Total cost management
Encyclopedia
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 the full presentation of the process in the "Total Cost Management Framework" in 2006.
begins with the "initiation" of a project. The most well known treatment of the project management process is included in the Project Management Institute's Project Management Body of Knowledge
(PMBOK). However, the PMBOK does not address what happens before a project is initiated; i.e., how does a project come into being?, how is the project identified and decided upon among other operating, maintenance, or investment options available to an enterprise. Total Cost Management maps the process upstream of project management. In TCM, what precedes project management is referred to as "strategic asset management" or more traditionally, "portfolio and program management". A unique element of the TCM process is that it integrates all the steps that an organization must take to deploy its business strategy. This includes monitoring and becoming aware of a performance issue with an asset in its asset portfolio (i.e., capital asset base), to completing a project and delivering a modified or new asset to the company's portfolio. It also addresses managing multiple projects as a program or project portfolio.
TCM has found its widest audience in the companies that make large capital investments in fixed capital assets through construction projects (e.g., oil and gas, chemical, pharmaceuticals, utilities, etc.). However, the process is industry generic and is finding wider use in IT, software and other companies.
The TCMF is made freely available online for anyone to download at no cost through the AACE website after login requirement has been completed (see Further reading link).
AACE International
AACE 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...
to a process for applying the skills and knowledge of cost engineering
Cost engineering
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."- Overview...
. It is also the first integrated process or methodology for portfolio, program and 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...
. AACE first introduced the concept in the 1990s and published the full presentation of the process in the "Total Cost Management Framework" in 2006.
Overview
Traditionally, the field of project managementProject 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...
begins with the "initiation" of a project. The most well known treatment of the project management process is included in the Project Management Institute's Project Management Body of Knowledge
Project Management Body of Knowledge
A Guide to the Project Management Body of Knowledge is a book which presents a set of standard terminology and guidelines for project management. The Fourth Edition was recognized by the American National Standards Institute as an American National Standard...
(PMBOK). However, the PMBOK does not address what happens before a project is initiated; i.e., how does a project come into being?, how is the project identified and decided upon among other operating, maintenance, or investment options available to an enterprise. Total Cost Management maps the process upstream of project management. In TCM, what precedes project management is referred to as "strategic asset management" or more traditionally, "portfolio and program management". A unique element of the TCM process is that it integrates all the steps that an organization must take to deploy its business strategy. This includes monitoring and becoming aware of a performance issue with an asset in its asset portfolio (i.e., capital asset base), to completing a project and delivering a modified or new asset to the company's portfolio. It also addresses managing multiple projects as a program or project portfolio.
TCM has found its widest audience in the companies that make large capital investments in fixed capital assets through construction projects (e.g., oil and gas, chemical, pharmaceuticals, utilities, etc.). However, the process is industry generic and is finding wider use in IT, software and other companies.
Total Cost Management Framework
In 2006, AACE published their Total Cost Management Framework- An Integrated Methodology for Portfolio, Program and Project Management. In this tested and proven methodology, portfolios of assets are optimized through the use of portfolios of projects, using project management as a delivery system, to support and enhance large, strategic or operational programs in support of the business and strategic objectives of the organization.The TCMF is made freely available online for anyone to download at no cost through the AACE website after login requirement has been completed (see Further reading link).