CONSTRUCTION COST ENGINEERING
Module 1: INTRODUCTION
Cost engineering is the engineering practice devoted to the
management of project cost. Cost engineering consulting involves
estimating, cost control, cost forecasting, investment appraisal, and
risk analysis.
This is value cost engineers bring to each construction project. Cost
engineers do the budgeting, planning, and monitoring to ensure that
your construction project is viable and successful.
It’s a fine line between managing the cost, quality, and time required
to see your project come to life.
A skilled cost engineer has the experience to anticipate problems and
challenges before they result in cost overruns and scheduling slow-
downs.
Why Construction Projects Fail?
Construction projects fail because of communication break-downs
and the inability to address underlying issues.
Key factors in management of the construction project that contributes to
the above core reasons for failure;
1. Poor Estimating
Accurate estimating is essential to construction project success.
Estimating involves assessing material, human, budgetary, and
processing demands.
Are the materials available?
Have the permits been filed and approved?
What are the environmental impacts?
Do we have a reliable workforce to complete the project?
Are there ample funds to manage any unexpected costs and
interruptions?
2. Scope Creep
What Is the Scope of a Project?
In simple terms, the project scope refers to all the work that is required
to complete a project.
What Is Scope Creep in Project Management?
Scope creep is what happens when changes are made to the project scope
without any control procedure like change requests. Those changes also
affect the project schedule, budget, costs, resource allocation and might
compromise the completion of milestones and goals. Scope creep is one of
the most common project management risks.
Scope creep is extremely common, regardless of the size of the
construction project. It’s super important that everyone understand
the project goals – what needs to be built, what isn’t going to be built,
and why. Your cost engineer and entire construction management
team needs to work with you to clearly detail the project scope – what
will and won’t be done and why new changes can’t be introduced
once the project is underway.
3. Delays
There are times when the paperwork, approvals, and regulations
simply don’t all come together on-time. While this is often considered
a normal practice in construction, it doesn’t have to be this way. The
better planning, communication, and investigation into site regulations
and permits – the easier it is to prevent construction delays. This
planning might seem tedious at the outset, but it pays huge dividends
once the construction project is underway.
4. Confusing Specifications
The more specific the project details – the better. You, the client,
have the right to be demanding and make sure that the PCS team is
interpreting your requests correctly. It’s important that the entire
construction team understands what you want. This allows the cost
engineer and other team members to properly plan and budget for
your project.
5. Budgetary Problems
Budgetary problems can typically be traced back to the core issues of
poor communication and lack of planning. The cost engineer is
responsible for planning all aspects of the construction project cost –
this includes the budget. You and your cost engineer need to have
honest, open conversations about what you can and can’t afford. It’s
important that there is a plan in place in the event unexpected costs
occur.
6. Communication Failures
Managing and seeing a construction project to successful completion
requires clear and open communication at all times. Your
construction team should be providing you with regular updates on
the project schedule, project problems, and any unexpected issues.
You need to be ready to answer any questions the construction team
has and be ready to challenge the team when unexpected events
occur.
7. Inadequate Planning
The failure to properly plan always results in construction project
failure. The more planning, double-checking, reviews, and
assessment before the project starts – the better. Yes, this planning
process may appear to be slowing down the project start, but it’s
critical that a clear schedule and plan is in place before the project
starts.
What is Cost Engineering?
Cost engineering is critical to the success of your construction
project.
The Association for the Advancement of Cost Engineering (AACE) defines
cost engineering as:
“Cost engineering is the application of scientific principles and techniques
to problems of estimation; cost control; business planning and
management science; profitability analysis; project management; and
planning and scheduling.”
So, what does this mean for you and the success of your construction
project?
It means that cost engineering consulting is crucial to avoiding the
key reasons for construction project failure and ensuring the success
of your project.
You can expect your cost engineer to be guided by 3 core principles,
ensuring that your project is successful:
Areas for Improvement
When you meet with your cost engineer, ask about previous
construction projects. Ask this person about the project successes
and failures. Ask the cost engineer about his or her change
management principles. It’s key that your cost engineer is committed
to learning from each construction project. How could the budgeting
have been improved? What worked really well? Where did the slow-
downs occur? Are there tools that could be used to improve
scheduling and planning?
Assessment and Measurement
To successfully manage the entirety of the construction project costs,
your cost engineer must have a complete understanding of the
resources available. This includes understanding the viability of these
resources (people, materials, budgets, time) and how these
resources will be used. Your construction project plan should include
a clear analysis of what is needed for the project to succeed, what
could cause the project to fail, and detailed checks and balances
used through-out the project to keep it on track and budget.
Cost Control
Cost is about more than dollars. Cost control includes managing
every aspect of the construction project – the people, materials,
permits, regulations, budget, scope, project details, and being
prepared for unexpected circumstances. This includes looking for
issues that could cause project interruptions and cause the
construction to be delayed or to end up in cost overruns. Anticipation
of costs is critical to successful construction project planning.
What Does a Cost Engineer Do for Your Construction Project?
A cost engineer ensures that your construction project can and will be a
success. Specifically,
Assists with feasibility studies.
Studies architect and engineer plans.
Identifies costs and sets an overall budget.
Creates project benchmarks.
Plans costs to help the team stay on-track.
Communicates with you through-out the project.
Reviews and assesses project timelines.
Resolves scope creep and any other project slow-downs.
Assessing the project upon completion for areas of improvement.
Know that the cost engineer is the person who keeps all the pieces of
project working and fitting together.
Rely on your cost engineer to do the planning, scheduling,
management, and review of your construction project from start-to-
finish.
