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 AACE International Recommended Practice No. 11R-88

REQUIRED SKILLS AND KNOWLEDGE OF COST ENGINEERING

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TCM Framework: General Reference
(All Sections)
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Note: As AACE International Recommended Practices evolve over time, please refer to www.aacei.org for the latest
revisions.
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Contributors:
Disclaimer: The opinions expressed by the authors and contributors to this recommended practice
are their own and do not necessarily reflect those of their employers, unless otherwise stated.

(June 18, 2013 and May 11, 2012 revision)

John K. Hollmann, PE CCE CEP (Author) Todd W. Pickett, CCC CEP
Jeffery J. Borowicz, CCC CEP PSP Bernard A. Pietlock, CCC CEP
Peter R. Bredehoeft, Jr., CEP H. Lance Stephenson, CCC
Robert B. Brown, PE Charles P. Woodward, PE CCE
Larry R. Dysert, CCC CEP

(January 17, 2006 revision)

John K. Hollmann, PE CCE (Author) Iftikhar K. Madni, CCE
Edward E. Douglas, III CCC PSP Alexia A. Nalewaik, CCE
Clive D. Francis, CCC David A. Norfleet, CCC
Paul E. Harris, CCE Ronald M. Winter, PSP
Dr. Kenneth K. Humphreys, PE CCE Dr. Carl Wolf

Copyright © AACE® International AACE® International Recommended Practices

 ®
AACE International Recommended Practice No. 11R-88
REQUIRED SKILLS AND KNOWLEDGE OF COST
ENGINEERING
TCM Framework: General Reference
(All Sections)

June 18, 2013

This recommended practice has the following purposes:

 define what core skills and knowledge of cost engineering a person is required to have in order to be
considered a professional practitioner, and in doing so,
 establish the emphasis of core subjects for AACE International education and certification programs.

It is also hoped that enterprises will find this useful as a reference or guide for developing their own competency
models. Knowledge is an understanding gained through experience or study, and skills are abilities that transform
knowledge into use. Core subjects are those whose usage is occasional to frequent and are considered by AACE
International as being required for professional practitioners of cost engineering to know and be able to use.

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This recommended practice lists these core subjects and provides general performance statements (i.e., “be able
to” describe, perform, etc.) to represent the level of proficiency expected in each subject area. These statements
are representative or guiding examples only PL
This text is an outline that is intended to be the structural foundation for products and services developed by the
Educational and Certification Boards. It will continue to be modified as current practice changes.

BACKGROUND AND SCOPE UPDATE

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The original recommend practice Required Skills and Knowledge of a Cost Engineer was developed by the AACE
International Education Board and published in 1988 based on their evaluations of a membership survey. Until that
time, AACE International lacked a formal definition of professional cost engineering in terms of skills and
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knowledge. Based on the recommended practice findings, the Education Board then published the first Skills and
Knowledge of Cost Engineering text to provide an educational product to elaborate on the core skills and
knowledge subjects. The earlier text has been regularly updated by the Education Board.

Since the original publication, the AACE Technical Board was given the charter to define the technology of cost
engineering and total cost management. In 2005, the Technical Board completed development of the Total Cost
Management Framework which describes a systematic process (i.e., TCM process) through which the skills and
knowledge of cost engineering are applied. It also provides an integrated structure upon which the Technical Board
can organize its development of recommended practices, including this one.

This update of the Required Skills and Knowledge of a Cost Engineer retains most of the content of the earlier
versions while incorporating those elements of the TCM process that the AACE associate boards (Technical,
Education and Certification) determined are required for a professional practitioner of cost engineering to know. It
also incorporates a more systematic organization of the subjects, based on TCM developments, to better
differentiate between general supporting knowledge used in more than one practice or process (e.g., statistics,
elements of cost, etc.), and specific practice knowledge used in particular functions or processes (e.g., cost
estimating, planning and scheduling, etc.)

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11R-88: Required Skills and Knowledge of Cost Engineering 2 of 23

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INTRODUCTION

A professional cost engineering practitioner must first be able to articulate the meaning of the terms cost
engineering and total cost management (TCM). Practitioners will frequently be asked these questions. Given the
importance of this first knowledge requirement to the understanding this recommended practice, the questions
are answered here. Elaboration of all other skills and knowledge requirements is left for subsequent Education
Board products.

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

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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
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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.

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.
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How is cost and schedule management an “engineering” function?

Most people would agree that “engineers” and engineering (or more generally, the “application of scientific
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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 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.

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11R-88: Required Skills and Knowledge of Cost Engineering 3 of 23

June 18, 2013

Do cost engineering practitioners need to have a traditional “engineering” background?

The skills and knowledge required to deal with costs (i.e., 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: a) specialized in function (e.g., cost estimating, planning and scheduling,
etc.); b) focused on either the asset management or project control side of the TCM process; and c) 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

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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
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knowledge of, and skills in, all areas of cost engineering are required to perform their job effectively. In summary,
the purpose of this document is to define these required skills and knowledge of professional cost engineering.

THIS DOCUMENT’S OUTLINE STRUCTURE AND ITS RELATIONSHIP TO PARTICULAR FUNCTIONS AND AACE
INTERNATIONAL CERTIFICATIONS
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Figure 1 illustrates the hierarchical structure of the Required Skills and Knowledge of Cost Engineering. The first
level of the structure differentiates between general supporting knowledge used in more than one practice or
process, and specific practice knowledge used in particular functions or process steps. Succeeding levels further
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break down the content to whatever level is appropriate for each skills and knowledge area. The location of a skill
or knowledge element in the level of the outline does not reflect on its relative importance.

On the process and functional side, the structure is organized in accordance with the plan, do, check, (or measure),
and assess (PDCA) process model that serves as the basis for the TCM process through which all the skills and
knowledge of cost engineering are applied. It is not structured by a practitioner’s work function. For example, cost
estimators will not find all of their required skills and knowledge under one heading. Their particular function’s
required skills and knowledge will include elements of supporting knowledge, as well as elements of planning,
measuring, and assessing that are appropriate to their function.

This document includes the required skills and knowledge that certified cost engineers and consultants (CCE/CCCs)
must have. Its scope is broad and represents the comprehensive skills and knowledge that business management
may expect someone with overarching responsibilities in an organization to have (e.g., supporting overall capital
program or project system management).

For specialty certifications [e.g., planning and scheduling professionals (PSP)], the Certification Board will
document appropriate skills and knowledge requirements. These will include elements from this overall outline as
they apply to the scope of the particular function. They may also include more detailed skills and knowledge than
included here. The scope of those requirements will not be as broad, but will be deeper, representing the skills and
knowledge that business management may expect from a manager of or expert in the particular function.

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SKILLS AND KNOWLEDGE OF COST ENGINEERING

Definition of Cost Engineering and
Total Cost Management

1. Supporting Skills and Knowledge 2. Process and Functional Skills and Knowledge

1.1. Elements of Cost 2.1. Total Cost Management (TCM) Framework

1.1.1. Cost 2.1.1. Overall TCM Process and Terminology

1.1.2. Cost Dimensions 2.1.2. Strategic and Asset Management Process

1.1.3. Cost Classifications 2.1.3. Project Control Process

1.1.4. Cost Types 2.2. Planning

1.1.5. Pricing 2.2.1. Requirements Elicitation and Analysis

1.2. Elements of Analysis 2.2.2. Scope and Execution Strategy Development

1.2.1. Statistics and Probability 2.2.3. Schedule Planning and Development

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1.2.2. Economic and Financial Analysis 2.2.4. Cost Estimating and Budgeting

1.2.3. Optimization and Models 2.2.5. Resource Management

1.2.4. Physical Measurement 2.2.6. Value Analysis and Engineering

1.3. Enabling Knowledge

PL 2.2.7. Risk Management

1.3.1. Enterprise in Society 2.2.8. Procurement and Contract Management

1.3.2. People in Organizations and Enterprises 2.2.9. Investment Decision Making

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1.3.3. Information Management 2.3. Plan Implementation

1.3.4. Quality Management 2.3.1. Project Implementation

1.3.5. Value Management 2.3.2. Project Control Implementation

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1.3.6. Environmental, Health and Safety (EHS) 2.3.3. Plan Validation

2.4. Performance Measurement

2.4.1. Cost Accounting

2.4.2. Project Performance Measurement

2.4.3. Asset Performance Measurement

2.5. Performance Assessment

2.5.1. Project Performance Assessment

2.5.2. Asset Performance Assessment

2.5.3. Forecasting

2.5.4. Project Change Management

2.5.5. Asset Change (Configuration) Management

2.5.6. Historical Database Management

2.5.7. Forensic Performance Assessment

Figure 1. High Level Outline of the Skills and Knowledge of Cost Engineering

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11R-88: Required Skills and Knowledge of Cost Engineering 5 of 23

June 18, 2013

Note: The outline that follows signifies key concepts and performance statements for which the practitioner
should have at least a basic understanding.

1. Supporting Skills and Knowledge

1.1. Elements of Cost
1.1.1. Costs: be able to define/explain these general concepts in relation to each other and to assets and/or
activities.
1.1.1.1. Resources
1.1.1.2. Time
1.1.1.3. Cost
1.1.2. Cost Dimensions:
1.1.2.1. Lifecycle: be able to describe this term and differentiate the life cycle of an asset and a project
1.1.2.2. Process (product vs. project): be able to describe and differentiate the cost characteristics and
types (see cost types below) that make up product and project costs.
1.1.2.2.1. Be able to distinguish among products, co-products, and byproducts.
1.1.2.3. Responsibility: be able to describe and differentiate the cost perspectives of an owner and a

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contractor/supplier
1.1.2.4. Valuation: be able to describe and differentiate cost from cash/monetary versus
economic/opportunity costs (also see economic analysis) perspectives.
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1.1.2.5. Influence: be able to explain the concept of the cost influence curve
1.1.2.6. Legal:
1.1.2.6.1. Be able to explain how cost and schedule analysis practices might differ when applied for
forensic versus traditional planning and control purposes.
1.1.2.6.2. Be able to describe some potential legal consequences that may result from using poor or
unethical cost management practices (e.g., anti-trust, claims, Sarbanes-Oxley, etc)
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1.1.3. Cost Classifications: for the following classifications, be able to:
1.1.3.1. Explain the general differences between the ways costs are classified for various cost
management
purposes
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1.1.3.2. Given a problem with appropriate cost classification inputs (e.g., indirect cost using ABC
classification method), be able to calculate how the cost would be accounted for in a project or product
estimate.
1.1.3.2.1. Operating (Production, Manufacturing, Maintenance, etc.) vs. Capital
1.1.3.2.2. Capital vs. Expense
1.1.3.2.2.1. Depreciation
1.1.3.2.2.2. Amortization
1.1.3.2.2.3. Accrual
1.1.3.2.3. Fixed vs. Variable
1.1.3.2.4. Direct vs. Indirect
1.1.3.2.4.1. Activity-Based Costing (ABC)
1.1.3.2.4.2. Job Costing
1.1.4. Cost Types: for the following cost types, given cost type and classification inputs, be able to apply them
in a project or manufacturing estimating application (i.e., for project or product cost)
1.1.4.1. Materials:
1.1.4.1.1. Materials types: be able to describe the types and their cost drivers:
1.1.4.1.1.1. Raw
1.1.4.1.1.2. Bulk
1.1.4.1.1.3. Fabricated
1.1.4.1.1.4. Engineered or designed

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