Cost Engineering 101

Cost Engineering 101
Hery Mada Indra Paska

Duri, June 2020
1
About :
Hery Mada Indra Paska ,SET, ST, MMT, M.Eng, CCP
Degree :
• Bachelor Applied Degree in Accounting
• Bachelor of Mechanical Engineering
• Master of Management Technology
• Master of Engineering in Mechanical Engineering
Experience :
• More than 15 years of industrial experience in Mining and Oil&Gas.
Certification :
• Cost Certified Professional – AACEI
Competency :
Cost Engineering :
• Budgeting, Cost Engineering and Control
• ESAR and CSRA
• Well Development Project Planning
• Cost Estimation & Analysis
• Oil & Gas Project Management, Earn Value Management and Risk Management System
• Proficiency in Total Cost Management (life cycle costing).
• Proficiency from conceptual to detailed design engineering estimate
• Familiar with various construction contracts such as Production Sharing Contract (PSC System),
traditional lump sum, unit rate and EPC contracts
• Project Portfolio Monitoring
• Contract Administration and Implementation
Mechanical Engineering :
• New Renewable Energy : Solar Chimney Power Plant
• Basic Heat Transfer, Thermodynamics and Fluid Mechanics
Industrial Engineering :
• Quality Function Deployment : From Voice of Engineer to Voice of Customer
• Master Production Schedule, Layout System, Total Quality Management, Lean Sigma, Ergonomics 2
Agenda
 What is Cost Engineering?

 The Cost Engineering Handbook
 Why Cost Engineering?
 Role of Cost Engineer
 The Enterprise Perspective of Cost Engineering
 The Two Levels of Cost Engineering
 Cost Engineering in PDEP
 The Influence Curve
 Role of Cost Engineer
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© 2020 Hery Business Strategic Corporation
What is Cost Engineering?
Cost & Schedule

Predictability
• Consistency of Project
Management / Cost
Engineering
Implementation
• Organizational Capability
• Consistency of competency
development
• Updated and reliable

historical project
performance database
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• “Cost Engineering includes the work processes, procedures, tools, and practitioners to develop
quality, predictable project cost estimates, schedules and CE risk management plans; and then
manage project execution through sound project controls.”
• AACE International defines Cost Engineering as: “That area of engineering practicewhere
engineering judgment and experience are utilized in the application of scientific principlesand
techniques to the problems of cost estimating, cost control and profitability”.
Good
Randomly
Project
Project
EXECUTION
Success
Success
Project Poor
Fail Project
Successful Project from CE perspective:
 Actual Cost = in +/- 10% variance from Planned Cost Poor PLANNING Good
 Actual Schedule = in +/- 10% variance from Planned Schedule
5
Applying methods and techniques for:
• Estimating
• Planning
• Cost Control / Cost Management
• Contracting / Tendering
• Quantity Survey
• Risk Assessment
• Value Engineering
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Cost Engineering Hand Book
TCM is a Process for Applying the Skills and Knowledge of Cost Engineering :
“…the effective application of professional and technical expertise to plan and control resources,
costs, profitability and risks. Simply stated, it is a systematic approach to managing cost
throughout the life cycle of any enterprise, program, facility, project, product, or service. This is
accomplished through the application of cost engineering and cost management principles,
proven methodologies and the latest technology in support of the management process.”
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Why Cost Engineering?
Birth of the Cost Engineer
• Merchants should seek advise from engineers
• Engineers often see their designs too optimistic
• The merchants protect themselves by cost experts, and than it all went a bit
wrong!
• medical disabled technicians became Cost Engineers
• technologists saw the Cost Engineers as spoilers
• Cost Engineers could shoot the technologists
• the Cost Engineer is the only engineer who knows that the outcome of
his calculations will be wrong
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9
10
11
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Project Top 10 Pitfalls
1. Failure to develop a reasonably defined scope

2. Relying solely on previous estimates
3. Failure to account for PEP / Contracting Strategy
4. Failure to involve the right people or groups
5. Missing or incomplete Estimate Plan and or Basis of Estimate
6. Dismissing allowances (technical and cost)
7. Not enough contingency
8. A bid is not the project estimate
9. Failure for the project team to check work (quality checks and metric tests)
10. Not enough time to execute the work, conduct reviews, etc.
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14
Role of Cost Engineer
• The Cost Engineer is accountable for the quality,

the consistency, and the timeliness of the products
resulting from the responsibilities.
• These products are primarily the following:

Estimates, plans, schedules, budgets and project
status report.
• The quality, consistency and timeliness are usually

formalised in work processes and procedures
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CE Framework
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Project Element
 Quality
 Schedule
 Cost
 Scope
 Plan
 Implement
 PM Tools
 Skills
 Project Communication Plan
 Risks
 Review, Reflect or Report
 Project Organization
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The Enterprise Perspective of Cost Engineering
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The Two Levels of Cost Engineering
Focus and Process Areas
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Asset Level Activities by Project Development &
Execution Process (PDEP) Phase
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Project Level Activities by Project Development &
Execution Process (PDEP) Phase
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Cost Engineering in PDEP
• Framing • Analyze • Cost • Monitoring • Look back

• DA Estimate • Measurement • Lessons
• Select • Schedule • Tracking Learned
Development • Forecast
• Resource
• Contract &
Proc. Plan
• Project
Controls Plan
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The Influence Curve
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27
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29
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Q&A
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Thank You
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Cost Engineering 101

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Cost Engineering 101

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Cost Engineering 101

Hery Mada Indra Paska

 What is Cost Engineering?

Cost & Schedule

• Updated and reliable

Applying methods and techniques for:

Project Top 10 Pitfalls

1. Failure to develop a reasonably defined scope

• The Cost Engineer is accountable for the quality,

• These products are primarily the following:

• The quality, consistency and timeliness are usually

• Framing • Analyze • Cost • Monitoring • Look back

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