Cost Engineering (Unit 36)

An APC Candidates Guide.

Unit 36– Outlines the specialized competencies required for Cost Engineering.

The unit clarifies that cost engineering, which includes cost estimating and cost control, is an area of engineering practice that requires a strong background in engineering or quantity surveying. Although its principles can be applied to any infrastructure project, this competency primarily focuses on petrochemical projects.

It explains that cost engineering has its origins in the USA and has experienced significant growth since the 1950s, especially in the petrochemical industry. This practice is prevalent in countries like the USA, China, and parts of Europe. Professionals in these sectors are often referred to as cost engineers. To maintain consistency, the term "cost engineer" is used throughout this unit.

For this competency, it is assumed that cost engineers will be involved in all aspects of cost engineering, including both cost estimating and cost control.

To effectively prepare cost estimates and carry out cost control, the following tasks are necessary:

• Define the project budget and establish a plan.

• Understand the scope of the contract.

• Implement control tools for budget management and actual cost collection.

• Collect actual costs.

• Analyze and report actual costs.

• Implement corrective actions.

The Element Performance Criteria for Unit 36 are further divided into the following areas:

• Estimating: This includes preparing screening estimates, budget estimates, and definitive estimates.

• Estimating: Labour Productivity: Establishing base productivity, identifying variables that affect it, and evaluating labour productivity for a given project.

• Estimating: Indirect Costs: This covers items such as contractor's on-site supervision, temporary construction, consumables, offsite overheads and profits, design and drafting costs, and owner's costs.

• Cost Data: Unit Rates: Pricing equipment, bulk materials, direct/subcontractor labour, contractor distributables, temporary employment management facilities, miscellaneous services, subcontracts, and cost indices for the project location.

• Estimate Coding/Work Breakdown Structure: Breaking the project into manageable units with defined interfaces, as well as using a code of accounts and estimate coding.

• Escalation: Researching escalation indices and establishing labour, material, and subcontract escalation.

• Contingency: Defining the basis, quality, and method of the estimate used to prepare contingency and its drawdown.

• Estimate Documentation: Documenting the estimate basis, assumptions, and exclusions.

• Budget: Defining the project budget using Cost Breakdown Structure/Code of Accounts, establishing the plan, project estimate, management adjustments, negotiation periods, contract awards, vendors, and the original budget.

• Cost Control: Providing information for cost control, highlighting overruns, recommending corrective actions, forecasting monthly costs, monitoring costs over time, recording changes, providing estimates for design alternatives, and maintaining a central cost information file.

• Trending and Change Control: Identifying potential trends, pricing and approving them, and recording trend estimates.

• Field Manual Labour Job Hour and Cost Control: Measuring against budgets, analyzing labour performance, and forecasting installation job hours, quantities, and costs/wage rates.

• Quantity Installation Analysis: Reporting quantities, unit rates, analyzing labour costs, and calculating unit rates and performance.

• Monitoring and Forecasting: Defining forecast scope and plan, forecasting project scope, quantities, costs, and schedules; reconciling the forecast; and conducting reviews and approvals.

• Reporting and Analysis: Preparing trend reports, monthly project progress performance reports, monthly project cost reports, engineering progress and performance reports, construction cost and schedule reports, government/client reports, and project financial status reports (PFSR).

• Change Authorization Paper: Capturing, approving/rejecting, incorporating, and documenting changes.

• Cost Analysis: Developing and analyzing cost data and performing variance analysis.

• Quantitative Risk Analysis (QRA) and Contingency Analysis: Identifying, ranging, and pricing risks, and recording and reporting on contingency.

• Systems and Tools: Understanding common systems and tools for accurate cost management reporting.

In summary, Unit 36 provides a comprehensive overview of the competencies required for cost engineers in infrastructure projects, particularly those focused on petrochemical initiatives, covering both the estimation and control aspects of project costs.

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Disclaimer: This information is for general knowledge purposes only and should not be considered legal advice. It is essential to consult with a qualified legal professional for any legal matters or concerns.