Blog

12thApril
What is Cost Engineering?

When I tell people I am a Cost Engineer I often get puzzled reactions. “What does that actually entail?” “What kind of work do you actually do?” So here I am, writing this blog trying to explain.

Cost engineering

Let’s first start with the first part, “cost” is the collective term for resources such as: money and time. These resources are limited and should be utilized as efficient as possible. That is where the practice of cost engineering focuses on; “managing cost throughout the life cycle of any enterprise, (e.g. project or program).”

In order to achieve this, a cost engineer relies on sound engineering practices. A cost engineer applies his engineering skills and experience to forecast the development of a project, seeking to predict the progress of a project and to spot deviations from the plan early on. To analyze a deviation in the original design, it is vital to understand what other parameters will be affected and how this impacts the rest of the design and planning. Trying to answer the question: ‘where will the current technical developments lead and how will they affect the economic prospects of this project?’

The activities of a cost engineer can broadly be presented into three separate categories: measure, control, improve.

Measure

In order to manage resources, they need to be defined and measured. This starts with gathering the knowledge gained from previous projects. Making sure the knowledge is accessible so that it can be used for future projects. If stored correctly this information should give you a basis from which to perform your early risk and cost estimates. Risk estimates are used to get an idea of the threads facing a project. Initially the accuracy of these estimates can vary substantially, but as the definition of the project scope becomes clearer the accuracy of the estimates will improve as well. 

Cost estimates are important to get an idea of the total amount of resources required for the project and will serve as input for the projects planning.

Control

With the scope of the project defined and the resources allocated accordingly, it is now up to the cost engineer to control the resources. For a cost engineer it is not sufficient to merely track any deviations from the initial baseline; they ought to prevent them. Look for the right indicators and spot deviations early on. Find and analyze possible solutions and support the project manager in decision making, providing him the information he needs to choose between alternatives.

Improve

Looking back at a project it is important to learn from mistakes and to incorporate the lessons learned in your working methods and to communicate these findings. Change management is therefor also a vital part of a cost engineer’s responsibility in order to make sure the entire company will actually benefit. To ensure their working methods are up to date, cost engineers should regularly attend training and obtain relevant certifications and share their best practices among one another. And last but not least, make sure you are using the best cost management tools and software for the job!

This of course is merely a summary of the cost engineering activities within a company, but it shows the diversity of the scope within which a cost engineer operates.