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Mike 20norbisch 20 - 20CD 20and 20estimate 20class 20
Mike 20norbisch 20 - 20CD 20and 20estimate 20class 20
– 91 sections
– 7,708 members
• According to 2010 Membership Survey, 22% of respondents
were Estimators by primary job function
AACE International
• Cost Engineering defined
– Collective set of practice areas that includes the following:
• Business and program planning
• Cost estimating
• Economic and financial analysis
• Cost control
• Program and project management
• Planning and scheduling
• Cost and schedule performance measurement
• Change control
• Total Cost Management (TCM) is the "process" through which
these practices are applied
– TCM Framework free download from website
– Will soon be available as web-enabled, process flow diagram tied to
all AACE technical products
AACE International
• Estimating-specific
– Certified Estimating Professional (CEP)
• One of four “specialty” certifications currently offered
• Introduced in 2008, currently there are 110 CEPs in database
• Intent is to recognize specialists who meet established set of estimating criteria
by examination, experience, education and ethical qualifications
– Recommended Practices (RPs)
• 17R-97: Cost Estimate Classification System
• 18R-97: Cost Estimate Classification System: As Applied in Engineering,
Procurement, and Construction for the Process Industries (JAN 2011)
• 19R-97: Estimate Preparation Costs: As Applied for the Process Industries
• 31R-03: Reviewing, Validating and Documenting the Estimate
• 34R-05: Basis of Estimate
• 40R-08: Contingency Estimating: General Principles
AACE International
• DOE Relationship
– Cooperative agreement first signed in 1997
• Reauthorized in 2002 and 2007
– Current DOE “sponsor” is OECM
– Key elements:
• Advance “state-of-the-art” of TCM through
increased communication and dialogue
• Apply established cost engineering/cost management principles,
proven methodologies, and latest technology
• Develop new cost engineering/cost management methodologies and
technology in pursuit of optimum resource utilization
• Encourage utilization of cost management standards and practices and
their continual improvement/advancement
DOE Estimating Guide (413.3-21)
• AACE Estimate Classification System (1998 version
included as Appendix J)
Reprinted from AACE RP No. 18R-97, Cost Estimate Classification System – As Applied
in Engineering, Procurement and Construction for the Process Industries
DOE Estimating Guide (413.3-21)
• DOE “Suggested” Estimate Classifications
Reprinted from Table 4.2, U.S. Department of Energy Cost Estimating Guide
DOE Estimating Guide (413.3-21)
• AACE Estimate Classification System (2011 version)
Reprinted from Figure 1, AACE RP No. 18R-97 (2011), Cost Estimate Classification System – As
Applied in Engineering, Procurement and Construction for the Process Industries
DOE Estimating Guide (413.3-21)
• Critical Decision (CD) Requirements
– CD-0
• Cost estimate range (i.e., order of magnitude)
– Due to lack of detail or design during early project formulation
• An estimate of costs to be incurred prior to CD-1 could also be required
– For developing Conceptual Design for project
– CD-1
• Prior to approval of CD-1, project team should develop definitive
estimate of near term preliminary design cost
– For PED funding request
• Life-cycle cost estimate (LCC) of likely alternatives that are being
considered
• After selecting alternative, project team develops total project cost
(TPC) range
DOE Estimating Guide (413.3-21)
• Critical Decision (CD) Requirements (cont’d)
– CD-2
• Single point estimate that will represent entire project,
utilizing current scope and associated design parameters
– 70-80% confidence level (CL)
– CD-3
• Cost estimate based on Final Design [or sufficiently mature
to start construction]
– May incorporate actual bids received from contractors used to
establish project’s requirements for construction or execution
– CD-4
• Final Estimate at Completion (EAC)
– In accordance with project’s approved WBS
Mapping Recommendations
• CD-0:
– Cost estimate range: Class 5
• Rationale:
– At best, will use stochastic methods to develop cost ranges
– Assumptions will be made for drivers having significant impact on
project cost
– Estimate of costs to be incurred prior to CD-1: Class 3
• Rationale:
– Resources needed to support Conceptual Design effort should be
known within range of -20% to +30%
– Acquisition strategy and scope of work for Conceptual Design
should also be known
Mapping Recommendations
• CD-1:
– Estimate of near term preliminary design cost: Class 3
• Rationale: Class 3 is minimum requirement to be definitive estimate;
for less complex projects Class 2 would be appropriate
– LCC of likely alternatives that are being considered: Class 5
• Rationale: Data for some of life cycle costs will be available, but most
will be projections, which will be applied to Class 5 estimate of project
– TPC range: Class 4
• Rationale:
– This estimate uses as its basis scope that is at best only 15% defined
– There is still an overabundance of unknowns that will require allowances
rather than definitive estimates
Mapping Recommendations
• CD-2:
– Single point estimate representing entire project:
• Low risk projects (left of 50% below): Class 3
• High risk projects (right of 50% below): Class 2
– Rationale: Class 3 requires 10-40% of full project definition; Class 2
requires 30-70% of full project definition
• CD-4:
– Final Estimate at Completion (EAC): N/A
• Rationale: Based on actual costs (no longer an estimate)
Conclusion
• Currently soliciting input from:
– AACE (Estimating Committee)
– EFCOG (Cost Estimating Subgroup)
• Once received/compiled, goal will be to formalize
– New AACE RP or Addendum to existing?
– Revision to DOE Estimating Guide?
Questions?