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2. Degree: Mechanical Engineering Experience: Technical Director, Cost Engineering Consultancy B.V. More than 40 years of industrial experience in consulting various industries such as oil & gas, petrochemical, power, mining & minerals, chemicals, construction and pharmaceutical. Professional Field: Co-founder of Cost Engineering Consultancy Member of NAP/DACE, AACEI, ICEC and AcostE Teacher of cost engineering courses Cost Engineering Consultancy: Cost Engineering LinkedIn Group (> 6000 members) Facebook Twitter kdesbouvrie@costengineering.eu

3. www.costengineering.eu What is Cost Engineering? Cost Estimating Cost Control Planning Challenges of the Modern Cost Engineer Achieving an Integrated Work Process through a Holistic Mindset

4. www.costengineering.eu AACEI defines Cost Engineering as: “That area of engineering practice where engineering judgment and experience are utilized in the application of scientific principles and techniques to the problems of cost estimating, cost control and profitability”.

5. www.costengineering.eu The Profession of Cost Engineering: Applying methods and techniques for: Cost Estimating Cost control Planning Contracting / Tendering Quantity survey Risk Assessment Value Engineering

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7. Some advise: Keep it simple, Cost Engineering is not “Rocket Science” In science 1 + 1 = 2, in cost engineering 1 + 1 = 3 Keep in mind that cost engineering is a profession!

8. www.costengineering.eu “It costs time” “It costs resources” “ It costs money” Everything invested in assets and projects is a Cost

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10. Cost Estimating

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12. Past performance is no guarantee for future results

13. www.costengineering.eu “An evaluation of all the costs of the elements of a project or effort as defined by an agreed-upon scope.” (AACE 10S-90) Cost Estimate Involves assumptions and unknowns Involves probabilities (and therefore ranges of costs) Involves a given scope Contingency covers variability within the defined scope - not changes in scope

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15. An estimate should not be regarded as a single point number (or cost) An estimate is a range of potential cost outcomes, and associated probabilities of occurrence Thus – the accuracy range of an estimate is a probabilistic assessment of how far a project’s final actual cost can be expected to vary from the estimate The range is driven by risks

16. www.costengineering.eu Level of Project definition End UsageMethodology Expected Accuracy Range Preparation Effort 5 4 3 2 1 Estimate Level 0% to 2% 1% to 15% 10% to 40% 30% to 70% 50% to 100% Concept Screening Study or Feasibility Budget, Authorization or Control Control or Bid / Tender Check Estimate or Bid / Tender Capacity factored Parametric Models, Judgment or analogy Equipment factored or Parametric Models Semi-detailed unit cost with assembly level line items Detailed Unit Cost with Forced Detailed take- off Detailed Unit Cost with Detailed take-off L: -20% to -50% H: +30% to +100% L: -15% to -30% H: +20% to +50% L: -10% to -20% H: +10% to +30% L: -5% to -15% H: +5% to +20% L: -3% to -10% H: +3% to +15% 1 2 to 4 3 to 10 4 to 20 5 to 100

17. www.costengineering.eu Study Type C Class4 90/10 Order of magnitude D Class5 Bas e ~2-8% ~1-5% Budget Type B Class3/2 Control Estimate Class1 +40% +10% -25% - 10% Base 50/50 Base 10/90 90/10 Zero baseline Base 90/10 50/50 Base Bas e

18. www.costengineering.eu Influences on the estimate Scope definition Tools Database Risk Systemic Risk Project Specific Risk Market influences Knowledge of the cost engineer

19. www.costengineering.eu What happens with too much pressure?

20. www.costengineering.eu “Measurements are the key. If you cannot measure it, you cannot control it. If you cannot control it, you cannot manage it. If you cannot manage it, you cannot improve it.” - James H. Harrington

21. www.costengineering.eu Cost Control

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23. There are two processes used for controlling the costs of the project. 1.Change Management – a formal process that identifies any requested (or un-requested) changes to the contract. 2.Forecasting – predictions of the costs at completion for any cost elements in progress or not yet started.

24. www.costengineering.eu All changes shall be documented, regardless if no net change in schedule or cost has happened. Don’t run and hide !!!

25. www.costengineering.eu Forecasts are much like estimates. Whereas an estimate is always for future activities and assets, forecasts are predictions of the costs at completion for cost elements in progress.

26. www.costengineering.eu BCWS (Budgeted cost of work scheduled) ACWP (Actual cost of work performed) Budget plan BCWP (Budgeted cost of work performed

27. www.costengineering.eu Challenges of the Modern Cost Engineer

28. www.costengineering.eu Process Engineering Project Control Estimating Project DirectorConstruction Operations /Commissioning Business Feedback/Learning/Knowledge Engineering Detailed Engineering /Procurement

29. www.costengineering.eu Money Business Case Process Engineers Engineering Quality Time / Schedule Environment Safety Cost Engineers Project Lead Proces s Flow Data sheets Sub Contractors Health Regulation Contractors Permits Government Risk Assessment Discipline Engineers Involvement Process for Technical Projects

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31. Potential of Decisions to Influence Value Potential of Changes to Destroy Value Project Life Cycle (Better Scope Definition/Time) More involvement results in better scope definition

32. www.costengineering.eu Front End Loading (FEL) Percentage Above or Below Industry Average Cost FEL Index From: Hollmann, John K., Best Owner Practices For Project Control, 2002 AACE Transactions 5% Lower Cost = 1% Better ROE SCREENINGPOORFAIRGOODBEST

33. www.costengineering.eu Percent That Achieve Objective As Reported by IPA, Inc.

34. www.costengineering.eu Achieving an Integrated Work Process through a Holistic Mindset

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42. Mixing all different ideas together

43. www.costengineering.eu A process for collecting, maintaining, and analyzing project historical information so that it is ready for use in an effective form by each functional process Empirical information is the most fundamental project planning resource available It is manifested in the form of quantified and documented historical data and information The purpose is not to repeat history, but to learn from it (continuous improvement)

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46. Suddenly, a heated exchange took place between the King and the project manager What was objective? “dig a ditch next to the castle wall” or “defend the castle from attack” Good Scope and Communication is ESSENTIAL!

47. www.costengineering.eu Cost Engineering Consultancy HQ - PO box 25, 3330 AA Zwijndrecht, IJsselmeer 32e, 3332 EX Zwijndrecht T: +31 78 620 09 10 F: +31 78 620 91 42 E-mail: info@costengineering.eu www.costengineering.eu