Successful Cost Reduction Strategies and Cost Engineering and Earned Value Management

Introduction

How well are you doing at the current oil price? Is everyone aware of costs, managing them effectively to maximize profits? Seeking the optimum balance between cost, quality, and time requirements are essential in managing a project. Cost engineering and cost reduction strategies are important in operating practices efficiently to avoid cost overruns and schedule slips, and to deliver step-change improvements in running projects. Earned Value Management is important to provide accurate forecasts of project performance problems which are an important contribution to project management. Our Successful Cost Reduction Strategies & Cost Engineering course is developed to help you learn the required techniques in project cost engineering, managing cost reduction, and providing scope of improvements to manage project cost and risk successfully. Earned Value Management course is developed to help you learn the principles, methodologies in analyzing project performance to contribute to the project’s increased performance and success.

Objectives

• Understand the business context, the project life cycle, and the purpose of cost engineering
• Learn the methodologies of project cost engineering to maximize business Return on Investment (ROI) in the long run
• Learn to prepare cost estimates & cost reduction strategies
• Prepare cost estimates from high-level factor estimating to very detailed equipment and bulk material cost, as well as managing cost-effectively and maximizing profits.
• Understand the principles and methodologies of risk analysis and execute risk mitigation
• Learn the methodologies of risk management through risk analysis skills to better measure the parameters and uncertainties in a project.
• Learn the techniques to control, forecast and report the cost and monitor project performance
• Able to control, forecast, and report the cost and progress during project execution.
• Attain skill to analyze project performance
• Learn the principles, methodologies, and best practices in analyzing project performance and to provide accurate cost and schedule forecasting at project completion

Training Methodology

This is an interactive course. There will be open question and answer sessions, regular group exercises and activities, videos, case studies, and presentations on best practices. Participants will have the opportunity to share with the facilitator and other participants on what works well and not so well for them, as well as work on issues from their own organizations. The online course is conducted online using MS-Teams/ClickMeeting.

Who Should Attend?

This course is designed for cost engineering professionals who wish to enhance their knowledge in cost engineering and earned value management of projects, including:

• Cost Engineers
• Cost Estimators
• Cost Controllers
• Project Managers
• Project Engineers
• Project Planners
• Finance Managers & Executives

Course Outline

Day 1: Cost Engineering Definitions & Cost Estimating Methodologies and Cost Reduction by Scope Optimization & Reduction Estimating Definitions

• Project Life Cycle
• Purpose of Estimates
• Accuracy and Probability
• Allowances
• Contingency and Escalation
• Money of the Day / Real Term
• Estimating Plan
• Basis of Estimate

Factor Estimating

• Definitions, advantages and disadvantages
• Exponent method
• Cost per capacity method
• Lang, Hand and Chilton method
• Peter-Timmerhaus method
• Specific factor method

Case study: Factor estimating

Quantity Ratio Estimating

• Definitions, advantages and disadvantages
• Quantity ratios for piping 
• Quantity ratios for electrical & instrumentation
• Quantity ratios for structural steel
• Quantity ratios for civil, painting & insulation

Case study: Quantity ratio estimating

Parametric and Range Estimating

• Nomenclature
• Pareto’s Law
• Critical elements and key questions
• Range estimating input and simulation

Case study: Building a Parametric Cost Model

Cost Reduction by Scope Optimization & Reduction

• Cost Awareness & Focus of the Whole Project Team
• Value Engineering; Optimizing the Scope, Fir-For-Purpose rather than “Gold-Plated”
• Target Costing
• Life Cycle Costing
• Scope Standardization, Building Blocks, Etc.
• Value Improvement Practices
• Defining & Managing Scope

Case Study: Cost Reduction by Scope Optimization

Day 2: Location & Market Factor, Indices, Budgeting & Project Control and Cost Reduction through Contracting & Procurement Strategies Detailed Estimating

• Discipline Estimating
• Unit Rates & Sources of Pricing
• Estimating of Equipment
• Estimating of Bulk Materials & Construction Cost

Location Factors and Market Factors

• How to set up a location factor
• Location cost surveys
• Steel and commodity prices
• Benchmarks
• Indices
• Cost modeling

Case study: Analyzing differences between locations and markets

Budgeting

• Setting up a project budget
• Project baseline
• Contingency allocation
• Work breakdown structure
• Cost breakdown structure
• Code of accounts
• Interaction with Contracting & Procurement

Case study: From estimate to budget

Project Control

• Why Cost Control
• Potential influences on costs
• Pre-requisites for effective cost control
• Cost control plan and procedures
• Schedule control
• Progress measurement
• Earned value analysis/management
• Project controls best practices
• Integrated cost & schedule control
• Project control tools

Case study: Earned value analysis

Cost Reduction through Contracting & Procurement Strategies

• Contracting Strategies
• Competitive Bidding & Tendering
• Incentive Schedules
• Bid Clarifications, Reconciliation & Negotiations
• Contract Management

Case Study: Cost Reduction through Contracting & Procurement

Day 3: Advanced Project Control, Assurance, Risk Analysis & Management, Cost Reduction through Project Execution & Controls

Advanced Project Control

• Management of change
• Re-baseline
• Monthly reports
• Forecasting
• Project close-out & lessons learned
• How to manage project control
• Total Cost Management

Project Assurance

• Estimate verification and assurance
• Estimate assurance reviews
• Client vs. contractor estimate reconciliation

Case Study: Project assurance

Risk Analysis Introduction and Definitions

• Definitions and terminology
• Risk register
• Deterministic Methodology
• Probabilistic Methodology
• Risk Analysis Tools
• Cost Risk Analysis
• Schedule Risk Analysis
• Project Risk Management

Case study: Risk Analysis

Integrated Cost and Schedule Risk Analysis

• PERT
• Critical Path
• Critical Chain
• Correlation between cost and schedule risks
• Essentials of cost and schedule risk analysis
• Methodology

Case study: Integrated cost/schedule risk

Cost Reduction through Project Execution & Control

• Project Execution Planning
• Project Controls Planning
• Managing Interfaces
• Supply Chain Management
• Optimized Project Teams
• Total Cost Management
• Outsourcing & Off-shoring

Case study: Cost Reduction through Project Execution & Control

Day 4: Definitions, Objectives, Methodologies, and Analysis

• Course objectives
• Course program
• Case studies

Definitions and Principles

• Cost engineering definitions
• Estimates, budgets, and value
• Budget and Contingency allocation
• Project baseline
• Work Breakdown Structure
• Cost Breakdown Structure
• Work packages
• Allocation of budget to WBS and work packages
• Basic Earned Value terminology

Case Study: Budget allocation

Project Control

• Project Control objectives
• Project Control variables
• Project Control methodologies
• Project Control cycle
• Project Control plan and procedures
• Project Control best practices
• Schedule Control
• Integrated Cost & Schedule Control

Case Study: Project baseline and control sheet

Earned Value Analysis

• Earned Value Analysis overview
• Evaluate Earned Value techniques
• Define and assess Earned Value
• Cost Variance (CV) and Schedule Variance (SV)
• Cost and Schedule Performance Indicators (CPI and SPI)
• Forecasting on Cost and Schedule
• Different forecasting methodologies and formulas
• Accuracy of Cost and Schedule forecasts
• Generate and Validate Estimate at Completion
• Cost and Schedule performance curves
• Trend analysis
• Productivity analysis
• Earned Schedule analysis

Case Study: Earned Value Analysis

Day 5: Monitoring, Reporting & Advanced EVM

Monitoring

• Elements of monitoring
• Productivity
• Progress measurement
• Progress milestones
• Monitoring plan
• Cost and Schedule performance
• Identify the steps used in updating the project status
• Understand how predictive performance data is used
• Controlling/managing engineering cost & schedule
• Controlling/managing equipment cost & schedule
• Controlling/managing bulk materials cost & schedule
• Controlling/managing construction cost & schedule
• Baseline Schedule date vs. Forecast date

Case Study: Earned Value Monitoring

Reporting

• Reporting requirements
• Reporting calendar
• Reporting templates
• Report on Program Performance Using EVMS
• Best Practices
• Project dashboards

Case Study: Project Controls Report and Dashboard

Advanced Earned Value Management

• Management of Change
• Problems and pitfalls
• Pro’s and con’s of Earned Value Management
• Alternatives to Earned Value Management
• Earned Value vs. Value of Work Done
• Managing change and re-baseline
• How to manage Project Control
• Implementing Earned Value Management
• Earned Value Management tools
• Identify appropriate Work Authorization Levels
• Use CPI and SPI in project management
• EVM and related management responsibilities
• Total Cost Management
• Project close-out & lessons learned

Case Study: Advanced Earned Value Management