1994 AACIE T1NSAC1IONS

Athulr J.o ldiert

EM @OU121~JCTl@IH approach is going to be bulletproof, there are some principles thatcan generally be followed to enhance the cost engineer's

Cost engineering is not workingl Cost growth and schedule probability for success. Success can best be measured by theextensions on major projects have become a regular phenomenon attention shown by decision makers to cost engineers' work, theirin all industries. Cancellation of major weapons procurement, stated need for the work, and their use of it to keep projects oncurtailment of infrastructure projects, and downscoping of future track. If we can identify our audience, respond to its needs bywork is headline fodder for the front page and business sections of communicating information effectively, and provide training aslocal newspapers. The concept of Total Cost Management (TCM) required, cost engineering will work.is a cry in the dark when efforts to date have produced fewtangible results. DO'S AND DONTS

How can this be happening when greater and greater portions As I mentioned earlier, processes and tools for costof overall project expenditures are being devoted to control and engineering have become sophisticated. While this trend has givenoversight functions? As funds for new work become more and the profession multiple ways of examining information, it has alsomore scarce, the emphasis on productivity, cost efficiency, and the created a mutation within our ranks. In large corporations or long-bottom line must lead management's decision making from the term projects, most organizations include a managementpoint of authorizing the project through its commissioning. Yet, information systems (MIvS) division or operational research (OR)project after project in all industrial sectors continue to overrun group to manage the automated systems used within the company.their budgets and fail to meet scheduled openings. However, in smaller firms or one-time joint ventures, the project

control organization, by default, takes on management of computerThese unfavorable developments are an affront to the cost programming, and hardware and software purchases. There now

engineering profession. Project management tools have become exists a large number of cost engineers/computer hacks in ourmore sophisticated over time in response to the growing midst, and the marriage is not all a blissful one. Our responsibilitycomplexity of projects. Applications, both in processes and is to gather information, analyze it, and forecast the impacts to thehardware/software, have given the cost engineer a number of ways project. All too often, every ad-hoc request or non-standard reportto conduct analyses and report on the status of work in a wide becomes an excuse to create a new spreadsheet model, database,variety of formats. or purchase requisition for some new analytical tool. The

computer hack will often sacrifice the end result for the means toThrough the integration of these applications, cost engineers get there. In other words, the process of developing the model will

can accurately project the trend of future events and recommend take precedence over the responsibility for delivering a professionalcorrective actions. Given these tools, the expertise of the cost position based on cost engineering standards and practices. Theengineer, and the precision of his or her analysis, how can I dare information is delivered late, the data is questionable, and theblaspheme that cost engineering is not working? results are ultimately ignored. Do the analysis; do not regard the

computer as the solution in and of itself.Putting the blame on project managers and their wanton

disregard for the information provided through cost engineers does Related to the whole personal computer debate is the use ofnot relieve us from guilt. Unfortunately, much of the value of the contoured systems written specifically for a given project versusefforts performed by the cost or scheduling professional is lost on the use of commercially available software that can generally meetthe decision-making entity, the project manager. What we are between 75 to 80 percent of the perceived needs of the team. Thewitnessing is a gap between the orientation of different disciplines, in-house MIS department will be a factor in that decision, butresulting in a communication breakdown that is ruinous for projects relying on personal bias from experience in the aerospace andand frustrating for the cost engineering professional. Closing this construction industries on projects ranging from $30 million to $2gap is the responsibility of both parties. billion, I strongly recommend the use of commercial software as

the primary engine for analysis and reporting. Those areas that areThe greatest potential for our profession lies ahead, and this not adequately covered by the "canned" package can be covered

paper should serve as a wake-up call to those who view the state via programs that are written by an MIS department or outsourcedof our position in the work place with complacency. While no through a reputable programmer. Think for a moment how many

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1994 AACE TRANSACTIONS

spreadsheets, databases, graphics packages, and even program Policies and procedures are written as controlling documents tomanagement packages have been developed by frustrated cost ensure consistency among those responsible for performing specificengineers or adventurous MIS departments. Think of the cost of functions. One look at that paragraph would send mostcompleting each, the additional cost if the system breaks down or professional schedulers to toss the policy out the window andthe programmer leaves the assignment for greener pastures, leaving develop his or her own "standard."no documentation behind. Think of how many different projectswithin the same firm are developing these products independently. We must simplify terms and cross-train project managers toTCM is supposed to prevent ill-advised use of resources while the accept a vernacular that is currently alien to them. Results of atools used to accomplish this mission are being recreated in a questionnaire distributed to 35 professionals within a largehighly inefficient manner. In the past, I've worked in a project engineering firm yielded the data shown in Figure 1 regardingcontrol organization where staff on four projects, all located on the comprehension of key cost engineering skills. While responses tosame floor, in close proximity, preparing the same standard reports questions regarding understanding of a project control system werewere using unique spreadsheets and database programs. ranked slightly above average, the results in the areas of creationCommercially available software will not give you everything you and maintenance of baseline information (schedules, budgets) andcould possibly want. Report formats may be overly structured, use of reports was alarming. The technical staff barely knew howwhat-ifs may require that data be organized in a specific manner, the elements of cost engineering were created or how to read statusand processing time may be agonizingly slow. Connmunicating reports and other information.critical information to your audience may be limited by the typesof graphics supported by the software. However, there are some Use terms that are quickly recognizable to the reader. Do notreal positives to be found in being forced into setting up data in a assume that terms of the trade are recognized by everyone. Definelogical, consistent structure. Limitations on report formats are key terms and differentiate them from one another.temporary drawbacks and, in some aspects, also favorable.Working with available reports, the cost engineer has a baseline set Identifyiag the Audienceof information that can be produced regularly and that can becomethe building basis for creating future "user friendly" reports. There Who are th e decision makers in your organization? The firstare very few software programs that cannot export data into step in the process of making your work meaningful is to make itspreadsheets, graphics programs, or databases for custom reporting. meaningful to the persons responsible for acting on it. Look at theThose ancillary programs should be die domain of the NUIS project organization chart and determine those team members who

will require estimates, cost reports, risk analyses, schedule data,department or a subset of the project control group dedicated tomaintaining and controlling the home-grown systems. These and productivity status. The need will vary from person to person

and by level of responsibility. Realization of the types ofsystems can generally be adopted from "proven" programming that and by level of responsibility Realzaon of the types of

information required by each project member will get you started.dly available from users groups or bullet boards at One of the greatest mistakes we make is to neglect the fact that

software manufacturers set up as part of their product serviced. ateseveryone who participates in the project has a right to know howhe or she is performing to the plan. This means that your audience

C Ustze comniercially available software o whenever possiblen is inclusive of the entire project team. This point was reinforcedCustomize around the purchased software. Do no reinvent the at a conference I attended that was given by a recipient of theproverbial project management wheel. Malcolm Baldridge Award. This honor is given to U.S. companies

who demonstrate excellence in total quality. The speakers at thisTerms of the trade are not widely understood by those outside seminar discussed the importance of measuring the results of

our vocational clique. This assertion was reinforced recently by implementing a total quality initiative (which is a good idea). TheQuentin Fleming, a noted author of several management books company posted charts on bulletin boards on the shop floor, in thewho, upon reviewing the draft of a procedure I'd written for earned order processing office, the shipping department, and the executivevalue, asked me "Couldn't you use the term 'plan value' instead of office. Those closest to the product were given weekly feedback'budgeted cost of work scheduled'?" [2]. His point can be on their performance or lack thereof. We cannot exclude anyoneextrapolated to the entire language we use. We can readily assume from the information circuit if our goal is to make cost engineeringthat the terms "budget," "schedule," or "expenditures" will be a productive part of the project or institution. Focusing only onunderstood by all. Yet, differentiation between "plan" and the project manager or executive staff is the type of tunnel vision"budget" or "plan" and "schedule" or "plan" and "forecast" can we must avoid. However, the paradox here is that we also cannotcreate confusion when used interchangeably in reports. Use of get bogged down into a cycle that leaves little time for anythingacronyms further exacerbates the situation and is a major cause of but reporting.frustration with those who need vital information but can't decipherthe project control slang. I recently reviewed a procedure for Once the audience is identified, segregate it into groups by thepreparation of design project schedules that read like this: type, frequency, level of detail, and quantity of information each

needs. Over time, a pattern will emerge, indicating who is usingThe project scheduler using the project's ABCS, WAS, what type of information, and you can adjust your grouping of theDCL, OBS, CD, and templates from the Programwide audience accordingly. The executive information system model,Library, as applicable, develops the Project Activities discussed in the next section, will help you to further analyze yourListing with built-in WAS, OBS, and CD coding. [1] audience and to develop the type of analysis they need to make the

project succeed.

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1994 AACE TIRANSACTIFONS

Knowledge of Project Control System43 Total Respondents Project Baselines and Data Collection

GRADE GRADE

3.5 2=4

0 1 2 3 4 5 0 1 2 3 4 5Audience Audience

lL~Senior MMiFSupervising niervra afSenior Supervising -EnineerFAverage

Sanagerent Suer Engineer AegManagement Engineer Enginee

Representative Sample was asked a series of 12 questions 35 respondents - 12 questions were posed and graded

Answers were graded on a scale of 1-5 (5 being highest) on a scale of 1-5 (5 being highest). Questionsevaluate knowledge of preparation and use of data.

Knowledge of and Use of ReportsGRADE

2.4

_ 22~~~. 1

0 1 2 3 4 5Audience

Senior MMSupervising E i AIlManagement Engineer ngineer ngne verage35 Respondents - 12 questions and examples of standardreports. Graded on a scale of 1-5 (5 being highest).

Figuire 1-Survey Data: Staff Knowledge of Key Cost Engineering Concepts

The audience includes internal and external organizations. I As a cost engineer, I have predicated my work on its being

have dealt mainly with the audience that provides a service, but not destined to drive project management to remain on course or take

with the entity who has purchased the service-the owner. This corrective action depending upon results of the analysis I

audience usually has strong ideas regarding the procedures, performed. Ingrained with this noble purpose, I utilized all of my

personnel, hardware, and software to be used to implement a cost educational background, ongoing education, and years of working

engineering system. The owner has the same dichotomy in its experience to prepare complex analyses and reports that most

divisions as does the consultant. Project control vernacular will be assuredly would keep multi-million dollar projects on track. After

misunderstood, the value of the cost engineer will be undervalued, much editing and fine tuning, I delivered the finished documentsand eveiy new control mechanism will be scorned. The consultant to the project manager, eagerly awaiting his praise for "saving" theproject control organization faces a nearly iurmountable obsutacle. day. After waiting several days for such positive feedback, I tookproject control organization faces a nearly insurmountable obstacle. . X

Added to the general disdain for information that can potentially report in theduled trip to the project manager's office to find myreport in the "out basket" with a large red question mark defacing

point out deficiencies in one or both organizations' technical. the first page of my magnum opus. As it turns out, the pure logicmanagement of the work, the owner will invariably want its control diagram schedule sered to confuse, the histograms showing

system to be followed by all consultants. resource usage by trade were too busy, and the narrative that

supported my assumptions referred back to the two documents thatOwners and consultant project control organizations alike the project manager was unable to comprehend. When I attempted

should realize a mutual understanding of the hurdles they, as a to explain that we were projecting a schedule delay of two weeks,

profession, will face and work together to create a synergistic team the project manager wanted backup that supported my

early in the process. If this positive effort is not undertaken, the conclusions-the ones covered with the big red question mark.

function of cost engineering will be of marginal value to theprogram. Complex analyses of profitability, risk, time, and facilities cost

are keys to TCM and are the domain of the cost engineer. The

CommunD icating results of these analyses must be communicated in a manner thatfacilitates their use. Depending upon the audience, information

The next step is to format the information in a way that will must be synthesized and summarized for the individual manager.get immediate attention and recognition from the reader. The While a pure logic diagram is an essential tool for sequencing

following war story should help focus the importance of this point. work, it is not a good presentation tool. Figure 2 represents howinformation generated for analysis can be summarized.

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1994 AACE TRANSACTIONS

IThis chart summarizes the entire project for the executive]

* Within 5% of Target uOutside target > 5% Outside Target > 10%

CONTRACT BUDGET SCHEDULE FORECAST

DESIGN

CONSTRUCTION

PROFESSIONAL ASERVICES

Arrows indicate trend from last report.Figure 2-Project Summary Status XX/94

This is not to suggest that we throw away pure logic An EIS isn't going to work if it doesn't meet the needs ofdiagrams, detailed cost reports, work package level estimates, or the sponsor. It can't reflect those needs if the EISmulti-dimensional models. This data is useful as backup material developer doesn't know what they are. One of the mostin a report appendix or in your back pocket when you present your important skills required of the EIS developer is thefindings. The results of your investigations should not be buried ability to listen carefully to what the executive wants.in a mass of detail that may have led to your conclusions, but do The time spent demonstrating the EIS should benot result in a value added to the point you are trying to make. minimized, and the time spent eliciting executiveWhen dealing with project management and above, information feedback, advice, and suggestions should be maximized.should be geared to the "30 second" rule. That is, if the reader The EIS will belong to that Executive to the extent thatcannot grasp the intent of your presentation within 30 seconds of he or she has had a role in its design and tailoring. [3]reading the page or listening to your pitch, the message will belost. One of the best ways to address the 30 second rule is to This paper is not about EIS, but there are some usefulfollow the process used in development of executive information parallels between EIS and the larger issue of making costsystems (EIS). engineering work. Project control systems cannot be formulated

in a vacuum. Users of the service must be understood. If youAn EIS is actually two subsystems: one that contains a attempt to ram a system down a manager's throat, it will be

snapshot of project or program status using standard graphics and ignored. By working with the technical team and through effectivetabular reports geared toward the decision making style of the listening, we can contour aspects of the processes we use toexecutive, and a second subsystem that gives the user a develop responsive, informative, and useful products for ourmultidimensional database for reviewing data in a variety of clients.combinations as well as allowing for optimization studies and riskanalysis. The development of the first subsystem requires a great Stated earlier, our clients include all levels of the projectdeal of interfacing between the end users and the programmers. In organization, including the owner. Each group will havean iterative cycle, eye-appealing, simple charts and tables are preferences as to the look and information they would like to havestandardized. Standardization only occurs through refining, in included in a given analysis. Finding areas of commonality amongconjunction with the end user, the information required, its all groups and negotiating subtle differences will reduce the overallpresentation, and its frequency. Alan Paller writes in The ElS work load for the project control staff. Where customization isBook that: required, approach with caution. First, you must prioritize who is

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1994 AACE TIRANSACT]IONS

going to get what and when. This is easier said than done. on key cost engineering concepts, we can change attitudes to theProject managers want it all yesterday. The owner wanted it all point where the team understands how project management andlast week. If you can't effectively communicate the plan to the control can work for everyone.working elements of the team (the people who will actuallyexcavate, tie rebar, and pour concrete), you may be doomed from Training begins with an overview of the basics includingthe start. The answer may lie in giving each group a "starter set" planning, budgeting, scheduling, cost control, and risk analysis.of information. This is part of the EIS scheme. Lay out a straw The training should be contoured to the specifics of the system thatman that uses one set of data from the project management system will be used over the life of the project or program. A member ofthat you have standardized. Send out a report that includes the senior management team (the construction manager or projectinformation that can be easily generated from your system. Follow engineer) should make an introductory statement about theup with each audience and retain those items that get the message importance of completing the job within the budget and scheduleout effectively. Determine which of the remaining reports can constraints negotiated with the owner. He or she must stress thatbecome effective through a one-time explanation to the audience the project control function will provide the tools to manage theor slight alteration (within the bounds of the system), and which business aspects of the job.reports require serious rework. Discard the rest. If the informationis critical in your estimation, attempt to reorient your message. The training must be given by someone who is a competentTake this step last. The more special reports you have to generate, instructor, who can field the questions of the skeptical studentthe less time you will have to perform your real function. body, and who can focus on the areas requiring the greatestSometimes, it seems as if the cost engineering function is regarded amount of attention. There are many knowledgeable cost engineersas the chart makers and not as a management control function. who are not good teachers. Mentoring is a skill possessed by theThis tendency weakens our ability to be taken seriously by few. One of the biggest mistakes you can make is to arbitrarilytechnical engineers and those people in the field who "have been pull someone from your staff to give a four-hour class indoing this for thirty years" and don't need a schedule to manage estimating. If it is the wrong person, you will do far more harmthe job. than good.

To summarize this section, all of the good analysis in the Training should key on the aspects of the system that the classworld isn't going to save your firm a penny if either you are not will use most often. The students are not going to change careersthe senior official on the job or you cannot communicate your at the conclusion of your seminar. Hopefully, they will understandposition in a meaningful way to the team. Deciding what to the tools available to them, use the tools to control their work, andpresent and how to present it takes a great deal of investigation see you as a positive supporting part of the team. I have foundand effective listening. The preparation of a standard document that the use of "brown bag" presentations (regularly scheduledcannot consume all or even 50 percent of the cost engineer's time lunchtime seminars) work well. The informal atmosphere isor the report will become more important than the content. In conducive to partnering and time is not taken away fromother words, cost engineers don't want to be confused with the production.graphics and publications department located on some other floorof the building. Becoming a prominent part of the team by I have alternated sessions between cost engineering topics anddemonstrating the ability to understand and communicate the cause technical engineering topics. One meeting might be devoted toand effect of the daily events that make up a project will ultimately cost forecasting and the next on segmental bridge construction.prove the worth of the cost engineer. Both groups learn from each other and both tend to work more

closely. The training aspect of making cost engineering work may7raIning well be the most important since it opens the eyes of the team to

a segment of a project that gets little vocational attention and,I think we get caught up in our professional work to the point therefore, is viewed with caution, if not disdain.

where we assume everyone must know what it is we're doing. Ofcourse, the corollary is often true as well; we are the only ones thatknow what we are doing and no one else could possibly SUBI$ fAIRYunderstand our complex world. Both views are tonics for disaster.Much of what we do can be viewed negatively by the team since The TCM concept is exciting if not new. Prevention ofwe analyze variances. What gets lost in the shuffle is that we also unwarranted expenditures of time and dollars has been central toprovide opportunities for the team to work more efficiently, to save the total quality concept. In the United States, Total Qualitytime, and to save money. Since there is a skepticism to cost Management is slowly finding its way into the mainstream. Costengineering and because our profession lies outside of the pure engineering, too, is still struggling to achieve its place in the sun.technical sciences, we must train cost engineering concepts to our There are things we can do as members of this profession to hastencounterparts in the organization. acceptance of management control into industry. We have become

quite sophisticated in our approach to our work. That those toMeasurement of the performance of a design team or field whom we provide a service have failed to keep pace is a problem

crew has a "Big Brother" connotation. Through effective training that we must solve proactively.

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First, we need to recognize some of the deficiencies that REFERENCES

developed over time and resolve them. Next, we must recognizethat users of cost engineering tools encompass the entire projectorganization and that each can use our service. Our audience will 1. Engineering Management Consultant Policy PC006. 1993.

be receptive to the work we do once it is effectively communicated Project Design Schedule Development, revision 00.

to them. We are responsible for presenting the facts quickly,succinctly, and accurately. Lastly, we cannot assume that everyone 2. Fleming, Quentin W. 1994. Oral communication, Los

understands the concepts we use on a routine basis. It is our Angeles, CA., January 12.

responsibility to make the organization aware of TCM through arepresentative training program. These are basic issues that are 3. Paller, Alan and Richard Laska. 1990. The EIS Book

easy to implement. If each is addressed, cost engineering will Homewood, IL: Richard D. Irwin Inc., p. 111-112.

work.

Arthur J. HadnettParsons Brinkerhoff Quade & Douglas, Inc.707 W. Wilshire Blvd./Suite 2900Los Angeles, CA 90017

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