March

March 2009
2009

The AACE International Journal of

Cost Estimation, Cost/Schedule Control, and Project Management

Promoting the Planning and

Management of
Cost and Schedules

IN
IN THIS
THIS ISSUE
ISSUE
• Certification Paper -
SAP — An Effective
Tool for Managing
Multiple Small
Projects

• Technical Article -
Programs and
Projects Driven by
Asbestos
Regulations

• Technical Article -
Soft Skill
Quantification (SSQ):
Human Performance
vs. Metric

• President’s Message -
Establish Business
Management
Practices Early
• Women in
Project Controls -
Erin Dunavant

• Executive Article -
Emotional Fitness at
Work

COST
COST ENGINEERING
ENGINEERING FOCUS:
FOCUS: • Special Feature -
The CPI and the TCPI
PEOPLE
PEOPLE PERFORMANCE
PERFORMANCE
• Special Focus -
MANAGEMENT
MANAGEMENT Cost Management
Drives National
Economies

The Association for the Advancement of

Cost Engineering International
Visit our website at www.aacei.org
 AACE International
Board of Directors The AACE International Journal of
Cost Estimation, Cost/Schedule Control, and Project Management
President
Stephen P. Warhoe, PE CCE CFCC
WSDOT, WA
206-464-1292
e-mail: president@aacei.org
ESTABLISHED 1958
President-Elect
Mark G. Grotefend, CCC
CH2M Hill Inc., WA
206-988-5503 Depar tments
e-mail: preselect@aacei.org
President’s Message ................................3 For the Bookshelf..................................34
Past President Women in Project Controls ..................5 Professional Services Directory ............35
William E. (Bill) Kraus, PE CCE
Executive Article ....................................7 AACE International Bulletin................36
International Aviation Consult., GA
615-828-2037
Special Focus ........................................15 Article Reprints and Permissions ..........43
e-mail: pastpres@aacei.org Special Feature ....................................22 Calendar of Events ..............................44
AACE International Bookstore ............32
Vice President-Administration
Kerri J. Hunsaker Stannard
BWXT Y-12, LLC, TN Featured Ar ticles
865-241-3262
e-mail: vpadmin@aacei.org
SAP — An Effective Tool for Managing Multiple Small Projects 9
Vice President-Finance
Sidney J. Hymes, CFCC Betty A. Poettcker, CCC
Chesterfield, MO SAP can be used as an effective tool to assist in the management of cost, schedule, and resources for a single
314-825-7885 project, as well as, for a portfolio of small projects. Using this method for small projects allows project man-
e-mail: vpfinance@aacei.org agers to analyze a group of projects and make timely decisions. This article will explore the use of SAP in each
Vice President-TEC of the three areas of project costs, milestone schedules and resources. Each section will describe the setup in
Vera A. Lovejoy, CCE PSP SAP, the analysis of the data for management and project controls, and the benefits of using SAP as a tool for
626-440-6241 project management. A standardized approach for each project in the portfolio provides consistent informa-
e-mail: vptec@aacei.org tion that can be analyzed across the entire portfolio of projects. The key to using SAP successfully is to be con-
Vice President-Regions sistent and to update the information regularly. SAP can be an effective tool for managing and controlling mul-
Michael R. Nosbisch, CCC PSP tiple small projects.
626-440-2000
e-mail: vpregions@aacei.org
Director-Region 1
Programs and Projects Driven by Asbestos Regulations 16
Peter W. Ripley, CCC Paul Stanford Kupakuwana
Fluor Canada Ltd, Canada Asbestos’ ability to resist high temperatures resulted in its extensive use as a fireproofing and insulation materi-
403-537-4042 al from the 1950s through to the mid 1980s. But today, asbestos is equally viewed as a beast. This arises main-
e-mail: dirregion1@aacei.org ly from a consideration of the dire consequences of deaths from asbestos-related cancers that have resulted from
Director-Region 2 past exposure. Asbestos litigation has given rise to claims against some former producers, sellers, distributors,
John J. Ciccarelli, PE CCE PSP and installers. Some were forced out of businesses, or into diversification and bankruptcy. This article analyses
Deloitte, PA the implications of new asbestos regulations in determining program and project directions at the London
215-246-2401 Borough of Hillingdon. That analyses showed a significant impact.
e-mail: dirregion2@aacei.org
Director-Region 3
Michael B. Pritchett, CCE Soft Skill Quantification (SSQ): Human Performance vs. Metric 26
Faithful+Gould, GA Edward Muzio and Dr. Deborah Fisher
770-957-8070
In this follow-on study to a successful initial pilot study by the authors, the Soft Skill Quantification (SSQ) tool
e-mail: dirregion3@aacei.org
was evaluated for its ability to accurately detect high-performers as a function of SSQ metrics. The SSQ model
Director-Region 4 has demonstrated for a second time the ability to distinguish between performance levels based upon measur-
James E. Krebs, PE CCE able constructs. Furthermore, seven emotional intelligence metrics were identified as being correlated with
734-207-1457 high performance, but it was more moderate values of these metrics that corresponded with the highest per-
e-mail: dirregion4@aacei.org
formers. Contrary to intuition, "more" is not always "better" when it comes to SSQ metrics.
Director-Region 5
Andy Padilla, CCC
505-362-2633 In This Issue
e-mail: dirregion5@aacei.org
Director-Region 6
Board of Directors Contact List ........................1 How to Submit to the Cost Engineering Journal ..40
Alexia A. Nalewaik, CCE MRICS The 2nd Quarter (2Q) Certification Exams ..6 The AACE International CyberSection................41
Moss Adams LLP, CA News from AACE International Region 8 ....14 The 2009 Western Winter Workshop ..........42
213-399-1373 Index to Advertisers..............................................35
e-mail: dirregion6@aacei.org
Director-Region 7 On the Cover: Scenes of the Seattle Sheraton Hotel, location for AACE International’s 53 Annual Meeting,
Madhu P Pillai, CCC June 28-July 1. Additional information/reservations available at www. aacei.org or www.sheraton.com/seattle/.
S A Kent Company Ltd, Saudi Arabia
+966.50.0179621 COST ENGINEERING AACE International Headquarters
e-mail: dirregion7@aacei.org Vol. 51, No.3/March 2009
209 Prairie Avenue, Suite 100
Director-Region 8 Managing Editor - Marvin Gelhausen - mgelhausen@aacei.org
Morgantown, WV 26501
Tetsuya Yonezawa, CCE Graphic Designer/Editor - Noah Kinderknecht - nkinderknecht@aacei.org
Toyo Engineering Corporation, Japan ph: 800.858.COST
IT/IM/Graphics Specialist - Robin Donley - rdonley@aacei.org
+81.47.4541582 fax: 304.291.5728
e-mail: dirregion8@aacei.org
Policy concerning published columns, features, and articles -
Executive Director
Viewpoints expressed in columns, features, and articles published in Cost Engineering journal are solely those of the authors and do not represent an official position of AACE
Andrew S. Dowd, Jr., PSP
International. AACE International is not endorsing or sponsoring the author’s work. All content is presented solely for informational purposes. Columns, features, and articles not
304.296.8444
designated as Technical Articles are not subject to the peer-review process.
e-mail: adowd@aacei.org
Cost Engineering (ISSN: 0274-9696/08) is
published monthly by AACE International,
Inc, 209 Prairie Ave., Suite 100, Morgantown,
WV 26501 USA. Periodicals postage paid at
P resident’s
P resident’s Message
Morgantown, WV, and at additional mailing
office. POSTMASTER: Send address
changes to AACE International; 209 Prairie Stephen P. Warhoe, PE CCE CFCC
Ave., Suite 100, Morgantown, WV 26501 USA. President
Customer #7012359 (APC), Publications Mail
Agreement No 40624074, Return
undeliverable Canadian addresses to PO Box
503, RPO West Beaver Creek, Richmond Hill,
ON L4B 4R6. Single copies: US$8 members/
US$12 nonmembers (both +shipping),
Establish Business Management Practices Early
excluding special inserts available to AACE
members only. Subscription rates: United
or just about anyone who is involved should first ensure that its in-house project

F
States, US$65/year; all other countries,
US$82/year. Overseas airmail delivery is
available at US$99. Subscriptions are with the execution of a project, the management infrastructure has been estab-
accepted on an annual-year basis only. projects that end poorly are typically lished. This infrastructure includes the
Copyright © 2009 by AACE International, Inc.
All rights reserved. This publication or any because they either complete later than establishment of business processes, proce-
part thereof may not be reproduced in any expected, are over budget, or both. From my dures, and management structure; appropri-
form without written permission from the
publisher. AACE assumes no responsibility experience in the claims and disputes busi- ate to the size of the project. Oftentimes,
for statements and opinions advanced by the
contributors to its publications. Views
ness, failed projects, for the most part, arise as owners hire some of the best project manage-
expressed by them or the editor do not a result of poor communications somewhere ment staff and consultants to successfully
necessarily represent the official position of
Cost Engineering, its staff, or AACE
in the intricate network of communication manage their complex projects, but once the
International, Inc. Printed in York, PA, USA. chains that comprise a project. These com- project has progressed along, it becomes evi-
Cost Engineering is a refereed journal. All
technical articles are subject to review by a
munication deficiencies can usually be attrib- dent to these bright people that the owner's
minimum of three experts in the field. To uted to the relationship between the owner project management infrastructure can be
submit a manuscript for peer review, please
e-mail it to editor@aacei.org. Cost and contractor. However, communication the biggest obstacle to accomplishing the
Engineering is indexed regularly in the problems internal to the owner's or contrac- project management objectives. The owner's
Engineering Index., Cambridge Scientific
Abstracts, by EBSCO Publishing, and in the tor's own project teams can also be attributa- project management infrastructure can, and
ABI/Inform database. Cost Engineering is ble to the cause of a claim or dispute. Failure sometimes does, inhibit the success of a proj-
available online, via the ProQuest information
service; on microform; electronically on CD- to communicate via phone calls, e-mails or ect. The problems are often attributable to
ROM and/or magnetic tape from Bell & letters might be the most prevalent reasons any or a combination of the following infra-
Howell Information and Learning, PO Box
1346, Ann Arbor, MI 48106. Photocopy why communications fail on a project. structure components:
permission: Authorization to photocopy However, there is another avenue of commu-
articles herein for internal or personal use, or
the internal or personal use of specific nication that if inadequately addressed will • Project Business Processes—
clients, is granted by AACE International,
Inc., provided that the base fee of US$4.00 is
lead to project problems; a poorly developed Consistency in the way projects are man-
paid directly to Copyright Clearance Center, design or an internal review process that sim- aged is one of the most important keys to
222 Rosewood Drive, Danvers, MA 01923
USA. Telephone: 978.750.8400. For those
ply does not work correctly. successfully managing a project.
organizations that have been granted a For example, projects that fall behind Developing and implementing ‘best
photocopy license by CCC, a separate system
of payment has been arranged. The fee code schedule or end up over budget can be avoid- project management practices,’ that are
for users of the transactional reporting ed if the owner and the contractor know and defined well before the project starts,
service is ISSN-0274-9696/02 US$4.00. This
permission to photocopy does not extend to use a few basic principles of good project and helps the owner’s project team. This
any Cost Engineers’ Notebook, AACE business management practice. Since the helps the team better understand and
Recommended Practices supplements, or
membership directories published in this owner has the advantage of prescribing how execute what is expected of them and
magazine and/or special inserts. Payment certain processes and procedures of the proj- other team members. It helps with
should be sent directly to CCC. Copying for
other than personal or internal reference use ect will be followed, the owner can help respect to performing roles and accom-
without the express permission of AACE is influence the success (or failure) of the proj- plishing objectives on the project.
prohibited. Address requests for permission
on bulk orders to the editor. ADVERTISING ect well before the contract is executed. These business processes should inte-
COPY: Contact Network Media Partners.,
Executive Plaza 1, 11350 McCormick Road,
An excellent example of a project man- grate the company's overall business mis-
Suite 900; Hunt Valley, MD 21031. Telephone: agement process that the owner can influ- sion, vision, and practices.
410.584.1966. E-mail: aace@networkmedia-
partners.com for rates. Advertisers and
ence is with project specifications.
advertising agencies assume liability for all Specifications help the owner and/or the Examples of some of the project business
content (including text, representation, and
illustrations) of advertisements printed and
designer communicate to the contractor how processes that should be in place within the
also assume responsibility for any claims they want certain activities to be completed. owner’s project management organization
arising therefrom made against the publisher.
The publisher reserves the right to reject any One such specification, known as the sched- include, but are not limited to, the following.
advertising that is not considered in keeping ule specification, describes how the contrac-
with the publication’s mission and standards.
The publisher reserves the right to place the tor will develop, manage, and report on proj- • procurement; consultants, contractors,
word advertisement with copy which, in the ect time and resource usage. For more dis- materials and supplies;
publisher’s opinion, resembles editorial
matter. All advertising accepted for cussion on scheduling specifications, please • invoice processing;
publication in Cost Engineering is limited to refer to my messages found in the January • content management, including docu-
subjects that directly relate to the cost
management profession. Current rate card and February 2009 issues of the Cost ment control;
available on request. COST ENGINEERING Engineering journal. • real estate acquisition;
DEADLINES: Submissions for Cost
Engineering must be received at least 7 Before the owner endeavors to take on a • project controls;
weeks in advance of the issue date. Send to:
Editor, 209 Prairie Ave., Suite 100,
project, no matter how large or complex, it • risk management;
Morgantown, WV 26501 USA. Deadlines do
not apply to technical papers.
Cost Engineering Vol. 51/No. 3 MARCH 2009 3
 • change management;
• design quality assurance and review; Recognizing and working to develop each of these three
• construction quality assurance, oversight and management; areas will ensure a positive step towards a successful project.
and, Failure in any one of these areas can easily lead to a project that
• disputes management. completes much later, costs much more than expected, or both;
and may even create a situation in which project team morale is
There are no universally accepted standard processes for any low. The poor performance of these components should not be
of the above categories. However, there are many templates and reasons that a project fails for an owner, but, unfortunately, they
forms developed and implemented, some better than others, that often are.
I have seen within owner organizations for various types of build- The success of a project, regardless of which side of the con-
ing programs. For many organizations, their versions of these tract we are on, depends on our preparation. For the owner,
processes are constantly being scrutinized and further refined as whether it intends to execute a one-time project or procure for
the company becomes more experienced with design and con- several projects, it is essential to establish its project management
struction project management. For other organizations that have infrastructure well before the contractor procurement phase. ◆
processes and procedures which are inefficient, they don’t seem
to either care or have the expertise to make a positive change.
The key point to using business processes on a project is that Register Now for the 48th Annual
they create consistency on how business is performed. Although Western Winter Workshop
business processes may vary from owner to owner, or project to
project, they are a valuable tool for project teams to operate as a March 13-15, 2009
unit; and operating as a unit is the goal for all project teams. Portola Hotel and Spa
• Tools—In order for any of us to adequately perform just Monterey, CA
about any function, whether for our jobs, yard work, or even Join us and continue to grow this
sailing a boat, having the best and most advanced tools avail- young west coast tradition!
able will make everything we do more productive and less
burdensome on our minds and our backs. We need to have Visit www.aaceisf.org
these ‘best tools’ to accomplish our goals in a productive and for more information
timely manner. The field of project management is no Contact: John Haynes 925-570-4647
exception, including the areas of schedule and cost manage-
jhaynes@trsconsultants.com
ment. The primary tools necessary to adequately develop
cost and schedule systems are: software, hardware, and access
to resources such as books, and databases. Since the early
1980’s, after the personal computer was introduced to the
world, along with the project management software that fol-
lowed, there has been a boom in project management pro-
ductivity. These tools are what help execute the processes;
that is, with the appropriate team members who are skilled
and knowledgeable, armed with reliable scheduling and cost
management packages, the project team has what it takes to
be as productive as possible.

• The Human Element—Avoiding any claims or disputed

changes, whether schedule, cost, scope or quality related,
becomes futile if members of the owner's project team either
cannot or will not use the business processes or tools
designed to help manage the project for a successful out-
come. Whether it is because of a lack of training, compla-
cency, or unwillingness to change previous working behav-
iors, the project manager is faced with a challenge if any or
all of these factors exist within his/her team. Overcoming or
mitigating these factors takes experience working with a
diverse set of people with varying education, skills, and expe-
rience levels. It sometimes takes a project manager who not
only understands the technical aspects of the project but is
also a person who understands how to work a myriad of per-
sonalities, and can motivate or convince team members to
change their mindsets or paradigms in order to move the
entire team in the same direction.

4 Cost Engineering Vol. 51/No. 3 MARCH 2009

W omen
Women in Project
in Project Controls
Julie Owen, PSP CCC

Spotlight on Women in Project Controls —

Erin Dunavant
Editor’s Note: This series of articles from the AACE International Women in Project Controls Task Force will highlight the accomplishments and contributions of AACE
International women who work in project controls. The series will be one component in accomplishing the mission of the Women in Project Controls Task Force which is,
“to encourage women to actively participate in program/project management and project controls, and to identify avenues for the recruitment, mentoring, and recognition of
women in AACE International.
The WPC Task Force includes: Valerie Venters, CCC, chair; Julie Owen, CCC, PSP, vice-chair; Kathy Garza, CCC, secretary; Jennie Amos, Headquarters
representative; and Ginette Basak, P.Eng; Clive Francis, CCC; Marlene Hyde, CCE; Vera Lovejoy, CCE PSP; Alexia Nalewaik, CCE and Carole Venters, CCC, as advisors.

rin Dunavant was born and the Southern California section recent history. Erin realized the

E raised in Southern California

and will tell you that she "epito-
mizes what can be accomplished in
your career through dedication and
hard work". She began her career in
project controls in the eighties at E&L
Associates, a small engineering compa-
Erin Dunavant ny, where she initially worked in
accounts payable, payroll, and accounts receivables.
At E&L, she quickly established herself as a company asset
and was promoted into the project controls department as an
associate cost engineer. This experience sparked Erin's passion
for communication and intrigued her to learn more and more
about project controls. She loved the experience of working in
her new role and worked hard to continually increase her experi-
ence by taking advantage of the new opportunities. These oppor-
tunities offered a variety of excellent learning experiences in cost
engineering and scheduling.
Erin is currently the planning and scheduling manager at
Brinderson Engineers and Constructors in Costa Mesa,
California. Remembering the words from her first boss, “to suc-
ceed in project controls, you need to be a very hard worker; it's
not easy!”—Erin took those words to heart and the rest is history.
She was introduced to AACE International in 2006, when
invited to attend a local Southern California section dinner meet-
ing. Erin could tell the Association was right up her alley and
jumped in head first. She immediately joined the local Board of
Directors and took responsibility for event planning. Serving as
Events Director, Erin met many people, introduced speakers at
meetings, learned valuable information from technical presenta-
tions, and shared this information with her managers and col-
leagues.
She became the AACE International "cheerleader"— talk-
ing to colleagues, getting them involved, helping them succeed,
and improving project controls within her company. Through
this process, Erin was given the opportunity to announce associa-
tion events at her department meetings each month.
She had a vision that all project controls people in her com-
pany should be certified and spearheaded an effort to have 30
people from her company sit for the certification exam at one
time. This resulted in the highest certification exam turnout in
fruit of her efforts when she was awarded last year's AACE
International Southern California Section Service Award.
Erin says AACE International membership has helped her
career and given her access to an incredible network of project
controls professionals and critical technical resources. She regu-
larly takes advantage of the many opportunities listed on the
AACE International website, like distance learning, technical
committees, and forums. She appreciates having access to the
technical articles, recommended practices, as well as the profes-
sional practice guides.
Erin says, “getting involved in AACE International is truly
rewarding and the opportunities are endless.” Erin had the
opportunity to go to the 2008 Western Winter Workshop in
Monterey, California. She says, “The networking opportunities
were remarkable. I even met the AACE International President,
Bill Kraus, and had dinner with him!”
Erin's current employer, Brinderson Engineering and
Constructors, sent her to the AACE International Annual
Meeting in Toronto, Canada, where she continued to network
and met more amazing professionals. She comments, “these
kinds of events are fantastic and I was thrilled by the training
opportunities and people I met.”
What Does Erin's Future Hold?
Since Erin accepted the challenge with Brinderson
Engineering and Constructors, there have been many opportuni-
ties for growth and advancement. She firmly believes the oppor-
tunity came her way because of her desire to succeed and help
mentor others to achieve their career goals.
As the planning and scheduling manager at Brinderson
Engineers & Constructors, Erin has the desire to mentor her staff.
She is taking steps to ensure her staff is properly trained, men-
tored, and has opportunities to reach their career goals. Her goal
for the coming year is to get all of her project controls staff certi-
fied through AACE International and active in the Southern
California Section.
Erin's Advice for Other Women in Project Controls
“I encourage everyone to get involved in AACE International
because this will help your career growth and provide you with
many wonderful resources and opportunities along the way. Set

Cost Engineering Vol. 51/No. 3 MARCH 2009 5

 career goals, get training and education,
believe in yourself, move forward with con-
fidence, step outside your comfort zone,
take advantage of opportunities you are
given, seek mentors, and plow straight
ahead with enthusiasm and you will get
there.” ◆

AACE International now

has a new online
Certification Directory
where you can search a daily
updated list of those who have
been certified.
Just visit
www.accei.org/certification/directory/

AACE International Certification Exams

The Second Quarter (2Q) 2009 Nevada Seattle (AACE Annual Meeting)
CCC/CCE, EVP, PSP, and New Jersey Saturday, June 20, 2009
CCT Certification Exams will New Mexico North India - Delhi/NCR
be given at the following AACE North Florida
International sites: Oklahoma Arabian Gulf Locations
Pittsburgh Tuesday, June 11, 2009
Saturday, June 13, 2009
Rattlesnake Mountain Al-Khobar
The Early deadline to sign up
Rocky Mountain Wednesday, June 12, 2009
for this exam is March 23, 2009.
South Africa Dubai
The Final deadline is April 6,
Southwest Ohio Thursday, June 13, 2009
2009. Visit www.aacei.org for
(Cincinnati and Doha, Qatar
additional exam information.
Columbus)
Atlanta Other Scheduled Exams and
Cascade Sites. Visit www.aacei.org for
Central Savannah River additional exam information.
Connecticut Saturday, June 6, 2009
Great Lakes Kuwait
Houston Gulf Coast
Montreal Saturday, June 27, 2009
National Capital

The Final Deadline for the Second Quarter Exam is April 6, 2009.

6 Cost Engineering Vol. 51/No. 3 MARCH 2009

 EExecutive Ar ticle
xecutive Article
Barton Goldsmith, Ph.D.

Emotional Fitness at Work — Speed Bumps at Work

has occurred. It could be the moment that prevents your com-

I
believe that any disagreement can be turned into a positive
experience. I call these moments “Speed-bumps” because pany’s from becoming a tragedy and turns it into a triumph. ◆
they require us to slow down and look at the circumstances
and behaviors that surround our issues at work. Slowing down is ABOUT THE AUTHOR
important because if you don’t, the speed-bump is going to rattle
you and you won’t be able to respond appropriately. Dr. Goldsmith’s new book “Emotional Fitness at
For most, these uncomfortable moments are really opportu- Work” (Career Press) will be released this fall. For more
nities for growth. If they are overlooked you are left with the than two decades Fortune 500 companies, educational
same behaviors that caused the upset. If you use the moment to institutions, and government organizations worldwide
focus on resolving the issue appropriately, without raised voices have relied on Dr. Barton Goldsmith to help them
or saying things that will anger one another, everyone involved develop creative and balanced leadership. He is a high-
and the business will grow. Furthermore, you will not have to go ly sought-after keynote speaker, business consultant and
through the same difficult dance time and time again. author. His columns appear in over 500 publications,
Learning to slow down and look at your actions, take cor- including the Chicago Sun-Times, the Detroit News,
rective measures, and agree on the best way to proceed, is not and the Los Angeles Business Journal. Considered an
easy at first. Begin by recognizing that you have hit a speed- expert on small business, he has spoken worldwide to
bump and that you need to use it to make things better. That step groups of 10 to 5,000, and is in high demand for
alone will keep the situation from escalating into an argument. keynotes, training and consulting. He may be contact-
Once you have agreed that you are going to work this ed through his web site BartonGoldsmith.com or at
through in a safe and sane manner then simply replay your ver- (818) 879-9996.
sion of what happened between you and your co-worker. This
way you both know what the other person experienced and how
they are feeling. You can then respond to their needs rather than
react to your own highly-charged emotions.
Now you need to take a little time to process what has
occurred. For most people an hour is enough but others may
need much less or a little more time. It all depends on your expe-
rience; individuals who regularly use speed-bumps as a growth
opportunity need much less time to process their feelings than
those who are new at it. Whatever the length of time that is need-
ed you must agree to never walk away angry with the other per-
son. If that means talking about it into the wee hours of the
morning so be it. Truth be told if you don’t resolve the issue you
won’t be your best self the next day no matter how much sleep
you get.
Once you have experienced what it is like to actually resolve
an issue with a co-worker or boss, you will be more available to
do it again the next time. You will also have the benefit of not
holding on to the negative feelings that accompany arguments.
Learning to correctly process and communicate your feelings is
one of the best tools you have for maintaining a profitable busi-
ness and for keeping your job.
Everyone experiences difficult moments. It is how we han-
dle these moments that make the difference between businesses
that work and those that don’t. Learning to slow down and calm-
ly investigate the way you deal with problems is a tool that will
make your working world a better, and more successful, place to
be.
So the next time you hit a speed-bump, slow yourself down
and take a little time to examine how you really feel about what

Cost Engineering Vol. 51/No. 3 MARCH 2009 7

 C ERTIFICATION PAPER
Standard Project Work Breakdown
Structure (WBS)
SAP— An Effective Tool for The WBS is a grouping of related
items from the estimate, into main
Managing Multiple Small Projects elements. All elements in the WBS
structure are created with the same
numbering system for each project. Figure
Betty A. Poettcker, CCC 1 lists the items in a standard WBS.
The WBS elements include the
ABSTRACT: SAP can be used as an effective tool to assist in the management of cost, schedule,
and resources for a single project, as well as, for a portfolio of small projects. Using this method following.
for small projects allows project managers to analyze a group of projects and make timely deci- • Owner's Costs—home office costs
sions. This article will explore the use of SAP in each of the three areas of project costs, mile- such as project management,
stone schedules and resources. Each section will describe the setup in SAP, the analysis of the document control, engineering, and
data for management and project controls, and the benefits of using SAP as a tool for project project expenses.
management. A standardized approach for each project in the portfolio provides consistent • External Engineering—engineering
information that can be analyzed across the entire portfolio of projects. The key to using SAP by an external engineering company.
successfully is to be consistent and to update the information regularly. SAP can be an effective • Procurement—materials purchased
tool for managing and controlling multiple small projects.
by the owner company and/or by the
KEY WORDS: Cost, milestones, planning, schedules, and resource management engineering company.
• Direct Construction Work
Packages—all items from the estimate
million dollars, and are from an owner which are purchased and/or
Editor’s Note: In 1972, five former IBM employees
– Dietmar Hopp, Hans-Werner Hector, Hasso company perspective. External companies constructed by a construction
Plattner, Klaus Tschira, and Claus Wellenreuther – are usually engaged to provide part or all of contractor.
launched a company called Systems Applications the engineering and construction • Construction Management—time
and Products in data processing in Mannheim, installation services. The framework for
Germany. Their vision: to develop standard spent by the owner company's
application software for real-time business every project is the same and will be construction team. This does not
processing. Over the course of three decades, SAP has described in greater detail. include field coordination provided by
evolved from a small, regional enterprise into a This article does not discuss portfolio the contractor.
world-class international company. Today, SAP is management, (i.e., which projects to
the global market leader in collaborative, inter- • Indirect Construction Costs—items
enterprise business solutions. The company now execute during a given year.) Only projects provided by the owner company, such
employs more than 51,500 people, whose that have received approval in the annual as safety watches, scaffolding, and
commitment and innovative spirit pace its future capital budget are considered. The inspections.
success. assumption is that the annual budget is in • Unit Support—support provided by
place, together with a list of projects that operations and maintenance for
AP can be used as an effective tool

S
will be worked on, as well as, the project reviews, isolations, commissioning,
to assist in the management of cost, stage(s) that will be completed. validation, etc.
schedule, and resources for a single This discussion will conclude that SAP
project, as well as for a portfolio of small can be used effectively for managing
projects. Cost, schedule, and resource multiple small projects in the areas of cost,
management are essential on all projects. schedule, and resource management. Project No. 12345
This is true regardless of size or complexity Title: Project One
of the project. The use of cost, schedule, PROJECT COSTS
and resource management helps ensure 12345 Project One
that projects are completed on time and 12345.1 Owner's Costs
To begin, let’s discuss how SAP is beneficial
within budget. 12345.2 External Engineering
for managing costs, for an individual
This article will explore the use of SAP 12345.3 Procurement
project, as well as, a group of projects. All
for each of the project control elements of 12345.4 CONSTRUCTION
projects in the group are set up with a
project costs, milestone schedules, and 12345.4.1 Direct Construction
standardized work breakdown structure.
resources. Each section will describe the Work Packages
The project estimate is recast into a control
setup in SAP, the analysis of the data for 12345.4.1.1 CWP 1 (Title)
budget, and a forecast is entered for each
management and project controls, and the 12345.4.1.2 CWP 2 (Title)
work breakdown structure (WBS) element.
benefits of using SAP as a tool for project 12345.4.2 Construction
This allows reporting and analysis for
management. Management
similar activities on all the projects in the
Although SAP has the capability of 12345.4.3 Indirect Construction
group.
providing extensive details for large Costs
projects, this discussion will focus on small 12345.5 Unit Support
projects. The projects described typically 12345.99 Contingency
have a total installed cost of less than three Figure 1— Standard Work Breakdown
Structure

Cost Engineering Vol. 51/No. 3 MARCH 2009 9

 • Contingency—funds specified in the In the event that project changes are Regular review of project costs, and re-
estimate for items that may be required, the cost of approved changes are forecasting future costs, provides early
required, but are unknown at the time also assigned to one or more WBS warning if certain elements are trending
of the estimate. elements. As shown in figure 2, the sum of over budget. The project manager can
the original budget and the supplemental then make decisions and/or take corrective
Each of the WBS elements can be funds then becomes the current budget. action that will either bring the project
divided further if more detail is desired. The next step is to enter a forecast for back on track, or will necessitate a request
For example, if there are multiple work each WBS element. Initially, this will be for supplementary funding. If the project is
packages, then the direct construction work the same as the original budget. The nearing completion, it might be possible to
package WBS may have another level with forecast-to-go amount for each WBS reduce the forecast for some WBS
several sub-elements, one for each work element is reviewed on a regular basis, and elements, thereby reducing the forecasted
package. Figure 1 illustrates multiple work the forecast for each WBS element is overall total installed cost.
packages. updated to ensure the forecast amount is Figure 3 shows that project one is
sufficient to complete the project. trending over budget by $17,000 or 2
Cost Management The third step is to forecast the cash percent. The forecast trend column
When a project receives approval for flow requirements for the total installed identifies which items were under-
implementation, the first step is to recast cost of the project. The cash flow can budgeted or over-budgeted. Closer
the estimate into a control budget, which either be entered at the highest-level WBS examination indicates that procurement is
becomes the baseline, or original budget. element, or at the lowest-level WBS complete and the forecast for WBS
Each item in the estimate is assigned element. For larger projects, it is 12345.3 can be reduced by $5000. It may
to a WBS element, according to the advantageous to forecast the amount also be possible to reduce contingency to
definitions identified in the previous projected to be spent in each month at the bring the project back to equal, or less
section. The project implementation plan lowest level WBS element. This method than, the budgeted amount.
will assist in determining the assignment of allows the project manager to examine
items in the estimate to the WBS elements. each element individually. Benefits of SAP for Cost Management
The result may be that some items In his article entitled, Effective Cost A standardized template is easily
from the estimate will be grouped into a Management -- Back to Basics, Robert L. entered into SAP for every project. In a
single WBS element. For example, if all Tichacek, PE, states that, “cost multiple small project environment, there
the material is to be procured by the management focuses upon measuring are usually too many projects being
construction contractor, then the WBS performance, comparing against managed simultaneously to allow sufficient
element for the direct construction work expectations, and finding reasons for time to build a unique work breakdown
package will contain both materials and divergence [1].” structure for each project. In addition,
labor. many smaller projects have a short

Figure 2— Cost and Commitment Report

Figure 3— Cost and Commitment Report

10 Cost Engineering Vol. 51/No. 3 MARCH 2009

duration and do not require the same
attention to detail that is required on a
large project.
Standard cost reporting eliminates the
need to use spreadsheets for reporting costs
and commitments. Spreadsheets can be
time consuming and may be inconsistent
across all projects. Using SAP cost reports
improves accuracy by eliminating errors
that can be made by transposing data from
SAP or other reports into a spreadsheet.
SAP contains real time data. There is
no need to wait for the month-end reports
from the accounting department. Details
of each transaction are easily accessed by
the drilldown capabilities in SAP.
SAP provides a rollup of all projects,
facilitating forecasting by month, and by
year, to assist in capital portfolio
management. Corporate management is
keenly interested in the cash flow
distribution for all capital projects, to
ensure that the total annual forecast is
within the annual spending plan, and that
sufficient funds are available at the
appropriate time.
The impact of increasing or reducing
the forecast for a single project is
immediately identified in the total group of
projects. Figure 4 provides an example of
grouping several projects together in one
report.
A summary report of all projects can
provide valuable information for analyzing
project metrics, such as average cost index
or the percentage of engineering cost,
when compared to the total installed cost.
This highlights the importance of a
standard WBS for all projects. Figure 5
illustrates the effect of extracting the
external engineering costs. The data can
Figure 4— Plan by Month
Figure 5— External Engineering
be exported to a spreadsheet and charted
for visual benefit.
A summary of all projects also provides
historical data that can be useful for
estimating subsequent projects. If the
amount spent on construction
management, for example, is usually more
than estimated, then the estimator can use
the historical data to justify an increased
amount on future projects.
Using SAP as a tool to manage and
report project costs has many benefits and
possibilities. The standard WBS provides
the framework for managing a group of
small projects.
MILESTONE SCHEDULES
SAP can also be an effective tool for
managing schedules in a multiple small
project environment. Networks are used
for scheduling. A standardized set of
activities and milestones within each
network provides the framework that
facilitates schedule management. This can
be for an individual project, as well as, for a
group of projects.
Standard Milestone Schedule (Network)
The milestone schedule is a
combination of main stages (activities) and
major milestones. Every project has the
same set of activities and milestones.
Similar to the WBS, the network can
also be expanded to include multiple
engineering and construction work
packages. The main stages represented in
the network include the following.
• investigation;
• development;
Cost Engineering Vol. 51/No. 3 MARCH 2009
• detailed engineering;
• construction; and
• validation.
Major milestones include the
following.
• The design basis memorandum
(DBM);
• engineering design specification
(EDS);
• Issue for construction (IFC); and
• turnover.
If long-lead equipment is to be
purchased, this can also be planned in the
network. It should be noted that project
stages are identified in the network and not
in the WBS structure. Only one stage of
the project is released at a time.
Work centers are assigned for the
engineering and construction activities.
Each work center can be unique or
represent a group of companies. For
example, if a resident contractor will do the
construction, then a unique work center
would be assigned to the construction
activity along with the estimated hours. If
the construction will be issued for bid to a
contractor other than the resident
contractor, then a work center representing
a non-resident contractor would be
assigned.
Schedule Management
To be used effectively, in a multiple
project environment, project schedules
must be reviewed and adjusted on a regular
basis The schedule for each project is
reviewed with the project manager and
updated with the latest information. Each
project manager may have eight to 12
11
 projects at various stages. Some projects
may be in the investigation stage. Other
projects will be in the detailed engineering
stage, or in the construction stage.
SAP has a powerful option that allows
the project activities to be filtered,
effectively reducing the number of
activities that need to be reviewed. For
example, you may want to find all the
activities that have either started or are
scheduled to begin within the next 30 days.
Or you may want to find all the activities
scheduled to be completed within the next
30 days.
It is then possible to analyze the report.
If there are too many activities that are to
be completed in the given time frame, then
the project schedules can be revised to
make the workload manageable. By
limiting the number of activities that
require a review, the amount of time
required to update a group of projects is
reduced.
Benefits of SAP for Schedule
Management
When all projects are kept up-to-date,
schedule analysis becomes effective and
efficient. By using a standard set of
activities and milestones, the project
manager can easily view the impact that
Figure 6— Construction Activities
Figure 7— Construction Hours During Summer Months
12
changing the schedule on one project has
on a group of projects.
It is also beneficial to pull together a
list of projects that are in the same stage in
any given time frame. For example, the
construction manager may want to review a
list of all projects that will be constructed
by the resident contractor during the
summer months. Since the construction
activity in each project identifies an
estimated number of hours, as well as, a
planned start and finish date, SAP can pull
together all resident contractor
construction for all projects. See figure 6.
This information can be shared with
the resident contractor to assist in planning
resources required on the project,
especially during peak construction times.
It is also useful to determine which projects
may need to be rescheduled in order to
load level the work. SAP can provide a
graphical view in the form of a gantt chart
that provides easy identification of
construction activities that may need to be
rescheduled.
Figure 7 shows an example of how the
data can be viewed in the form of a bar
chart with a distribution of hours required
in each month. The same reporting can be
done for other like activities, such as
engineering by an external engineering
company.
Cost Engineering Vol. 51/No. 3 MARCH 2009
RESOURCES
Planning resources becomes easier
with the use of SAP, especially when the
same group of project managers, engineers,
and designers of various disciplines in the
owner company execute multiple projects.
If the projects are small in size a limited
pool of resources usually does the work,
and requires working on several projects at
once. SAP can be used effectively to
analyze and level the workload.
Planning Resources in the Milestone
Schedule (Network)
Internal labor is managed as a sub-
operation of the major activities in the
network, and is not duplicated in the WBS.
Since the network consists of project stages,
internal resources can be assigned to each
stage of the project. Home office resources
are assigned a unique work center, which
allows management to view the capacity
loading for each resource.
Planned hours are entered for each
resource as a sub-activity on each of the
main stages of the project. When the
duration of the activity is changed, the
duration of the hours planned for each
resource is also changed. Regular reviews
by the individual resource are essential to
ensure that there are enough hours
planned to complete each activity.
Resource Management
Reporting within SAP is used to
display the planned hours versus the
available capacity of each resource with a
unique work center. The data for all
projects in the group is reported by week,
by month, or by year, and can be displayed
either as a list or as a graph.
Both the list and the graph will
identify the workload of the resource.
Figure 8 illustrates the planned hours for
an electrical engineer for week 2 to week
14.
A graphical view of the capacity plan
for an individual resource will quickly
identify time frames where the resource is
either overloaded, or has available capacity.
If the resource has available capacity, he or
she can be assigned to one or more
additional projects. If the resource is
overloaded, it may be possible to extend
the duration of the activity in the network.
The plan in figure 8 demonstrates that
this resource has available time in weeks
five, six, and seven, but is overloaded in
weeks eight, nine, and ten. The question to
be asked is, can the work in week eight be
started earlier? Extending the duration of
the activity will have impacts on other
resources, as well as on other milestones
and activities in the project, and on the
overall group of projects.
If it is not possible to extend the
duration of activities to load level the hours
for a resource, then it may be necessary to
request an additional resource, or out-
source the work to an external engineering
company, to keep the projects on track.
Benefits of SAP for Resource
Management
One of the benefits of using SAP for
resource management is that it assists the
owner resources with prioritizing their
workload. When the list of activities is
sorted in order of finish date, each resource
can easily see the activities that are
required to be completed in a given time
frame.
Each resource can view the list of
projects he or she has been assigned to, and
determine if the hours planned are
sufficient to complete the work for that
stage of the project. If the remaining hours
are zero, but the work is not complete, then analyzed across the entire portfolio of
projects. Changing the data for one
Figure 6— Construction Activities
a forecast of the hours required to complete
the work will be added for the resource.
If the work is complete, then any
remaining hours will be removed. Actual
hours entered into the timesheet by the
individual resource will draw down the
planned hours. Depending on the
frequency of entering hours into the
timesheet, SAP will provide an accurate
picture of remaining hours for the active
activities in each project.
Planning hours for resources in the
project networks allows better
management of department resources
overall. As explained in the previous
section, the workload for each resource can
be adjusted to allow full use of available
hours. If a resource is overloaded, and the
duration of the activity cannot be changed
because of schedule restraint, then the over
capacity can provide justification for hiring
an additional resource.
SAP reporting can also be used to
calculate the cost of hours planned for
work centers in each project. The cost
report for planned work can then be used
to assist in the preparation or validation of
the project estimate and cash flow.
SAP can be an effective tool for
managing the workload of a pool of
resources, which is an important part of
project controls.
standardized approach for each
A project in the portfolio, provides
consistent information that can be
Cost Engineering Vol. 51/No. 3 MARCH 2009
project has an impact on the schedule,
resource loading, and cash flow of the
entire portfolio. The effect of the change is
immediately visible in SAP. The key to
using SAP successfully is to be consistent,
and to update the information regularly. It
has been shown that SAP can be an
effective tool for managing and controlling
multiple small projects. ◆
ACKNOWLEDGMENTS
Sincere appreciation is given to my
colleagues, Denise Bos, Ken Kuehn, Jill
Gowan, and Susan Delaney for their
advice and encouragement.
REFERENCE
1. Tichacek, Robert L., Effective Cost
Management -- Back to Basics. 2005
AACE International Transactions,
CSC11. Morgantown, WV: AACE
International, 2005.
RECOMMENDED READING
1. Basak, Ginette B., Understanding
Owner Needs. 2005 AACE
International Transactions, CSC06.
Morgantown, WV: AACE
International, 2005
2. Westney, Richard E., Effective Control
of Multiple Small Projects. Cost
Engineers' Notebook, 1989 AACE
International, 1989.
3. Rad, Dr. Parviz F. and Dr. Ginger, A
Levin. Formalized Model
Managing a Portfolio of Internal
Projects. 2005 AACE International
for
13
 Transactions, PM.04. Morgantown,
WV: AACE International, 2005. News from AACE International Region 8
ABOUT THE AUTHOR
Betty A. Poettcker, CCC, works in
project controls with NOVA Chemical
Corporation of Red Deer, Alberta, Canada.
She can be contacted by sending e-mail to:
poettcb@novachem.com.

ATTENTION AACE
International Members
-
Look in the upcoming
April issue of the Cost
Engineering
journal for a listing of
the winners from the Submitted photo
On December 15, 2008, five cost engineers working for Colombian oil company Ecopetrol, in
annual election which is AACE International’s Region 8, took the CCC/CCE exam in Bogota with Technical Board
ending March 15 Director John Hollmann, CCE CEP acting as proctor. Should they pass, this group will represent
the first CCC/CCEs resident in Colombia. The CCC/CCE candidates from Ecopetrol in
Colombia are, shown above from left to right, Ricardo Londoño, Alex Castro, Alexandra
Rodriguez, Mario Vila, and Andres Pereira.

14 Cost Engineering Vol. 51/No. 3 MARCH 2009

 SSpecial Focus
pecial Focus

Cost Management Drives National Economies

egion 7 Director of AACE International, Madhu P. Pillai,

R emphasized the direct and highly visible influencing link

between effective cost management and national
economies, in his keynote address to the Global Symposium on
Project Management at the Center Stage of Economic
Transformation.
The global symposium was conducted Dec. 16-18, 2008, in
New Delhi, India. The symposium was organized by the
International Project Management Association (PMA) and the
International Construction Project Management Association
(ICPMA) with active participation of various ministries of gov-
ernment of India, industry, international consultants and acade-
micians. Mr. Pillai's keynote address titled, "Strategic Fit &
Effective Cost Management: Drivers for National Economies" was
Submitted photo
well received by more than 350 delegates. The attendees repre- Madhu Pillai is shown above delivering the keynote address for the
sented different facets of industry and business. Global Symposium on Project Management at the Center Stage of the
The event was very timely to discuss the possible contribu- Economic Transformation in New Delhi, India. The symposium was
tion of project management knowledge areas and practices to mit- December 16-18, 2008.
igate the impact of the ongoing economic recession in many sec-
tors across the world.
Mr. Pillai elaborated on multiple opportunities to manage
the cost element in various areas of nation building and areas
contributing to national GDP. The cost for the system (govern-
ment, semi-government and private) for getting the benefits of
each plan/program reached to the beneficiary with its full value,
many times becomes prohibitive because of ineffectiveness and
inefficiency. Establishing that almost every link in this chain
needs to be primarily planned monitored and controlled in terms
of dollar values, he proposed that many of AACE International
practices and the Total Cost Management (TCM) Framework
can help the situation for noticeably positive results. He added
that internationally accredited professional certifications play a
major role in enforcing best practices and systems. Submitted photo
The keynote also facilitated awareness about AACE Madhu Pillai, AACE International Region 7 Director, and Adesh Jain,
International among the professional community and many of Chairman of IPMA, participate in a question and answer session at the
the delegates were inquisitive about AACE International prac- Global Symposium in New Delhi, India. The symposium was Dec 16-
tices, certifications, and activities. ◆ 18, 2008.

Voting in the AACE International Elections Runs from February 1 - March 15

The annual AACE International Board of Directors election began Feb. 1 through March 15. The full slate of candidates was
published in the December 2008 issue of Cost Engineering journal. Candidate photos, bios, goals and objectives can be viewed
in the hard copy of the journal, the online version, or click on "Click here to vote” image on the homepage of our website
(www.aacei.org). Most offices have two candidates vying for election, with the exception of two of the Regional Director offices. In
Region 3, there are three candidates vying for the office of Director-Region 3. Those candidates include: Asoka K. Pillai, CCE
EVP; Andrea Bach, and Ernest Hani, PSP. In Region 8, Candidate Tetsuya Yonezawa, CCE, is running unopposed. For all other
offices, there are two candidates for each opening.
Please take time now to review each candidates bio, goals and objectives and select which candidates for whom you desire to
cast your vote. ◆

Cost Engineering Vol. 51/No. 3 MARCH 2009 15

 T ECHNICAL A RTICLE PEER REVIEWED
The 2002 Control of Asbestos at Work
Regulations (CAWR) introduced the new
Programs and Projects Driven by duty to manage asbestos risk in non-
domestic premises. Regulation 4, the duty
Asbestos Regulations to manage asbestos came into force on
May 21, 2004, following an 18-month lead-
in period.
Paul Stanford Kupakuwana The Control of Asbestos Regulations
(CAR) 2006 came into force on Nov. 13,
ABSTRACT: Asbestos’ ability to resist high temperatures resulted in its extensive use as a fire- 2006. These regulations, which are used in
proofing and insulation material from the 1950s through to the mid 1980s. But today, asbestos
conjunction with the Approved Code of
is equally viewed as a beast. This arises mainly from a consideration of the dire consequences
of deaths from asbestos-related cancers that have resulted from past exposure. Asbestos litiga- Practice L27, brought together the three
tion has given rise to claims against some former producers, sellers, distributors, and installers. previous sets of regulations covering the
Some were forced out of businesses, or into diversification and bankruptcy. This article analy- prohibition of asbestos, the control of
ses the implications of new asbestos regulations in determining program and project directions asbestos at work, and asbestos licensing [9].
at the London Borough of Hillingdon. That analyses showed a significant impact.
Purpose and Significance of Research
KEY WORDS: Asbestos, programs, projects, regulations, resources The primary purpose of this article is
to identify and describe programs and
he London Borough of Hillingdon related cause of death from ill health. It is projects at the London Borough of

T (LBH) is situated 14 miles from

Central London, on the western
edge of Greater London. It is the second
largest London Borough, covering about
42 square miles. It is bounded to the North
by the London Borough of Harrow and
Three Rivers District Council, to the South
by the London Borough of Hounslow and
Spelthorne District Council, to the east by
the London Borough of Ealing and to the
West by South Bucks District Council.
London Heathrow Airport and Brunel
University are within the Borough
boundary [14].
The Borough contains a mixture of
residential, rural, shopping and industrial
areas and incorporates the communities of
Hayes, Harlington, Harmondsworth,
Sipson, Hillingdon, Yiewsley, West
Drayton, Cowley, Uxbrdge, Ickenham,
Harefield, Ruislip, Eastcote Northwood
(part) and Pinner (part). The major
shopping area is Uxbridge where the Civic
Centre is located [14].
The LBH manages many properties of
different sizes, age, construction, location
and environment. The majority of these
are held primarily for service or socio-
economic reasons. There are also
additional properties leased from other
landlords [7]. Part of this huge building
portfolio is subject to regular outsourced
reactive and cyclic maintenance work,
alterations, extensions, and occasional
demolition [14].
The health and safety executive (HSE)
reports that asbestos is the main cause of
occupational ill health from about 1950
onwards, and is the greatest single work-
said that airborne asbestos fibres can be
deadly if they are inhaled over a long
period of time. Past exposure is said to be
now responsible for about 4000 people
dying from asbestos-related cancers every
year. This figure is expected to rise over the
next 10 years and then decline. Research
suggests that the groups most at risk are
those who carry out building maintenance
and refurbishment work [11].
Research carried out indicated that
any type of building built before 2000
(houses, factories, offices, schools,
hospitals, etc) could contain asbestos [11].
Although some asbestos containing
material has been removed over the years,
there are many thousands of tones of
asbestos still present in buildings. It is
estimated that over half a million non-
domestic premises currently have some
form of asbestos in them. There is extensive
repair and removal work, which will
continue for the foreseeable future [10].
The use, supply and importation of
asbestos and asbestos products were
banned for all but a few exceptions by the
1992 Asbestos (Prohibition) Regulations
[11]. The regulations also banned the
second-hand use of asbestos building
materials that are not part of an existing
building, taken down and put up again
within the same premises.
The 1994 Construction Design and
Management Regulations, and their 2007
revision, require that the client of
demolition and major building works takes
positive steps to identify any hazards
associated with the site, including asbestos,
and informs contractors accordingly.
Hillingdon, whose implementation were
influenced by the new asbestos regulations.
This study aims to demonstrate the
potential influence that new legislation
could have in determining corporate
program and project directions, especially
given the fact that we exist in environments
full of uncertainty and characterized by
legal dynamics.
Literature Review
Asbestos litigation has given rise to
claims against some former producers,
sellers, distributors, and installers. The
effects of this litigation have included the
selling out of businesses, diversification,
and forced bankruptcy of some large
asbestos manufacturers, mainly in the US
and the United Kingdom [3].
Booker and North in their book,
Scared to Death, tell the inside story of all
major scares of recent decades including
asbestos, showing how they have followed a
remarkably consistent pattern [4]. Even
though a scare often begins with some
genuine problem, such as asbestos, Booker
and North analyze the crucial role played
in each case by supposed scientific experts
who are said to eventually turn out to
misread or manipulate the evidence; then
by those sections of the media who are also
said to eagerly promote the scare without
regard to the facts.
The tipping point of any scare, Booker
and North show, comes when it is taken up
by the politicians., They and other officials,
come up with an absurdly disproportionate
response. This, they say, leaves us all to pay

16 Cost Engineering Vol. 51/No. 3 MARCH 2009

 Table 1 — Cost Estimate Methods Developed for Usage at the Planning Stage and the Factors They Employ
a colossal price, often running into billions
or even hundreds of billions of pounds.
A deliberately fostered confusion
between different types of asbestos is what
created within the US one of the greatest
swindles in legal history. Some termed this
a $200 billion miscarriage of justice. It
brought Lloyds of London to its knees. This
was said to have been followed by a further
multi-billion pound scandal on both sides
of the Atlantic when new laws allowed
specialist contractors to charge almost any
sums they liked to businesses and to
homeowners panicked by the scare [4].
The stigma of asbestos to blight a
property and to influence sales and
property values downwards at below market
average is said to be another modern day
problem [1].
J.D. Fisher and others carried out a
study to develop a valuation procedure and
a model for estimating the impact of the
presence of asbestos-containing materials
(ACMs) on real estate income property [8].
A key aspect of the valuation procedure was
that the value of a property with asbestos,
and hence the value adjustment for the
presence of asbestos, depended on the
optimal strategy for dealing with the
asbestos.
Value-maximizing conditions were
derived from the model for determining if
and when removal should occur.
Information obtained from a survey of real
estate appraisers provided data for
parameterizing the model for the purpose
of simulating the effects of ACMs on the
value of different categories of property [8].
In all but the simplest of building
types, an asbestos survey is unlikely to find
the location of all asbestos materials.
Access to all parts of a building is rarely
achieved for various reasons, and variations
in materials used during construction can
lead to inconsistencies that may not be
noticed at the time of the survey.
Asbestos within flooring, ducting, or
hidden voids may still escape detection
until the actual refurbishment or
demolition process is undertaken. When
planning projects, all clients should budget
both sufficient time and funds to deal with
hidden or trapped asbestos materials.
These may have been missed (e.g.,
concealed) within the building structure;
or, present in previously inaccessible voids
etc.) [2].
Research Methodology
The methodology for this study
encompassed evaluating information from
the following three primary sources.
• Responses from three requests for
information (RFIs) by department;
• Acquisition reports, documents and
studies; and
• interviews with two local authority
senior executives.
Once the complete set of data was
assembled, it was organized, assimilated,
and reviewed for common themes.
By gathering information on the •
types of projects being managed and the
contexts in which they were being carried
out in a bid to comply with legal •
requirements, this study is able to
demonstrate the potential influence that
Cost Engineering Vol. 51/No. 3 MARCH 2009
new legislation could have in determining
corporate program and project directions.
By use of a cross-sectional hedonic
pricing model, employing property specific
data, a study was carried out to investigate
the relationship between asbestos and the
prices of single properties.
Study and Discussion
In order to meet statutory
requirements regarding the compilation of
asbestos information and records for all its
buildings, as well as identify any asbestos
that could pose a risk to buildings users, the
LBH embarked on a number of programs
and projects. Included in these programs
and projects was the initiation of a four-year
asbestos survey program in 1999, to update
its records. Tables 1 and 2 show the
asbestos related project activity and cost
levels for eight financial years to 2007/8.
The LBH proceeded with the
establishment of asbestos registers as
required by the new regulations to manage
asbestos risk in non-domestic premises.
Whether to carry out a type 1
(presumptive), or type 2-semi-intrusive, or
type 3-intrusive asbestos survey is a decision
that has to be made. In making this
decision, consider the following
cost/benefit items, in addition to LBHs
standing orders (See table 1):
Is the survey type the minimum
acceptable to the health and safety
executive?
Opportunity cost and time-value-for-
money considerations (e.g., do I
undertake a type 2 asbestos survey
17
 Table 2 — Project Cost Levels
now, and a type 3 later, if and when it
becomes necessary)?
• Asset management and property-life-
cycle considerations (e.g., is the
property a candidate for either
refurbishment or demolition? Has it
reached the end of its economic
usefulness and should be considered
for either sale or disposal).
• Is the building listed, and are there any
legal limitations to structural
alterations?
After examining these considerations,
it was decided to carry out an asbestos type
2 survey. This was the basis for the
establishment of an asbestos register. This
was the minimum acceptable to the HSE.
[See tables 1 and 2].
The LBH procured services from
measured term contractors. To pre-qualify
as a measured term contractor, one has to
to be licensed by the health and safety
executive; and, the environmental agency.
Asbestos removal contractors must be
registered with the Asbestos Removal
Contractors Association. Asbestos
surveying firms must be accredited by the
United Kingdom Accreditation Services.
The asbestos survey costs were largely
determined by the property size and the
prevailing survey hourly rates. Asbestos
removal costs were largely based on
volumes and hourly rates.
Adoption of best value procurement
practices helped to contain costs. It cost
about £200 ($286.74) per ton to legally
dispose of hazardous waste like asbestos
[20].
Type 3 asbestos surveys were only
undertaken for pre-refurbishment and/or
pre-demolition as required by law. As the
18
number of properties with in place asbestos
registers began to increase, this resulted in
a gradual decline in both surveys and
removal projects over the years (See table
1). Roughly 99 percent of the non-
residential properties had been surveyed by
the end of March 2007 [16].
All asbestos that had been identified as
posing an immediate risk was removed,
encapsulated, or programmed for removal.
Where unavoidable delays occurred in
removal, management procedures were
established to ensure that risks were
negated or minimized [16].
If suspected asbestos containing
materials were found during refurbishment
or demolition work (and not previously
identified), The LBH stopped work.
A full investigation was carried out to
determine whether asbestos was present
(samples collected and analyzed), and
proper account taken if asbestos was
subsequently confirmed. All asbestos
containing material was always removed or
dealt with by a licensed asbestos removal
contractor who also had health and safety
executive approval. This ensured that the
LBH fulfilled its legal obligations, and that
all asbestos waste materials were disposed
of in strict accordance with the current
legislation for dealing with asbestos waste
[16].
To ensure that full asbestos
information was kept, a web-based asbestos
database package called Asbestos
Management Suite (AMS) was purchased
in 2001/2 from a company called
Performance Support International (PSI)
(See table 2). A firm called Alcontrol
Technichem Limited was contracted to
carry out asbestos surveys and to make
direct entries into the PSI-AMS database.
Cost Engineering Vol. 51/No. 3 MARCH 2009
The database was updated in February
2003, and has allowed certain information
to be available through the LBH’s intranet
from September 2005. Usernames and
passwords were created for key staff for use
in conjunction with the web-tracker. In
2006, an alternate CAPS database was
rolled out to property services staff,
together with appropriate training. Asbestos
related information was fed into this CAPS
database on an ongoing basis [16].
Linked to this PSI-AMS database was
an annual maintenance license fee and an
insurance software escrow agreement.
This agreement provided the LBH with the
protection and assurance that the LBH
would be able to access the source code of
its software application if its software owner
went out of business or failed to meet
contractual obligations to maintain the
software (See table 2) [16, 18].
From 2006 forward, all new asbestos
surveys and re-inspections started to be
entered into a new asbestos database,
which linked into the new CAPS property
database (See table 1) [16].
The property design and standards
(PDS) group which housed the asbestos
management function was responsible for
the identification, management and
removal of asbestos from the LBH’s
property stock. The PDS kept a depository
of accessible asbestos registers. The PDS
offered guidance on asbestos management
to LBH staff either by phone or through its
intranet posted asbestos in buildings
process map. Asbestos awareness seminars
were organized on an occasional basis (See
table 1) [16].
The PDS was in constant liaison with
the facilities management (FM) group in
terms of the need to commission asbestos
Type 3 surveys for either pre-refurbishment
or pre-demolition. Most re-refurbishment
or demolition projects had concomitant
asbestos related projects (See table 1) [16].
Refurbishment and/or demolition
projects based on a Type 2 asbestos surveys
were observed to generally have relatively •
higher cost variances than those based on a
Type 3 survey. The positive cost variances
for refurbishment and/or demolition
projects, concurrent with asbestos
removals, were assumed to have occurred
mainly because of the following reasons
[15]:
• For projects with an initial asbestos
survey below the level of Type 3, the
survey presented limited information
on the asbestos containing materials at
the start of the project.
• Some asbestos survey and/or removal
work was scheduled outside normal
working hours and the cost was
therefore at premium rates.
• Project delays (e.g., because of the
asbestos survey upgrade; health and
safety executive notification came
prior to asbestos removals; design
alterations; etc).
• Design options being considered on
site without adequate time to consider
cost implications. (e.g., possibly
prompted by the need to avoid
disturbing presumed asbestos
containing materials).
• Exposure to claims and counter-claims
(e.g., extension of time claims; human
exposure claims; etc.).
• Projects’ critical paths getting affected
by asbestos related delays, often
resulting in a domino effect cost-wise.
• In some cases, commissions for surveys
and removal work were done on an
adhoc basis, and this introduced high
set-up costs.
The observed general pattern for costs
and risks can be summarized as follows
[15]:
• Asbestos surveying fees cost estimate:
Type 3 surveys > Type 2 surveys >
Type 1 surveys.
(The reason: Type 3 is intrusive; Type
2 is semi-intrusive; Type 1 is
presumptive).
• The risk of finding more asbestos
containing material during
refurbishment and/ or demolition is
based on: Type 1 survey > Type 2
survey > Type s Survey.
(The reason: Type 1 presents the
greatest probability of finding asbestos,
therefore the highest risk to exposure
and/or potential litigation).
Asbestos related costs for projects
concurrent with refurbishment and/or
demolition and based on: Type 1
Survey > Type 2 Survey > Type 3
Survey
(The reason: Type 1 presents very
limited asbestos information at the
onset).
In cases where the respective
properties were deemed to have reached
the end of their economic usefulness,
property sales and disposals were
considered. It was observed that some
property selling prices were affected by
asbestos considerations. Potential buyers
preferred to bid at prices lower than the
market average. Asbestos considerations
affected on average 36 percent of the
properties’ selling prices (See table 1) [16].
These findings concurred with earlier
studies carried out by C.S.Decker and
others which indicated that, when
controlling for relevant socio-economic
variables, asbestos is a significant
determinant of property values [6]. Risk
inheriting liabilities that may prove costly
in both the un-anticipated asbestos removal
costs and postponed timescales, both
seemed to incur financial penalties.
The Asbestos (Prohibitions)
Regulations of 1992, made it necessary for
the establishment of a strict liaison among
the LBH’s property design, planning and
procurement functions. This cooperation
was observed to work well, with
procurement observed to execute its
sustainable procurement strategy [16].
There was a need for the LBH to
resource the necessary asbestos related
skills. A position was created initially for an
asbestos supervisor and later on upgraded
to asbestos risk assessment manager. This
function was responsible for the provision
of asbestos risk management Services for
general fund buildings and schools.
This responsibility included
adherence to program, tendering,
management of measured term
contractors, site checks of survey content
and quality control, monitoring of
resources uses and payment certification,
the provision of awareness seminars and
Cost Engineering Vol. 51/No. 3 MARCH 2009
training, preparation and submission of
monthly progress reports. The asbestos
manager’s professional indemnity
insurance cover was embraced within the
LBH’s insurance portfolio (See table 2)
[16].
The CAR 2006 made asbestos
awareness training a mandatory
requirement for all workers who may be
exposed while working. Every employer
was compelled to ensure that adequate
information, instruction, and training was
given to his/her employees who might be
exposed to asbestos, or who supervised such
employees, so that they were aware of the
properties of asbestos and its effects on
health. In compliance with this
requirement, a program was rolled out by
the LBH to provide training and
development for employees to enable them
to satisfactorily carry out their duties while
avoiding the dangers of asbestos. This
program saw quite a number of LBH staff,
head teachers and premises managers
receive the necessary training. The
presentation of this training was out-
sourced. In addition, relevant literature,
pamphlets and posters from authoritative
sources such as the HSE and the
environmental agency continued to be
disseminated on a real-time basis (See table
1) [16].
The LBH continued to carry out a
range of duties in respect of the
identification, management, and removal
of asbestos from its property stock. It
procured measured term contracts,
standing price agreements or similar call-
off contracts for asbestos removal/
reinstatement and asbestos consultancy
services in compliance with EU
Regulations, the LBH’s Constitution and
Contract and Procurement Standing
Orders and best practice.
In June 2006, a rolling program of
asbestos re-surveys was commenced in
order to facilitate the updating of the
asbestos registers and also to ensure
continued compliance with CAR 2006
[See table 1]. Another rolling program for
annual asbestos risk assessments in schools
and non-domestic properties was put in
place in November 2007, in line with the
element of due diligence[See table 1].
Annual asbestos audits / risk
assessments were carried out to ensure that
the element of due diligence was exercised
at all times and that the premises held up-
to-date asbestos registers. In some cases,
19
 asbestos audits / risk assessments were
carried out on demand and on an ad hoc
basis ahead of such projects as
refurbishments, demolitions, and disposals
[16].
A contractors’ site register was
introduced by the LBH for use in
conjunction with the asbestos register by
duty holders to inform contractors about
potential asbestos hazards. Any contractor
working on the fabric of the building was
made to first consult the asbestos register
and then sign and date the log sheet to
certify that he/she had consulted before
commencing work. This requirement
protected the LBH or duty holder from any
possible asbestos related claims.
A permit-to-work was only issued when
all pre-set requirements had been met
satisfactorily [16].
The LBH also dealt with isolated cases
of the removal of fly-tipped asbestos whose
cost was settled through the use of the
management reserve. There were no
reported legal suits or claims made against
it nor health related incidences [16].
his study succeeded in
need for maintenance or removal/disposal Hazards Centre Trust (December
in the future. 1995), Chapter 9 -The Asbestos
As asbestos is removed and many Producers, ISBN-10: 0948974133;
premises are cleared of known asbestos, it is ISBN-13:978-0948974137.
said that the need for annual type 2 4. Booker C. and R. North. Scared to
inspections would be negated. The Death - From BSE to Global
credibility of such a pro-active strategy and Warming: Why Scares Are Costing
its presumed benefits, however, need to be Us the Earth, The Cromwell Press,
further investigated and validated. Trowbridge, Wiltshire. ISBN 0-8264-
This study had a limitation in that it 8614-2, (2007).
did not proceed to determine the 5. Coomber R. Finance and
percentage effect that asbestos had on each Benchmarking Officer, London
property’s selling price. This presents an Borough Hillingdon, Finance and
opportunity for further research work. Resources, Property Design and
Aggressive marketing campaigns, Standards Team, Civic Centre,
backed by millions of dollars, are targeting Uxbridge, Middlesex, United
decision-makers and consumers in Kingdom, (2008).
developing countries. The increase of 6. Decker C.S., D.A. Nielsen and R.P.
asbestos consumption in countries which Sindt. Residential Property Values and
have little information on long-term Community Right-to-Know Laws: Has
consequences of asbestos exposures. These the Toxics Release Inventory Had an
countries have few if any specific asbestos Impact? Growth and Change, A
laws, no enforcement of the laws which do Journal of Urban and Regional
exist, no official workplace inspections, no Policy, Vol. 36 Issue 1 (Winter 2005):
compensation, no health services and no pg. 113.
social security. This is a cause for serious7. Edwards G. Head of Corporate
concern. Some trade unions are Property Services, Performance of the
campaigning against asbestos and are at the Property Portfolio, Financial Year 2004

T demonstrating the significant

influence that the new asbestos
legislation had in determining corporate
program and project directions at the LBH
in its bid to comply. From a business
perspective, this new legislation presented
opportunities, threats and risks.
Opportunities arose from a consideration
of new business ventures which capitalized
on the new legislation. Whereas, threats
and risks arose from the potential for
asbestos related deaths, prosecution and/or
litigation with its associated costs and
claims. As we exist in environments full of
uncertainty and characterized by legal
dynamics, this study further strengthened
the need for a management reserve for
dealing with unknown unknowns in
program and project management.
Limitations and Suggestions for Future
Research
Progressive organizations are said to be
adopting an increasingly pro-active
approach to remove all known asbestos,
wherever practical and economical over
the next few years. It is said that the obvious
benefit to such a strategy would be to
reduce the anticipated capital expenditure
on asbestos in future years and negate the
forefront of the ban asbestos movement.
They also expose the nefarious practices of
the exploiting organizations [13]. ◆
ACKNOWLEDGMENTS
The author wishes to acknowledge the
following people who also contributed to
this effort: Geoff Eldridge, Phil Hopkins,
Richard Coomber, Mayur Patel, Martin
White, and Nesrin Crilly.
REFERENCES
1. Alberini Anna. Determinants and
Effects on Property Values of
Participation in Voluntary Cleanup 10. Health and Safety Executive,
programs: The Case of Colorado, SIEV-
Sustainability Indicators and
Environmental Valuation, Department
of Agricultural and Resource 11. Health and Safety Executive, The
Economics, University of Maryland
and Fondazione Eni Enrico Mattei,
(2006).
2. Alcontrol Technichem Limited. Type
3 Asbestos Survey at Barra Hall Kiosk,
Survey No. A05/03/116/PC, Report 12. Hopkins P. Budget Coordinator,
issued March 31, 2005, on behalf of
Hillingdon Property Services.
3. Asbestos Hazards Handbook: A
Guide to Safety Work in the
Community and at Home (London
Hazards Centre Handbook), London
/ 5, Finance and Resources Civic
Centre, Uxbridge, Middlesex, United
Kingdom (2005).
8. Fisher J.D., G.H. Lentz , and K.S.
Maurice Tse, Valuation of the effects of
Asbestos on Commercial Real Estate,
American Real Estate Society, Journal
of Real Estate Research, Volume 7,
Issue 3, (1992) pg. 331-350.
9. Health and Safety Executive, A Short
Guide to Managing Asbestos in
Premises, Published by the Health
and Safety Executive, (October, 2003)
United Kingdom
Asbestos, Published by the Health and
Safety Executive, (April, 2005), United
Kingdom.
Control of Asbestos Regulations
2006 - A Guide for Safety
Representatives, Published by the
Health and Safety Executive, United
Kingdom, (December 2006).
Asbestos Management Programme,
Compiled Expenditure, London
Borough of Hillingdon, Finance and
Resources, Property Design and
Standards Team, Civic Centre,
(2008).

20 Cost Engineering Vol. 51/No. 3 MARCH 2009

 Uxbridge, Middlesex, United Kingdom
13. Kazan-Allen L., Asbestos-The Human
Cost of Corporate Greed, A
GUE/NGL publication, European
United Left/Nordic Green Left,
European Parliamentary Group,
Brussels (2006).
14. Kelly C. Invitation to Tender, Asbestos
Technical Support Services Contract,
Corporate Procurement Unit (1S/07),
London Borough of Hillingdon, 10th
March, Document Revision 1 (2008).
15. Kupakuwana P.S. A Critical Analysis
of Asbestos Removal Project Cost
Implications. Cost Engineering,
Vol. 49, Issue No.11, (Nov. 2007).
16. Kupakuwana P.S. Asbestos and
Legionellosis Risk Assessment
Manager, Asbestos Management
Programme, Compiled Statistics,
London Borough of Hillingdon,
Finance and Resources, Property
Design and Standards Team, Civic
Centre, Uxbridge, Middlesex, United
Kingdom, (2008).
17. Nesrin Crilly, Occupational Health
Unit Manager, London Borough
Hillingdon, Occupational Health
Unit, Civic Centre, Uxbridge,
Middlesex, United Kingdom, (2008).
18. NCC Group, Escrow Solutions, Full
Verification, Assure, Secure, Advice,
NCC Services Ltd,
www.nccgroup.com, (2007).
19. Patel M. Senior Surveyor, London
Borough Hillingdon, Finance and
Resources, Estates & Valuation
Service, Civic Centre, Uxbridge,
Middlesex, United Kingdom, (2008).
20. Shorter A. Dumping on Britain for a
Profit, BBC News Magazine, United
Kingdom, (May 4, 2005).
21. White M. Corporate Property Strategy
Manager, London Borough
Hillingdon, Finance and Resources,
Corporate Property Strategy, Civic
Centre, Uxbridge, Middlesex, United
Kingdom, (2008).
RECOMMENDED READING
1. Bond S.G. Do Market Perceptions
Affect Market Prices? A Case Study of a
Remediated Contaminated Site.
Department of Property, Faculty of
Architecture, Property Planning and
Fine Arts, University of Auckland,
Auckland, New Zealand, Chapter 12
(2002).
2. Chattopadhyay S, Braden J.B. and
Patunru A. (2005), Benefits of
Hazardous Waste Cleanup: New
Evidence
from Survey - And Market-Based
Property value Approaches,
Contemporary Economic Policy,
Volume 23
Issue 3 Page 357-375, July.
3. Colquitt L.L., Hoyt R.E. and
McCullough K.A. (2002), The Impact
of Asbestos and Environmental
Reserves
Increases on Shareholder Wealth,
Casualty Loss Reserve Seminar,
Arlington, VA.
ABOUT THE AUTHOR
Paul Stanford Kupakuwana is an
asbestos and legionellosis risk assessment
manager, with the London Borough of
Hillingdon, Finance & Resources,
Property Design and Standards Group,
Uxbridge, Middlesex, in the United
Kingdom. He can be contacted by sending
e-mail to: kupakuwana@hillingdon.gov.uk,
or to: kupakuwanaps@yahoo.com.
He passed the UK’s Institution of
Chemical Engineers’ Design Project
Examination in 1989. In 1992, he achieved
an MBA degree from the Hull University
Business School in England. Thereafter in
2000, graduated with specializations in
Manufacturing and Process Engineering
through the UK based Engineering
Council. In 2008, he achieved several
professional certifications, PMP® and
PRINCE2™ Practitioner, all in the field of
project management. Professionally, he is
registered both as a European Engineer
and a Chartered Engineer. He is a
Corporate Member of the UK Institution
of Engineering and Technology, and a
Fellow of the Institute of Directors.
Between 1982 and 2008, Paul worked in
Zimbabwe, South Africa and the United
Kingdom in various capacities for both the
public and private sectors. His lecturing,
research and consultancy interests are
focused mainly in the areas of project and
operations management. He has previously
led/delivered hard, transformation, and soft
projects. In addition, he has consulted for
various organizations, presented and
published papers and e-books with some
jointly, in internationally refereed journals.
Cost Engineering Vol. 51/No. 3 MARCH 2009
AACE International
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Opportunities
visit - www.aacei.org
Registration is now open for Stevens
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21
 SSpecial Feature
pecial Feature
Quentin W. Fleming and Joel M. Koppelman, Primavera Systems, Inc.
The Two Most Useful Earned Value Metrics: The CPI and the TCPI
ABSTRACT — The Project Management Institute (PMI) has just released the
Fourth Edition to its world standard on project management: A Guide to the
Project Management Body of Knowledge, the PMBOK ® Guide. Many new
features have been added to this massive document among them new coverage
of an earned value metric called the “To-Complete Performance Index” or
simply the TCPI. What is the TCPI and why is it important? This article
describes its purpose and utility.
henever a project commits to the employment of
W earned value to help manage their effort, they are sud-
denly inundated with a windfall of performance met-
rics which are available in no other project management tech-
nique. New acronyms suddenly emerge: PV, EV, AC, SV, SPI,
CV, CPI, BAC, EAC, TCPI, and on and on. While all of these
performance indicators can have value to any project, two EVM
metrics in particular are critical to projects. They are the “CPI”
and the “TCPI.”
The CPI (Cost Performance Index) tells us, “what we have
accomplished for what we have already spent.” Did we stay with-
in the budget, or did we overrun? By contrast, the TCPI (To-
Complete Performance Index) focuses on future work: “what per-
formance levels we must achieve on the remaining work in order
to meet our financial commitment to management.” While most
practitioners of earned value understand the utility of the CPI,
Figure 1 — Monitoring Earned Value Cost Performance (CPI)
22 Cost Engineering Vol. 51/No. 3 MARCH 2009
most have rarely ever used the TCPI. What a pity, for the TCPI
when used in conjunction with the CPI provides a powerful set of
tools in the management of a single project, a program, or a full
portfolio of projects.
Earned Value Management (EVM). . .The Ten Requirements
As a general rule, whenever a project manager makes the deci-
sion to employ earned value in the management of a project, that
choice ideally should be supported by management, the stake-
holders at all levels. Stakeholders must want to know the full truth.
The reason: EVM performance data can be available to everyone
working the project: the functions, senior management, the paying
customers, all parties who have a vested interest in the success of
the project. As long as everyone has a rudimentary understanding
of what the EVM data means, everyone connected to the project
knows what everyone else is doing. Thus, it is imperative that there
be a management buy-in whenever a project manager elects to
employ EVM on a project.
The commitment to employing EVM requires both the com-
pliance with certain basic requirements, and discipline on the part
of everyone supporting the project. Based on our experience, 10
key requirements are listed which must be met in order to success-
fully implement EVM. Some find these requirements overwhelm-
ing. See for yourself. These requirements include the following 10
Figure 2 — The Relationship of Cumulative CPI versus TCPI
bulleted items.
• EVM requires that the project be fully understood, defined,
and scoped to include 100 percent of the project effort. You
need to know what constitutes 100 percent of the work in order
to measure progress along the way.
• EVM requires that the defined scope be decomposed, broken
down into major management tasks, which are selected as
points of management control, then planned and scheduled
down to the detailed work package level.
• EVM requires that an integrated and measurable project base-
line be authorized, relating the scope of work directly to an
achievable budget, then locked into a specific time-frame for
performance measurement. It’s called: bottom-up planning.
• EVM requires that only authorized and budgeted work be
accomplished. The effort being worked must be tightly con-
trolled. Scope creep cannot be allowed. All changes must be
managed, and not worked until specifically authorized by the
project manager.
• EVM requires that physical performance be measured (the
earned value) using previously defined schedule metrics.
• EVM requires that the values earned be related to the planned
values to reflect performance against the project baseline.
Earned value less the planned value represents a variance from
the baseline plan.
• EVM requires that the actual costs being reported be consis-
tent with the earned value being measured, to allow for an
accurate portrayal of cost performance. The relationship of val-
ues earned to actual costs reflects the true cost performance.
Earned value less actual costs provides cost performance.
• EVM requires that forecasts be made periodically (weekly,
monthly) as to how much time, and how much money it will
take to complete 100 percent of the project.
• EVM requires that a full disclosure of actual results be made
Cost Engineering Vol. 51/No. 3 MARCH 2009
to all persons who have a vested interest in the project. All
stakeholders will receive the same actual performance results.
Only one set of books is allowed.
• EVM requires that project management, in conjunction with
management at all levels, and customer stakeholders, decide
on the appropriate actions to be taken to stay within author-
ized project expectations.
These 10 requirements are what is needed to successfully
implement earned value on any project. To the authors, these
requirements constitute nothing more than following fundamental
project management best practices.
Now let us discuss the two, in the opinion of the authors, most
important earned value indicators: the Cost Performance Index
(CPI) reflecting completed performance, and the To-Complete
Performance Index (TCPI) with a focus on the required future per-
formance.
What Is A CPI (Cost Performance Index), And How Is It Used?
The EVM Cost Performance Index (CPI) is a reflection of
project cost efficiency. The CPI relates the physical work accom-
plished expressed in its budgeted value, against the actual costs
incurred to accomplish the performed work. Budgets can be set
with various monetary values, hours, deliverables, anything that
can be measured. The issue: are we staying on target, under-run-
ning, or perhaps overrunning our costs? This concept is portrayed
graphically in figure 1.
Perfect cost performance would be defined as achieving a CPI
of 1.0. For every dollar spent we would get an earned value equal
to one dollar. Sometimes we do better, sometimes worse. This is a
particularly critical metric to track for performance less than 1.0 is
a reflection of excessive costs spent against budget. Initial overruns
are typically non-recoverable. Think about it: in order to recover an
overrun you must under-run future work. Rarely does this happen.
23
 Figure 3 — Two To-Complete Performance Index (TCPI) Formulas
The same conditions which may have caused the overrun in the
first place are likely to occur again and again.
Sometimes the CPI will reflect values over 1.0, suggesting that
an under-run of costs is occurring. Care must be taken when actu-
als reflect an under-run of costs to budget. Oftentimes this condi-
tion is simply the result of costs which are lagging, slow to be
recorded in the organizational cost ledger. For example: we meas-
ure the earned value and give full credit, but the related costs are
not reflected in the cost ledger. Reason: many/most of the project
work may be performed by outside “purchased labor,” people who
are not part of the internal labor system. Thus there can be a time
mismatch between the earned value measured, and the actual pay-
ment of the purchased labor invoices. The payment of invoices
generally takes more time than the recording of labor.
Under runs of costs are rare. And if artificially caused by lag-
ging actual costs, the positive results can hide or offset problems
that need management attention. It takes organizational discipline
to make sure that earned value credits match the actual costs.
Why is the CPI so important? Answer: because past perform-
ance can be used to accurately determine requirements for final
performance, in order to meet financial goals. The cumulative
(from the beginning) CPI has been shown to stabilize from about
the 20 percent completion point of project performance. Empirical
scientific studies by the US Department of Defense on 155 actual
contracts has shown that at the 20 percent point of project comple-
tion, the final projected results will only change by plus or minus
10 percent. What a finding! What useful data.
In practical terms, one can immediately take the total author-
ized budget (BAC), divide it by the cumulative CPI and project the
total costs of a project with an accuracy of plus or minus 10 percent.
If management doesn’t like the final cost projection, then correc-
tive action can be taken to change the forecasted results. Few proj-
24 Cost Engineering Vol. 51/No. 3 MARCH 2009
ect management techniques give a comparable “early-warning” sig-
nal. This formula, the BAC/Cumulative CPI = EAC, can be used
on the total project, or any sub-project, or integrated project teams
to predict final results on their work.
The CPI metric can be used to track periodic results (month-
ly, weekly, daily), or the cumulative position to see the long-term
performance trends.
What Is A TCPI (To-Complete Performance Index), And How Is
It Used?
Whereas the CPI is an indicator of past cost performance, the
TCPI has its focus on future performance. At issue: what will it take
to meet the goals set by management? The TCPI works in con-
junction with the CPI, and is conceptually illustrated in figure 2.
The CPI can be thought of as “sunk-costs,” whatever the
results they cannot be altered. In the illustration shown, the cumu-
lative CPI is at .75, for every dollar spent we only earned 75 cents
of project work. If the project is exactly 50 percent complete, in
order to stay within management’s budget, we must accomplish
$1.25 for every dollar in the future. Will this likely happen?
Questionable at best, but highly unlikely. Opportunities for
improvements are illustrated by use of the TCPI.
The formula for the TCPI is: the [work remaining] (defined as
total budget less the earned value) divided by the [funds remain-
ing]. Note in figure 3, there are two scenarios for funds remaining.
Funds remaining will focus initially on the authorized budget.
Management will track performance against what it has authorized
in the form of an official budget. However, once it becomes obvi-
ous that the budget is no longer achievable, the next question from
management is: how much money will it cost to complete this job,
called the estimate at completion (EAC). The project then stops
work and makes a new forecast of what is needed to finish the job.
 Preparing a new EAC forecast can get emotional. Unrealistic
optimism sometimes takes over, at the expense of realism. It is not
uncommon for projects, when making a new EAC forecast to
assume that everything will suddenly go right, and that all project
risks are behind them. Thus an initial EAC may be unrealistic,
unachievable. “Piecemeal EACs” are often the norm, where the
EAC projection goes up each month as actual performance is
known.
Using figure 2 as an example, would an EAC requiring a
future TCPI of 1.25, or 1.10 be achievable? Probably not. More
likely, a TCPI of 1.0 or .90 would be reasonable. But it is painful to
admit the full value of an EAC, having just acknowledged that the
BAC is no longer valid.
mploying the EVM technique can present a project with
E data not available with any other management tool. And
while each metric can be useful, the authors are of the
opinion that the two metrics described above are particularly use-
ful in the management of any project, or program, or a portfolio of
projects. ◆
ABOUT THE AUTHORS
Quentin W. Fleming is a management consultant specializing
in earned value. He has been a consultant to the staff at Primavera
Systems, Inc. since 1993. Quentin was on the core team which
updated the Project Management Institute’s (PMI) PMBOK ®
Guide Fourth Edition, released in December 2008. His personal
website is http://www.QuentinF.com
Joel M. Koppelman is the cofounder and Chief Executive
Cost Engineering Vol. 51/No. 3 MARCH 2009
Officer (CEO) of Primavera Systems, Inc. His corporate website is
http://www.Primavera.com
Fleming and Koppelman are the co-authors of “Earned Value
Project Management,” published in 1996, by the Project
Management Institute (PMI). The Third Edition of this book was
released in the fall of 2005. Over 80,000 copies have been sold by
PMI worldwide.
END NOTES
This article first appeared in the December 2008 issue of
Crosstalk Magazine. All terms used in this article are consistent
with the A Guide to the Project Management Body of
Knowledge (PMBOK ® Guide), Fourth Edition, published in
December 2008, by the Project Management Institute, Newtown
Square, PA, US. The terms are: planned value, earned value, actu-
al costs, schedule variance, Schedule Performance Index, cost vari-
ance, Cost Performance Index, budget at completion, estimate at
completion, and To-Complete Performance Index.
The points of management control are sometimes called project
teams, subprojects, or control account plans (CAPs) depending on
the organization.
Dr. David S. Christensen, “Using Performance Indices to
Evaluate the Estimate at Completion,” The Journal of Cost
Analysis of Cost Estimating and Analysis, Spring 1994, page 19.
Figures used in this article are inspired from the book, Earned
Value Project Management, third edition, Quentin W. Fleming
and Joel M. Koppelman, published by the Project Management
Institute, Newtown Square, Pennsylvania, 2005.
25
 T ECHNICAL A RTICLE PEER REVIEWED

These metrics can be applied at the

Soft Skill Quantification (SSQ): individual level to allow a person to better
understand his or her own actions, how to
Human Performance vs. Metric work better with others, and most
importantly, how to be more productive
and successful. Application of the metrics
Edward Muzio and Dr. Deborah Fisher of human interaction has been shown to
produce immediate results in
ABSTRACT: In this follow-on study to a successful initial pilot study by the authors, the Soft Skill
communication skills, negotiating skills,
Quantification (SSQ) tool was evaluated for its ability to accurately detect high-performers as a
function of SSQ metrics. The SSQ model has demonstrated for a second time the ability to conflict resolution, and overall
distinguish between performance levels based upon measurable constructs. Furthermore, effectiveness [15].
seven emotional intelligence metrics were identified as being correlated with high perform- The four metrics can be described as
ance, but it was more moderate values of these metrics that corresponded with the highest per- follows.
formers. Contrary to intuition, "more" is not always "better" when it comes to SSQ metrics.
Behavior is the most clearly visible
KEY WORDS: Statistical analysis, forecasting, human performance indicator of another person's
behavioral preferences. Behavioral
s cost engineers we are very good at recent body of knowledge surrounding “soft assessment teaches the ability to read

A using statistical techniques to

forecast costs. Facility capacities
and historical costs, analyzed with
regression analysis, produce “factors” that
can be used to estimate future costs [6].
And these statistical techniques not only
apply to money, but time as well.
Scheduling impacts, statistically
correlated with project plans, are used to
justify sound scheduling practices [12].
Furthermore, these same statistical
techniques can be used to forecast project
performance. When actual performance is
analyzed using performance-impacting
“factors,” future project performance can
be accurately forecasted [7].
Although our industry has not
traditionally used statistical correlation
techniques with human soft skills, we have
recognized the importance of the human
contribution to successful group work
outcomes, and the corresponding impact to
project control [3]. Understanding the
impact of motivational theories, for
example, such as McGregor, Maslow,
Alderfer, McClelland, and Herzberg has
been shown to be critical [13].
Furthermore, we have developed non-
quantitative applications and developed
"best practices" related to these theories for
our industry. And we know how to broadly
recognize and characterize a high
performance culture within an
organization [14].
But can we take the next step, using
statistics to truly, quantitatively measure
and correlate people's soft skills and predict
or forecast future human success? Can
human performance be forecasted and
predicted like project performance? The
skill quantification” (SSQ) suggests that
this is becoming possible. This article
describes a follow-on study to an initial
pilot “soft skill quantification” (SSQ) study
that demonstrates the feasibility of such an
approach [16].
Background
Figure 1 summarizes the metrics of
human beings, divided into hard and soft
skills. The bottom two levels of the triangle
illustrate hard skills. At the base is the
native intelligence with which one is born.
It identifies what an individual had before
receiving any training or education. In that
sense, it answers the question of who the
person is inherently.
The second level is a measure of one's
skills and education. It is comprised of
what was studied at school, as well as
additional education and training around
specific subject areas, such as cost
certification. It answers the question of
what a person can do based upon an
acquired skill set.
The top four levels of the triangle
represent an individual's soft skills. At first
glance, they appear to be more abstract
than the bottom two levels. However, our
analysis indicates that the metrics of soft
skills (soft skill quantification or SSQ) can
be measured and correlated with actual
performance.
SSQ comprises the following four
basic metrics of human interaction.
• behavior;
• motivation
• task balance; and,
• emotional intelligence (EQ).
and respond to behavioral tendencies.
This improves influencing skills,
teamwork, and career direction using
information easily observed.
Motivation is a quantifiable part of
any individual that can be measured
and understood as the basic reason for
taking action. The factors related to
motivation can be quantitatively
assessed and then learned and used to
influence others in a way that is
individually meaningful.
Emotional Intelligence (EQ) is
comprised of up to 82 different specific
skill attributes that can be used to
characterize an individual's strengths
and development areas. By mapping
an individual's skills to the
requirements of the job, departments
can craft a data-based development
plan to raise performance to the next
level.
Task Balance is an indication of the
inherent task type preference that each
individual has. It can be used to
obtain and maintain optimal job
satisfaction and performance.
Any of these metrics can be used as an
organizational effectiveness tool at an
individual or team level. They can be used
for organizational optimization, team
development, and to identify ideal job
matching for current or future employees.
Methodology
Population
The target population analyzed was an
organization of engineering professionals

26 Cost Engineering Vol. 51/No. 3 MARCH 2009


Figure 1 — Fisher’s Hierarchy of Skills [8.9]
in the early part of their careers.
Participants were members of a program
which hires between 40 and 150 recently
graduated engineers into the parent
company each year. These individuals,
specifically hired for their expected ability
to succeed in a dynamic environment, are
hired with the intent of completing
between two and three different
engineering assignments in their first year
of work
While on their temporary assignments,
these engineers are given project work
and/or sustaining work to be completed
within the scope of their “rotation.” The
program manager, oversees the hiring,
development, and placement of all of the
engineers, and serves as their direct
manager during the time they are engaged
in their 4-6 month projects.
With frequent job changes and
targeted development, both driven by the
employee, this rotation program is a
microcosm of the larger business climate
nationwide, in which there are about as
many job seekers on the market who are
employed as there are who are seeking jobs
[10]. Career motion becomes a constant,
with an emphasis on employability and
portable skills [4]. Both accurate candidate
screening and effective employee
development are essential in this
environment, for the individual employees
and for the program, especially in light of
the upcoming labor shortages that our
industry will be experiencing [17].
In this follow-on study to the
successful initial pilot, the SSQ tool was
evaluated for its ability to accurately detect
high-performers independently of any
other information [16]. By contrast to the
pilot study, which demonstrated
application of the SSQ model in employee
development and job placement, this
analysis focused exclusively on comparing
assessment results to real-world job
performance.
Data Gathering: SSQ Assessment
A total of 35 engineers were given an
SSQ assessment suite from the metrics in
table 1. Assessments were provided directly
to the employees, who took them
individually at different times over
approximately a two week period, all
without manager intervention.
The exercise involved the following
three specific activities:
• Emotional Intelligence (EQ) :
Sorting two representative lists of 18
statements, each in preferential order.
These statements represent various
axiological patterns of thought which
have been correlated to specific soft
skill indices [18].
• Behavior: Selection of most and least
preferred of 24 sets of behaviorally
descriptive terms. These terms can be
correlated to individual behavioral
tendencies and corresponding skill
areas [2].
• Motivation: Ranking of 16 sets of
personal preferences which can be
correlated to individual internal
motivation [1].
The resulting output of this particular
SSQ assessment suite was a total of 81
parameters, including the following.
• 67 attributes of emotional intelligence
(from item 1);
• 8 specific behavioral characteristics
(from item 2); and,
• 6 specific motivational factors (from
item 3).
Cost Engineering Vol. 51/No. 3 MARCH 2009
Table 1 contains the list of all of these
parameters.
Data Gathering: Real-World
Performance
Independently of the assessment
process, the program manager compiled
the formal employee performance results
as determined by the rotation hosting
groups. This information had already been
collected using the company's standard
360 degree feedback process based upon
consistent, pre-defined criteria. Therefore,
this information was considered to be the
company's assessment of real-world
individual performance. It was provided to
the researchers independently of any other
assessment results.
The real-world performance ranking
itself consisted of a numerical rating of 1, 2,
or 3, with 1 being assigned to the highest
performers. As shown in figure 2, only 17
percent of participants were rated in the
highest performance category. The
majority, 46 percent, fell into the middle
performance category, and the remaining
37 percent fell into the third and lowest
category.
Independence of Data Sets
To the best knowledge of all involved,
none of the employees had any prior
experience with the assessment tool or its
underlying research. Neither the
employees nor the manager were allowed
to see any report until all had completed
the assessment.
Basic, standard instructions were
communicated regarding the mechanics of
how to complete the assessment, but no
additional information pertaining to the
tool or the research was communicated in
advance of all employees and the manager
completing their assessments.
This complete independence of actual
performance from SSQ assessment result
was critical in the ability to establish a
meaningful statistical link between the
two.
Analysis
A discriminant analysis technique was
selected because of its natural application
to such a data set. As explained by MIT
[5].
Discriminant analysis uses continuous
variable measurements on different groups
of items to highlight aspects that
distinguish the groups and to use these
27
 Table 1 — Measured SSQ Parameters for This Study

measurements to classify new items.
Common uses of the method have been in
biological classification into species and
sub-species, classifying applications for
loans, credit cards and insurance into low
risk and high risk categories, […etc.].
In this case, the groupings are by
performance levels and the analysis was
conducted to see if any of the SSQ metrics
could be connected to performance in a
statistically meaningful way.
The following two types of
discriminant analysis were conducted:
• A full discriminant analysis, to
determine whether complex
combinations of SSQ measurements
could provide predictive information;
and,
• A stepwise discriminant analysis to
identify those SSQ parameters with
the closest relationship to ultimate
performance.
The clear separation of the lowest That is to say, which factors have the
performers from the others along the strongest ability to differentiate
"Function 1" axis is apparent. This performances? Like the full discriminant
function was the most descriptive of the analysis, the stepwise analysis produced
two, accounting for 82.5 percent of the good differentiation. Unlike the full
population's variation based upon analysis, however, the stepwise analysis
Eigenvalue analysis. (Function 2 yielded only a single linear function.
accounted for the remaining 17.5 percent). A review of the structural coefficients
While further study and analysis are of that function indicates a group of seven
characteristics that play the largest role in
planned, it certainly looks from these initial
results like a future performer could be differentiation (characteristics with
evaluated against these functions and a coefficients greater than 0.8). Table 2 lists
prediction could be made of his or her these characteristics, which can be
performance level. reasonably labeled as the most important
drivers of the measurable differences
Step 2—Stepwise Discriminant Analysis between the low, medium, and high
The stepwise discriminant analysis was performers.
used to determine which of the particular The meaning of the coefficients is
SSQ parameters were most important. quite straightforward. Based on the

Step 1—Full Discriminant Analysis

The most compelling result of the two
analyses came from the full discriminant
analysis. The technique yielded a set of
two linear functions of the SSQ
parameters, which clearly showed the
ability of the SSQ parameters to distinguish
individuals from the various performance
groups. Figure 3 displays the close
clustering of the three different
performance groups, based on the two
functions calculated using all of the data
collected. Figure 2 — Distribution of Performer Rankings where n=35

28 Cost Engineering Vol. 51/No. 3 MARCH 2009

stepwise discriminant analysis, the
performance-predicting function would be
the sum of each characteristic multiplied
by its coefficient. This is essentially adding
together the characteristic scores, after
weighting them by the coefficients. The
characteristics whose coefficients have the
highest absolute value in table 2, are most
important to the predictive function.
Table 3 gives the values of the full
linear function evaluated at the centroid of
each performance cluster. What is most
fascinating in this analysis is the fact that
the highest performers did not have the
highest scores for the parameters in the
linear function generated by the stepwise
analysis.
In other words, the highest performers
did not have the highest scores for the
characteristics used to differentiate
performers. Contrary to what would be a
very intuitive assumption, it turned out that
it was those clustered around the medium
scores that seemed to perform the best. Figure 3 — Canonical Discriminant Functions
Figure 4 clearly shows that it was the “see” what the performance evaluation observable behavioral metric that most
middle performers that were clustered system “sees.” The next logical step might correlated to success. Instead, it was
around the highest scores, with the lowest be to collect data on another set of specific EQ attributes which can be both
performers predictably clustered about the individuals and compare predicted measured and learned. This is good news
lowest scores. performance to actual performance using for well-designed employee development
the functions determined here. programs, and bad news for pre-hire
Results The results of the stepwise screening methodologies that rely upon
The result of the full discriminant discriminant analysis (step 2), on the other behavioral cues and/or motivational
analysis (step 1) is fairly straightforward: hand, raise some much more complex and profiles alone.
While more data and analysis are interesting issues. Second, there is the fact that it was
needed and planned, the SSQ model has First, there is the fact that all of the more moderate coefficients that predicted
demonstrated for a second time the ability most important measured characteristics the highest performers. Contrary to
to distinguish between performance levels come under the heading of “Emotional intuition, “more” is not always “better.” All
based upon measurable constructs. Intelligence.” This suggests that in this of the characteristics listed in table 2
The scatter plot in figure 3 population it was neither the innate seemed instead to be better in moderation,
demonstrates that the SSQ process can motivational structure metric nor the as illustrated in table 3.

Table 2 — Structure Matrix for Coefficients > 0.8

Cost Engineering Vol. 51/No. 3 MARCH 2009 29

 Why? The answers for some
characteristics appear straightforward. The
idea that successful employees must have a
moderate need to belong to a team (sense
of belonging), and a moderate need to
experience external rewards (status and
recognition), makes sense. It seems
intuitive that either of these characteristics
taken to either a high or low extreme could
be detrimental [11]. The data supports this
conclusion: the most successful workers
are incentivized by external factors, but not
totally reliant upon them. The same might
be said for enjoyment of the job: the best
employees have fun, but not too much fun.
The need for moderation in other
factors is less intuitive. The preference
toward moderate scores in self
management and realistic personal goal
setting are perhaps the most surprising.
How can moderation be best on scores
which measure an employee’s ability to
realistically set and execute goals? And
what of sense of timing? How can
employees need some idea when to speak
or not speak, but not too much of those
notions?
One likely reason for these unexpected
trends is the demographics of the
employees and their environment. Because
this particular group is a population of new
hires, their hosting program takes special
pains to ensure that they stretch beyond
their comfort zones. It may be that too
strong a sense of one’s own limitations will
actually impede one's tendency to make
those stretches, reducing the more cautious
employee to one who is successful, but not
exemplary. Perhaps it is best, in this
program anyway, to speak and act out of
turn once in awhile.
Another possible driver for these trends
may be the performance assessment system
itself. The biggest strength of a 360-degree
evaluation system is also its biggest
weakness: it is based on what others can
observe. It may be that the employee who
does speak out of turn or occasionally take
on a bit too much is not actually any more
productive, but merely appears so in the
eyes of colleagues and management.
In a corporate culture in which “risk
taking” is rewarded, the too-meek
employee may suffer a reduction in others'
perception of his or her effectiveness. It
has been noted that managers sometimes
have difficulty observing the specific
performance characteristics of their
employees, so perhaps the occasional act of
30
Table 3 — Linear Function from Stepwise Analysis Evaluated at Performance Group
Centroids
Figure 4 — Graphical Display of Normalized Stepwise Analysis Function Centroids
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ACKNOWLEDGMENTS 7. Fayek, Aminah, Stephen O. Revay,
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Erv Thomas of Intel Corporation for his Assessing Performance Trends on
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Intelligence, Bantam Books, New 17. Preparing for a Future Labor Shortage, A large percentage of the member-
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Intelligence, Bantam Books, New 18. Smith, Dr. Robert Kinsel (1998). 12/31/08.
York (2006). Hartman Validation Compendium. If you have changed your address,
12. Griffith, Andrew F., Scheduling ©1998 by Clear Direction, Inc. phone number or e-mail address in the
Practices and Project Success, Cost www.cleardirection.com/docs/validati past year, please update it once you
Engineering journal, (Sept., 2006): p. o n / v a l i d a t i o n c o m p e n di u m . p d f , have logged into your profile, so we
24-30. accessed (Oct., 2006). can provide membership services to
13. Kaliprasad, Minnesh, The Human you without interruption. The AACE
Factor I: Attracting, Retaining, and ABOUT THE AUTHORS
International database is automated, so
Motivating Capable People, Cost Edward Muzio is President & CEO of
it automatically stops creating mail
Engineering journal, (June 2006): p. Group Harmonics, Inc., 400 Gold Ave SW,
labels for members whose dues have
20-26. Suite 909, Albuquerque, NM 87102. He
14. Kaliprasad, Minnesh, The Human can be contacted by sending e-mail to: expired. Therefore, it is important to
Factor II: Creating a High ed@groupharmonics.com. Or visit the renew prior to your expiration date.
Performance Culture in an company website at: If you have forgotten or misplaced
Organization, Cost Engineering www.groupharmonics.com your login information, please contact
journal, (June 2006): p. 27-34. Dr. Deborah Fisher is Vice President, AACE International Headquarters for
15. Muzio, Edward, Deborah Fisher, Erv Research and Training with Group assistance
Thomas, Four Secrets to Liking Your Harmonics, Inc. She can be contacted by Phone: +1.800.858.2678 / +1.304.2968444
Work: You May Not Need to Quit to sending e-mail to: Email: info@aacei.org
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Cost Engineering Vol. 51/No. 3 MARCH 2009 31

 AACE I nternational B ookstore
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certification exam. 450 pages
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1545-02 CD-ROM US$60.00 member/US$90.00 nonmember
CCC/CCE Certification Study Guide, 3rd Edition
Michael B. Pritchett, CCE, Editor, 2006
The AACE International CCC/CCE Certification Study Guide provides an
all-encompassing reference text to prepare for the exam. The CCC/CCE
Certification Study Guide provides background information on how to
become certified; gives those studying for the certification exam a single
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their study time; and provides a concise overview of the fundamentals of cost
and project management.
1820-35 paper version US$60.00 member/US$90.00 nonmember
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CCC/CCE Certification Study Guide, 3rd Edition Combo
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Cost Engineers’ Notebook
This CD-ROM is an important reference for any project or
cost professional. It includes data and procedures related to basic
skills and knowledge that all cost engineers should possess, extensive
material on capital and operating cost estimation, and papers in four
subject areas: cost control, planning and scheduling, project
management, and economic analysis and business planning.
4060-01CD-ROM
US$75.00member/US$115.00 nonmember
AACE International Recommended Practices
Standard Cost Engineering Terminology; Cost Estimate
Classification System; Estimate Preparation Costs in the Process
Industries; Project Code of Accounts; Required Skills and
Knowledge of a Cost Engineer; Roles and Duties of a Planning and
Scheduling Engineer; Profitability Methods; plus many more.
4060-03 3-ring binder version
US$100.00 member/US$160.00 nonmember
4060-05 CD-ROM
US$80.00 member/US$120.00 nonmember
The Total Cost Management Framework
John K. Hollmann, PE CCE, Editor, 2006
4060-21 paper version US$60.00 member/US$90.00 nonmember
4060-20 CD-ROM US$60.00 member/US$90.00 nonmember

PSP Certification Study Guide, 1st Edition AACE International Transactions

Peter W. Griesmeyer, Editor, 2008
This study guide is intended to assist you in your study and review of the
overall topics as one step toward successful Planning and Scheduling 2008
Professional certification. The outline provides a listing of the terms you Transactions
should know & topics for which you should have a good understanding of 5220-08 CD-ROM
how to apply the concepts to solve problems. Each chapter also contains US$85.00 member
sample exercises, which test your knowledge of that chapter's concepts. US$110 nonmember
Additional sample questions are provided in an appendix. 5220-08B 3-ring binder
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Control and Management of Capital Projects, 2nd Ed

NOW
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John W. Hackney; Kenneth K. Humphreys, Editor, 1997
5185-02 CD-ROM US$35.00 member/US$50.00 nonmember
This must-have reference contains presentations featured at the
2007 Annual Meeting in Nashville, TN. The CD-ROM is fully
AACE Salary and Demographic Survey of Project and Cost Professionals searchable.
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2006-2007 Transactions CD-ROM
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Cost Engineering 3-ring binder version US$165 member US$190 nonmember
The international journal of cost estimation, cost/schedule control, project management, and total cost
management. Subscriptions are accepted on an annual basis. An automatic benefit of AACE 2000-2005 Transactions (paper or CD-ROM)
International membership, also available to nonmembers. US$65.00 member/US$90.00 nonmember - each
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Cost Engineering CD-ROMs (1996 - 2008)

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The AACE International Professional Practice Guides (PPGs)
(PPGs) are a series of reference CDs
that consists of selected Cost Engin-
eering articles, AACE International
Transaction papers, and other previ-
ously published documents to which
AACE has rights.
Price per PPG:
Member Price US$60.00
Non-Member Price US$80.00
Price for the PPG Package,
includes all 20 PPGs:
Member Price US$1000.00
Non-Member Price US$1300.00
PPG#1: Contracts and Claims, 4th Ed.
James G. Zack Jr., Editor, 2008
Covers: Contract Administration; Management of
Construction Schedules; Schedule Control; Schedule Float
Ownership; Cost Control; Management of Change; Cost
Impacts; Productivity Impacts; Management and Analysis of
Delay; Concurrent Delay Issues; Pricing of Delay; and more.
PPG#2: Risk, 2nd Ed.
Keith D. Brienzo, PE, Editor, 2007
Covers: Dictionary; Capital Investments; Cash Flow;
Competitive Bidding; Contingency Analysis; Contracts; Cost
Engineering; Currency Rates; Decision Trees; Economic
Analysis; Escalation; Human Factors; Manufacturing;
Research & Development; Safety & Health; Schedule;
Technological Risk; and Value Engineering.
PPG#3: Cost Engineering in Aerospace and
Aviation
Sarwar A. Samad, Editor, 1998
Covers: Aerospace and Aviation.
PPG#4: Planning and Scheduling, 2nd Ed.
Trevor X. Crawford, CCC, Editor, 2006
Covers: Planning; Schedule Development; Schedule
Management/Control; and Classics.
PPG#5: Earned Value, 2nd Ed.
Robert A. Marshall, Editor, 2007
Covers: Why Use Earned Value?; Basics of Earned Value;
Cost/Schedule Control System Criteria; Actual Physical
Percent Complete; Productivity and Earned Value; Earned
Value Reporting; Applications of Earned Value Project
Management; and more.
PPG#6: Construction Cost Estimating, 2nd Ed.
Dr. Douglas D. Gransberg, PE CCE, And Carla
Lopez del Puerto, CCC, Editors, 2006
Covers: Recommended Practices; Estimating Theory;
Conceptual, Parametric, and Range Estimating; Estimating
Factors and Indices; Estimating Material Costs and Quantity
Surveying; Estimating Labor Costs; Estimating Equipment
Costs; Subcontracting Costs; Estimating Overhead and
Indirect Costs; Profit, Contingencies, and Mark-Ups;
Estimating International Construction Costs; and more.
AACE International Ordering Instructions
• All orders must be paid in US or Canadian currency.
• All orders must be prepaid.
• All orders from countries other than the US or Canada must be paid for
by credit card or wire transfer.
• All prices and availability subject to change without notice.
• Make checks payable to AACE.
• Allow 2 to 3 weeks for delivery.
PPG#7: Cost Engineering in the Utility
Industries, 2nd Ed.
Dennis M. Thompson, Editor, 2007
Covers: Auditing; Cost Estimating; Cost Modeling;
Cost/Schedule Control; Generation Power Plant; Natural
Gas Industry; Nuclear Power Plant; Other Energy Related
Topics; Planning and Scheduling; Project Management;
Utility Rates; and Utility Property Valuation.
PPG#8: Contingency, 2nd Ed.
Kul B. Uppal, PE, Editor, 2005
Covers: General Topics On Contingency; Cost Estimating
and Contingency; Risk Analysis and Contingency; and
Other Related Topics.
PPG#9: Decommissioning Costs
Kin Chao, PE CCE, Editor, 2001
Covers: Standardized Approach to Estimating
Decommissioning Cost; Decontamination and
Decommissioning Estimating Approaches; Development of
Decontamination and Decommissioning Cost Estimating
Models; and Decontamination and Decommissioning
Estimating Issues and Challenges.
PPG #10: Project Delivery Methods, 2nd Ed.
Dr. Douglas D. Gransberg, PE CCE, Tammy L.
McCuen, and Keith Molenaar, Editors, 2008
Covers: Design-Bid-Build (DBB) – DBB Estimating,
DBB Scheduling, DBB Project Management; Construction
Management (CM) – CM Estimating, CM Scheduling,
CM Project Management; Design-Build (DB) – DB
Estimating, DB Scheduling, DB Project Management;
International Project Delivery; Constructability; and
Partnering.
PPG #11: Environmental Remediation
Richard A. Selg, CCE, Editor, 2002
Covers: Environmental Remediation; Planning and
Scheduling Methodology; Cost Estimating; Project Controls;
Cost Modeling; Reporting; Contingency Management; Risk
Analysis Environmental Regulations; Benchmarking;
Economics of Environmental Waste Remediation and Waste
Management; Cost-effective Waste Minimization and
Pollution Prevention; and Construction Practices
PPG #12: Construction Project Controls
Dr. Douglas D. Gransberg, PE CCE, and James
E. Koch, Editors, 2002
Covers: Introduction to Construction project Controls; Cost
Control; Schedule Control; Quality Control; Document
Control; Computer Applications; and International Project
Controls
PPG #13: Parametric and Conceptual
Estimating, 2nd Ed.
Douglas W. Leo, CCC, Larry R. Dysert, CCC,
and Bruce Elliott, CCC, Editor, 2004
Covers: Parametric/Conceptual Estimating; Classification;
Methodology; Capacity Factoring; Process and Non-Process
Industries; and Systems
• To order by mail, send to: AACE International, 209 Prairie Ave.,
Suite 100, Morgantown, WV 26501 USA*
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• To order by fax, fax your order to 304-291-5728.*
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PPG #14: Portfolio and Program
Management, 2nd Ed.
Randy R. Rapp, PE CCE, Editor, 2007
Covers: Enterprise Management: General Imperatives and
Concerns; Asset Requirements Elicitation and Analysis; Asset
Planning and Investment Decision-Making; Asset Performance
Assessment and Change Management; and Program
Management.
PPG #15: Life-Cycle Cost Analysis
Dr. Douglas D. Gransberg, PE CCE, and Carla
Lopez del Puerto, CCC, Editors, 2007
Covers: Life-Cycle Cost Theory; Life-Cycle Cost Methods,
Determining Discount Rate; Estimating Capital Cost of
Design and Construction; Estimating Operating Costs;
Estimating Salvage/Residual Value; Estimating Sustainability;
Life-Cycle Cost Risk Analysis; Life -Cycle Cost Case Studies;
Life-Cycle Cost Analysis in the International Context
PPG #16: Cost Engineering in the
Global Environment
Kul B. Uppal, PE, Editor, 2007
Covers: General Topics on International Projects; Applicable
AACE International Recommended Practices; Cost
Estimating Methodology; Risk and Contingency; and
Miscellaneous Topics
PPG #17: Public Sector Estimating
Joseph L. Macaluso, CCC, Editor, 2007
Covers: Basis of Estimates; Labor Costs; Overhead and Profit;
Soft Costs; Bid/Estimate Reconciliation; and Change Orders
PPG #18: Green Building
Joseph L. Macaluso, CCC, Editor, 2008
Covers: Recognition of Affects and Economic Costs on the
Environment; Formulating Ways of Addressing Green
Building Strategies and Associated Economic Costs; Specific
Green Building Strategies and Project Costs; Budgeting and
Justifying the Cost of Sustainable Practices; Evaluating
Competing Sustainable Strategies: Using Value Engineering;
Evaluating Competing Sustainable Strategies: Other
Techniques
PPG #19: Leadership and Management
of People
John J. Hannon, CEP, Editor, 2008
Covers: Leadership; Teams; Leadership Roles; Motivation;
and Ethics.
PPG #20: Forensic Schedule Analysis
James G. Zack, Jr., CFCC, Editor, 2008
Covers: Recommended Practice No. 29R-03 Forensic
Schedule Analysis; Synopsis of Recommended Practice; Basics
of Schedule Delay Analysis; MIP-Observational Static Gross;
MIP-Observational Static Periodic; MIP-Obersvational
Dynamic Contemporaneous As-Is; MIP-Obersvational
Dynamic Contemporaneous Split; MIP-Observational
Dynamic Modified or Recreated; MIP-Modeled Additive
Single Base; MIP-Modeled Additive Multiple Base; MIP-
Modeled Subtractive Single Simulation; Non-CPM Schedule
Delay Analysist Techniques; General Schedule Analysis Articles
 FFor the Bookshelf
or the Bookshelf
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his book is highly recommended. It is an inexpensive vol-

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glossary of terms, and a resource guide to books, pamphlets and
websites dealing with green buildings. The book is replete with
great ideas to make homes more green and energy efficient. If
only a few of these ideas are implemented, the cost of the book
will be repaid many times over.

Dutch Association of Cost Engineers Price Book, 26th Edition

he Dutch Association of Cost Engineers and Reed

T Business Information have just released the 26th edition

of this premier source of process industry construction
cost information for Europe. The DACE Prijzenboekje (Price
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Dutch Association of Cost
Book) is a data book of unit costs from hundreds of actual proj- Engineers and Reed Business
ects in Europe. The 26th edition retains the pocket size format of Information, 2008,
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European Common Market. While the book is in Dutch, its
many cost tables are very easy to interpret using and English-
Dutch glossary. ◆

34 Cost Engineering Vol. 51/No. 3 MARCH 2009

 P rofessional S er vices D irector y

2009 Editorial Calendar

Practical Articles Sought for the
The 2009 Editorial Calendar is posted at the
Cost Engineering Journal AACE International website, www.aacei.org. Author
The Cost Engineering journal is seeking articles from guidelines are listed under the Submitting
members for publication on practical job related topics. Manuscripts banner. A manuscript submission form
These articles should not be very technical, but provide use- and publication agreement must be completed to
ful information on dealing with day to day problems, lessons- submit a manuscript.
learned on prior projects, how to basics that may be of help to
student members, or those just entering the cost and project
controls professions.
If you like more information please contact Cost Advertise in the
Engineering Managing Editor, Marvin Gelhausen at Cost Engineering journal
mgelhausen@aacei.org.
• Reach the entire AACE International membership every month
by placing an ad in the Cost Engineering journal.
• Place your products/services in front of over 50,000 users each
month with a banner ad at our website, www.aacei.org.
Index to Adver tisers • Exhibit at the 2009 AACE International Meeting in Seattle, WA,
and meet over 750 AACE International members face to face.
ACM, Inc., this page Contact Chris Martin at Network Media Partners Inc.
p: 410-584-1966 • f: 410-584-8359 •
ARES Corporation, back cover e-mail: cmartin@networkmediapartners.com • www.aacei.org.
Bechtel Corporation, page 8
Deltek, inside back cover
Footbridge Staffing, page 31 Order your PSP Certification
George Washington University, page 40 Study Guide at the
AACE International Bookstore
IPA Institute, page 7
Visit the AACE International Online Bookstore at
McDonough Bolyard Peck, page 14 www.aacei.org/bookstore/
MOCA Systems, page 6
ORACLE/Primavera, inside front cover The PSP Certification Study Guide
PMSI, page 40 is intended to assist you as one step
toward successful Planning and
Pro-Est - Construction, page 2 Scheduling Professional certification.
Each chapter contains sample exercises,
Questant, LLC, this page
which test your knowledge of that chap-
Ron Winter Consulting, page 4 ter's concepts. Additional sample ques-
tions are provided in an appendix.
Skire, Inc., page 25
For additional information about the listed advertisers or about advertising with us, please
phone Chris Martin at Network Media Partners, (410) 584-1966, or e-mail him at
cmartin@networkmediapartners.com

Cost Engineering Vol. 51/No. 3 MARCH 2009 35

 TThe Bulletin
he AACE International Bulletin
Chicago Midwest Section
Submitted photo
The January 14 Chicago Midwest Section meeting featured a panel discus-
sion and question and answer session. Shown above from left are panel mem-
bers, James Turner, Jonathan Moss, and Dave Sauerman.
Submitted photo
The February Chinook Calgary Section meeting included a panel discussion
between Gerry Hopkins, above left, and Ingo Gloge, above right. The panel
moderator was Ginette Basak, above center.
Submitted photo
At the January Chinook Calgary Section meeting, Section President Tanveer
Ahmed, above left, talks with speaker, Lenz Grzyb, above center, vice president
of Worley Parsons Calgary. He was introduced by Tony Isaac, above right.
36 Cost Engineering Vol. 51/No. 3 MARCH 2009
Chinook Calgary Section
Some 46 Chinook-Calgary members and guests attended
the February technical dinner meeting in the Riverview Room of
the International Hotel. President Tanveer Ahmed asked mem-
bers to be sure to vote in the AACE International Board of
Directors election this month. He also announced that the
March 26 technical session will be a joint meeting with PMI.
Director Region 1 Peter Ripley announced that all AACE
International sections across Canada are involved in cost engi-
neering activities. Ginette Basak acted as moderator for a discus-
sion panel titled, Estimate, Cost and Schedule Linking, Fact or
Fiction. She introduced Ingo Gloge, Manager, Project Services
with Concise Design and Gerry Hopkins, Manager, Project
Management System, Suncor Project Services.
Ingo Gloge suggested that one can streamline most complex
project costing using real time project examples. With central-
ized project cost management, schedule estimates can be report-
ed in a single system. As time is money, integrating cost esti-
mates, scheduling, and cost management is desirable to avoid
conflicts between cost estimators and planners. He cited a lack of
standards as a drawback in reporting of project execution.
Computer assisted drawings provide a basis for cost information
reporting for comparison between budget estimate and actual
cost. There is various software available for use instead of spread-
sheets, but these need to be examined for compatibility with a
project. There also needs to be more collaboration between esti-
mators and planners during project execution.
Gerry Hopkins used information from Suncor’s Voyageur
project for project management systems. In order to improve
information update, earned value reporting on a monthly basis
was done using cash flow from computer programs rather than
from spreadsheets. They tried linking accounting control to
schedule activities and used curves to adjust monthly cash flow
values. In 2007, a second integration was used to obtain cash
flow in PRISM and send cost information directly to SAP.
Updates were used to revise and send cost information to
finance. They introduced new logic requirements in schedule,
cost process training. There was concern over who controls what
and when in a project.
In the Voyageur Project, Suncor initiated PRISM based
activity dates and cash flow as managed in SAP and/or linked to
a detailed schedule. Presumably dates were adjusted automati-
cally by the computer program. PRISM is now fully implement-
ed in the Voyageur Project. The Firebag project is currently
reviewing requirements. The goal is to standardize procedures
and processes used.
The two presentations were followed by lively
question/answer period.
About 60 Chinook-Calgary Section members and guests
attended the Jan 14, technical dinner meeting in the Riverview
Room of the International Hotel. President Tanveer Ahmed
introduced PMISAC’s Marriane who asked for nominations for
PMI’s awards, to be submitted by the end of January. Tony Isaac
then introduced Len Grzyb, VP of WorleyParsons Calgary. who
gave a talk on Alliance Project Delivery.
Worldwide there have been some 300 alliance type projects
over the past 15 to 17 years, usually in long term contracts. They
have been used for lump sum, fixed price, reimbursable, bid and
negotiated type contracts. They require governance by both par-
ties with integration of organizations inside companies and
clients’ offices. If one party does not make money then they are a
failure. Business goals are important when agreements are shared.
Joint teams set goals, roles and responsibilities. A steering com-
mittee determines leadership in the project, removes road blocks,
and approves annual plans. Personnel career development
requires work rotations.
The alliance ensures that appropriate resources are provided,
using workload forecasting with at least monthly updates.
Reporting involves streamlined billings and cash flow estimates.
Using an integrated team allows for systems, office and operations
maintaining a business relationship.. Organizing around clients’
business involves delegation of authority with joint solutions for
shared problems. Using long term workload forecasts determines
staff requirements, personnel rotation and hiring to suit the proj-
ect vision and goals.
Cross-pollination between partner staff improves staff satis-
faction. A long term project needs to be matched to current busi-
ness and project drivers in order for alliance growth and renewal.
There has to be client satisfaction and the alliance must focus on
providing an operating facility-not on just a single deliverable.
Feedback from completed projects is required to ensure that
future adjustments can be incorporated into alliance methods.
Project level goals include safety, costs vs AFE’s, optimized
program execution, value and innovation quality, improved engi-
neering efficiency. The relationship goals and strategic plans
require support and compliance with approved processes. It must
operate between a facility group in an operating company and
contractor group. The staff needs to manage inside and outside of
the alliance and client. Business acumen is a necessity. They
need to keep working on renewal with an emphasis on relation-
ships with the entire client organization. The goal is to manage
service to client’s requirements, stressing project focus.
Following the presentation, there was a question/answer peri-
od.
Central Savannah River Area Section
January’s Central Savannah River Area Section dinner meet-
ing featured Norman Powell, Vice President of Site Integration,
of the Savannah River Nuclear Solutions, LLC. As part of the
new integration contractor team at the Savannah River Site, Mr.
Powell is responsible for the overall integrated site baseline,
including change management and interface management for
the Department of Energy’s Savannah River Site. His responsi-
bilities include developing the site interface plan and maintain-
ing relationships with other site contractors. He also leads the
planning and integration of projects and operations, project con-
trols, and the site-wide performance measurement system includ-
ing risk identification, estimating standards, and work authoriza-
tion.
Since the contract award, SRNS has been hard at work devel-
oping their baseline estimates and preparing for contract baseline
certification. The SRNS proposed “projectized delivery model”
Cost Engineering Vol. 51/No. 3 MARCH 2009
Submitted photo
Nonn Powell, Savannah River
Nuclear Solutions, LLC, Vice
President of Site Integration,
above left, and Central
Savannah River Area Section
President, Ronny McIver,
above right, shake hands at the
January section meeting.
Submitted photo
Myron Berry, above right, of the Central Savannah River Area Section, vol-
unteered his Saturday morning on January 24, judging at the Future City
Competition, one of the events of National Engineers Week, February 15-21.
is based on the basic and sound planning principles, including
the following.
• segmenting scope into discrete projects;
• ensuring line management accountability;
• integrating technical/cost/schedule/risk performance base-
line for each project; and,
• managing both the risks and opportunities as integral parts of
the performance baseline.
Each integrated project team leader is responsible for deliv-
ering results, backed by a definitive scope, a rigorous and sound
estimating process, a detailed basis of estimate (BOE) and a com-
plete package of BOE documentation. The end result—an inte-
grated, prioritized performance measurement baseline that is
externally certifiable, clearly identifies performance based incen-
tives for each major WBS element, and provides the foundation
for a streamlined change control process and identification and
implementation of cost savings.
The Central Savannah River Area Section once again spon-
sored one of several awards given to winning teams at the 2009
Future City Competition. Myron Berry spent several happy
hours Jan. 24., discussing and reviewing students concepts for
improving water use by creating home systems that minimize use
of the of municipal or externally supplied water for daily require-
ments. Sponsored across the US by the professional engineering
community, Future City strives to stir young people’s interest in
science, technology, engineering, and math. Students work in
teams under the guidance of a teacher and a volunteer engineer
mentor to design and build a city of tomorrow. They must also
conduct research for an essay on a pressing social need.
37
 Mr. Berry congratulated the New Charleston - First Baptist
Church School team winning the CSRA sponsored “Best
Planned City” award. The Future City event was huge this year.
We picked an excellent team that actually laid out the plan in
great detail on who did what and when each action was due.
They will be great schedulers and planners in a few years. The
team’s mentor, James Plemmons, is an AACE International
member from the Charleston area and teaches project manage-
ment courses at the Citadel and at surrounding area companies.
Great Lakes Section
The Great Lakes Section Board has been busy crafting new
ideas for the upcoming season of meetings in southeast Michigan.
The three main initiatives are reaching out to new participants, try-
ing out new meeting locations, and holding a series of programs
around the fundamentals of cost engineering and project man-
agement.
The first meeting was on Sept. 24, 2008. The program was an
introduction to AACE International and presentations were given
by several long time members on how the organization promotes
cost and schedule management practices. For this initial meeting,
members were allowed to sponsor one guest who is new to the
Great Lakes Section at no cost. This resulted in a positive
response and drew professors and students from local universities.
The Great Lakes Section also honored long-time section board
member Dave Van Tassel for his years of outstanding service to
AACE International.
The next meeting was on Oct. 22, 2008, and was an open
forum discussion on planning and scheduling. The format includ-
ed Tamara Sutton of Walbridge Aldinger discussing the contrac-
tor’s perspective on project scheduling and Jim Krebs of ACM dis-
cussing the owner’s perspective on project scheduling. Questions
were posed by the representatives to each other with open discus-
sion from all attendees. The goal of the evening was to present
and explore these differences and offer experiences of successful
project scheduling. This meeting received a positive response and
created a lively discussion from those in attendance.
The Great Lakes section has also been reaching out to local
colleges and universities. The section is promoting and educating
students on AACE International and careers in project controls,
cost engineering and estimating. In the fall, some of the section
members attended open houses at Wayne State University and
Eastern Michigan University and distributed AACE International
information to students. The students showed an interest in the
profession and were excited to learn about these types of careers.
In addition to hosting certification exams, the final task for
2008 saw the section sponsor a scheduling training class in
December. The four topics covered were planning, critical path,
progress collection and control and project controls - resource
management, performance management. There was a good turn-
out with professionals of varying experience in the industry attend-
ing. The feedback forms that were filled out by the participants
indicated that the class was helpful in promoting their knowledge
and understanding of scheduling principles.
The Great Lakes section is looking forward to a busy 2009.
Presentations have included estimating as a career in January, the
annual Engineer’s Week joint meeting with ASCE and MSPE in
February, a March presentation on claims management and a job-
site tour (TBD) is planned for April.
38 Cost Engineering Vol. 51/No. 3 MARCH 2009
Houston Gulf Coast Section
The sixth meeting of the HGCS program year for 2008-2009
was on Tuesday, Feb. 10, at the HESS club in Houston. Over 70
members attended the meeting. Dr. Stephen P. Mulva, from the
Construction Industry Institute (CII), spoke on, “Oil and Gas
Benchmarking.”
The Construction Industry Institute’s (CII) Benchmarking &
Metrics program has been developing benchmarking metrics and
producing performance data for the construction industry for
more than 10 years now. Over the past three years, CII has
embarked on the oil and gas benchmarking with the sponsors
from oil and gas owner companies. This presentation offered the
benchmarking methodology, metrics and progress to date.
Stephen P. Mulva, Ph.D., is the associate director,
Construction Industry Institute (CII) for Benchmarking and
Metrics. He comes to CII from Texas State University-San
Marcos, where he taught courses in construction management
for the past four years. He earned his master’s at the University of
Texas and his doctorate from Georgia Tech. At UT Austin, he par-
ticipated in the civil engineering project management program
and helped Dr. Richard L. Tucker, the original CII Director, dur-
ing a CII funded study that led to the development of the
Institute’s best practices. Prior to his association with Texas State
University, he was a project management consultant with Austin-
based ePM, where he was involved in modeling and simulating
industrial and offshore projects. He also has experience with
Fluor, Bechtel, and Phillips Petroleum.
The HGCS will sponsor a five-week project controls training
course beginning Thursday Night, April 23, at Aker Solutions’
office located at 3600 Briarpark Drive, Houston, TX 77042. The
two primary goals for the course are to provide an opportunity for
project controls professionals to improve their skills and knowl-
edge through study and sharing with their peers and the second
goal is to serve as a review course for potential candidates who
desire to earn a nationally recognized certification in project con-
trols. Contact Valerie Venters at vsquareval@aol.com for further
details.
Montreal Section
The Montreal Section has been enjoying excellent technical
presentations this season. In December 2008, a group of 60
attended the special presentation by Gerald McEniry entitled,
“Evaluating the Cumulative Impact of Changes on Labor
Productivity - An Evolving Discussion” with some highlights from
an article authored by William Ibbs and Gerald McEniry and
recently published in AACE International’s Cost Engineering
journal. This topic attracted a wide range of participants as Mr.
McEniry explained the compounding or cumulative effect of
numerous changes that can occur on a project. Data from
researched studies were discussed that developed statistical rela-
tionships between the amount of change and end-of-project labor
productivity. A series of curves were presented that can serve as
guidelines. Other sources of data on productivity loss were also
discussed. The presentation was followed by an extended ques-
tions and answer period.
Palm Beach Section
Noted management consultant and author, Dr Harold
Kerzner, was the speaker for the Feb. 12, Palm Beach Section
meeting. The meeting was in the Terrace Room of the Palm
Beach Gardens Marriott.
Dr Kerzner has been published in periodicals and texts. He
is currently serving as the executive director for the International
Institute of Learning and is completing the 4th edition of his col-
lege text, Best Practices in Project, Program and Portfolio
Management. His presentation was a case study entitled, ‘The
Rise, Fall and Resurrection of Iridium,’ This was a project where
the risks were not evaluated and the change control process was
nonexistent. The result was a $4 billion cost overrun and the
investors lost 100 percent of their money. This presentation was
of great interest to everyone who is concerned about runaway
costs and how to avoid cost over-runs.
The Iridium Project was designed to be the 8th wonder of the
world; a complete global satellite communication system where
you call anywhere in the world at any time. But after more than
10 years of development and at a cost in excess of $6 billion,
Iridium filed for bankruptcy protection within the first eight
months of operations.
The case study is a classical example of the complexities in
managing long-term, high technology projects. Topics discussed
include: developing a business plan under market uncertainty;
the necessity to evaluate assumption periodically; when to evalu-
ate the assumptions; establishing a cost baseline under uncer-
tainty; managing a long-term project under extreme risks; man-
Submitted photos
Gerald McEniry, shown above and below, presented a program at the
December 2008 Montreal Section entitled, “Evaluating the Cumulative
Impact of Changes on Labor Productivity - An Evolving Discussion.”
Cost Engineering Vol. 51/No. 3 MARCH 2009
aging a global project team; the problems with managing scope
changes on a long term project where the value of the project
changes; the differences between a project champion and an exit
champion; the risks of establishing a collective belief; the impor-
tance of project risk management; establishing a criteria for can-
celing a project; the danger of spending good money after bad
money; the importance of politics in project decisions; and the
application of professional responsibility.
This meeting was jointly sponsored by the Palm Beaches and
Treasure Coast Sections of AACE International and the South
Florida Chapter of PMI.
There is much interest among the group about the section
hosting a certification workshop in the spring. It was announced
that we would have to have a minimum of five people to sign up.
FP&L has graciously agreed to let us use their facilities at the
Juno Beach headquarters to assist the Section in this endeavor.
The section has presentations scheduled in the upcoming
months on the exciting new nuclear program that is being kicked
off by FP&L to meet the fast-growing demand for electricity. In
addition, a presentation is scheduled for their extended power
uprate (EPU) projects. A power uprate involves modifying or
replacing existing plant components, such as the turbine genera-
tors, pumps, heat exchangers, valves and certain control systems,
to increase electric generation capacity. (Instead of building new
power plants).
Also discussed was a possible joint meeting with PMI in May.
Rocky Mountain Section
The Rocky Mountain Section was fortunate to have two
excellent speakers for its November 2008 meeting. Discussion
was about the “Construction Industry Institute” (CII). Keith
Molenaar, a professor for the University of Colorado provided an
introduction and background history of CII. He also discussed
the development by CII of the Project Definition Rating Index
(PDRI) used to evaluate project definition. This was followed by
John Zimmerman of Jacobs Engineering who presented infor-
mation on how PDRI is used for industrial projects.
The Rocky Mountain Section members and wives held their
Christmas meeting on Dec. 11., 2008, at the Embassy Suites in
the Tech Center here in Denver. The program featured Bill
Submitted photos
Rocky Mountain Section December 2008 speaker Bill Spear, above left, and
Section Vice President, Ken Giese, talk following a splendid program.
39
 Submitted photo
Shown above are sone of the attendees of the Rocky Mountain Section’s
December 2008 meeting
Spear, managing partner of MTB Project Management
Professionals Inc. in Denver, CO. Mr. Spear provided a discus-
sion of the precious metals industry in general, and then focused
in on the platinum group of metals and their respective markets.
He then discussed the basics of platinum recycling both from a
process and a feasibility perspective, and then discussed the
investor-funding challenges to construct and operate a full-scale
plant. ◆

HOW TO SUBMIT SECTION NEWS TO THE

COST ENGINEERING JOURNAL
All submissions should be e-mailed to editor@aacei.org.
Information may be included in the body of the e-mail or as an
attachment. Microsoft Word files are the preferred format.

All photos should be sent as PC tiff or jpg files at 300 dpi. If

submitting at only 72 dpi, please send the photo as large as possible as
conversion will reduce its size. Include the names and titles of each
person shown in any photos.

Many times AACE International Sections have been referred to

as chapters. The correct reference should always be to a Section.
AACE International does not have chapters. Please do not refer to
Sections as chapters.

If an event is during the month of publication, it will be listed as

an upcoming event even if members will not receive their journal in
the mail until after the listed event. The journal goes to press about a
month in advance of the issue date, which is always the first of each
month, at which time the electronic version should be posted.

AACE International reserves the right to edit all submissions and

to refuse to publish any submissions determined by the editor or
executive director to not meet the standards of the journal.

Anyone with questions on submitting copy or photos may

contact Managing Editor Marvin Gelhausen at
mgelhausen@aacei.org, Graphic Designer/Editor Noah
Kinderknecht at nkinderknecht@aacei.org, or IT/Graphics Specialist
Robin Donley at rdonley@aacei.org.

40 Cost Engineering Vol. 51/No. 3 MARCH 2009

 hen new members join PDF™ presentations as well as desk-top

W AACE International, an attempt

is made to assign them to a local section.
However, this assignment is not always practical, as
sharing for collaboration and roundtable dis-
cussions. Our new communication tool is DimDim™
which requires no software installation for partici-
some members are not close to a section. These pants. Since we do not have a toll-free phone number,
members are usually unassigned or at-large. we suggest using a headset with microphone combi-
CyberSection was established to support all of our at- nation for cost free participation. We have had only
large or unassigned membership. partial success using Vista™ and FireFox™, so we sug-
The AACE International CyberSection is now gest using Internet Explorer 7™.
bringing “the section experience” to at-large and unas- Shortly, we will be contacting the unassigned and
signed AACE International members. The goal of the at-large membership with an invitation to join the
CyberSection is to provide an internet based experi- CyberSection, however, any AACE International
ence for members to communicate, network, and member is welcome to participate. If you have ques-
meet - much like that of a standard section. The tions, comments, or would like to participate in help-
CyberSection uses a combination of websites and ing CyberSection; please post at the www.aacei.org
internet communication tools to accomplish this goal. forums.
We are constantly reviewing and testing new technol- As “SuperCost” our CyberSection mascot says:
ogy to improve. Your participation will help to hone
and perfect these tools and techniques.
For a number of years we have been using Yahoo
Groups ™ to post messages and conduct meetings. As
new, cost-effective tools and support became avail-
able, we moved under the AACE International
umbrella and adopted DimDim™ as our web confer-
encing tool. Web conferencing allows us the ability
to host presentations and discussions and to record
them for future viewing. Our CyberSection page,
under Regions on AACE International’s main website,
www.aace.org, has been recently updated to reflect
these new features and enhancements. “Stop by and say hello.”
CyberSection meetings are announced by direct
e-mail and forum postings. The meetings will be web- The AACE International CyberSection was
hosted voice chat, via phone-in and internet voice. founded Aug. 23, 1999, as a standing committee
We have the capability to make PowerPoint™ and reporting to the Vice President of Regions.

Don’t have a local section, traveling or on assignment?

Feel free to visit our CyberSection webpage under AACE International Regions:
www.aacei.org/cyber
Sign up for the CyberSection forum and begin the on-line section experience.
 The 2009 Western Winter Workshop
March 13-15, 2009
It’s time to prepare for the premier west coast event for project controls specialists, planners and schedulers,
cost managers, estimators and bidders, project managers, risk managers, and professional engineers working in
the cost and management field. The San Francisco section of AACE International will be holding the 48th
Annual Western Winter Workshop, March 13-15, 2009 at the scenic Portola Hotel and Spa in Monterey,
California.
AACE International celebrates 48 years of the Western Winter Workshop contributing to the cost manage-
ment profession. The 48th annual workshop brings us up-to-date with cost objectives, as well as adding the “The
TCM Approach to Building Information Modeling, “4-D,” and much more.

“Over 20 Billion in Capitol Management Projects” to be discussed in a Saturday panel session. Capital
Program directors include:
Andrew Fremier, Bay Area Toll Authority
Bijan Sartipi, California Department of Transportation
Harlan Kelly, San Francisco Public Utilities Commission
Ivar Satero, San Francisco International Airport
Kathy Mayo, Bay Area Rapid Transit (BART Earthquake Safety Program)
Leonard Takayama, Sacramento International Airport
Paula J. Hammond, Washington State Department of Transportation
Susan Martinovich, Nevada Department of Transportation

The San Francisco section will continue to host the President’s Cup golf outing, a tradition spanning back
to 1961 and a great place to network in an enjoyable setting. This annual golf outing has supported the educa-
tion fund for decades while helping to nurture lasting relationships amongst the participants. Grab your clubs
and come along to enjoy the beautiful ocean course at Pacific Grove Golf Links. Stephen P. Warhoe, PE CCE
CFCC, this year’s AACE International President, will be on hand to award the trophy for the President’s Cup
golf challenge.

Join us and continue to grow this young west coast tradition in our 48th year!
Visit www.aaceisf.org for more information

Exhibitors and Sponsors Contact:

John Haynes • 925-570-4647 • jhaynes@trsconsultants.com
 A r ticle Reprints and Per missions

Cost Engineering Journal, Volume 51/Number 3, March 2009

Pages 9-14 Pages 26-31

SAP — An Effective Tool for Soft Skill Quantification (SSQ):
Managing Multiple Small Human Performance vs. Metric
Readers of the Cost Engineering
Projects Edward Muzio
journal can purchase copies of selected
articles that are published with an
Betty A. Poettcker, CCC and Dr. Deborah Fisher
SAP can be used as an effective tool to
AACE International reference number assist in the management of cost, schedule, and In this follow-on study to a successful ini-
at the end of the article. Articles can be resources for a single project, as well as, for a tial pilot study by the authors, the Soft Skill
delivered in print form or in Adobe portfolio of small projects. Using this method Quantification (SSQ) tool was evaluated for its
Acrobat (PDF) format. for small projects allows project managers to ability to accurately detect high-performers as a
Please refer to the AACE analyze a group of projects and make timely function of SSQ metrics. The SSQ model has
decisions. This article will explore the use of demonstrated for a second time the ability to
International reference number when
SAP in each of the three areas of project costs, distinguish between performance levels based
contacting our Publications Sales upon measurable constructs. Furthermore,
milestone schedules and resources. Each sec-
department. tion will describe the setup in SAP, the analysis seven emotional intelligence metrics were
of the data for management and project con- identified as being correlated with high per-
To Order trols, and the benefits of using SAP as a tool for formance, but it was more moderate values of
Contact: AACE International Publications project management. A standardized approach these metrics that corresponded with the high-
for each project in the portfolio provides con- est performers. Contrary to intuition, "more" is
Sales at pubsales@aacei.org
sistent information that can be analyzed across not always "better" when it comes to SSQ met-
the entire portfolio of projects. The key to rics.
Reprint Prices: Reprint 21637
using SAP successfully is to be consistent and
Quantity Member/Non-Member to update the information regularly. SAP can
1-9 copies $5.00/$7.50 be an effective tool for managing and control-
10-49 $4.50/$7.00 ling multiple small projects.
50-79 $4.00/$6.50 Reprint 21635
80-99 $3.50/$6.00
100-499 $3.00/$5.50 Pages 16-21
Programs and Projects Driven by
To Contact Us Asbestos Regulations
AACE International Paul Stanford Kupakuwana
209 Prairie Avenue, Suite 100 Asbestos’ ability to resist high tempera-
Morgantown, WV 26501 tures resulted in its extensive use as a fireproof-
USA ing and insulation material from the 1950s
Phone: 304.296.8444 through to the mid 1980s. But today, asbestos is
Fax: 304.291.5728 equally viewed as a beast. This arises mainly
from a consideration of the dire consequences
of deaths from asbestos-related cancers that
For Information On Other Reuse have resulted from past exposure. Asbestos liti-
Requests gation has given rise to claims against some for-
If you are seeking permission to mer producers, sellers, distributors, and
copy, quote, or translate into another installers. Some were forced out of businesses,
language any material from any issue of or into diversification and bankruptcy. This
article analyses the implications of new
the Cost Engineering journal, please
asbestos regulations in determining program
contact our Managing Editor, Marvin and project directions at the London Borough
Gelhausen at mgelhausen@aacei.org of Hillingdon. That analyses showed a signifi-
cant impact.
Reprint 21636

Cost Engineering Vol. 51/No. 3 MARCH 2009 43

 C alendar of
C alendar of Events
Events
March 2009 London, UK 15-17 The 23rd IPMA
Contact: www.smi-online.co.uk World Conference,
2-3 The New Engineering Manager: The International Project
moving from Technical Professional to 31 The 2nd Annual CFO Green Management Association (IPMA),
Manager, Conference: Making Sustainability Cost Helsinki, Finland
The American Society of Mechanical Effective, Contact: www.refresh09.com
Engineers (ASME), CFO Publishing
Omni Houston Hotel Westside InterContinental The Barclay New York Hotel
Houston, TX 25-28 AACE International Education
New York, NY
Contact: phone (973) 882-1167 Seminars, AACE International
Contact:
fax (973) 882-1717 Sheraton Seattle Hotel,
www.cfoconferences.com/green2008
infocentral@asme.org Seattle, WA

April 2009 Contact: phone 1-800-858-COST

5-6 Professional Responsibility for fax (304) 291-5728
Engineer, 1 SMi Energy Conference: Horizontal info@aacei.org
The American Society of Mechanical Drilling Technology and Techniques for www.aacei.org
Engineers (ASME), Coalbed Methane,
Omni Houston Hotel Westside SMi Group, 28 - July 1 AACE International’s
Houston, TX Copthorne Tara Hotel 53rd Annual Meeting,
Contact: phone (973) 882-1167 London, UK AACE International
fax (973) 882-1717 Contact: www.smi-online.co.uk Sheraton Seattle Hotel,
infocentral@asme.org Seattle, WA
20-21 SMi Energy Conference: Legal Contact: phone 1-800-858-COST
11-12 SMi Energy Conference: Oil & Issues in Oil and Gas, fax (304) 291-5728
Gas Satellite Communication, SMi Group, info@aacei.org
SMi Group, Crowne Plaza Hotel www.aacei.org
Copthorne Tara Hotel London, UK
London, UK Contact: www.smi-online.co.uk
July 2009
Contact: www.smi-online.co.uk
May 2009 2-3 AACE International Education
13-15 The 2009 Western Winter Seminars, AACE International
Workshop, 4-5 Developing a Leading Edge Seattle Sheraton Hotel,
The San Francisco Section of Operations Strategy, Seattle, WA
AACE International, MITSloan Management,
Cambridge, MA Contact: phone 1-800-858-COST
Portola Hotel and Spa,
Contact: http://mitsloan.mit.edu/exceed fax (304) 291-5728
Monterey, CA
info@aacei.org
Contact: John Haynes
June 2009 www.aacei.org
jhaynes@trsconsultants.com
8-12 ASME Turbo Expo 2009, 27-28 Developing a Leading Edge
24-26 Automation & Power World The American Society of Mechanical Operations Strategy,
2009, Engineers (ASME), MITSloan Management,
The ABB Group, The World Center Marriott Resort and Cambridge, MA
Orlando World Center Marriott, Convention Center, Contact: http://mitsloan.mit.edu/exceed
Orlando, FL Orlando, FL
Contact: www.abb.com/a&pworld Contact: IGTI Editor’s Note: Please submit items for
phone (404) 847-0072 future calendar listings at least 60 days
30-31 SMi Energy Conference: www.asmeconferences.org in advance of desired publication.
Unconventional Gas,
SMi Group,
Copthorne Tara Hotel

AACE International, 209 Prairie Avenue, Suite 100, Morgantown, WV 26501 USA phone: 304-296-8444
fax: 304-291-5728 e-mail: editor@aacei.org website: www.aacei.org

44 Cost Engineering Vol. 51/No. 3 MARCH 2009