(EST-3332) Development of General Maturity Assessment for Engineering Deliverables
Author(s)/Presenters(s): Christopher W. Carson, CEP DRMP PSP FAACE
As AACE Recommended Practices have demonstrated to the industry, the range of accuracy of estimates and schedules are connected directly to the maturity or the level of scope definition of the contract documents, the engineering deliverables. As the maturity increases, more is understood about the scope and it is possible to more closely estimate costs and time.
One of the problems that is faced in the industry is an inability to accurately define the level of scope definition, since the maturity of the full engineering deliverable is a function of the maturity of separate disciplines, so a 30% complete deliverable might have 80% structural design and 10% mechanical commissioning design. Without a good definition of the scope and reasonable way to assess the maturity, monitoring of engineering production and performance is difficult and there is a risk of late delivery of deliverables.
This paper will address the current state of the assessment of deliverables in AACE Recommended Practices Numbers 17R-97 and 18R-97, the Cost Estimate Classification System RPs, and suggest some improvements in how the maturity levels are established and monitored for engineering deliverables.
(EST-3341) (Presentation Only) Overview - The Estimate Basis
Author(s)/Presenters(s): Michael French, PE; Dave Kyle, CCP CEP
This session outlines the need for a well defined estimate basis. When prepared correctly, any person with appropriate 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. The BOE is characterized as a deliverable that documents the scope and cost of the project, and ultimately becomes the basis for change management.
This presentation is based on 106R-19 (Development of Cost Estimate Basis - as Applied in Engineering, Procurement, and Construction for the Process Industries); and 34R-05 (Basis of Estimate).
(EST-3342) (Presentation Only) Overview - Planning the Development of the Estimate
Author(s)/Presenters(s): Michael W. Smith, II; Dave Kyle, CCP CEP
This session outlines the requirements for a well defined estimate plan. The early development of this document is crucial for a successful estimating process. The proper preparation and presentation of this key document greatly increases the likelihood of obtaining the desired results by all stakeholders. The Estimate Plan should identify key stakeholders, expectations, standards, scope definition, schedule, individual responsibilities, and expected methodologies. The plan provides opportunity to clarify expectations of stakeholders, allows time for proper preparation of estimate inputs, and generally results in less rework and/or unacceptable deliverables.
This presentation is based on 105R-19 (Owner's Estimate Requirements Document - as Applied in Engineering, Procurement, and Construction for the Process Industries); 36R-08 (Development of Cost Estimate Plans - as Applied in Engineering, Procurement, and Construction for the Process Industries); and 35R-09 (Development of Cost Estimate Plans - as Applied for the Building and General Construction Industries).
(EST-3345) (Presentation Only) Estimating Overview
Author(s)/Presenters(s): Dave Kyle, CCP CEP
This presentation for estimators (or any other Project Controls professionals seeking a better understanding of estimating) is a follow-up to TCM-XXXX Project Controls Overview: Putting Together the Pieces of the Puzzle. This session is based on the AACE publication Skills and Knowledge of Cost Engineering (6th Edition) Chapter 9 and provides a brief introduction to each facet of estimating including; estimate classification, required inputs and maturity level of the inputs to the estimate, planning the estimate, structuring the estimate, various common methodologies used to develop conceptual and deterministic estimates, estimate accuracy, risk analysis and contingency, the importance of integration with Cost and Schedule, documenting the basis of the estimate, and proper estimate presentation, review and validation.
Each section of this presentation will be examined in detail in subsequent sessions throughout the remainder of the four days.
(EST-3354) Understanding Construction Indirect Costs
Author(s)/Presenters(s): Robin Williams
When defining the basis of any project cost estimate, the project team must have reasonably thorough understanding of what goes into the construction effort from the contractor and owner sides of the equation. Often the numbers that build up the wage and indirect costs basis get indiscriminately tossed into a 'loaded wage' rate made up of assumed percentages and guesswork. This loaded wage rate first understanding glosses over important details that, if miscalculated, can negatively affect the success of the project budget. Furthermore, understanding those details will lead to better identification of gaps in scope, roles, and responsibilities from project stakeholders. This paper is written to combat gross misinterpretations of the construction total cost buildup. What elements make up a billable wage rate? What are some of the pitfalls to avoid when determining construction indirects for projects or programs? What are the factors that determine total indirect field costs? How does a deeper understanding of the construction indirects help contractors ask the right questions of clients? How does an owner determine which factors that have the most impact to their estimating methodologies? By considering these questions and more, the authors seek to increase awareness by and aptitude for the cost estimating practitioner and project professional.
(EST-3360) An Overview of Deterministic Estimating
Author(s)/Presenters(s): Kimberly Kozak; Thomas Gueville, CEP; Vishwambhara Kumbharathi, CEP
Development of accurate cost estimates is an essential element for the successful delivery of any project. There are several proven methodologies that can be used, however the approach chosen should align with the scope and level of design maturity and be based on defined assumptions and available information. Estimating methodologies typically fall into one of two groups: conceptual estimates which are used early in the project lifecycle to help define the variability of cost based on risks and limited design; and detailed or deterministic estimates, which are used as scope and deliverables are further quantified to provide single point estimates.
Deterministic estimating is the focus of this paper and will provide: 1. A detailed overview of methodology of a deterministic estimate, 2. Explanation of the different types of deterministic cost estimates: parametric (top down), detailed (bottoms up), and analogous(comparative), 3. Application of deterministic estimates based on level of scope development or estimate class, 4. Prerequisite items needed to prepare a deterministic cost estimate, 5. Allowance items to account for productivity, escalation, contingency and 6. Advantages and challenges faced in the development of deterministic estimates.
(EST-3361) Predictable Estimate - Understanding Project Scope and Execution
Author(s)/Presenters(s): Mustansir Raj, Peng CCP; Dave Kyle, CCP CEP
Coming up with a reliable predictable estimate is one of the most important step in a project life cycle and it affects the overall business plan. Although there are many factors that influence the outcome of an estimate, the competency of the estimating team to understand the project scope, the constructability and the complexity of the project are the most essential ones. This paper describes these key elements based on the author's experience in oil and gas projects.
The paper further analyses some other important factors and conditions affecting the predictability of the estimate such as the significance of a reliable historical data, benchmarking, alignment of stakeholder's expectations, market condition, and management culture. Solutions to tackle some of the major obstacles are also presented.
(EST-3370) Overview - Cost Estimate Reconciliation
Author(s)/Presenters(s): Augustus Tweneboa-Kodua, CCP; Gideon Chidi Akunne, CEP
Estimate reconciliation seeks to compare estimates developed by two different entities or for different phases in the course of a project. The reconciliation process helps owners/contractors to understand the various factors leading to the differences in cost estimates and equip owners/contractors to make decisions.
Estimating being an art as well as a science means it is more likely that no two independent cost estimates will be alike even when the estimates are generated from the same set of project documents and pricing. The probability of this happening rises as the project definition improves coupled with complexity in the estimate development methodology, hence the need to carry out estimate reconciliation.
The process of estimate reconciliation consists of resolving variances between estimates based on similar scope of work, identifying cost differences due to changes in scope, quantity, pricing, estimate methodology, or the level of risk mitigation accounted for within the two estimates.
This paper discusses a number of important points such as introduction to estimate reconciliation, basis or justification for estimate reconciliation, tools and processes involved, and benefits to the owner/stakeholders. The paper also discusses important elements to note when reconciling, comparing or relating one estimate to another.
(EST-3390) (Presentation Only) EARLY FEL ESTIMATES - What's in ISBL, OSBL and The Factors?
Author(s)/Presenters(s): Christopher L. Kinney
For most domestically and globally replicated petro-chemical and similar production projects, the Engineers and Cost Professionals approach the very early stages of the initial project development in terms of geographical boundaries known as ISBL (Inside Battery Limits) and OSBL (Outside Battery Limits).
The ISBL (product production area) has to be conceptually defined initially, then the OSBL (Utilities etc) are defined to support that are required to make the ISBL work.
As simple as this concept seems, confusion abounds. Every plant has its distinct requirements representing both advantages and disadvantages that are unique to each and every site.
There are many considerations. Here are a few:
- Is there more than one ISBL or OSBL?
- Which portions of the ISBL and of the OSBL are being replicated?
- Do any of the 'replicated' portions engage new technology?
- Are there any unique considerations in regard to HSE requirements?
- What are the process feed, storage, and quality requirements?
- What are the product marketing distribution and logistical requirements?
- How are the ISBL vs OSBL boundaries defined and communicated?
This presentation supports further definition with reusable visuals of the Lang factors, how to use Lang factors, and provides other factors and ranges that can be applied to an estimate.
(EST-3391) Risk Analysis Approach to Contingency From an Owners Rep Perspective
Author(s)/Presenters(s): Christopher L. Kinney
Typical major considerations of project risk are identified from an Owner's perspective:
- Setting Expectations of the Estimate and the Estimator
- Benefits of the Estimate and of Contingency
- Five basic areas of risk
- Benefits, justification, and management of contingency
- An Owner's definition and use of the range of accuracy
A process is explained for quantifying cost risks which include project planning, design, construction, and market conditions considerations that can be measured and controlled from project concept to completion. Are identified for further consideration.
The relationship between contingency and range of accuracy is clarified as well as how these can be effectively communicated and managed.
An Excel tool driven concept and time-phased contingency drawdown plan are presented that are useful to support and manage contingency recommendations.
(EST-3403) Function Points: One Size Fits All
Author(s)/Presenters(s): Daniel B. French
There are many challenges when faced with creating estimates for software development projects. However, without a doubt, the single largest driver for cost, effort, and duration is project size.
The typical approach to sizing a software project, if it is tried at all, is to 'estimate' software lines of code (SLOC). While this may be the most expeditious method, history has shown that this approach usually produces highly inaccurate estimates.
IBM developed function points as an alternative method to bring about more consistent and accurate project sizing for use in software project estimation. This methodology, while not a perfect solution, has enjoyed great success in more than 35 years of use worldwide.
This presentation will provide a brief overview of the International Function Point Users Group (IFPUG) Function Point sizing methodology, its key concepts, as well as strengths, limitations, and misconceptions. Function point-based metrics, FP based contracting and other key uses for FPA will be covered. The presentation will also detail why FPA is preferable to SLOC or other sizing methods when creating software development project estimates.
(EST-3404) From Point A to Point Estimate: How Requirements Become Function Points
Author(s)/Presenters(s): Daniel B. French; Carol Dekkers
The International Function Point User Group (IFPUG) function point analysis software sizing methodology has been successfully used by organizations for 30+ years. However, there remains confusion in the industry as to how the process works. Anyone who's heard of function points, but is not a practitioner, often does not understand how the functional requirements of a software project are 'translated' into function points. This presentation demystifies the Function Point Analysis (FPA) process and educates those interested in how function points are counted and/or are considering the use of IFUG Function Points in their organizations. The presenter will discuss functional vs. non-functional requirements, provide examples of good and poor requirements, and how an FP count is developed based on the functional requirements.
(EST-3405) The Value and Use of Benchmarked Cost Data
Author(s)/Presenters(s): Danielle Green
Cost Benchmarking refers to collection and use of cost data in sufficient detail for use in establishing a basis for two primary needs at early stages of scope definition; conceptual estimating, and comparison of similar projects. The challenge with conceptual estimating is the lack of full maturity of design documents, leaving details up in the air and risking incomplete budgets leading to the lack of appropriate funding. Use of a library of benchmarked cost data not only enables quicker conceptual budgeting and stronger position for forecasting but also better practices that lead to a more competitive performance. Benchmark data can bring to light weaknesses, highlight strengths and provide a plan for the future. Organizations across various industries can benefit from analyzing their internal performance and comparing it to their external competitors.
This paper will discuss a practical approach to collecting, analyzing, and using completed project cost data to compile a benchmarked database so that it is useful in these areas of budgeting and forecasting. The author has a primary role with these responsibilities in a global organization.
(EST-3412) (Presentation Only) Using Cost Engineering to quantify and identify project risks
Author(s)/Presenters(s): Anthony M. Bazzini
Quantification of project cost risks prior to full funding is well established requirement and practiced by many companies as part of normal project development requirements. This presentation shares how ExxonMobil utilizes detailed cost estimates ("bid check") to model fixed price bids on large ventures (>>1 G$) to assess both bidder understanding of job requirements on direct and indirect accounts as well as associated imbedded financial risk assessments. An overview of work processes and practitioner skill requirements to accomplish this outcome will be shared. This presentation will be supported by case studies that demonstrate the value and insight which this process produces on world-class size ventures.
(EST-3419) Estimating as it Pertains to Risk Management
Author(s)/Presenters(s): Shoshanna Fraizinger, CCP
The outputs of estimating are typically a primary input for business planning, cost and risk analysis, and management decisions, or project cost and schedule control processes. All of which are bounded or guided by an organization's risk appetite.
Estimating, as it pertains to risk management, is fundamental to the 'Assess' and 'Treat' steps of risk management, as defined in the TCM and S&K6. The skill of the cost estimator comes into play to determine the cost impact of the risk (assess), as well as the cost to implement the plan to address the risk (treat), respectively. The cost impact of the risk contributes to the overall amount of contingency required by the Organization.
This document addresses the topic of estimating as it pertains to risk management and is aimed at the junior to intermediate cost engineering professional. It will discuss the concepts of risk management, risk analysis and the aspects in which estimating plays a role in these processes with an emphasis on correlating the information to the preceding and succeeding cost engineering processes, terms and content as defined in the primary AACE knowledge sources (i.e. the Total Cost Management Framework and Skills and Knowledge 6th Edition)
(EST-3422) (Presentation Only) Understanding Expected Estimate Accuracy
Author(s)/Presenters(s): Larry R. Dysert, CCP CEP DRMP FAACE Hon. Life
This presentation will provide an overview of the AACE International Recommended Practice on "Understanding Expected Estimate Accuracy." It is intended that the RP will serve as the paper. The presentation will discuss the identification of an estimate as a range of potential values, identify the typical shape of the probability distribution associated with estimate ranges, describe estimate contingency, and identify the critical elements required to convey information about expected estimate accuracy to stakeholders.
(EST-3423) Overview of Conceptual Estimating Methodologies
Author(s)/Presenters(s): Larry R. Dysert, CCP CEP DRMP FAACE Hon. Life
A common issue often faced by estimators is how to prepare an estimate when there is very little information or scope on which to base the estimate? This paper will discuss a variety of conceptual estimating methodologies, as well as some of the problems faced when using these techniques.
There are many order-of-magnitude or conceptual estimating methods, and each is useful in specific situations. Often a single estimate will rely on using a combination of estimating techniques for different portions of the project. The conceptual estimating methods that will be briefly discussed in this paper include:
- capacity factoring
- parametric modeling
- end-product units method
- analogy, and
- expert judgment.
(EST-3424) Supporting Estimates with Effective Scope of Work Definition
Author(s)/Presenters(s): Larry R. Dysert, CCP CEP DRMP FAACE Hon. Life; Todd W. Pickett, CCP FAACE
Most estimators realize that one of the essential ingredients for an accurate estimate is the comprehensive and sufficient definition and subsequent control of project scope. Numerous studies have identified project scope definition as one of the most critical factors that influence project success. In 1982, the Construction Industry Institute (CII) Business Roundtable issued a report stating that 'poor scope definition at the (budget) estimate stage and loss of control of project scope rank as the most frequent contributing factors to cost overruns. Nevertheless, obtaining adequate scope definition for estimating purposes continues to be one of the most persistent problems faced by estimators.
This paper discusses issues involved in dealing with scope development problems during the preparation of capital cost estimates. Topics to be covered include:
- the identification of the minimum requirements to prepare various levels of estimates
- communicating information requirements to project teams and to estimate provider
- how estimating techniques may change with the level of scope provided
- how to engage the project teams to produce scope information, and
- how to present the estimate in relation to scope definition.
(EST-3454) Base Estimate, Estimate Accuracy, and Contingency
Author(s)/Presenters(s): Kelly Newman, PE CEP
This paper explores the definitions and relationships of three Total Installed Cost (TIC) Estimate elements: base estimate, estimate accuracy, and contingency. These elements have various definitions and applications in industry and the author seeks to bring practical clarity to both, which may challenge some common perspectives. The base estimate value is the foundation from which other parameters are measured and represents the most likely cost outcome of the project, within a range of probable outcomes. The base estimate value is typically in the middle third of the stated accuracy range, may include design allowances, but does not include contingency or management reserve. Estimate accuracy is best measured from the base estimate value, rather than the TIC estimate value (base estimate plus contingency). Although the latter method is commonly used, it tends to undermine the purpose and definition of 'base estimate' and may even shift the accuracy range high enough to exclude the base estimate itself (if contingency is greater than the lower accuracy bound). Contingency is added to the base estimate to establish the TIC estimate value at the desired confidence level within the accuracy range.
(EST-3480) (Presentation Only) Cost Estimate Classification Overview
Author(s)/Presenters(s): John K. Hollmann, PE CCP CEP DRMP FAACE Hon. Life
This presentation will review the basic concepts and principles of cost estimate classification systems as addressed in the AACE International (AACE) series of Recommended Practices (RPs) on the topic. The presentation will focus on Professional Guidance Document No. 1 (PGD-01) that was released by AACE in 2018. PGD-01, a hyperlinked online document, provides a roadmap for finding RPs relating to classification and estimate accuracy while also discussing the concepts and principles of classification. The presentation will also share the history of the concept as it evolved from the first AACE guideline on estimate types in 1958. Today, there is a series of industry-specific classification RPs aligned with common project phase-gate systems; these will be reviewed.
(EST-3490) Potential Cost Savings from Converting California Offshore Oil and Gas Platform Jackets to Artificial Reefs
Author(s)/Presenters(s): John B. Smith; Dr. Robert C. Byrd PE
This paper reviews cost estimates for removing the 23 oil and gas platforms located in Federal waters (OCS) offshore California and estimates the savings if the platform jackets are partially removed and reefed in-situ rather than fully removed. The cost savings are calculated by estimating the weight of the jacket structure that would remain and multiplying that weight by an estimated cost per ton for structure removal. An estimated cost range is developed and presented from a review of published information on estimated and actual jacket removal costs. The calculations show that if all 23 platform jackets are reefed in-situ the estimated total cost savings would range from a minimum of $856 million to $2.0 billion. On a per platform basis, the cost savings range from a low of $0.3 million for the smallest to a high of $494 million for the largest platforms. Under existing California law owners are required to share up to 80% of the cost savings with the State. Based on the cost savings estimates presented in this paper, the State of California would receive as much as $1.6 billion if all 23 OCS platforms were approved to be reefed in-situ.
(EST-3507) Open Book Estimates (OBE): a powerful alternative for EPC tendering process
Author(s)/Presenters(s): Antony Bardot, CEP; Melissa Chevalier-Ressicaud; Mehdi Haddar, CEP
This paper compares different types of tendering processes for Engineering, Procurement & Construction (EPC) contract. A focus will be done on the use of an Open Book Estimate (OBE).
Main purpose of the OBE is to reach a common objective between clients and contractors: agreeing on an EPC contract in an optimized timeframe.
While it does not involve new estimating methods, this contracting approach for EPC projects could become an alternative for all stakeholders. Not only does this contracting scheme save time and money but also it reaches better project performance, gives a good visibility on the share of risks and guarantees transparency.
The key feature is a master contract which covers both FEED and EPC phases to allow this approach. The award of the EPC phase would be granted on a negotiated basis or through an advanced process of conversion.
By comparison with a regular tender process, the OBE solicits and develops specific skills for project management team, such as commercial mindset as they will have to develop a relation of mutual trust and respect.
Pros and cons, development of an OBE and good practices will be presented.
(EST-3542) A Discussion of the Cost Estimate Classification System: As applied in the Engineering, Procurement, Construction and Operations for the Environmental Remediation Industries
Author(s)/Presenters(s): Dan Melamed, CCP EVP; Bryan A. Skokan, PE CCP; Gregory Mah-Hing, PE; Rodney Lehman; Jake Lefman
This article will discuss environmental restoration cost classification for projects within the regulatory framework of the regulatory framework for the United States with a specific focus towards environmental compliance under the Resource Conservation and Recovery Act (RCRA) and the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). These federal acts are perhaps the best understood frameworks for environmental remediation, and can serve as a proxy for other regulations at the state and local level as well as general guidance for managing these type of projects. The reasoning to support these Cost Estimates in relation to their project's maturity will be discussed.
(EST-3559) Overview - Presenting an Estimate to Your Client
Author(s)/Presenters(s): David Colangelo, CCP
Estimating the capital costs for a project can be very challenging for estimating professionals. The shear volume of information combined with the global nature of some projects can present challenges to the estimating team. The presentation of such estimates to clients is also one which requires a great deal of preparation and planning.
There comes a point in every project where a client is essentially presented with an estimate. Ideally, from inception to completion, there are a number of reviews where the client is kept abreast of the overall progress of an estimate. Whether it is the first or last meeting, setting an impression with your client is imperative. Presenting estimating deliverables to clients should be taken very seriously.
This article will present a checklist of the most popular items to consider when presenting an estimate to a client. Among the items featured are; Preparing a proper Estimating Plan, Agenda planning, use of visual aids, preparing your backup, the importance of historical references, basis of estimate, minimum reporting standards, etc. Some of these checklist items may be more helpful than others, as some are not required at the same levels of intensity for small projects vs. mega projects, and perhaps vary in detail depending on estimate class. Preparation is key.
(EST-3562) Risk based contingency allocation using stochastic risk analysis for oil & gas construction project applying Monte Carlo simulation
Author(s)/Presenters(s): Roszie Yanty Bt Rahmat; Roseeta Bt Rashidi; Nursuraya Bt Azeni
Cost contingency estimation is an important element added to a project estimate to cover the inherent project risk to ensure the project budget is not overrun. As part of the risk management process, risks are identified and quantified as a key step in generating risk-based estimate and development of confidence interval instead of arbitrarily assigning the percentage against the total project cost. This study proposes a probabilistic model to estimate the contingency by assessing the impact of the risks on project using quantitative analysis from schedule and cost perspective. Monte Carlo Simulation has been to determine the probability distribution related to the risks coverage and further generating the contingency of the project. The same simulation is use to generate the probability distribution based on risks assigned giving the project contingency breakdown by risks. The proposed method has been applied on oil & gas construction project of a real life company using Crystal Ball for Excel software. Using the stochastic contingency breakdown by risks, project team can better manage and strategize the risk response in their project thus drive the performance of project cost.
(EST-3563) (Presentation Only) Required Skills, Knowledge, Roles, and Responsibilities of a Project Estimator
Author(s)/Presenters(s): Peter R. Bredehoeft, Jr. CEP FAACE; Jeffery J. Borowicz, CCP CEP PSP FAACE
This presentation will align the core estimating skills, knowledge, roles and responsibility for Project from various AACE International recommended practices. This presentation will outline the core competencies of a project estimator. The following is the list of project estimator discussion topics:
- Planning the Estimate
- Estimate Methodologies
- Estimate Conditioning
- Risk Evaluation and Contingency Determination
- Estimate Documentation
- Estimate Reconciliation
- Estimate Review and Validation
- Estimate Reporting
- Estimate Closeout
This presentation will discuss the roles and responsibilities in relation to career development of a project estimator. This will outline the roles and from entry level to estimating manager.
This presentation will pull from key areas of the following AACE RPs:
- 11R-88: Required Skills and Knowledge of Cost Engineering
- 46R-11: Required Skills and Knowledge of Project Cost Estimating
- 101R-19: Roles and Responsibility of a Cost Estimator
(EST-3566) Overview - Estimate Validation, Verification, and Benchmarking
Author(s)/Presenters(s): Douglas W. Leo, CCP CEP FAACE Hon. Life