Cost engineering
Encyclopedia
Cost engineering is an area of engineering
practice concerned with the "application of scientific principles and techniques to problems of cost estimating, cost control, business planning and management science, profitability
analysis, project management
, and planning and scheduling."
s and schedule slips. The broad array of cost engineering topics represent the intersection of the fields of project management, business management, and engineering. Most people have a limited view of what engineering
encompasses. The most obvious perception is that engineering addresses technical issues such as the physical design of a structure or system. However, beyond the physical manifestation of a design of a structure or system (for example, a building), there are other dimensions to consider such as the money, time, and other resources that were invested in the creation of the building. Cost engineers refer to these investments collectively as "costs".
Cost engineering then can be considered an adjunct of traditional engineering. It recognizes and focuses on the relationships between the physical and cost dimensions of whatever is being "engineered". Cost engineering is most often taught at universities as part of construction engineering
, engineering management
, civil engineering
, and related curricula because it is most often practiced on engineering and construction capital projects. Engineering economics is a core skill and knowledge area of cost engineering.
. AACE International is one of many international engineering organizations representing practitioners in these fields.
In 2006, AACE published the Total Cost Management
(TCM) Framework which outlines an integrated process for applying the skills and knowledge of cost engineering (see References). This has also been called the world's first process for portfolio, program and project management.
Engineering
Engineering is the discipline, art, skill and profession of acquiring and applying scientific, mathematical, economic, social, and practical knowledge, in order to design and build structures, machines, devices, systems, materials and processes that safely realize improvements to the lives of...
practice concerned with the "application of scientific principles and techniques to problems of cost estimating, cost control, business planning and management science, profitability
Profit (accounting)
In accounting, profit can be considered to be the difference between the purchase price and the costs of bringing to market whatever it is that is accounted as an enterprise in terms of the component costs of delivered goods and/or services and any operating or other expenses.-Definition:There are...
analysis, project management
Project management
Project management is the discipline of planning, organizing, securing, and managing resources to achieve specific goals. A project is a temporary endeavor with a defined beginning and end , undertaken to meet unique goals and objectives, typically to bring about beneficial change or added value...
, and planning and scheduling."
Overview
One key objective of cost engineering is to arrive at accurate cost estimates and schedules and to avoid cost overrunCost overrun
A cost overrun, also known as a cost increase or budget overrun, is an unexpected cost incurred in excess of a budgeted amount due to an under-estimation of the actual cost during budgeting...
s and schedule slips. The broad array of cost engineering topics represent the intersection of the fields of project management, business management, and engineering. Most people have a limited view of what engineering
Engineering
Engineering is the discipline, art, skill and profession of acquiring and applying scientific, mathematical, economic, social, and practical knowledge, in order to design and build structures, machines, devices, systems, materials and processes that safely realize improvements to the lives of...
encompasses. The most obvious perception is that engineering addresses technical issues such as the physical design of a structure or system. However, beyond the physical manifestation of a design of a structure or system (for example, a building), there are other dimensions to consider such as the money, time, and other resources that were invested in the creation of the building. Cost engineers refer to these investments collectively as "costs".
Cost engineering then can be considered an adjunct of traditional engineering. It recognizes and focuses on the relationships between the physical and cost dimensions of whatever is being "engineered". Cost engineering is most often taught at universities as part of construction engineering
Construction engineering
Construction engineering is a professional discipline that deals with the designing, planning, construction, and management of infrastructures such as highways, bridges, airports, railroads, buildings, dams, and utilities. Construction Engineers are unique such that they are a cross between civil...
, engineering management
Engineering management
Engineering Management or Management Engineering is a specialized form of management and engineering that is concerned with the application of engineering principles to business practice...
, civil engineering
Civil engineering
Civil engineering is a professional engineering discipline that deals with the design, construction, and maintenance of the physical and naturally built environment, including works like roads, bridges, canals, dams, and buildings...
, and related curricula because it is most often practiced on engineering and construction capital projects. Engineering economics is a core skill and knowledge area of cost engineering.
History
Cost engineering is a field of engineering practice that began in the 1950s (AACE International was founded in 1956). The skills and knowledge areas of Cost Engineers are similar to those of Quantity SurveyorsQuantity surveyor
A quantity surveyor is a professional working within the construction industry concerned with building costs.The profession is one that provides a qualification gained following formal education, specific training and experience that provides a general set of skills that are then applied to a...
. AACE International is one of many international engineering organizations representing practitioners in these fields.
In 2006, AACE published the Total Cost Management
Total cost management
Total cost management is the name given by AACE International to a process for applying the skills and knowledge of cost engineering. It is also the first integrated process or methodology for portfolio, program and project management. AACE first introduced the concept in the 1990s and published...
(TCM) Framework which outlines an integrated process for applying the skills and knowledge of cost engineering (see References). This has also been called the world's first process for portfolio, program and project management.
See also
- AACE InternationalAACE InternationalAACE International was founded in 1956 by 59 cost estimators and cost engineers during the organizational meeting of the American Association of Cost Engineering at the University of New Hampshire in Durham, New Hampshire. AACE International Headquarters is located in Morgantown, West Virginia, USA...
- Building estimatorBuilding estimatorA building estimator is an individual that quantifies the materials and labor needed to complete a construction. Building estimating can concern diverse forms of construction from residential properties to hi-rise and civil works...
- Construction Estimating SoftwareConstruction Estimating SoftwareConstruction estimating software is computer software designed for contractors to estimate construction costs for a specific project. An estimator will typically use estimating software to estimate their bid price for a project, which will ultimately become part of a resulting construction contract...
- Cost overrunCost overrunA cost overrun, also known as a cost increase or budget overrun, is an unexpected cost incurred in excess of a budgeted amount due to an under-estimation of the actual cost during budgeting...
- Optimism biasOptimism biasOptimism bias is the demonstrated systematic tendency for people to be overly optimistic about the outcome of planned actions. This includes over-estimating the likelihood of positive events and under-estimating the likelihood of negative events. Along with the illusion of control and illusory...
- Quantity surveyorQuantity surveyorA quantity surveyor is a professional working within the construction industry concerned with building costs.The profession is one that provides a qualification gained following formal education, specific training and experience that provides a general set of skills that are then applied to a...
- Reference class forecastingReference class forecastingReference class forecasting is the method of predicting the future, through looking at similar past situations and their outcomes.Reference class forcasting predicts the outcome of a planned action based on actual outcomes in a reference class of similar actions to that being forecast. The theories...
- Value engineeringValue engineeringValue engineering is a systematic method to improve the "value" of goods or products and services by using an examination of function. Value, as defined, is the ratio of function to cost. Value can therefore be increased by either improving the function or reducing the cost...
Further reading
- Amos, Scott (editor), "Skills and Knowledge of Cost Engineering," Fifth Edition, AACE International, Morgantown, West Virginia, 2004.
- Humphreys, Kenneth K (editor), "Jelen's Cost and Optimization Engineering" 3rd Edition, McGraw-Hill, 1991.
- Hollmann, John K. (editor), "Total Cost Management Framework", AACE International, Morgantown WV, 2006.
- Dale Shermon, Systems Cost Engineering, Gower publishing, 2009, ISBN 978-0-566-08861-2