1994 AACIE T1NSAC1IONS

Athulr J.o ldiert

EM @OU121~JCTl@IH approach is going to be bulletproof, there are some principles that

can 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 the
extensions on major projects have become a regular phenomenon attention shown by decision makers to cost engineers' work, their
in all industries. Cancellation of major weapons procurement, stated need for the work, and their use of it to keep projects on
curtailment of infrastructure projects, and downscoping of future track. If we can identify our audience, respond to its needs by
work is headline fodder for the front page and business sections of communicating information effectively, and provide training as
local 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 few
tangible results. DO'S AND DONTS

How can this be happening when greater and greater portions As I mentioned earlier, processes and tools for cost
of overall project expenditures are being devoted to control and engineering have become sophisticated. While this trend has given
oversight functions? As funds for new work become more and the profession multiple ways of examining information, it has also
more 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 management
point 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 computer
These 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 our
more sophisticated over time in response to the growing midst, and the marriage is not all a blissful one. Our responsibility
complexity of projects. Applications, both in processes and is to gather information, analyze it, and forecast the impacts to the
hardware/software, have given the cost engineer a number of ways project. All too often, every ad-hoc request or non-standard report
to 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 to
Through 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 professional
corrective actions. Given these tools, the expertise of the cost position based on cost engineering standards and practices. The
engineer, and the precision of his or her analysis, how can I dare information is delivered late, the data is questionable, and the
blaspheme 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 of
not relieve us from guilt. Unfortunately, much of the value of the contoured systems written specifically for a given project versus
efforts performed by the cost or scheduling professional is lost on the use of commercially available software that can generally meet
the decision-making entity, the project manager. What we are between 75 to 80 percent of the perceived needs of the team. The
witnessing is a gap between the orientation of different disciplines, in-house MIS department will be a factor in that decision, but
resulting in a communication breakdown that is ruinous for projects relying on personal bias from experience in the aerospace and
and frustrating for the cost engineering professional. Closing this construction industries on projects ranging from $30 million to $2
gap 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 are
The 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 outsourced
of 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 to
management packages have been developed by frustrated cost ensure consistency among those responsible for performing specific
engineers or adventurous MIS departments. Think of the cost of functions. One look at that paragraph would send most
completing each, the additional cost if the system breaks down or professional schedulers to toss the policy out the window and
the programmer leaves the assignment for greener pastures, leaving develop his or her own "standard."
no documentation behind. Think of how many different projects
within the same firm are developing these products independently. We must simplify terms and cross-train project managers to
TCM is supposed to prevent ill-advised use of resources while the accept a vernacular that is currently alien to them. Results of a
tools used to accomplish this mission are being recreated in a questionnaire distributed to 35 professionals within a large
highly inefficient manner. In the past, I've worked in a project engineering firm yielded the data shown in Figure 1 regarding
control organization where staff on four projects, all located on the comprehension of key cost engineering skills. While responses to
same floor, in close proximity, preparing the same standard reports questions regarding understanding of a project control system were
were using unique spreadsheets and database programs. ranked slightly above average, the results in the areas of creation
Commercially available software will not give you everything you and maintenance of baseline information (schedules, budgets) and
could possibly want. Report formats may be overly structured, use of reports was alarming. The technical staff barely knew how
what-ifs may require that data be organized in a specific manner, the elements of cost engineering were created or how to read status
and processing time may be agonizingly slow. Connmunicating reports and other information.
critical information to your audience may be limited by the types
of graphics supported by the software. However, there are some Use terms that are quickly recognizable to the reader. Do not
real positives to be found in being forced into setting up data in a assume that terms of the trade are recognized by everyone. Define
logical, 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 Audience
of information that can be produced regularly and that can become
the building basis for creating future "user friendly" reports. There Who are
th e decision makers in your organization? The first
are very few software programs that cannot export data into step in the process of making your work meaningful is to make it
spreadsheets, graphics programs, or databases for custom reporting. meaningful to the persons responsible for acting on it. Look at the
Those 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 to
maintaining 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 of
systems 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 availablefrom or bullet boards at
users groups One of the greatest mistakes we make is to neglect the fact that
software manufacturers set up as part of their product serviced. ates
everyone who participates in the project has a right to know how
he or she is performing to the plan. This means that your audience
C Ustze comniercially available software whenever
o possiblen is inclusive of the entire project team. This point was reinforced
Customize around the purchased software. Do no reinvent the at a conference I attended that was given by a recipient of the
proverbial project management wheel. Malcolm Baldridge Award. This honor is given to U.S. companies
who demonstrate excellence in total quality. The speakers at this
Terms 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). The
Quentin Fleming, a noted author of several management books company posted charts on bulletin boards on the shop floor, in the
who, upon reviewing the draft of a procedure I'd written for earned order processing office, the shipping department, and the executive
value, 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 anyone
extrapolated to the entire language we use. We can readily assume from the information circuit if our goal is to make cost engineering
that the terms "budget," "schedule," or "expenditures" will be a productive part of the project or institution. Focusing only on
understood 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 cannot
create confusion when used interchangeably in reports. Use of get bogged down into a cycle that leaves little time for anything
acronyms further exacerbates the situation and is a major cause of but reporting.
frustration with those who need vital information but can't decipher
the project control slang. I recently reviewed a procedure for Once the audience is identified, segregate it into groups by the
preparation 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 using
The project scheduler using the project's ABCS, WAS, what type of information, and you can adjust your grouping of the
DCL, 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 your
Listing 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 System
43 Total Respondents Project Baselines and Data Collection
GRADE GRADE

3.5 2=4

0 1 2 3 4 5 0 1 2 3 4 5
Audience 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). Questions
evaluate knowledge of preparation and use of data.

Knowledge of and Use of Reports

GRADE

2.4

_ 22~~~. 1

0 1 2 3 4 5
Audience
MMSupervising E i A
IlManagement
Senior
Engineer ngineer
ngne verage
35 Respondents - 12 questions and examples of standard
reports. 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 documents
and eveiy new control mechanism will be scorned. The consultant to the project manager, eagerly awaiting his praise for "saving" the
project control organization faces a nearly iurmountable obsutacle. day. After waiting several days for such positive feedback,XI took
project control organization faces a nearly insurmountable obstacle. .
Added to the general disdain for information that can potentially report in theduled trip to the project manager's office to find my
report 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 logic
management 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 that
Owners 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 the
program. 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 that
facilitates 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 how
information 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 A
SERVICES

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 of
diagrams, detailed cost reports, work package level estimates, or the sponsor. It can't reflect those needs if the EIS
multi-dimensional models. This data is useful as backup material developer doesn't know what they are. One of the most
in a report appendix or in your back pocket when you present your important skills required of the EIS developer is the
findings. 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 be
not result in a value added to the point you are trying to make. minimized, and the time spent eliciting executive
When 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 that
cannot 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 be
lost. One of the best ways to address the 30 second rule is to This paper is not about EIS, but there are some useful
follow the process used in development of executive information parallels between EIS and the larger issue of making cost
systems (EIS). engineering work. Project control systems cannot be formulated
in a vacuum. Users of the service must be understood. If you
An 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 effective
tabular reports geared toward the decision making style of the listening, we can contour aspects of the processes we use to
executive, and a second subsystem that gives the user a develop responsive, informative, and useful products for our
multidimensional database for reviewing data in a variety of clients.
combinations as well as allowing for optimization studies and risk
analysis. The development of the first subsystem requires a great Stated earlier, our clients include all levels of the project
deal of interfacing between the end users and the programmers. In organization, including the owner. Each group will have
an iterative cycle, eye-appealing, simple charts and tables are preferences as to the look and information they would like to have
standardized. Standardization only occurs through refining, in included in a given analysis. Finding areas of commonality among
conjunction with the end user, the information required, its all groups and negotiating subtle differences will reduce the overall
presentation, and its frequency. Alan Paller writes in The ElS work load for the project control staff. Where customization is
Book 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 the
Project managers want it all yesterday. The owner wanted it all point where the team understands how project management and
last 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 actually
excavate, tie rebar, and pour concrete), you may be doomed from Training begins with an overview of the basics including
the 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 that
man that uses one set of data from the project management system will be used over the life of the project or program. A member of
that you have standardized. Send out a report that includes the senior management team (the construction manager or project
information that can be easily generated from your system. Follow engineer) should make an introductory statement about the
up with each audience and retain those items that get the message importance of completing the job within the budget and schedule
out effectively. Determine which of the remaining reports can constraints negotiated with the owner. He or she must stress that
become effective through a one-time explanation to the audience the project control function will provide the tools to manage the
or slight alteration (within the bounds of the system), and which business aspects of the job.
reports require serious rework. Discard the rest. If the information
is critical in your estimation, attempt to reorient your message. The training must be given by someone who is a competent
Take this step last. The more special reports you have to generate, instructor, who can field the questions of the skeptical student
the less time you will have to perform your real function. body, and who can focus on the areas requiring the greatest
Sometimes, it seems as if the cost engineering function is regarded amount of attention. There are many knowledgeable cost engineers
as the chart makers and not as a management control function. who are not good teachers. Mentoring is a skill possessed by the
This tendency weakens our ability to be taken seriously by few. One of the biggest mistakes you can make is to arbitrarily
technical engineers and those people in the field who "have been pull someone from your staff to give a four-hour class in
doing this for thirty years" and don't need a schedule to manage estimating. If it is the wrong person, you will do far more harm
the 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 class
world 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 careers
the senior official on the job or you cannot communicate your at the conclusion of your seminar. Hopefully, they will understand
position in a meaningful way to the team. Deciding what to the tools available to them, use the tools to control their work, and
present and how to present it takes a great deal of investigation see you as a positive supporting part of the team. I have found
and effective listening. The preparation of a standard document that the use of "brown bag" presentations (regularly scheduled
cannot consume all or even 50 percent of the cost engineer's time lunchtime seminars) work well. The informal atmosphere is
or the report will become more important than the content. In conducive to partnering and time is not taken away from
other words, cost engineers don't want to be confused with the production.
graphics and publications department located on some other floor
of the building. Becoming a prominent part of the team by I have alternated sessions between cost engineering topics and
demonstrating the ability to understand and communicate the cause technical engineering topics. One meeting might be devoted to
and 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 may
7raIning 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. Of
course, the corollary is often true as well; we are the only ones that
know what we are doing and no one else could possibly SUBI$ fAIRY
understand 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 of
we analyze variances. What gets lost in the shuffle is that we also unwarranted expenditures of time and dollars has been central to
provide opportunities for the team to work more efficiently, to save the total quality concept. In the United States, Total Quality
time, and to save money. Since there is a skepticism to cost Management is slowly finding its way into the mainstream. Cost
engineering 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 hasten
counterparts in the organization. acceptance of management control into industry. We have become
quite sophisticated in our approach to our work. That those to
Measurement 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 recognize
that users of cost engineering tools encompass the entire project
organization 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 a
representative 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. Hadnett
Parsons Brinkerhoff Quade & Douglas, Inc.
707 W. Wilshire Blvd./Suite 2900
Los Angeles, CA 90017

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