3 Introduction Key AACE members present to be recognized Michael Nosbisch BackgroundVP of Project Controls for Parsons Government Group (2005 – 2009)Became active in EFCOG PMWG during this timeVP of EVM for SM&A (2009 – present)Lead EVM Instructor for DOE’s PMCDPConsultant to several DOE contractorsPresident – Elect of AACE (2010 – present)Presented on AACE to this group a few years ago in Idaho FallsCurrent BoD “sponsor” for cooperative agreement with DOE
4 AACE InternationalFounded in 1956, currently largest global organization dedicated to furthering concepts of total cost management and cost engineering8 regions91 sections7,708 membersAccording to 2010 Membership Survey, 22% of respondents were Estimators by primary job function
5 AACE InternationalCost Engineering defined as the collective set of practice areas that includes the following:Business and program planningCost estimatingEconomic and financial analysisCost controlProgram and project managementPlanning and schedulingCost and schedule performance measurementChange controlTotal Cost Management (TCM) is the "process" through which these practices are appliedTCM Framework free download from websiteWill soon be available as web-enabled, process flow diagram tied to all AACE technical products
6 AACE International Estimating-specific Certified Estimating Professional (CEP)One of four “specialty” certifications currently offeredIntroduced in 2008, currently there are 110 CEPs in databaseIntent is to recognize specialists who meet established set of estimating criteria by examination, experience, education and ethical qualificationsRecommended Practices (RPs)17R-97: Cost Estimate Classification System18R-97: Cost Estimate Classification System: As Applied in Engineering, Procurement, and Construction for the Process Industries (JAN 2011)19R-97: Estimate Preparation Costs: As Applied for the Process Industries31R-03: Reviewing, Validating and Documenting the Estimate34R-05: Basis of Estimate40R-08: Contingency Estimating: General Principles
7 AACE International DOE Relationship Cooperative agreement first signed in 1997Reauthorized in 2002 and 2007Current DOE “sponsor” is OECMKey elements:Advance “state-of-the-art” of TCM through increased communication and dialogueApply established cost engineering/cost management principles, proven methodologies, and latest technologyDevelop new cost engineering/cost management methodologies and technology in pursuit of optimum resource utilizationEncourage utilization of cost management standards and practices and their continual improvement/advancement
8 DOE Estimating Guide (413.3-21) AACE Estimate Classification System (1998 version included as Appendix J)Reprinted from AACE RP No. 18R-97, Cost Estimate Classification System – As Applied in Engineering, Procurement and Construction for the Process Industries
9 DOE Estimating Guide (413.3-21) DOE “Suggested” Estimate ClassificationsOnly difference lies in specific Techniques (DOE) vs. Methodology (AACE)Additional table included in Guide showing “secondary characteristics” is an exact reprint from the AACE RPReprinted from Table 4.2, U.S. Department of Energy Cost Estimating Guide
10 DOE Estimating Guide (413.3-21) AACE Estimate Classification System (2011 version)Reprinted from Figure 1, AACE RP No. 18R-97 (2011), Cost Estimate Classification System – As Applied in Engineering, Procurement and Construction for the Process Industries
11 DOE Estimating Guide (413.3-21) Critical Decision (CD) RequirementsCD-0Cost estimate range (i.e., order of magnitude)Due to lack of detail or design during early project formulationAn estimate of costs to be incurred prior to CD-1 could also be requiredFor developing Conceptual Design for projectCD-1Prior to approval of CD-1, project team should develop definitive estimate of near term preliminary design costFor PED funding requestLife-cycle cost estimate (LCC) of likely alternatives that are being consideredAfter selecting alternative, project team develops total project cost (TPC) range
12 DOE Estimating Guide (413.3-21) Critical Decision (CD) Requirements (cont’d)CD-2Single point estimate that will represent entire project, utilizing current scope and associated design parameters70-90% confidence level (CL)CD-3Cost estimate based on Final Design [or sufficiently mature to start construction]May incorporate actual bids received from contractors used to establish project’s requirements for construction or executionCD-4Final Estimate at Completion (EAC)In accordance with project’s approved WBS
13 Mapping Recommendations CD-0:Cost estimate range: Class 5Rationale:At best, will use stochastic methods to develop cost rangesAssumptions will be made for drivers having significant impact on project costEstimate of costs to be incurred prior to CD-1: Class 3Resources needed to support Conceptual Design effort should be known within range of -20% to +30%Acquisition strategy and scope of work for Conceptual Design should also be known
14 Mapping Recommendations CD-1:Estimate of near term preliminary design cost: Class 3Rationale: Class 3 is minimum requirement to be definitive estimate; for less complex projects Class 2 would be appropriateLCC of likely alternatives that are being considered: Class 5Rationale: Data for some of life cycle costs will be available, but most will be projections, which will be applied to Class 5 estimate of projectTPC range: Class 4Rationale:This estimate uses as its basis scope that is at best only 15% definedThere is still an overabundance of unknowns that will require allowances rather than definitive estimates
15 Mapping Recommendations CD-2:Single point estimate representing entire project:Low risk projects (left of 50% below): Class 3High risk projects (right of 50% below): Class 2Rationale: Class 3 requires 10-40% of full project definition; Class 2 requires 30-70% of full project definitionReprinted from Figure 3, DOE O 413.3B
16 Mapping Recommendations CD-3:Cost estimate based on Final Design [or sufficiently mature to start construction]:Low risk and final design complete: Class 1If low risk and final design not complete: Class 2If high risk (final design or not): Class 2Rationale: For high risk, one of a kind or complex projects, some of detail will still not be fully developedCD-4:Final Estimate at Completion (EAC): N/ARationale: Based on actual costs (no longer an estimate)
17 Conclusion Currently soliciting input from: AACE (Estimating Committee)EFCOG (Cost Estimating Subgroup)Once received/compiled, goal will be to formalizeNew AACE RP or Addendum to existing?Revision to DOE Estimating Guide?
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