Cost Management
Introduction
Yahya Khatib
Contents
The study material will be in ﺳﺗﻛون اﻟﻣﺎدة اﻟﻌﻠﻣﯾﺔ ﺑﺎﻟﻠﻐﺔ اﻹﻧﺟﻠﯾزﯾﺔ،
English. Do you prefer ﻟﻛن ھل ﺗﻔﺿل أن ﯾﻛون اﻟﺷرح ﺑﺎﻟﻠﻐﺔ
explanation in English Or اﻟﻌرﺑﯾﺔ أو اﻹﻧﺟﻠﯾزﯾﺔ؟
?Arabic
)(Type in the Chat Box )أﻛﺗب اﻟرد ﻓﻲ ﺻﻧدوق اﻟﻣﺣﺎدﺛﺔ(
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Contents
1. Author Biography
2. About AACE
3. Assets & Projects-Definition
4. What is Lifecycle Costing
5. Cost Management vs Cost Control
6. Cost Estimate Classification
7. Contracts Classification in Terms of Cost.
8. Q&A
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Author Biography
Yahya Khatib
o Cost Consultant
o 15 years in Development, Project Management & Construction
o Certified Cost Professional, CCP (AACE)
o Certified Estimating Professional, CEP (AACE)
o Planning & Scheduling Professional, PSP (AACE)
o Charted Arbitrator, MCIArb (CIArb)
o Value Methodology Associate (SAVE)
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o Project Management Professional (PMI)
About AACE
Association for Advancement of Cost Engineering
Non-profit Organization, HQ in USA
Established in 1956 and currently 7500 member
Local Chapter (AGS) was established in 1980
Setting cost management framework
Sharing knowledge and establishing Recommended Practices
Certification
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Assets & Projects
What is an Asset:
Any unique physical or intellectual property of some scope that
is of long term or ongoing value to the enterprise.
What is a Project:
A temporary endeavor to conceive, create, modify, or terminate
an asset.
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Life Cycle Costing
Asset Lifecycle Project Lifecycle
Planning Execution
Ideation Closure
Life Cycle Costing
1 Ideation
Recognize an opportunity or need for a new/improved asset.
Asset Lifecycle
2 Creation
Create/ implement the asset solution through execution of a project or
program.
3 Operation
Deploy or put the new or modified asset into service, function,
production, operation, etc.
4 Modification
Improve, modify, or otherwise change or recycle the asset through
execution of a project or program.
5 Termination
Decommission, close, retire, demolish, remove, dispose, or otherwise
terminate the asset from the enterprise’s portfolio.
Life Cycle Costing
1 Ideation
Project Lifecycle Project team assesses alternative concepts for performing the project
and selects an optimal performance strategy.
2 Planning
Project plans are developed that address the strategic requirements
and selected performance strategy.
3 Execution
Planning Execution The plans are implemented through the execution of planned project
activities.
4 Closure
Asset or deliverable is reviewed, tested, verified, validated, and turned
over to the customer.
Ideation Closure
Life Cycle Costing
Asset Project
Asset Lifecycle Project Lifecycle
Lifecycle Lifecycle
Planning Execution
Ideation Closure
Cost Management vs Control
Cost Management VS Cost Control
• Covers the full lifecycle of • Cost Control is concerned
the project and the with measuring variances
complete activities including from the cost baseline and
planning, estimating, taking corrective action.
budgeting, financing, • Cost Control is a part of Cost
funding, controlling costs, Management
etc…
Cost Management vs Control
(Cost Management Process)
Cost Estimate Classification
Not all estimates need to have the same effort and accuracy.
Estimate classification depends mainly on the available project maturity details
and the end use of the estimate.
As per AACE (Associate for Advancement of Cost Engineering), the cost estimates
are classified to five (5) Classes (with Class-5 having lowest accuracy and Class-1
having highest accuracy).
As per RICS (Royal Institution of Chartered Surveyors), the cost estimates are
classified into five (5) main types:
1) Order of Cost Estimate 2) Elemental Cost Plan 3) Pre-tender estimate
4) Bill of Quantities/schedule of work 5) Post-tender estimate
Cost Estimate Classification
AACE Estimate Classifications
Cost Estimate Classification
RICS Estimates Types
Order of Cost Estimate
Cost Plan
Pretender Estimate
Post Tender Estimate
Bill of Quantities/
Schedule of Work
Contracts Types
Three (3) main Categories and many subcategories
Lump Sum • Fixed Cost for Specified Scope.
• Can include a provision for economic price adjusted when long duration.
Cost Remeasurable • Based on remeasure of scope line items with agreed and fixed unit rates.
• Uncertainty of quantities by the time of tender, actual quantities will be measured and
billed during construction.
Cost Reimbursable • Uncertainty of scope by the time of tendering.
• Contractor will be compensated the actual cost plus an agreed profit & overhead margin.
Question & Answers
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Yahya Khatib, BEng, MCIArb, CCP, CEP, PSP, PMP, VMA
[email protected]
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