system performance, ABC/M methods can be used to assign indirect enterprise project system capability management costs to the projects depending on which projects are driving these costs (i.e., each project is an activity in the project system). As is true for any activity, assigning project system indirect costs to projects on an arbitrary basis (e.g., flat percentage) contributes to poor decisions.

[36] Philip Crosby estimates that it is common for 80 percent of the cost of quality to originate with the process (Crosby, Philip B., Quality Is Still Free, McGraw Hill, 1996).

[37] Watson, Gregory H., Strategic Benchmarking, John Wiley and Sons, Inc., 1993.

[38] Adapted from Watson.

[39] The Institute of Configuration Management (www.icmhq.com) offers a certification program referred to as CMII.

[40] The current primary standard for configuration management is ANSI/EIA-649-1998.

[41] This section is based on the following paper: Institute of Configuration Management, “CMII-Model for Configuration Management (White Paper-Revision B),” 2003.

[42] Player, Steve and David E. Keys, Editors, “Activity-Based Management: Arthur Anderson’s Lessons from the ABM Battlefield,” MasterMedia Limited, 1995.

[43] In TCM, an equivalent forensic cost engineering field, if so named, would effectively apply professional and technical expertise to investigate resource, cost, and schedule performance failures and problems with assets or projects.

[44] If the schedule consists of only bar charts or Gantt charts, this is the only technique that can be utilized for schedule delay analysis purposes.

[45] AACE’s Claims and Dispute Resolution Committee is preparing a Recommended Practice on Forensic Schedule Analysis, which contains a more detailed description of each technique and the differences among them.

[46] See AACE’s Recommended Practice (RP) 25R-03, which discusses the myriad ways to perform a productivity loss or impact analysis in a forensic situation.

[47] Monsey, Arthur, “Estimating Construction Claims-A Different Problem,” 1993 AACE International Transactions.

[48] Heather, Paul R., and Michael D. Summers, “Consequential Cost Effects,” 1996 AACE International Transactions.

[49] A Guide to the Project Management Body of Knowledge, 3rd ed., Project Management Institute, Upper Darby, PA, 2004.

[50] This section covers project schedule planning and development, not production scheduling (i.e., ongoing asset operation). However, project schedule planning and development often must consider production schedule requirements where the project interfaces with operations (e.g., production shutdown and startup).

[51] The topic of this section is often referred to as “planning and scheduling.” However, the phrase “schedule planning and development” is used to highlight that “planning” is not referring to the project planning process as a whole. The section topic is also sometimes referred to simply as “scheduling,” which inappropriately downplays the steps of schedule planning.

[52] This section’s definition and discussion of budgeting for project control purposes is distinct from the process of capital budgeting for strategic asset management, which is included in Section 3.2.

[53] SAVE International, Value Methodology Standard (Glossary), 2003.

[54] SAVE International defines the many types of value (e.g., esteem, market, perceived, use, etc.) and functions (e.g., basic or essential, work, sell, etc.). Refer to the SAVE International Value Terminology Dictionary, 2005.

[55] SAVE International has established a standard it calls “Value Methodology”(VM). (See SAVE International, Value Methodology Standard, 2003, www.value-eng.org). VM delineates a process in the form of a “job plan.” AACE International’s VA/VE sub-process is conceptually consistent with the VM job plan phases, but the process is abstracted here in recognition of the different purposes and contexts of the two products. (Again, see SAVE International, Value Methodology Standard, 2003, www.value-eng.org).

[56] See Section 11.1 for a discussion of societal values.

[57] These four phases were identified by AACE International’s Risk Management Committee and published in the AACE International Risk Management Dictionary (Cost Engineering, vol. 37, no. 10, 1995).

[58] AACE International Recommended Practices, Cost Engineering Terminology (10S-90), AACE International, Morgantown, WV.

[59] For a well planned project, it is not uncommon for 5 to 10 percent of the project funds to be expended prior to the start of execution (e.g., prior to detailed engineering and construction). Unfortunately, in a misguided effort to reduce early “expenses,” management may expect control planning for execution to wait until the start of the execution phase (e.g., wait until the contractor submits its plans). The result is increased risk of project failure because extensive early execution work is done without the benefit of control based on full understanding of the execution work.

[60] This subsection is largely abstracted from Levin, Ginger, “Leadership and Management of Project People” (Chapter 22) in Skills and Knowledge of Cost Engineering, 5th edition, AACE International, Morgantown, WV, 2004. That text and, by extension, this one include excerpts from Flannes, Steven W., and Ginger Levin, People Skills for Project Managers, Vienna, VA: Management Concepts Inc., 2001; Reprinted with permission.

[61] The introduction to the Canons of Ethics reads: “The AACE member, to uphold and advance the honor and dignity of Cost Engineering and the Cost Management profession and in keeping with the high standards of ethical conduct will (1) be honest and impartial and will serve employer, clients, and the public with devotion; (2) strive to increase the competence and prestige of their profession; and (3) will apply knowledge and skill to advance human welfare.”

[62] Some of this subsection is abstracted from Bent, James A., “Project Organization Structure” (Chapter 19), in Skills and Knowledge of Cost Engineering, 5th edition, AACE International, Morgantown, WV, 2004.

[63] Mintzberg, Henry, The Rise and Fall of Strategic Planning. New York: The Free Press, 1994.

[64] AACE International. Recommended Practice 11R-88, Required Skills and Knowledge of Cost Engineering, AACE International, Morgantown, WV, 2005.

[65] Lepsinger, Richard and Anntoinette D. Lucia, The Art and Science of Competency Models: Pinpointing Critical Success Factors in Organizations, Jossey-Bass/Pfieffer, San Francisco, 1999.

[66] Some of this subsection is abstracted from Neil, Dr. James M., “Performance and Productivity Management (Chapter 17),” Skills and Knowledge of Cost Engineering, 5th edition, AACE International, Morgantown, WV, 2004.

[67] www.iso.org/iso9000-14000/iso9000/qmp.html

[68] Brian R. McConachy discusses how project control could cover quality management for project execution in his article “Concurrent Management of Total Cost and Total Quality,” AACE International Transactions, 1996.

[69] Crosby, Philip B., Quality is Free, McGraw-Hill, New York NY, 1979.

[70] As an example application, AACE International works with ANSI to establish standard terminology for cost engineering (e.g., ANSI Z94.2 or most recent release).

[71] Juran, J.M., Managerial Breakthrough, Revised Edition, New York: McGraw-Hill, 1995.

[72] The general concept of value as discussed here should not be construed as “appraised” value, which is narrowly defined as a monetary measure of an asset’s worth (see Section 3.2).

[73] Miles, Lawrence D., Techniques of Value Analysis and Engineering, 3rd edition, Washington, D.C.: Lawrence D. Miles Foundation, 1989.

[74] SAVE International, Value Methodology Standard (Glossary), www.value-eng.org, 2003.

[75] Information security is covered in Section 11.3.

[76] McDonough, William and Michael Braungart, “The Next Industrial Revolution,” Atlantic Monthly, October 1998.

[77] The environment (land, air, water, other life forms, etc.) can alternately be viewed as a stakeholder in any business problem or opportunity, or as a societal asset; that is, it is an encompassing, multi-dimensioned entity upon which society, including the enterprise, ultimately and collectively depends for its health, safety, and well being.

[78] Hoffman, Andrew J., Competitive Environmental Strategy—A Guide to the Changing Business Landscape, Washington, DC: Island Press, 2000.

[79] Hirsch, Dennis D., “Second Generation Policy and the New Economy,” Capital University Law Review, Vol. 29, Number 1, 2001.

[80] Global Environmental Management Initiative (GEMI). New Paths to Business Value: Strategic Sourcing—Environment, Health & Safety, 2001.

[81] Gibson, Will. Chapter 26 in A Practical View of Life-Cycle Assessment: Implementing ISO 14000, Tom Tibor and Ira Feldman, Editors. Chicago, IL: Irwin Professional Publishing, 1997.

[82] Barcott, Bruce, “What’s Wilderness Worth?” Outside Magazine, March 2005.

[83] Piasecki, Bruce, Better Products Better World, Saratoga Springs, NY: The AHC Group, Inc. (in press for 2006).

[84] Guide to the CERES Principles, The Coalition for Environmentally Responsible Economics, Boston, MA, 1994.

[85] Goodman, Susannah Blake, Jonas Kron, and Tim Little. The Environmental Fiduciary—The Case for Incorporating Environmental Factors Into Investment Management Policies, The Rose Foundation for Communities and the Environment, 2004.

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