Project Planni NG - AS Appli ED I N Engi Neeri NG AND Constructi ON FOR Capi TAL Projects

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AACE® International Recommended Practice No. 39R-06
PROJECT PLANNING – AS APPLIED IN ENGINEERING AND

CONSTRUCTION FOR CAPITAL PROJECTS
TCM Framework: 3.1 – Requirements Elicitation and Analysis
3.2 – Asset Planning
4.1 – Project Implementation
7.1 – Project Scope and Execution Strategy Development
7.2 – Schedule Planning and Development
7.3 – Cost Estimating and Budgeting
7.4 – Resource Planning
7.5 –Value Analysis and Engineering
7.6 – Risk Management
7.7 – Procurement Planning
8.1 – Project Control Plan Implementation
Rev. December 8, 2011

Note: As AACE International Recommended Practices evolve over time, please refer to web.aacei.org for the latest
revisions.
Any terms found in AACE Recommended Practice 10S-90, Cost Engineering Terminology, supersede terms defined in
other AACE work products, including but not limited to, other recommended practices, the Total Cost Management
Framework, and Skills & Knowledge of Cost Engineering.
Contributors:
Disclaimer: The opinions expressed by the contributors to this recommended practice are their own and do not necessarily
reflect those of their employers, unless otherwise stated.
Edward E. Douglas, III CCC PSP (Primary Contributor) Donald E. Parker, PE CCE
Peter W. Griesmyer (Primary Contributor) Perry Petersen
Christopher W. Carson, PSP Wesley R. Querns, CCE
John O. Evans III, PSP Hannah E. Schumacher, PSP
Earl T. Glenwright, Jr. PE Carmelita Thorndike, PSP
John Hollmann, PE CCE CEP Ronald M. Winter, PSP
Donald F. McDonald, Jr. PE CCE PSP David C. Wolfson
Jose Noe James G. Zack, Jr. CFCC
Glen R. Palmer, CFCC PSP
Copyright © AACE® International AACE® International Recommended Practices
Single user license only. Copying and networking prohibited.
This document is copyrighted by AACE International and may not be reproduced without permission. Organizations may obtain permission
to reproduce a limited number of copies by entering into a license agreement. For information please contact editor@aacei.org
AACE® International Recommended Practice No. 39R-06
PROJECT PLANNING – AS APPLIED IN ENGINEERING
AND CONSTRUCTION FOR CAPITAL PROJECTS
TCM Framework: 3.1 – Requirements Elicitation and Analysis
3.2 – Asset Planning
4.1 – Project Implementation
7.1 – Project Scope and Execution Strategy Development
7.2 – Schedule Planning and Development
7.3 – Cost Estimating and Budgeting
7.4 – Resource Planning
7.5 –Value Analysis and Engineering
7.6 – Risk Management
7.7 – Procurement Planning
8.1 – Project Control Plan Implementation
December 8, 2011
TABLE OF CONTENTS
Table of Contents ..........................................................................................................................................................1

Purpose ..........................................................................................................................................................................2
Applicability ...................................................................................................................................................................2
TCM Framework Correlation .....................................................................................................................................2
Overview ........................................................................................................................................................................3
Recommended Practice .................................................................................................................................................3
Schedule Planning and Schedule Development ........................................................................................................4
Planning Responsibilities ...........................................................................................................................................4
Planning Process ........................................................................................................................................................5
Planning Development (Input) ..................................................................................................................................6
Planning Product (Output) .........................................................................................................................................6
Identification of Stakeholders ...................................................................................................................................7
Stakeholder Considerations .......................................................................................................................................7
Contract Requirements..............................................................................................................................................8
Contract Documents / Technical Specifications ........................................................................................................8
Planning Input and Data ............................................................................................................................................9
Historical and Physical Project Data ..........................................................................................................................9
Variables and Constraints ........................................................................................................................................10
Resource Planning ...................................................................................................................................................10
Planning Assessments ..............................................................................................................................................11
Value Engineering ....................................................................................................................................................11
Constructability........................................................................................................................................................11
Risk and Response Planning ....................................................................................................................................11
Why Plans Fail ..........................................................................................................................................................12
Output and Deliverables ..........................................................................................................................................12

39R-06: Project Planning – As Applied in Engineering and Construction for Capital Projects 2 of 18
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Define the Project Scope of Work ...........................................................................................................................13

Define Project Goals ................................................................................................................................................13
Define Project Plan ..................................................................................................................................................13
Phase Definition .......................................................................................................................................................14
Sequence and Phase Relationships .........................................................................................................................14
Establish Work Breakdown Structure (WBS) ...........................................................................................................14
Establish Organization Breakdown Structure (OBS) ................................................................................................15
Establish Cost Breakdown Structure (CBS) ..............................................................................................................15
Cost Estimate Development ....................................................................................................................................15
Baseline Plan ............................................................................................................................................................16
Periodic Forecasts and Planning ..............................................................................................................................16
Stakeholder Review .................................................................................................................................................17
Project Planning Approval .......................................................................................................................................17
References ...................................................................................................................................................................17
Contributors.................................................................................................................................................................18
PURPOSE
This recommended practice (RP) to project planning provides guidelines developed primarily for engineering and
capital construction projects.
AACE International Recommended Practices are intended to provide guidelines, not to establish standards. This
recommended practice is intended to be a guide for the many project team members involved in the planning and
scheduling of their work process and can be adapted for any type of project or program where planning is
required.
This recommended practice is intended to focus on the elements of project planning: who, what, where, when, and
how. It also focuses on the actions required by members of the project team in order to translate that planning
effort into a useful project plan that will serve as a management navigation tool to guide the project team to
successful project completion. This RP will focus on the actions required by the engineering and construction
project team AFTER the development of the clients’ business requirements, business case, alternatives and
assumptions.
APPLICABILITY
This recommended practice is intended to provide guidance for the planning process as it pertains primarily to
capital project planning. Project planning is a critical and important step in commencing a project and the
subsequent preparation of the project execution schedule.
TCM Framework Correlation
This recommended practice includes references to many of the planning elements detailed in AACE International’s
TCM Framework included in the following chapters:

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• Chapter 3 – Strategic Asset Planning

• Chapter 4 – Project Implementation
• Chapter 7 – Project Control Planning
• Chapter 8 – Project Control Plan Implementation
Project planning as outlined in TCM is a process comprised of a series of integrated steps which begin with
conceptual planning, continues with project scope development and execution planning, schedule planning and
schedule development, resource and procurement planning, cost estimating and budgeting, risk management,
value management and after approval ultimately concludes with project controls implementation. Other key
components of the planning process for construction that need to be understood are logistics planning and
planning documentation.
OVERVIEW
Project planning, as defined by AACE is “the determination of a project’s objectives with identification of the
activities to be performed, methods and resources to be used for accomplishing the tasks, assignment of
responsibility and accountability, and establishment of an integrated plan to achieve completion as required.” [1, 2]
Project planning consists of:
• Identifying project stakeholders and their roles, responsibilities and their affect on the scheduling
planning process.
• Identifying contract requirements including project delivery methods under the terms of the contract. The
contract delivery method will determine the extent of the planning effort by the project team.
• Identifying the constraints, and variables that will allow the project team to begin the planning process.
• Establishing a planning process to determine the scope of work, client requirements, schedule hierarchy,
division of responsibility, project plan review and approval requirements and distribution.
• Identifying major work activities (phases) and deliverables (goals) and the preferred sequence in which
they are to be accomplished.
• Establishing an integrated time phased plan to achieve project completion as required.
• Identifying project management coordination necessary to establish cost/schedule areas for the further
definition of the scope of work.
• Development of non-schedule related planning methodologies such as logistics planning including but not
limited to: site access plan, heavy lift plans, placement of cranes, long lead material/equipment
procurement plans, owner provided material/equipment planning, and other such specific purpose plans.
These planning methodologies are not discussed in detail in this RP however an effort will be made to
identify the major non-schedule planning methods that are required on most engineering and capital
construction projects.
RECOMMENDED PRACTICE

December 8, 2011
Schedule Planning and Schedule Development
Planning and scheduling are distinctively different but related processes for capital construction projects. Schedule
planning and schedule development usually require a different set of skills and knowledge.
Planning consists of planning the work, the resources, and the estimated cost over time to complete the scope of
work defined in the early phases of project. Schedule planning includes the identification of many elements that
are associated with the scope of work which is developed into work packages, sequenced into phases and then
discrete activities. The means, methods and resources have iterative planning processes as the project plan is
developed prior to the project execution phase. Schedule planning continues evolving during the life of the project
and puts emphasis on the experience and knowledge gained from previous project successes and failures.
The purpose of planning by a project management team is to establish an acceptable course of action ("plan") to
perform the defined scope of work of a project in an efficient, coordinated manner based on a review of project
requirements and responsibilities. Included in this planning effort is the identification of stakeholders, contract
requirements, and the project delivery method that are key elements in the initial planning effort.
The purpose of scheduling by a project management team is to develop a time phased management tool that will
help implement the approved plan and guide the project toward the desired results using the outputs of the
planning process. Planning should precede the scheduling effort and while it may become less formal in later
stages of the project, planning is a continuous process that never stops until the project is completed. The project
schedule is detailed during the schedule development phase of the project. There is a relatively seamless transition
from project planning to schedule development while the project plan document is finalized and reviewed by the
appropriate stakeholders.
Planning Responsibilities
Key participants in any planning team are those who have expertise in the planning process and the ability to
conceptually schedule work. The planning team should include participants familiar with the key project work and
expertise in their organizational functions and disciplines. These planning capabilities are needed in both the early
conceptual planning and subsequent construction execution phases.
Planners must understand the work to be performed and also be prepared to coordinate and communicate with
those individuals who lack full understanding of the proposed project work. The planning process for data input
requires an understanding of the constraints and significant considerations specific to the end product and/or
project. Equally important is identification of the stakeholders who will be involved throughout the various phases
of the project.
Effective project planning begins and ends with the efforts of the project team. How well the project team
identifies the scope of work and develops the associated project plan will contribute to the success or failure of the
project. The planning effort must be the collective product of the project team in order to optimize the
opportunities for project success.
Effective schedule planning depends on the project team’s commitment to the concept of the plan prior to
implementation. Once the plan is developed and accepted, the detailed schedule development process is
implemented. The schedule development processes are described in separate AACE planning & scheduling
recommended practices.
The planner/scheduler is responsible for development of the project schedule, while the project management
team is responsible for the overall project planning effort. The planner/scheduler provides professional assistance
and guidance to the project team in developing and implementing the project plan, monitoring project progress,

December 8, 2011
and recording/reporting the impact of changes monitoring, statusing and forecasting an integrated project
schedule (a cost and resource-loaded schedule) so that a project may be executed in an efficient manner. The
planner/scheduler must also incorporate changes as efficiently as possible while maintaining and updating the
schedule as the project progresses.
Planning Process
The objective of planning by a project management team is to:
• Identify the stakeholders, contract requirements, and project delivery method.

• Identify the scope of work and the constraints/variables that may impact the project.
• Establish an acceptable course of action ("plan") to perform a project (scope of work) in an organized and
coordinated manner through the review of project requirements; roles and responsibilities.
• Respond to events during project execution to keep the project on schedule.
Project planning begins as soon as the project is identified and continues as the project progresses through the
various phases of the project life cycle from project conception to project completion and closeout. Rather than a
definitive sequential process, it is best thought of as an evolving planning cyclical process. Scheduling is the process
of creating discrete activities, durations and relationships between activities that represent the plan chronologically
and that can be communicated effectively.
Project planning essentially consists of planning development (input) and planning product (output).
Project management professionals generally agree that there is a basic five-step process involved in developing a
project plan. Essential questions that are answered during project planning:
• Who? Stakeholders, resource commitments and organization breakdown structure (OBS).

• What? The physical features and technical objectives (scope of work).
• Where? The location where the project work will be performed: engineering, procurement and
construction.
• How? Work breakdown structure (WBS) decomposition of the scope into deliverables.
• When? Initial timeline, phases and sequence for the subsequent schedule planning process.
• How Much? Rough order of magnitude (ROM) cost estimate to the budget.
Generally the recommended sequence to develop the project plan includes:
1. Identify stakeholders.
2. Identify the contract requirements, project objectives and project delivery method.
3. Define the project scope of work (SOW).
4. Establish the work breakdown structure (WBS) of deliverables.
5. Identify resources availability (people and capital assets).
6. Identify the constraints and variables and their potential impact on the project.
7. Establish the preliminary timeline and sequence of deliverables (phases).
8. Determine the rough order of magnitude (ROM) cost estimate for each component phase, work package,
or group of tasks. Include estimated quantities, planned production rates and pricing.
Project planning includes:

December 8, 2011
1. Identifying project stakeholders, division of responsibility, constraints, variables and contract

requirements to begin the planning process and to mediate any differences the stakeholders may have
during the planning process.
2. Identifying the contract requirements and project delivery method. Both the contract requirements and
the project delivery method will influence the efforts of the planning process. The project delivery
method will determine the time and planning effort required by the project team due to the different
aspects of the delivery method utilized.
3. Determining the client requirements, scope of work (SOW), technical documents and specifications, and
other project requirements.
4. Establishing the work breakdown structure (WBS) and organization breakdown structure (OBS).
5. Identifying major activities (phases) to be performed and the preferred sequence in which they are to be
accomplished.
6. Developing the planning elements such as logistics planning, heavy lift planning, etc. Include all key non-
schedule planning that is integral to project success or failure.
7. Identifying the different planning methodologies versus scheduling.
8. Establishing the initial project sequencing and phasing including the initial development of the foundation
for the project baseline.
9. Establishing, communicating, and transferring the integrated plan to achieve project execution and
completion, project plan review and approval and appropriate distribution.
10. Developing the planning basis document with all the assumptions and exclusions identified and
reconciled. Developing the basis for potential project risks and mitigation plans.
Planning Development (Input)
Project planning essentially consists of planning development (input) and planning product (output).
A conceptual project plan will be developed when an owner or developer; (whether a public entity, or a private
individual or commercial organization) first perceives a need for an industrial process or a capital project. From this
initial conceptual effort planning for the proposed project commences.
The planning process identifies and considers among other elements the constraints of resources and project
variables. With the owner’s scope identified, consideration of engineering or technical variables is reviewed to
identify the choices of the various stakeholders. This process is interactive so that appropriate choices are
identified that satisfy the interests of the parties and the goals of the project.
One of the important concepts and responsibilities for planners is recognition of the cyclical and iterative nature of
the planning process. Additionally, maintaining open-mindedness and communication throughout the planning
process leads to the identification of the most appropriate concepts for the success of the project.
Planning Product (Output)

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The project plan is a result of the overall planning development process. It is required for all projects. The project
plan provides data source input for the subsequent CPM schedule development process. Smaller or less complex
projects may abbreviate the outputs and deliverables from the planning process to only provide the minimal
information needed to define the requirements and approaches for accomplishing the relevant scope of work.
These products might be identified as the site execution plan or a task execution plan.
Development of the project execution plan (PEP) or project implementation plan (PIP) provides the project team
with a format for clearly organizing and defining tasks, interfaces, responsibilities and accountability for
accomplishing the project scope. The project execution plan is known in some professional groups as the project
management plan (PMP) and the construction management plan (CMP) and as the project implementation plan.
Regardless of the title, the plan is a key product from the project planning process. The topic formats, sections and
titles vary among organizations and are also project dependent.
Suggested components of the project execution plan are listed below:
1. Executive summary
2. Scope of work
3. Project objectives, goals & strategy
4. Contract requirements
5. Safety, health, environmental & security
6. Quality assurance / quality control
7. Execution approach, work plan
8. Change control
9. Risk management
10. Internal (project) requirements
11. Public & community relations
12. Organization, roles & responsibilities
13. Communications & reporting
14. Documentation requirements
Identification of Stakeholders
Any party that has an interest (stake) in the endeavor or project is a stakeholder. Stakeholders may directly or
indirectly affect or become involved in the day-to-day management and execution of work.
There are many different stakeholders on a project and each has different goals and objectives. These stakeholder
goals and objectives influence the development of the plan and the interaction between the team implementing
the plan and the various stakeholders.
Stakeholder interests may be positive or negative as related to the planning process therefore obtaining consensus
among the stakeholders during the planning process is important to project success.
Stakeholder Considerations
Stakeholder considerations and constraints must be identified, evaluated and reconciled as part of the planning
process. Stakeholders large and small will have a significant impact on the success or failure of a project.
It is important for the planner and the project team to communicate the project plan, goals and objectives to all
stakeholders and ensure the stakeholders fully understand the plan, goals and objectives of the project as various
stakeholders will have different views that are not always in agreement with other project stakeholders. It will

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then be the planner and the project team responsibility to mediate any differences that may exist between
stakeholders to ensure the plan is implemented as developed and agreed upon. Failure to resolve any differences
may result in failure or cancellation of the project.
Stakeholders include but are not limited to the following:
• Owners / users / operators

• Designers / architects / engineers
• Contractors / subcontractors / direct hire craft
• Suppliers / vendors
• Government or public agencies
• Local utilities
• Community and special interest groups
Contract Requirements
The primary focus of the project team during the planning phase is to understand the total scope of the contract
documents. It is important for all project team members to know and understand contract terms, conditions,
project delivery method, technical requirements, and their relationship to the work.
Identification of the baseline scope of work is critical to the planning effort. This is the basis for the initial planning
process. This scope of work should be defined by the project owner and communicated to the project team for the
planning effort.
Contract Documents / Technical Specifications
The requirements for a project normally come from the governing contract documents. The requirements define
the scope of work and type of processes and procedures to be used. They explicitly or implicitly define the
minimum planning and scheduling requirements.
Note that the term “contract documents” applies equally as well to projects that have evolved to the draft contract
stage or to an endeavor that has yet to evolve to a contract, if a contract should result. In the latter case, a
planning and scheduling specification, an organization’s policies/ practices, procedures or experience will guide the
planning process.
Requirements in the contract documents cannot be disregarded, even if the planners feel that there are better
options. Any contract specifics that do not fit with the proposed plan must be identified and wavered by the
stakeholders in order to exclude that task.
Contract types: There are project risk allocation advantages and disadvantages of these various types of contracts
from both the owner and contractor viewpoints:
Stipulated Sum (Value) Contracts
• Fixed price
• Unit price
Cost Reimbursable Contracts

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• Cost-plus (with fixed, incentive, or award fees)

• Time and materials (T&M)
Project Delivery Methods: These project delivery methods influence the roles and responsibilities of the project
participants:
• Design-bid-build
• At risk construction management
• Multi-prime contracting
• Design-build
• EPC (engineering-procurement-construction)
• Design-build-operate
• Integrated project delivery (IPD)
• Variations of the above
The contract delivery method will influence the extent to which the planning occurs. Each delivery method will
have its own process as described in the two examples:
• In a traditional owner designed – owner contracted construction method the early aspects of planning are
undertaken between the owner/architect/engineer-designer. Only when the construction contract is
awarded does the “builder” generally acquire a planning responsibility.
• In an EPC project the designer/builder is given a much broader responsibility for planning because of their
earlier entry into the project.
Planning Input and Data
Key to successful project planning is the input of relevant and accurate data concerning the project. This
information can be historical data, benchmark data and/or new data pertaining to the current project. The input
and data collection phase represents the initial process of identifying these requirements.
The input and data collection process includes identification of project stakeholders, the contract/ technical
requirements and performance of the initial planning (constructability) assessment.
Historical and Physical Project Data
The use of relevant historical and site specific project data can be beneficial in developing the project plan, and
project cost and schedule.
A project plan library includes project historical reference documents such as conceptual plans, pertinent project
correspondence, project variations and constraints, and other impacts related to the project. This data will be
useful for planning similar or like projects.
There are several factors when initiating a new project that influence the development of the project plan.
Examples of relevant historical data include:
• Type of project
• Throughput/capacity
• Technology

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• Global market conditions

• Labor resources
• Project team organization
• Lessons learned
• Actual cost and schedule data
Examples of relevant physical data include:
• Geographic and other location factors

• Geological
• Terrain
• Utilities
• Transportation
• Environmental
• Cultural
• Climate factors
Variables and Constraints
Each project has variables and constraints beyond the availability of resources. These variables include but are not
limited to such factors as site conditions and restrictions, financial and economic factors, cultural and religious
factors, and local laws and regulations. These variables and their relative impacts must be identified, evaluated,
documented, and resolved or mitigated in the best interest of the stakeholders and the project. As the planning
process evolves, these uncertainties may change, be resolved, magnified or disappear. Therefore, when the
variable changes, planning dynamics change and the plan must be re-evaluated.
A project variable is an event, element, or feature that will have an impact on project performance. The key in
planning is the identification and resolution of these as required for the success of a project. Significant project
variables and constraints include:
• Physical location and space

• Geological limitations
• Efficient sequencing
• Productivity assumptions
• Identification of resources available
• Project labor agreements
• Funding methods and phases
• Contracting & project delivery method
• Closeout and commissioning requirements
Resource Planning
Resources planning is critical to the planning process and if not considered can adversely impact the project.
Planners must identify the key resources in relation to the overall objectives of the project. Resources include the
various assets used to accomplish the specified work during the life of a project. Resources include but are not
limited to the following:
• People
• Equipment

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• Materials
• Technology
• Capital funding
Planning Assessments
Value engineering and constructability assessments are important elements of the planning process.
While constructability reviews focus on the optimal execution of the current plan, value engineering is concerned
with the re-design of the project to meet stated performance criteria in a less costly manner than previously
envisioned.
Value Engineering
Value engineering (VE) often begins during design and focuses on maximizing value, which can be formulated as
the sum of design item functionality and quality, per unit cost.
Value engineering during project design planning is intended to optimize product and production system design in
consideration of the effective performance of manufacturing and related activities. Alternate materials, or
technologies and standardization (e.g., use common parts for different products) are some of the considerations.
In its relationship to the planning process value engineering must consider stakeholders’ requirements, prioritize
required functions, and evaluate their cost and schedule impact.
Constructability
Constructability is the application of construction knowledge and experience during project planning, design,
procurement and field execution to consider methods that achieve the most effective performance of construction
activities. Alternate materials, installation construction sequencing, safety, and construction technologies are all
considerations. Constructability analysis during the planning process examines the methods and cost of installed
equipment and materials, technology, site conditions, resources, and related infrastructure.
Constructability assessments should begin during the initial planning phase and continue throughout the entire
planning cycle and into the implementation phase of the project. The constructability assessment can reduce both
time and cost impact to a program or project. Constructability analysis is often continued throughout the life of a
project to optimize the cost and schedule planning while mitigating risk. It has the most significant positive impact
when implemented during the earliest planning stages of the project.
(Refer to AACE Recommended Practices No. 30R-03, Implementing Project Constructability and 48R-06, Schedule
Constructability Review for additional details.)
Risk and Response Planning
Risk management planning includes development of risk response plans to propose potential solutions to impacts
caused by risk or change. Changes may either have a positive or negative impact on the current project plan.

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Developing procedures to identify impacts and response planning is necessary. During the planning process, it is
appropriate to identify areas of potential risk and methods to apply to mitigate risks. Planning for change should
be part of the planning process. The project team should develop response plans as part of the planning process.
As the plan is developed, the project team should be aware of the potential risks and implement a risk
management plan. This alerts management to monitor for risks. The risk management plan may be used to
mitigate risk.
Risk may be reduced as the plan is refined. Conversely, project risk may increase as new variables are identified,
the plan is revised, or scope changed. Risk must be continually monitored as the project scope and planning
evolve. The project team should continue to perform risk assessment to determine the feasibility of the plan. In
some cases risk may be too great for the project to proceed, thus resulting in the cancellation or major
restructuring of the program/project.
Schedule risk should be evaluated once the scope of work and the project plan have been finalized and the initial
cost estimate and schedule models have been developed.
(For more on risk planning and management please reference the AACE International Recommended Practices
(RPs) on the AACE website or to Chapter 7.6 Risk Management in the TCM Framework.)
Why Plans Fail
Projects may not succeed because of limiting factors. Among the oversights which might lead to failure are but not
limited to:
• Lack of understanding by the project team to fully comprehend the scope of the project.
• Failure or poor execution by the project team in developing and implementing a comprehensive plan.
• Failure by the project team to revise the plan when major changes have been identified and incorporated
into the scope of work.
• Major stakeholders (owner or underwriter) are unable to financially support the project.
• Stakeholders having different interpretations of the project plan and/or goals and failure by the project
team to reconcile these differences.
• The project team failing to perform essential non-planning methodologies during project development
and execution.
Output and Deliverables
The outputs and deliverables phase is the second step of the planning process. As the project plan developed,
several major elements required identification, evaluation, and selection of the optimum alternatives. The output
and deliverables elements include:
• Defined scope of work

• Defined project goals
• Defined project plan
• Definition of phases

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• Phase sequencing & relationships

• Establish project coding structures
• Work breakdown structure
• Organization breakdown structure
• Cost breakdown structure
• Development of the project cost estimate and budget
• Development of the baseline plan
• Risk & mitigation plans
• Project team implementation approval
• Stakeholders reviews and acceptance
• Periodic forecasts & planning
Define the Project Scope of Work
At the conceptual stage of a project, the scope of work is a narrative description. The client/owner is responsible
for defining the conceptual scope of work.
As the project evolves the scope of work is refined and expanded during the planning process into an assortment
of deliverables to reflect the current project goals and requirements. In later stages of planning the level of detail
continues to be enhanced.
The scope of work is identified and expressed as an achievable product. As the planning process progresses the
scope of work becomes better clarified and is more specifically defined.
Development of the work packages is a product of the planning phase of the project. The scope of work provides
the relationship between the execution strategy, and the considerations and constraints that serve and support
the contractual requirement.
The scope of work provides a basis from which the baseline plan for performance measurement is developed
during the scheduling phase of the project.
Define Project Goals
Every program or project must establish achievable goals in order to be successful. The client and owner establish
the initial conceptual goals and the team is responsible for identifying, reviewing and recommending incremental
goals for stakeholders’ action.
A project goal is a concept that is identified and expressed as an achievable end product. The goals may be either
contractual or non-contractual, depending on the nature of the program and/or project. The contract should only
represent definable (or measurable) and achievable goals.
Each stakeholder may have different perceptions of established goals that require reconciliation to ensure goal
alignment. Subsequently, some stakeholders may have differing opinions of the degree of project success.
Define Project Plan
The project plan is the output of the planning process for a project. The project team planning actions eventually
develop through reviews and revisions into the project baseline plan. The baseline plan provides the framework
and benchmark for all project measurement evaluations.

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The initial scope of work identified during the planning process determines the basic methods and means
necessary to develop the project plan that will enable the process to move forward.
An organization’s policies and procedures, along with the project’s policies and procedures, may influence the
development, review and approval of a baseline plan.
The project plan is a baseline document, which is fixed unless modifications or changes to the scope of work (SOW)
cause significant changes to the project. Significant scope changes may require modification of the current plan or
creation of a new plan. Any revised project plan should be agreed to by appropriate stakeholders to the extent
that those stakeholders have a contractual basis to provide such input. However, input from non-contractual
stakeholders should also be carefully and appropriately considered.
Once the project plan is identified, an initial schedule risk assessment/analysis should be completed to determine
the feasibility and risk(s) associated in meeting the timeframe identified in the project plan.
Phase Definition
A phase is a significant period or grouping of work within a project. A phase may encompass several stages of
planning and work. Phase definition involves the initial identification and outlining of major relationships and
sequence planning, as defined by the scope of work. As the scope of work is refined, planning includes the
identification or breakdown of the project scope into various tasks that may likewise be expanded to encompass
the entire project.
Phase definition will lead to the initial development of the cost estimate, control level schedules and the
identification of risk to achieving success in those defined phases.
Phases are based on and derived from the scope of work, sequence of work, phase relationships and the work
breakdown structure (WBS). Phases might be defined/ modeled by a fragnet and can have distinct start and finish
milestones.
Sequence and Phase Relationships
Phase relationships are the basis for development of a framework for monitoring, analyzing, controlling and
reporting. Work phases eventually become broad groupings within the schedule and ultimately result in a nesting
of specific work packages and activities.
Sequencing is a part of the planning process that brings together the interrelated phases of a project using simple
relationships. Phases may overlap within the project.
Sequencing and phase relationships are an output. They result from the project team’s definition of the various
phases of the project. Sequencing and identification of phase relationships comprise the beginning of the process
that results in the translation of the plan into the project schedule.
Establish Work Breakdown Structure (WBS)
The work breakdown structure (WBS) is a hierarchical division of the work elements to be performed on a project.
The function of the WBS is to divide the scope of work into manageable parts that correspond to key deliverables,
phases and/or milestones with the intent to avoid the omission of key elements and assist in the communication
of cost, schedule and resource performance data to stakeholders.

December 8, 2011
The WBS must balance between complexity required for control and simplicity for accurate progress reporting.
Rules of thumb for defining activity complexity and number are:
• Any activity should require at least a day in duration; and

• No activity duration should exceed a project routine reporting period, for example, one month.
Establish Organization Breakdown Structure (OBS)
The organization breakdown structure (OBS) is a hierarchical division of the producers of the work to be performed
by a particular organization. The function of the OBS is to allocate the resources required to execute the scope of
work as identified in the work breakdown structure. The OBS must balance between complexity required for
control and simplicity for accurate progress reporting.
The work breakdown structure and organization breakdown structure must also relate to code/chart of accounts.
• A work package is the lowest level WBS and OBS where resources/cost can be budgeted or estimated.
• The cost account is the intersection of WBS and OBS components where actual costs can be forecasted
and collected.
Establish Cost Breakdown Structure (CBS)
A cost breakdown structure (CBS) is a hierarchical definition of the key elements of a project. At the highest level
these are: labor, materials, direct and indirect costs. For a complex project there will be many sub-levels of these
major elements.
The cost breakdown structure is a key element of control for a project and a planning requirement which allows all
levels of management to track the cost for the project to meet their particular control and reporting needs. The
CBS allows management to evaluate the effectiveness of the estimate versus the work in place, remaining work,
and overall costs.
Every project requires a cost breakdown structure in order to define the full range of elements of cost associated
with implementation. The development of the cost breakdown structure allows tracking and forecasting of
estimated costs versus actual costs. A CBS also makes it possible to perform additional, unplanned work on a cost
for labor and material (T&M) basis, when required.
As construction is underway proper assignment of costs and roll-up cost summaries must be maintained for
effective control of labor and materials both on-hand and installed. Accurate accountability for direct and indirect
cost elements associated with the project is essential.
Cost Estimate Development
During the planning process, goals, objectives and overall scope of work are developed. The budget planning
process and development incorporates stakeholder expectations for the project.
Budget projections are continually refined based on identified constraints and considerations. Budget projections
are often revised to be in agreement with project goals, objectives and timeline.
Impacts associated with resource constraints and considerations influence the timeline and budgeting process.

December 8, 2011
Contract documents may dictate how and when the cost estimate is developed. They may outline the type and
timing of various detailed estimates for the entire project or for specific phases or deliverables.
The work breakdown structure (WBS) and organizational breakdown structure (OBS) are integrated into the
preliminary cost estimate and this integration should form the basis for the schedule WBS/OBS model.
Cost estimates plus contingencies and other risk factors should lead to budget estimates. Budget development and
evolution drives development of the project schedule. The budgetary process provides the underlying basis of cost
and schedule baselines used for monitoring, controlling and reporting.
During the planning process, alternatives for resource options are developed and evaluated based on timelines
and the projected budget considerations. These “time versus cost” considerations include value engineering and
constructability assessments in addition to revisions to the project scope.
The planning timeline and associated budget are developed concurrently. At the point major elements of the work
scope are known in sufficient detail to graphically depict on a timeline allowing an analysis of cash flow, overall
resource utilization and further optimization of the plan. If necessary, revisions are developed and evaluated to
reflect meeting the overall program/project goals.
Baseline Plan
The baseline plan is the final output of the initial planning process for a project. The baseline provides the
framework for all progress and measurement evaluation as the plan is implemented.
Unless significant modifications to the scope of work occur, the baseline plan is a ‘fixed’ or unchanging document.
Significant changes to the scope of work can cause the previous baseline to be an inadequate representation of the
work and of little value for work progress reporting. When that occurs, a planning effort to re-baseline is
recommended. Budget, schedule, and percent complete status are all typically affected. This revised baseline
should be agreed to by the appropriate stakeholders (contracting parties).
The planning timeline evolves during the planning process. At this final stage in the planning process goals,
objectives and overall scope of work are defined in sufficient detail.
Sequencing and phasing of major tasks allow planning to evolve into conceptual schedule model development. Key
milestones can be identified and established. The project schedule model begins with a planning timeline and
conceptual budget. These high level presentations allow stakeholders to evaluate the project planning status and
likelihood of meeting desired goals.
The baseline planning timeline and cost estimate/budget for completion are evaluated to determine feasibility of
meeting stakeholder requirements. If necessary revisions are developed and evaluated to reflect meeting overall
project goals.
Each organization manages to its own baseline plan and schedule requirements. That is, an owner/ client may not
need or want to manage the project execution plan to the same level of detail as a contractor. Likewise, a
subcontractor focuses primarily on only the breadth of its scope of work and interfaces with related trade work
and/or phasing and may not need any further level of detail.
Periodic Forecasts and Planning

December 8, 2011
A forecast is a prediction, (or an estimate) of future conditions and events based on factual information and
observable trends, professional judgment, and documented assumptions available at the time of the evaluation. A
periodic forecast update is typically produced on a regular basis for a given future period. Periodic forecasts are
usually limited in scope. Forecasts fall into categories of periodic or special.
Conditions may dictate that a special purpose forecast be produced. The special purpose forecast may be defined
as a periodic forecast in the contract documents or created by one of the stakeholders to provide a proposed
solution to a specific problem. A special purpose forecast might be used by managers to assess the risk associated
with a contingent event.
Assessment of the planned work scope and goals from the project plan are essential tools to monitor periodic
forecasts. These forecasts are important for controlling and reporting progress toward project deliverables and
milestones.
Stakeholder Review
Stakeholders influence the entire planning process. It is important to the project team to manage all stakeholder
interests and concerns. This does not mean that all stakeholder concerns should be acted upon. However all
concerns should be actively listened to and documented. Stakeholder input and review throughout the planning
process is critical.
The key stakeholders’ detailed review and decision making must be documented. Their concerns may result in
positive or negative actions requiring re-planning or stoppage.
Minor stakeholders’ review and input is also important to project success. Failure to embrace these stakeholders in
the planning process may cause social or political issues that should not be over looked. Otherwise, additional
planning and potentially significant cost and schedule impacts may be the result.
Not all stakeholders contribute resources. Some may only have opinions or may be activists. Their involvement
costs them little or nothing in resources. Commitments and obligations to stakeholders are critical to the planning
process.
Project Planning Approval
It is essential that all of the project participants have an opportunity to review the completed initial plan and
comment on it. Adequate time for management and appropriate stakeholder approval of the final project plan is
important to success of the project.
REFERENCES
1. H. L. Stephenson, Ed., Total Cost Management Framework: An Integrated Approach to Portfolio, Program and
Project Management, 2nd ed., Morgantown, WV: AACE International, Latest revision.
2. AACE International Recommended Practice No. 10S-90, Cost Engineering Terminology, AACE International,
Morgantown, WV, (latest revision)
3. AACE International Recommended Practice No. 14R-90, Responsibility and Required Skills for a Project
Planning and Scheduling Professional, AACE International, Morgantown, WV, (latest revision)
4. Greismyer, Peter W., Editor, PSP Certification Study Guide, 1st Edition Revised, AACE International, Morgantown,
WV, 2008.

December 8, 2011
5. Baker, Sunny, and Ken Baker, On Time/ On Budget: A Step-By-Step Guide for Managing Any Project, Prentice
Hall, New Jersey, 1992.
6. Bechtel Group, White Paper: EN-3 Project Execution Planning, http://bsii.bechtel.com/BNI, World Wide Web,
December 2, 1997.
7. Dinsmore, Paul C., Editor, Human Factors in Project Management, Revised Edition, AMACOM, New York, 1990.
8. Douglas, Edward E. III, CCC, Project Planning – Then Scheduling, 2004 AACE International Transactions, PS.07,
AACE International, Morgantown, WV, 2004.
9. Knutson, Joan, and Ira Blitz, Project Management, AMACOM, New York, 1991.
10. Lewis, James P., Fundamentals of Project Management, Second Edition, AMACOM, New York, 2002.
11. Silvestrini, Remo J., The Planning Engineer – A Human Element of Planning and Scheduling, 1983 AACE
Transactions, E.3, AACE International, Morgantown, WV, 1983.
CONTRIBUTORS
Disclaimer: The content provided by the contributors to this recommended practice is their own and does not
necessarily reflect that of their employers, unless otherwise stated.
Edward E. Douglas, III CCC PSP (Primary Contributor)

Peter W. Griesmyer (Primary Contributor)
Christopher W. Carson, PSP
John O. Evans, III PSP
Earl T. Glenwright, Jr. PE
John Hollmann, PE CCE CEP
Donald F. McDonald, Jr. PE CCE PSP
Jose Noe
Glen R. Palmer, CFCC PSP
Donald E. Parker, PE CCE
Perry Petersen
Wesley R. Querns, CCE
Hannah E. Schumacher, PSP
Carmelita Thorndike, PSP
Ronald M. Winter, PSP
David C. Wolfson
James G. Zack, Jr. CFCC


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39R-

PROJECT PLANNING – AS APPLIED IN ENGINEERING AND

Rev. December 8, 2011

Table of Contents ..........................................................................................................................................................1

Copyright © AACE® International AACE® International Recommended Practices

Define the Project Scope of Work ...........................................................................................................................13

TCM Framework Correlation

Copyright © AACE® International AACE® International Recommended Practices

• Chapter 3 – Strategic Asset Planning

Project planning consists of:

• Establishing an integrated time phased plan to achieve project completion as required.

Copyright © AACE® International AACE® International Recommended Practices

Schedule Planning and Schedule Development

Copyright © AACE® International AACE® International Recommended Practices

The objective of planning by a project management team is to:

• Identify the stakeholders, contract requirements, and project delivery method.

• Who? Stakeholders, resource commitments and organization breakdown structure (OBS).

Generally the recommended sequence to develop the project plan includes:

Project planning includes:

Copyright © AACE® International AACE® International Recommended Practices

1. Identifying project stakeholders, division of responsibility, constraints, variables and contract

7. Identifying the different planning methodologies versus scheduling.

Planning Development (Input)

Planning Product (Output)

Copyright © AACE® International AACE® International Recommended Practices

Suggested components of the project execution plan are listed below:

Copyright © AACE® International AACE® International Recommended Practices

Stakeholders include but are not limited to the following:

• Owners / users / operators

Contract Documents / Technical Specifications

Stipulated Sum (Value) Contracts

Cost Reimbursable Contracts

Copyright © AACE® International AACE® International Recommended Practices

• Cost-plus (with fixed, incentive, or award fees)

Planning Input and Data

Historical and Physical Project Data

Copyright © AACE® International AACE® International Recommended Practices

• Global market conditions

Examples of relevant physical data include:

• Geographic and other location factors

Variables and Constraints

• Physical location and space

Copyright © AACE® International AACE® International Recommended Practices

Risk and Response Planning

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Why Plans Fail

Output and Deliverables

• Defined scope of work

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• Phase sequencing & relationships

Define the Project Scope of Work

Define Project Goals

Define Project Plan

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Sequence and Phase Relationships

Establish Work Breakdown Structure (WBS)

Copyright © AACE® International AACE® International Recommended Practices

• Any activity should require at least a day in duration; and

Establish Organization Breakdown Structure (OBS)

Establish Cost Breakdown Structure (CBS)

Cost Estimate Development

Copyright © AACE® International AACE® International Recommended Practices

Periodic Forecasts and Planning