www.covenantuniversity.edu.

ng

Raising a new Generation of Leaders

EDS512: COST
ENGINEERING

INTRODUCTION

Prof A. N. Ede Dept of Civil Engineering Covenant University Ota

Nigeria
 COST ENGINEERING -INTRODUCTION
• Course Code: EDS512
• Course Title: COST ENGINEERING
• Semester/session: Alpha 2022/2023
• Time: Two (2) hours Contact Time
•

• Course Instructors: Engr. Prof. Anthony N.Ede

• Engr. Dr. Gideon O. Bamigboye
• Engr. Dr. Oluwaseun. G. Mark,
• Engr. Abimbola O.Odetoyan

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 COST ENGINEERING -INTRODUCTION
Overview of Course Description

• Cost and schedule management – an engineering function. Supporting skills

and knowledge.
• Role of cost engineer during evaluation phase. Role of cost engineer during
the basic design phase. Role of cost engineer in contractor selection. Role of
cost engineer during detailed engineering design phase. Role of cost
engineer during construction.
• Cost engineering function as distinct from Design engineering function.
Canon of ethics for cost engineers. Basic capital cost estimating. Basic
operating cost estimating. Basic project planning and scheduling. Cost
engineering terminology. Cost engineering standards.

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 COST ENGINEERING -INTRODUCTION
Course Learning Outcomes
• At the end of this course, the students should be able to:
i. Develop enough confidence to practice in the industry.
[PO6.2.4.2].
ii.Understand how to use basic costing tools and standards and
practice in the Nigerian context [P05.1.4.3].
iii.Understand project timelines and how to draw them up
[P08.2.1.3].

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 COST ENGINEERING -INTRODUCTION
• Modules and Details of Topics
• Module 1- Introduction- Cost and schedule management – an engineering
function. Supporting skills and knowledge.
• Module 2- Role of cost engineer during evaluation phase. Role of cost
engineer during the basic design phase. Role of cost engineer in contractor
selection. Role of cost engineer during detailed engineering design phase.
Role of cost engineer during construction.
• Module 3- Cost engineering function as distinct from Design
engineering function. Canon of ethics for cost engineers. Basic capital cost
estimating. Basic operating cost estimating. Basic project planning and
scheduling. Cost engineering terminology. Cost engineering standards.

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 COST ENGINEERING -INTRODUCTION
• Cost and schedule management – an engineering
function. Supporting skills and knowledge.
•

• What is cost engineering and why is it important?

• Cost engineering is the engineering practice devoted
to the management of project cost. Cost engineering
consulting involves estimating, cost control, cost
forecasting, investment appraisal, and risk analysis. This
is value cost engineers bring to each construction project.
•

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 COST ENGINEERING -INTRODUCTION
• Cost and schedule management – an engineering function.
Supporting skills and knowledge.
• What is cost engineering and why is it important?
• Cost engineering is "the engineering practice
devoted to the management of project cost,
involving such activities as estimating, cost control,
cost forecasting, investment appraisal and risk
analysis". "Cost Engineers budget, plan and monitor
investment projects.
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 COST ENGINEERING -INTRODUCTION
• Cost and schedule management – an engineering function.
Supporting skills and knowledge.
• What is cost engineering and why is it important?
• Cost Engineering delivers early awareness of
costs associated with engineering decisions and
risks as a project first gets underway. Cost
Engineering supports the refinement of the estimates
as the technical baseline gets more consolidated and
the industrial teams are formed.
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 COST ENGINEERING -INTRODUCTION
• How is cost and schedule management an “engineering”
function?

• Most people would agree that "engineers" and engineering

(or more generally, the “application of scientific principles

and techniques”) are most often responsible for creating

functional things (or strategic assets)

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 COST ENGINEERING -INTRODUCTION
However, engineering has multiple
dimensions.
The most obvious is the dimension of
physical design and the calculation
and analysis tasks done to support
that design (e.g., design a bridge or
develop software).
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 COST ENGINEERING -INTRODUCTION
However, beyond the physical dimension of
design (e.g., the bridge structure), there are
other important dimensions of money, time,
and other resources that are invested in the
creation of the designed asset.

We refer to these investments

collectively as costs.
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 COST ENGINEERING -INTRODUCTION
• Using the above example, someone must estimate what the
bridge might cost, determine the activities needed to design and
build it, estimate how long these activities will take, and so on.
• Furthermore, someone needs to monitor and assess the
progress of the bridge design and construction (in relation to
the expenditure of money and time) to ensure that the
completed bridge meets the owner's and other stakeholder's
requirements.
• Someone must also monitor and assess the cost of operating
and maintaining the bridge during its life cycle.

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 COST ENGINEERING -INTRODUCTION
• "Understanding and managing the cost
dimensions requires skills and knowledge
in, “business and program planning;
• cost estimating;
• economic and financial analysis;
• cost engineering;
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 COST ENGINEERING -INTRODUCTION
• cost estimating;
• economic and financial analysis;
• cost engineering;
• program and project management;
• planning and scheduling; and cost and
schedule performance measurement and
change control.”
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•
 COST ENGINEERING -INTRODUCTION
No significant asset has ever been built without dealing with
these cost dimensions in some way, and the more
systematically and professionally these dimensions are
addressed, the more successful the asset performance is
likely to be.
• Therefore, cost engineering recognizes that cost is a
necessary extension of traditional engineering (and other
creative functions such as systems analysis, etc.), and that
there is an intimate connection between the physical and
cost dimensions of the asset.

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 COST ENGINEERING -INTRODUCTION
• Do cost engineering practitioners need to
have a traditional “engineering”
background? “
• The skills and knowledge required to deal with costs
(e.g., cost estimating, planning and scheduling, etc.)
are quite different from those required to deal with
the physical design dimension.
• From that difference, the field of cost engineering
was born.
•

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 COST ENGINEERING -INTRODUCTION
• Do cost engineering practitioners need to have a
traditional “engineering” background? “
• Cost engineering practitioners work alongside
of and are peers with engineers, software
analysts, play producers, architects, and other
creative career fields to handle the cost
dimension, but they do not necessarily have the
same background.
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 COST ENGINEERING -INTRODUCTION
• Do cost engineering practitioners need to have a
traditional “engineering” background? “
• Whether they have technical, operations, finance
and accounting, or other backgrounds, cost
engineering practitioners need to share a common
understanding, based on “scientific principles and
techniques,” with the engineering or other creative
career functions.
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 COST ENGINEERING -INTRODUCTION
• How Do I Become a Cost Engineer?
• Many employers seek workers with graduate degrees
to become a cost engineer. You should seek a
master's degree in either construction
management or engineering if you intend to run or
manage a cost estimating business. Even with a
degree, most workers must complete hands-on
training to become a cost engineer.

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 COST ENGINEERING -INTRODUCTION
• How Do I Become a Cost Engineer?
• A college education and on-the-job training are both
required to become a cost engineer.
• The earned college degree should relate directly to the
industry you intend to work within, normally either
construction or manufacturing.
• It also helps to have supplementary classes in
mathematics and computers to gain the attention of
prospective employers.

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 COST ENGINEERING -INTRODUCTION
•The main duty of a cost engineer
• is controlling a large project's expenditures while
maintaining quality and structural integrity.
• Construction is a common industry for a cost engineer's
talents;
• multiple contractors need materials purchased at the
lowest prices to ensure the job generates a profit.

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 COST ENGINEERING -INTRODUCTION
• Why is Cost Engineering important?

• Cost Engineering delivers early awareness of costs associated

with engineering decisions and risks as a project first gets
underway. Cost Engineering supports the refinement of the
estimates as the technical baseline gets more consolidated and the
industrial teams are formed.
• It has always been important for organisations to estimate and
control their costs properly.
• A high level of accuracy is essential to support the decision-
making process. Equally important is to maintain the costs within
the proposed values.

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 COST ENGINEERING -INTRODUCTION
• Why is Cost Engineering important?
• Cost Engineering delivers early awareness of costs associated with
engineering decisions and risks as a project first gets underway.
Cost Engineering supports the refinement of the estimates as the
technical baseline gets more consolidated and the industrial teams
are formed.

• Cost Engineering provides an informed assessment of a reasonable

and acceptable price for the product concerned.

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 COST ENGINEERING -INTRODUCTION
• Why is Cost Engineering important?
• But the extreme complexity of various types of projects means their
costs can be difficult to anticipate, manage and control.

• Cost engineering is about estimating the costs of a company’s

procurement and evaluating the prices of the offers, at different stages
of consolidation of the technical definition of the item and of the
programmatic context in which the procurement is performed.

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 COST ENGINEERING -INTRODUCTION
•Why is Cost Engineering important?
• Resources are always limited.
• Cost is therefore a major consideration in the
definition of technical solutions and cost engineering
is a fundamental discipline within systems
engineering.
• The management of complex leading-edge
programmes holds many difficulties.
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 COST ENGINEERING -INTRODUCTION
•Why is Cost Engineering important?
• Accurate estimation and control of costs poses a particular
challenge, especially when in the business of developing
something never before achieved.
• Cost engineering is the process of putting accurate price
tags onto every part of a project.
• Part of the process is the analysis of risks and estimation of
potential cost impact.

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 COST ENGINEERING -INTRODUCTION
• Why is Cost Engineering important?

• It involves the capture of practical experience in a systematic

way in order to develop tools and models that relate the cost of

each element to its driving characteristics with due

consideration of the context.

• Cost engineering can thus assist system engineers in trading

technical solutions.
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 COST ENGINEERING -INTRODUCTION
•Why is Cost Engineering important?
• Cost engineering supports project managers
in making predictions of likely costs, or
assessing if a quoted price is reasonable.
• These capabilities can then be applied
across a project life cycle to increase its
overall cost-effectiveness.
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 COST ENGINEERING -INTRODUCTION
• Why is Cost Engineering important?

• Big firms have centralised Cost Engineering sections which is

part of the organizations’s Directorate of Technical and Quality
Management.

• Its centralization ensures a systematic gathering of cost,

technical and schedule data for all areas of activity and all user
Programs in support to the preparation of independent cost
estimates.

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 COST ENGINEERING -INTRODUCTION
• What innovations does Cost Engineering
involve?
• Cost Engineering at has progressively
shifted focus from a purely economic
approach to a real engineering discipline,
with project technologies and architectures
linked to cost and risk.
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 COST ENGINEERING -INTRODUCTION
• What innovations does Cost Engineering involve?
• Cost engineers use tailored models to relate technical
solutions to cost.
• Progressive use of Concurrent Design during the last
decade has been significant in placing Cost Engineering
on an equal footing with other design disciplines and get it
involved at the very start of programme life cycles,
allowing the early identification and elimination of
unaffordable solutions.
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 COST ENGINEERING -INTRODUCTION
• What innovations does Cost Engineering involve?
• Cost engineers use sophisticated software to compare initial
industry estimates with negotiated prices and final
completion costs.
• Discrepancies are analysed, and lessons learned are
integrated into software models and recorded in a database.
• Checks are run regularly against the database to track the
activity and quality levels of services provided by suppliers.

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 COST ENGINEERING -INTRODUCTION
•What applications and missions
does Cost Engineering enable?
•Cost Engineering is essential for
all business projects, especially for
the more complex projects.
•

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 COST ENGINEERING -INTRODUCTION
• Cost Engineering is closely related to System
Engineering:
• Systems engineering is the process of designing,
developing and verifying that an integrated system is
able to fulfil defined objectives within acceptable
technical and programmatic frames.
• The step-by-step design process is guided by
considering what the integrated system seeks to
achieve and the amount of resources required to
achieve that.
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 COST ENGINEERING -INTRODUCTION
• Cost Engineering is closely related to System Engineering:
• There can be many potential solutions to each question so
system engineering is as much an art as a science, with
trade-offs made between the different options in terms of
performance, risk, cost, reliability and turnaround time,
among other factors.
• The design team includes experts on the various technical
disciplines involved to advise on their integration into the
overall design.

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 COST ENGINEERING -INTRODUCTION
• Cost Engineering is closely related to System Engineering:
• At the end of these feasibility and preliminary design
studies – known as 'Phase A' studies – a baseline
system plan is in existence, defining necessary
elements and including initial programmatic estimates.
• Follow-up 'Phase B' studies turn the preliminary design
into a full system design which can then be developed
further.

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 COST ENGINEERING -INTRODUCTION
• Cost Engineering is closely related to System Engineering:
• Among the most important factors in deciding whether to proceed to
further stage is a mission's likely cost.
• The process of putting accurate price tag onto the projects is an
associated discipline within the Systems Engineering domain called
'Cost Engineering'.
• Systems engineering effectively 'gives birth' to systems, turning an
initial idea into a full system description, with all necessary elements
integrated into a complete whole.
• These blueprints can then become the basis of subsequent decision-
making.

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 COST ENGINEERING -INTRODUCTION
• Cost Engineering is closely related to System Engineering:
• Systems engineering also follows the development and the operation
of the system to ensure that the system will fulfill this initial idea as
well as possible and as efficiently as possible.
• Systems engineers maintain the focus on the system as a whole rather
than a collection of functional elements through regular project
reviews occurring during subsequent 'Phase C/D' development,
production and testing.
• These serve to ensure the mission of the project remains on track.
• Systems engineering also guides technology development and
assesses the impact of new technologies.

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 COST ENGINEERING -INTRODUCTION
• Cost Engineering is closely related to System Engineering:
• In addition, the linked discipline of Cost engineering delivers
early awareness of costs associated with engineering
decisions as a project first gets underway, giving
knowledge of the likely expenses associated with
different potential solutions and allowing decisions to be
made on a cost/benefit basis.
• In an interactive process, Cost engineering narrows the error
band of the cost estimates as Systems engineering improves
the system technical definition.

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 COST ENGINEERING -INTRODUCTION
• Cost Engineering is closely related to System Engineering:
• In addition, the linked discipline of Cost engineering delivers
early awareness of costs associated with engineering
decisions as a project first gets underway, giving
knowledge of the likely expenses associated with
different potential solutions and allowing decisions to be
made on a cost/benefit basis.
• In an interactive process, Cost engineering narrows the error
band of the cost estimates as Systems engineering improves
the system technical definition.

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 COST ENGINEERING -INTRODUCTION
• Cost Engineering is closely related to System Engineering:
• What is the Cost Engineering domain?
• Resources are always limited.
• Cost is therefore a major consideration in the
definition of technical solutions and cost
engineering is a fundamental discipline within
systems engineering.

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 COST ENGINEERING -INTRODUCTION
• What is the Cost Engineering domain?
• The management of complex leading-edge programmes holds
many difficulties.
• Accurate estimation and control of costs poses a particular
challenge, especially when in the business of developing
something never before achieved.
• Cost engineering is the process of putting accurate price
tags onto projects.
• Part of the process is the analysis of risks and estimation of
potential cost impact.

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 COST ENGINEERING -INTRODUCTION
• What is the Cost Engineering domain?
• It involves the capture of practical experience in a systematic way in
order to develop tools and models that relate the cost of each element
to its driving characteristics with due consideration of the context.
• Cost engineering can thus assist system engineers in trading technical
solutions.
• Cost engineering supports project managers in making predictions of
likely costs, or assessing if a quoted price is reasonable.
• These capabilities can then be applied across a project life cycle to
increase its overall cost-effectiveness.

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 COST ENGINEERING -INTRODUCTION
• What is the Cost Engineering domain?
• It involves the capture of practical experience in a systematic way in
order to develop tools and models that relate the cost of each element
to its driving characteristics with due consideration of the context.
• Cost engineering can thus assist system engineers in trading
technical solutions.
• Cost engineering supports project managers in making predictions of
likely costs or assessing if a quoted price is reasonable.
• These capabilities can then be applied across a project life cycle to
increase its overall cost-effectiveness.

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 COST ENGINEERING -INTRODUCTION
• What are the 4 main functions of cost management?
• While cost management overall is a very complicated
process and a critical project management knowledge
area, we can break it down into four processes:
 Resource planning. ...
 Cost estimation. ...
 Cost budget. ...
 Cost control.

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 COST ENGINEERING -INTRODUCTION
• Cost and Schedule Estimating Process
• What is cost scheduling in project management?
• The cost and schedule estimation process helps in
determining number of resources to complete all project
activities.
• It generally involves approximation and development of
costing alternatives to plan, perform or work, deliver, or
give project.

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 COST ENGINEERING -INTRODUCTION
• Cost and Schedule Estimating Process-What is cost scheduling in project management?

• The cost and schedule estimation process helps in

determining number of resources to complete all project
activities.
• It generally involves approximation and development of
costing alternatives to plan, perform or work, deliver, or
give project.
• A good estimation is very much essential for keeping a
project under budget.

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 COST ENGINEERING -INTRODUCTION
• Cost and Schedule Estimating Process
• Two perspectives are generally required to derive
project plans. These perspectives are given below :
• Two perspectives are generally required to derive
project plans. These perspectives are given as:
• Forward-Looking :
• Backward-Looking :

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 COST ENGINEERING -INTRODUCTION
• Cost and Schedule Estimating Process
• Forward-Looking :
 The Forward-Looking approach is also known as Top-Down
approach.
 This approach generally starts with describing and explaining
various project tasks that involve starting with project aim or end
deliverable and breaking it all down into smaller planning
chunks.
 Top-down budgeting also refers to a method of budgeting where
project managers prepare a high-level budget for organization.

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 COST ENGINEERING -INTRODUCTION
• Cost and Schedule Estimating Process

• Forward-Looking :
 These project managers or senior management develops and creates a
characterization of overall size, process, environment, people, and
quality that is essential for the project.
 In this approach, duration of deliverable’s is estimated.
 It generally takes less time and effort than bottom-up estimate.
 With help of software cost estimation model, an estimation of overall
effort and schedule is done.
 The project manager generally divides estimation of overall effort into a
top-level of WBS (Work Breakdown Structure).

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 COST ENGINEERING -INTRODUCTION
• Cost and Schedule Estimating Process Forward-Looking :
 They also divide schedule into major milestones dates.
 At this stage, sub-project managers are simply given
responsibility for decomposing every element of WBS into
lower levels with help of various allocations of top-level,
staffing profile, and, major milestones dates as constraints.
 The main benefit of this approach is use of holistic data from
earlier projects or products, along with unmitigated risks, and
scope creeps.
 This also helps in reducing risk of overlooked work activities or
costs.
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 COST ENGINEERING -INTRODUCTION
• Cost and Schedule Estimating Process Backward-Looking :

Backward-Looking approach is also known as Bottom-up approach.

In this approach, project team breaks requirements of clients
down, determining lowest level appropriate to develop a range of
estimates, covering overall scope of project based on available
definition of task.
Overall elements of lowest level WBS are generally explained into
detailed tasks, for which WBS element manager is responsible for
estimating budget and schedule.
All of these estimates are joined and integrated into higher-level
WBS budgets and milestones.
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 COST ENGINEERING -INTRODUCTION
• Cost and Schedule Estimating Process
Milestone scheduling also called budget allocation with help of top-
down approach results in a highly optimistic plan.
• Whereas, bottom-up approach results in a highly pessimistic plan.
Iteration is very much needed and important, using results of one
approach to validate and even check results of other approach.
• Both of approaches should be used together, in balance, throughout
life-cycle of project as shown in the next slide
• Diagram showing planning balance through life cycle.

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 COST ENGINEERING -INTRODUCTION
• Cost and Schedule Estimating Process
• Diagram showing planning balance through life cycle.

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 COST ENGINEERING -INTRODUCTION
• Cost and Schedule Estimating Process

• Engineering stage planning emphasis on following points :

 Macro-level task estimation for engineering artifacts.
 Macro-level task estimation for production stage artifacts.
 Stakeholder concurrence.
 Coarse-grained variance analysis of actual vs. planned expenditures.
 Tuning top-down project-independent planning guidelines into
project-specific planning guidelines.
 WBS definition and elaboration.
• . WBS (Work Breakdown Structure).

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 COST ENGINEERING -INTRODUCTION
• Cost and Schedule Estimating Process
Production stage planning emphasis on following points :
Macro-level task estimation for production stage artifacts.
Macro-level task estimation for maintenance of
engineering artifacts.
Stakeholder concurrence.
Coarse-grained variance analysis of actual vs. planned
expenditures.

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 COST ENGINEERING -INTRODUCTION
•Cost and Schedule Estimating Process
• Top-down perspective generally dominates during engineering
stage.
• This is because there is no enough depth or details of
understanding not even stability in sequences of detailed task to
perform planning of bottom-up approach.
• On other hand, there is enough prior experience and planning
fidelity that bottom-up planning perspective dominates during
production stage.

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