cets 1 topic 1-2

is the process

of services creating cost data like reference

costs, cost databases and costing algorithms

for the purpose of construction, repair.

maintenance, or capital planning purposes.

involves scientific

principles and techniques are applied to

problems of cost estimation, cost control,

business planning and management service

In 1956, cost engineers formed an association under the name of the

This association is

devoted to the advancement of cost engineering wherein scientific

principles and techniques are applied to problems of cost estimation,

cost control, business planning, and management service.

is an internal accounting systems designed for managing

costs in an organization. It provides information for controlling costs.

is a method of presentation of the financial status of the

organization to the stakeholders, legal authorities or financial institutions who

are not directly involved in the day-to-day running of the organization.

The role of cost engineering in the project execution stage is just as important.

Basically, its functions will include:

Instead of waiting for an overall design completion, the proposal estimate should be refined and issued as the

This definitive, or control estimate, should be in such detail as to indicate all the equipment with specifications and physical characteristics, a complete bulk-material take-off with costs, construction manhours, all construction support facilities, and all indirect costs.

All bids for equipment and bulk materials must be reviewed by

the cost engineering department to ensure conformance with

the budget.

is defined by the American Association of Cost Engineers (AACE) as the application of procedures which attempt to limit project costs to those authorized, to focus control efforts where they will be most effective and to achieve maximum control at minimum cost.

a procedure used to make predictions or

estimates about the future of an ongoing project. By analyzing

metrics such as cost, duration and the quality or performance of

the deliverable, project managers can determine whether a

project is on track.

This is the main function of the cost engineer during the

construction phase.

As part of the cost-control function, the cost engineer is

constantly involved in

is a fact of life in the construction of any project.

Regardless of how well the plant is designed, how much has

been completed, and what the final bid specifications are,

changes and additions are always present.

part of the process of submitting a proposal for a

construction project.

All bids for equipment and bulk materials must be reviewed by

the cost engineering department

submitted to the client with the bid will be a

binding document, even though this may include only

milestone activities or events.

could be used in the initial stage of

the project, but as the job progresses and more details are

known, the schedule could be expanded accordingly.

The schedule should parallel activities shown in the estimate and

should be prepared by

is a qualified professional dedicated to TCM (Total Cost

Management) over the life cycle of a project, facility or manufacturing

operation.

Cost Engineers are responsible for carefully _____ and ______ the

integrity of all project capitalizable, and related non-capitalizable, cost data.

The cost engineer studies

Engineers and their achievements have been

around for millennia. An early example is a

treatise that discusses engineering and

capital investment in mining and metals in

Latin entitled

by 1852, the ______ was founded.

Civil engineering in the United Kingdom (UK) led the way primarily

because of its role in the construction of canals for

It is in the ___era that the first

of our early ‘cost engineers’ comes to light.

is considered the father of formal

‘engineering economy’ practice which is central to

the practice of Cost Engineering and investment

decision making

became an author publishing the

“Methods for the Computation from Diagrams of

Preliminary and Final Estimates of Railway

Earthwork” in 1874 at the still young age of 27.

From a cost estimating perspective this became a valuable

reference on the practice of

refers to the estimation of materials,

resources, and labor needed to complete a construction project.

his first notable contribution to

Cost Engineering is his prodigious publication

of numerous unit cost data books from 1903

to 1922 encompassing thousands of pages on

rock excavation, earth excavation, clearing

and grubbing, concrete, roads, mechanical

and electrical

Mr. Gillette's other notable contribution was to the practice of cost control. His text

with Richard Dana titled _______ in 1909

laid out many of the practices of cost management used in construction

today.

are expenses that can be traced directly to a

specific construction activity, task or project. These costs are the

building blocks of any construction project. Direct costs are often

referred to as project costs.

refer to the indirect costs related with

running a construction project that are not directly attributed to

any specific task or material. These costs are essential for

ensuring smooth operations and achieving project success.

He graduated with a degree in Civil Engineering from Cornell University

in 1892 and joined the faculty of Stanford in 1893; he taught at Stanford

for the next 42 years. He taught courses in railroad engineering and

other topics, but is most remembered for his work in engineering

economy.

Two professors, ____ and _____ founded

Industrial Research Services, Inc. in 1942 to “assist businesses in

obtaining and managing information pertinent to estimating project

costs” in the process industries.

They went on to publish a book in 1949 entitled ‘Chemical Engineering

Costs’ which by 1952 evolved into a regularly updated publication; the

‘Chemical Engineering Costs Quarterly’

A supervising engineer that suggested the idea to form

an organization to Zimmerman and Lavine. He suggested the title/name

to be “National Association of Cost Estimating Engineers

can analyze vast datasets to forecast potential cost

overruns and identify risk factors early in the project lifecycle.

The complexity and scale of modern projects demand a more

advanced approach to identifying, analyzing and mitigating risks.

Environmentally sustainable practices are a fundamental shift in

project planning and execution.

To identify the costs associated with an activity, construction

costs are categorized into

are costs that can be correlated to a specific

activity or a work-item which is being done or constructed

all costs connected with materials which become

permanent part of the project; can be measured and

costed item-wise

covers net expenses for procurement, maintenance,

and wages of foremen and all category of workers

employed at the work site for the execution of an item

of project.

all other expenses on account of services

rendered, which can be directly attributed to and

clearly identified with the execution of an activity

or work-item.

all costs which are attributable to a given project

but cannot be identified with the performance of

a specific activity or a work-package; range of

indirect costs vary from 7.5% to 35% of the total

costs.

all indirect manpower, indirect materials and other expenses

of the functional set-ups concerned with providing technical

and logistic support to the production centers

contain indirect manpower, indirect materials and other

expenses incurred by the project management for the

direction, control and administration of the project

direct material costs includes the following:

direct labor includes:

EXAMPLES OF OTHER DIRECT EXPENSES

expenses relating to the operations and services

rendered by the home-office

it includes construction management and related

staff

it includes logistics, clerks, security,

site cleaning, warehousing, maintenance of equipment, (except

personnel involved in temporary facilities, construction,

operation, maintenance and dismantling).

it includes supply, installation

(incl. labor) and dismantling of temporary facilities such as, but

not limited to:

it consist of operating costs associated

with temporary

it covers costs associated (except transportation

costs) with construction equipment, vehicles, cars, spare parts, in the

entire duration of the project

it includes costs of fuel,

lubricants, small tools, wearing parts and consumables

it covers supply, installation and dismantling of camp

and related facilities (kitchen, temporary roads, utility materials)

it includes catering and camp operating costs

it caters for personnal

equipment, temporary facility item, small tools, consumables, camp

structure and other facilities

In some contracts, most of the indirect costs are priced under the

preliminaries section of the BOQ and the balance is distributed

proportionally in the remaining items of the BOQ.

is a process where project

managers predict the amount of money they need

to fund their projects.

IMPORTANCE OF COST ESTIMATION

uses historical data to

calculate the costs associated with different components of a

project.

“preliminary” or “ballpark” estimate, less than ____

accuracy

are common

methods used in cost estimation, particularly in

construction and real estate.

Involves calculating costs based on

the area of a space. It is commonly used for estimating costs

related to flooring, painting, roofing, and other surface-based

elements.

This method involves calculating

costs based on the volume of a space. It is used for

estimating costs related to volumetric elements such as

insulation, concrete, or excavation.

involve determining the total cost of a

construction assembly or unit, which includes materials, labor, and

other components needed to complete a specific segment of the

project.

involve estimating the costs associated with

entire systems within a construction project, such as electrical

systems or plumbing systems.

intermediate level estimates, when drawings are

___ complete

within _____ accuracy

the most widely used format

of contract. For a number of reasons, almost all contracts

that involve public funds are awarded using competitively

bid contracts.

is one in which the contractor

quotes one price, which covers all work and services required by the

contract plans and specifications.

the project is broken down into work

items that can be characterized by units such as cubic yards,

linear and square feet, and piece numbers

is the second most widely used contract

format.