Enbridge Case Study Paper - 2018

2018 AACE® INTERNATIONAL TECHNICAL PAPER
OWN.2852
Path to Predictability: The Evolution of An

Owner Integrated Cost Engineering System
Prashant Srivastava, Kyle Rakowski, Maury Porter,
Nathan Len
Abstract
In 2006, a large scale energy infrastructure company (the Company) faced a growing portfolio
of capital projects, including several potential mega-projects. The company had a solid history
as an operator but did not have in-house cost engineering capability to evaluate and manage
such large capital investments. Significant challenges surrounding estimate accuracy provided
strong motivation to improve. Fast forward to 2018 and the Company has mature in-house Cost
Engineering expertise and an integrated suite of effective cost estimating and modeling, risk
analysis, and historical project benchmarking methods and tools that are aligned with AACE®
International Recommended Practices. Improvements in estimate accuracy and performance
repeatability have been excellent and demonstrable. This case study will walk through the
evolution from immature processes and tools, to fully customized, ground-up tools and finally
towards the use of standardized industry tools extensively calibrated with integrated systems
now used to develop estimates for the multi-billion dollar annual capital spend program. A
company acquisition now presents new challenges. A road map for future improvement and
integration will also be explored.
OWN.2852.1
Copyright © AACE® International.
This paper may not be reproduced or republished without expressed written consent from AACE® International.
Table of Contents
Abstract ........................................................................................................................................... 1
Table of Contents ............................................................................................................................ 2
Introduction .................................................................................................................................. 33
A Journey of Cost Engineering Systems ........................................................................................ 44
Phase A- Before Implementation: 2006 Baseline ......................................................................... 66
Phase B- Implementation: Developing Process Methods, Systems and Tools (2007-2010) ........ 66
Contingency Estimating Tool [6,7,8] ......................................................................................... 88
Escalation Estimating and Cost Normalization Tool ................................................................. 99
Cost Estimating Model [6] ........................................................................................................ 99
Project Knowledge Management System (PKMS) [16,17] ................................................... 1010
Project Scope Definition Tool [18] ....................................................................................... 1111
Phase C- Journey after Systems Implementation (2010-2011) ................................................ 1212
Cost Estimating Model Calibration ....................................................................................... 1212
Organizational Changes ........................................................................................................ 1212
Phase D- Continuing the Journey (2012 and Beyond) .............................................................. 1313
Contingency Tool Calibration ................................................................................................ 1313
Implementation of Estimating Software .............................................................................. 1414
Results ....................................................................................................................................... 1515
Conclusions/Path Forward ........................................................................................................ 1515
References ................................................................................................................................ 1616
OWN.2852.2
Introduction
In 2006, the Company faced a growing portfolio of capital projects, including several potential
mega-projects. This was driven primarily by growing investments by the company’s upstream
oil sands customers in Western Canada who needed to transport component products into
their facilities, and from their facilities to markets across Canada and the United States. While
the Company had a solid history as a pipeline operator and had executed many projects over
the years, it did not have specialized in-house cost engineering capability to support front-end
planning and investment decision-making for such large capital investments.
In 2006, the Project Development group charged with this front-end work comprised a
relatively small number of experienced engineers whose roles spanned from hydraulic studies
and design engineering to cost engineering. In many cases, the company relied on consultants
and contractors to provide both conceptual designs and the cost estimates. The group’s
increasing workload as well as challenges surrounding estimate accuracy provided strong
motivation to improve. In addition, there was a lack of consistency, timeliness, and perceived
unreliability of third-party cost estimates, and the company did not have the internal capability
to properly assure the quality of the estimates it was receiving.
Project Development’s ‘front-end’ role encompasses what AACE International calls Strategic
Asset Management and includes Class 5 and 4 estimating and scheduling supported by
historical data and support of capital budgeting and investment decision making by the
business unit (e.g., providing inputs to financial-economic models, etc.). Because of the direct
connection to specific customers and their upstream development schedules, it is especially
important to the company and its customers that front-end cost evaluations be reliable. The
question of capital cost risk ownership is always a point of negotiation in the commercial
dealings, even in a regulated environment, so cost and schedule risk must be well understood.
This paper describes the journey of cost engineering system that started with highly
unpredictable, unstructured project cost estimating to an accurate, timely, and ultimately
predictable outcome in support of underlying business drivers. This is being shared in an effort
to demonstrate a path for other companies to consider when undertaking similar improvement
initiatives.
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A Journey of Cost Engineering Systems

Over time, the Company has progressed the application and understanding of AACE principles.
The four symbolic phases of evolution experienced by the Company are shown in Fig. 1.
Figure 1: A Journey of Cost Engineering Systems
Achieving estimate accuracy, while staying cost-competitive and responsive through the
estimating phase, is one measure of cost engineering success and a particularly important one
in an environment of mega-projects and players placing a very high value on predictability. The
evolution of the cost engineering methods, tools, and capabilities occurred in parallel to a
period of evolving business strategy and market drivers, but the need for accuracy and
predictability remained paramount. From the interplay of cost engineering advancements and
business changes emerged four relatively distinct phases of accuracy and precision that can tied
back to those forces at play during each period. Total project cost variance over time is
illustrated in Figure 2. Accuracy was measured as the ratio of overrun or underrun, normalized
for escalation, from the total funding estimate (e.g., 0.25 is a 25% overrun). The bold, blue
center line shows how the P50 of projects completed in each year varied from the original
budget (at P50 half of projects are more or less) whereas the dashed lines show P90 (10
percent of observations were more) and P10 (10 percent of observations were less) values.
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A B C D
Figure 2: Projects Cost Performance in Different Phases
The four phases described in Figure 2 (A through D, denoted above the chart) can be better
understood by accuracy versus precision relationship shown in Figure 3. The corresponding
phases (A through D, denoted at lower right of dart boards) provide a useful analog to the
demonstrated outcomes over time.
Figure 3: Relationship between accuracy and precision
The discussions that follow tie together the process improvement efforts and business drivers
with performance over time.
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Phase A- Before Implementation: 2006 Baseline

In 2006, the oil sands in Alberta was a ‘hotspot’ of capital project activity; a center of the
world’s commodity ‘supercycle’. As the Company (based in Calgary, Alberta) engaged in various
multibillion dollar projects, it predominantly relied on external engineering firms to develop
project deliverables including cost estimates and risk assessments. The cost performance of the
projects authorized until the middle of 2007 can be seen in Figure 2, Phase A. Median (P50)
variation from budget was as high as 75 percent, with an 80% confidence interval (P10-P90) up
to 120 percent. During this phase, the company’s internal cost engineering systems and
expertise were limited to managing projects with relatively low budget (up to C$50 Million or
less) and there was a heavy reliance on external expertise. Although some nominal internal
systems were in place, they were not adequate to manage multibillion dollar projects.
Phase B- Implementation: Developing Process Methods, Systems and Tools (2007-2010)

By 2007, the Company was on the verge of executing the largest capital program in company
history. A decision was made to establish an internal Cost Engineering function as a part of
Project Development group to expand its expertise and capabilities in cost engineering. The
Cost Engineering team began to look for improvement opportunities and engaged some leading
consultants in their search. The company decided to draw from AACE® International (AACE®)
Recommended Practices and other resources of cost engineering where applicable.
Providentially, AACE® published its Total Cost Management (TCM) Framework in 2006 [1] and
its Technical Board was on the cusp of new developments in Decision and Risk Management. In
short, there was a foundation of resources (albeit in short supply in those boom times) and
expertise to tap.
The main objective of the Cost Engineering function was to provide cost estimates that:
 were accurate and predictable, but timely and cost-efficient,
 accurately characterize and account for risks based on true drivers, and
 supported the business decision-making process.
One requirement of the development was that practices should be consistent with AACE®
Recommended Practices or other standards where applicable to enable a common language
between the Company and its customers, consultants, and other industry stakeholders.
Another was that the methods and outcomes be empirically validated, such that estimates
reflect the current reality while at the same time providing metrics to support improvement
endeavors. At a high level, the AACE® TCM Framework provided a process to achieve these
objectives. Figure 3 shows the TCM process reduced to its essence from the owner perspective.
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Figure 43: The Essence of the TCM Framework Process
Project Development group owned the steps in this process with the exception of Project
Control in support of post-authorization execution. However, Project Development and Project
Control improvements were integrated as appropriate, particularly in respect to developing a
standard work breakdown structure upon which estimating and historical data tools could be
based. The scoping framework of the Project Development improvements included developing
processes, methods, systems and people to better perform:
 Cost Estimating
 Risk Analysis and Quantification
 Benchmarking and Management of Historical Data
 Governance
Cost estimating included the base estimate as well as cost escalation estimating. Escalation was
highly volatile during this time, particularly for steel as well as engineering and construction
services in Alberta where there were significant skilled labor shortages.
It would be convenient to report that the improvement effort was scoped out in a grand
integrated plan with top-down support and managed as a major project. However, the reality
was that while the overall objective was clear, the path to get there and the details of
implementation (and funding) were less so. There was also lurking hesitation as to how long the
mega-project boom would last. In fact, the improvements were done incrementally but with
increasing confidence with each development step as stakeholders could see the value
unfolding and the demand for the burgeoning cost engineering capabilities increasing. A lesson
to share is that it was helpful to have a large vision but see ‘early wins’ in small steps to help
build confidence, credibility and support. That said, the big projects were ‘knocking on the door’
so time was important.
By 2007, much of the global process industry had implemented or was in the process of
implementing phase-gate project scope development processes and the Company was no
exception. In 2007, the company was implementing such a system; however it was still at a high
level. The requirements for deliverables to support decision making were not fully defined
[3,4,5]. This was an opportunity for Project Development group to help define those
requirements for early stage gates as it developed its methods and tools. This was particularly
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true for the first step; a parametric contingency estimating tool for what AACE refers to as
“systemic” risks.
Before delving into the specific developments, note that this is a case study of the Project
Development evolution as a whole. Over the years, Project Development staff members have
written numerous papers about several of the methods and tool developments; these are
shown in the references for those who would like further details. As a case study, the major
methods and tools are covered below in the sequence of implementation.
Contingency Estimating Tool [6,7,8]

For Risk Analysis and Contingency, Project Development group decided to apply the methods
that are now documented in AACE Recommended Practices 42R-08 and 65R-11 [9 and 10]. At
the time, these Recommended Practices (RP) were not completed, but the RP author was
consulting to the Company on the effort [11]. The methods employed are predicated on there
being two types of risk in respect to the best way to quantify the cost and schedule risks.
Systemic risks, which are artifacts of one’s project ‘system’, and are best quantified with
empirically-based parametric models for cost and schedule. Project-Specific risks, which are
specific to the project scope and execution strategy, are best quantified with the expected-
value method with Monte-Carlo simulation. The two tools are integrated and produce a single
probabilistic outcome for cost and execution schedule duration.
A key to credibility was to ensure that the Systemic model was empirically-based. This was
achieved by first basing the tool on the ‘Rand’ research of cost and schedule growth in the
process industries [12] and then calibrating that to the Company’s experience based on
available data at that time.
Another advantage of the parametric method for systemic risks was that it was explicitly linked
to company’s project process. A project scope maturity matrix was developed and incorporated
into the tool. The matrix is consistent with AACE RP 18R-97, but enhanced to cover pipeline
project scope elements (e.g., right-of-way definition). The experience with the tool is that it
immediately focused management attention on the risk that mattered: scope definition. If the
contingency was considered ‘too high’, the mitigation required was clear. The tool was quick
and simple to use on every project, and for the first time Project Development group was able
to provide credible, repeatable and empirically valid estimates for contingency; an early win.
It is important to note that merely having a good tool doesn’t translate to an effective solution.
The tool needs the support of strong processes and capabilities to be effective. These aspects
of the implementation proved by far the most challenging and time-intensive. As a capabilities
example, a strong and objective facilitator must be able to recognize and resolve team biases
ranging from unconscious over-optimism on project definition and work completed, to
conscious pessimism to retain contingency funds. As a process example, a strong process on
who must participate in a contingency evaluation to how a risk register is validated is core to an
accurate determination. A facilitator should be knowledgeable of company’s processes and
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culture and be independent from those accountable from managing project execution or
project funding. A good facilitator comes up with an outcome that is acceptable to all and
focuses on “vital few from the trivial many” risks.
Escalation Estimating and Cost Normalization Tool

As previously mentioned, due to the oil sands boom among other factors coincident with this
implementation, the cost of commodities, engineering and construction service bids started
increasing significantly. This put escalation next on the priority list. For escalation, Project
Development group decided to apply the methods that are now documented in AACE
Recommended Practice 58R-10 [13]. Again, the RP was not completed at that time, but the RP
author was consulting to the Company [14]. A key to credibility was to ensure that the model
was empirically-valid so its outcome was benchmarked to downstream industry cost index data
[15]. The model was built from baskets of industry forecast indices sourced from a global data
provider, applying appropriate factors to work breakdown structure groupings according to the
project schedule. The model was corrected to backward-looking normalized outcomes and
calibrated to empirical results.
Cost Estimating Model [6]

The risk tools were an ‘easy sell’ as they were fairly simple to apply and low cost to implement.
The next improvement, in-house base cost estimating, was more difficult to justify. Project
Development group was obtaining most estimates from consultants and contractors. However,
it seemed that from estimate-to-estimate results varied widely, even for the same scope, and
Project Development engineers had no good way to validate or assure what was being
provided. Further, the estimates (even at early stages) took many weeks or months to prepare
for relatively straightforward scopes, and were prohibitively costly to allow scenario analysis.
The question was whether a practical and reliable estimating method and tool could be
developed for internal use by the engineers on staff to at least validate the third-party
conceptual estimates, if not replace them.
Working with a consultant with demonstrated experience in estimating model development,

Project Development group decided to develop a Class 5 estimating toolset in Microsoft Excel
for pipelines, pump stations, and terminals (later extended to other asset types). It used a
hybrid of conceptual (cost/capacity and assembly) and semi-detailed estimating. The toolset
was designed so that the engineers could input gross design parameters such as the meters of
pipe and pipe diameter, and the tool would quantify and provide an estimate of reasonable
detail. If more scope was known (e.g., bend counts), the model defaults could be overridden for
that quantity. In this way, every estimate was consistent, but applicable to the specific scope.
The initial data used for the tool was limited, which highlighted the need for a historical data
system. This evolved to development of a historical database that is described in the next
section.
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Project Knowledge Management System (PKMS) [16,17]

For the company to improve its cost engineering systems, and ultimately its project cost and
schedule results, it needed to ‘close the loop’ on obtaining actual, useful data from projects and
learning from it. Unlike with the earlier implementations in Project Development functions,
there were multiple stakeholders interested in access to reliable historical data and metrics and
therefore the PKMS system development was managed as a more formal project with
committed internal resources.
In order to ensure data collection for every project, themselves executed over protracted
timelines, the PKMS input deliverable was mandated in the company gating system known as
PLGC (Project LifeCycle Gating Control) at Gate 2, 3, 4 and Gate 6. Gate 2 corresponds to the
project authorization and the start of detailed design, Gate 3 corresponds to the start of
construction, Gate 4 corresponds to a substantially complete project. The Gate 6 is a project
closeout phase.
Initially the PKMS system was managed using spreadsheets. In this system, a set of data
collection forms were developed specifically for the collection of costs, design, schedule and
other details. However, with increasing volume of data and information, it was overwhelming
to manage and deep-dive information through the spreadsheets.
In 2010, the company decided to purchase and customize a database software package that
provided the necessary functionality. The Table 1 shows the evolution of the PKMS project.
Continuous improvement has always been a theme for the cost engineering team. As explained
above, the data collection requirement was identified at four different gates of project life
cycle. However, the naturally long durations between stage gates (up to several years) on large
capital projects naturally results in substantial lags in cost information, all the while subject to
escalation cycles and other factors. In 2013 the PKMS cost structure was aligned with project
WBS so that project cost data could be obtained directly and independently from the
company’s project controls software. Introduction of this process created a direct real-time
pathway for feedback on project costs, keeping the PKMS database consistently up to date
across all dimensions. Furthermore, this enabled a regular update cycle for the cost estimating
model, whereby routine updates derived from now real-time PKMS cost data kept cost
estimates reliably accurate and up-to-date.
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Q4 2008 2009 2010 2011 2011-2017

Requirement Proof of Proof of Concept Implementation of Ongoing
Concept Phase Phase 2 PKMS improvements
1
Need for Project data is PKMS Migration of existing Expanding system
consistent captured using deliverable data and new data to incorporate
capture and spreadsheets. mandated as a population other business units
reporting of gating information
data deliverable
Resulting Software Testing, training & Introducing direct
reports prove identification/ communications feedback from
useful but are purchase project controls
time process begins software.
consuming
Table 1: Development Phases of Project Knowledge Management System
Project Scope Definition Tool [18]

Poor project scope definition is known to be one of the main causes of project cost growth,
schedule slippage and operational issues. Historically, the company was evaluating project
scope definition using in-house rule of thumb methodologies. In 2010, a Project Scope
Definition Tool (PSDT) was developed to address the following key aspects:
 To make a customize tool specific to liquids pipeline requirements
 Tool outcome linked to AACE classification system
 To provide a granular checklist
 To provide a progress verification method
The foundation of PSDT was based on the company’s internal procedures, deliverables that the
company determined were important relative to the class of proposal, guidelines from the
Project Definition Rating Index (PDRI) from Construction Industry Institute (CII), recommended
practices by IPA (Independent Project Analysis) and AACE International guidelines.
A relationship between the PSDT score (% of project definition) and cost accuracy was then
established based on internal projects data.
In the meantime, CII was developing their PDRI tool for linear industrial projects, which was
more appropriate for the pipeline projects than the existing process-industry based model. To
enable comparability access to a large industry cost performance database with an increasingly
ubiquitous tool/standard, increase the granularity of questions, and allow facilitators external
training and certification, the company decided to move from internally developed PSDT to an
industry accepted PDRI in 2015, effectively replacing the question set in the systemic portion of
the contingency tool. The transformation included a line by line mapping of PSDT questions to
PDRI elements and establishing an empirical correlation between PSDT percent definition with
PDRI score across dozens of historical projects to ensure calibration. Ever since, project
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maturity is determined based on the PDRI score. Introduction of PDRI has enabled the Company
to adopt CII practices and comparable performance research.
Phase C- Journey after Systems Implementation (2010-2011)

As seen in Figure 2 the cost performance during Phase B became highly precise but
improvements were still needed from an accuracy point of view as projects had become
extremely predictable (precise) but consistently slightly under budget (accuracy) rather than
the 50th percentile sought for funding. This situation resulted in further improvement actions
being undertaken such as a calibration of the cost estimating model and a bolstering of cost
engineering expertise. With an increased focus on empirical calibration and improved cost
engineering systems, the P50 of project actuals costs started coming closer to budget.
Cost Estimating Model Calibration

The next phase was mostly focused on the calibration and modification of models and
processes to bring the P50 of actual cost outcomes closer to budget. The PKMS database was of
utmost importance during this phase. The calibration of models with actual business
performance was a challenge because there was no readymade calibration solution available.
The cost engineering team used a trial and error approach with multiple iterations to develop a
calibration methodology. The fundamental philosophy or “cost strategy” was to calibrate base
estimates to P25 of the actual historical distribution. The contingency estimating model was
then applied to bring the P25 base estimate to a P50 funding estimate based on the actual risk
profile of a given project. In this sense the base estimate is essentially an idealized risk-free
cost by design to allow competitive performance even when accounting for risk-based
continence funding. The philosophy adopted to calibrate the model is illustrated in Figure 4.
Figure 54: Basis of Cost Estimating Model Calibration
Organizational Changes
In addition to the calibration of models and updates of processes, Project Development
management decided to establish two separate cost engineering groups. The objective of the
reorganization was to balance the workload of cost engineering staff and maintain focus on
cost engineering improvements. One group (Cost Engineering Performance) was responsible for
managing clients’ day-to-day requests and expectations and to develop increased estimating
proficiency. The second group (Cost Engineering Systems) was responsible to develop and
maintain the tools and knowledge IP and keeping them up to date. Projects’ actual
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performance, evolving design standards and construction specifications and techniques could
quickly and reliably be built into the system without compromising customer service. This
separation of duties led to improved productivity and improved supporting models.
Phase D- Continuing the Journey (2012 and Beyond)

Experience with the toolsets took time. Along with modeling reliability and user-friendliness,
the user base expanded and became more acquainted, and they had a steady stream of ideas
for its improvement. While the estimating tool was designed to produce a ‘Class 5’ estimate,
the tool consistently demonstrated a level of accuracy commensurate with much more detailed
and intensive estimates. The company’s confidence in the results grew to where it was seen on
par with consultant estimates as a basis for authorization. In the same timeframe, market
pressures had made speed to market for pipelines tantamount to strategic imperative and the
extremely fast scenario analysis and accurate estimating enabled by the system became a
competitive advantage.
Within around two years over C$17 Billion worth of capital projects were authorized based on
the internal estimating toolset. These projects were developed quickly and authorized with
minimum engineering definition. As a result of the now-constant estimate calibration and risk-
based evaluation taking place, the portfolio remained extremely close to budget at median
(high accuracy). However, as speed was prioritized and front-end engineering time was
substantially reduced, the confidence band widened (reduced precision) as the business-driven
tradeoff. This can be seen in the phase D period of Figure 2.
In the latter part of Phase D, the pipeline market began to slow down slightly with the
corresponding drop in world oil prices and producers were more cautious with capital projects.
As such, less emphasis was placed on sanctioning projects based on speed and minimal project
definition. This change in the market enabled the Company to analyze actual project data,
further develop their cost systems and perform much needed calibration studies.
Contingency Tool Calibration

To further improve the project accuracy levels, the next step was to validate the contingency
tool’s “modeled” accuracy band with actual projects accuracy. It is important to note that the
tool’s original accuracy was based on generalized IPA, Rand and AACE RP 43R-08 information.
To validate the accuracy band, the cost engineering team analyzed over 50 project data points
and plotted the actual project accuracy relative to project definition at the time of project
authorization. The actual accuracy levels were then overlaid with modeled accuracy levels
corresponding to project definition. A similar analysis was conducted with AACE RP 18R-97
recommended accuracy levels corresponding to different project definition levels. Based on
analysis, a reduction of accuracy band was implemented in the contingency tool (i.e., the
project system was producing better accuracy than the general industry references).
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Figure 65: Validation of Contingency Tool Accuracy
Implementation of Estimating Software

The Cost Estimating Model (CEM) grew from a Greenfield pipeline estimating model to
additional assets such as pump station expansion, rail loading and unloading facility, pipeline
replacement, demolition, decommissioning and onshore wind farm estimates. Numerous
summary reports also evolved as additional outputs of the CEM.
Over time, the calibration of the Cost Estimating Model and the comparison of third party
estimates with the model output became time-consuming tasks given the manual and
calculation-intensive nature of the Excel model. To improve workflow and resource efficiency
the company made a decision in 2014 to migrate from the spreadsheet-based Cost Estimating
Model to a version housed in a well-established estimating software. The company undertook
thorough needs analysis facilitated by their information technology department, and also
explored the wide range of options available in the market. In the end, a database-driven
software package was chosen based on the following fundamentals:
 Flexibility to accommodate parametric estimating with high-level scope definition as
well as with detailed design inputs.
 Capable of producing internal reports compatible with project work breakdown
structure.
 Capable of supporting a variety of project analyses and ongoing calibration of design
parameters and empirical cost basis.
The company migrated successfully from the spreadsheet-based model to the estimating
software package in Q1 2016.
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Results
During its cost engineering process journey that started in 2006, the company has improved
both predictability and accuracy of estimates significantly. As illustrated in Figure 2 above, cost
performance underwent an evolution from 2006 to 2017, tied to market drivers, business
strategy, and system capabilities. After 2010, the median funding target had reached near-
perfect accuracy for the approved project portfolio, and only the confidence interval varied to
accommodate business needs. Robust historical data analysis permits the systems and tools to
be fine-tuned to keep it this way. It demonstrates significant improvement on company’s cost
predictability as an enviable competitive advantage in any environment.
Conclusions/Path Forward
In conclusion, the company has evolved from immature tools and processes to integrated and
well calibrated cost engineering systems. The cost engineering team plays an important role in
supporting company’s strategy to win new business, diversify, and improve competitiveness.
Tools such as Cost Estimating Model and PKMS database now play important roles in capital
investment decisions in ways that were not originally envisioned. Currently the cost engineering
system is being updated to support the company’s investment portfolio.
In 2017, the Company acquired another major North American pipeline operator to become
North America’s largest energy infrastructure company. The new company now has the benefit
of leveraging both industry leading liquids and gas transmission expertise and the associated
cost engineering skills. The next phase of the Company’s journey in cost engineering will be to
draw on the best practices, systems, and capabilities from across both legacy companies, and
the future looks promising.
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References
1. Hollmann, John, editor, Total Cost Management Framework (first edition), AACE
International, Morgantown WV, 2006.
2. AACE International, Cost Estimate Classification System – As Applied in Engineering,
Procurement, and Construction for the Process Industries, Recommended Practice
18R-97.
3. Good, Gordon, “Project Development and Cost Estimating — A Business
Perspective”, AACE International Transactions, 2009.
4. Philipenko, Ray, “Project Scoping in a Large Pipeline Company, AACE International
Transactions, 2009.
5. Kitson, Brent, “General Liquids Pipeline Projects Scope and Cost Estimating
Challenges”, AACE International Transactions, 2009.
6. Kitson, Brent, “Developing and Calibrating a Cost Estimating Toolset: An Owner’s
Experience”, AACE International Transactions, 2011.
7. Figueiredo, Christina, and Brent Kitson, “Risk and Contingency for Pipeline Projects”,
AACE International Transactions, 2009.
8. Alqasrani, Renna, Brent Kitson and Richa Sahib “Schedule Risk Management for
Pipeline Projects”, AACE International Transactions, 2010.
9. AACE International, Risk Analysis and Contingency Determinations Using Parametric
Estimating, Recommended Practice 42R-08.
10. AACE International, Integrated Cost and Schedule Risk Analysis and Contingency
Determinations Using Expected Value, Recommended Practice 65R-11.
11. Hollmann, John, “The Monte-Carlo Challenge: A Better Approach”, AACE
International Transactions, 2007.
12. AACE International, Risk Analysis and Contingency Determinations Using Parametric
Estimating – Example Models as Applied For the Process Industries, Recommended
Practice 43R-08.
13. AACE International, Escalation Estimating Principles and Methods USING INDICES,
Recommended Practices 58R-10.
14. Hollmann, John and Larry Dysert, “Escalation Estimation: Working With Economics
Consultants”, AACE International Transactions, 2007.
15. IHS, “IHS Downstream Capital Costs Index (DCCI)”,
https://www.ihs.com/info/cera/ihsindexes/, IHS CERA, Oct. 31, 2015.
16. Figueiredo, Cristina and Ray Philipenko, “Developing and Implementing a Project
Knowledge Management System (PKMS)”, AACE International Transactions 2010.
17. Figueiredo, Cristina and Ray Philipenko, “Taking a Project Knowledge Management
System (PKMS) to the Next Level”, AACE International Transactions, 2011
18. Philipenko, Ray, Jayant Acharya and Prashant Srivastava, “Define Your Project –
Reduce the Risk”, AACE International Transactions, 2011.
OWN.2852.16

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2018 AACE® INTERNATIONAL TECHNICAL PAPER

Path to Predictability: The Evolution of An

A Journey of Cost Engineering Systems

Figure 1: A Journey of Cost Engineering Systems

Figure 2: Projects Cost Performance in Different Phases

Figure 3: Relationship between accuracy and precision

Phase A- Before Implementation: 2006 Baseline

Phase B- Implementation: Developing Process Methods, Systems and Tools (2007-2010)

Figure 43: The Essence of the TCM Framework Process

Contingency Estimating Tool [6,7,8]

Escalation Estimating and Cost Normalization Tool

Cost Estimating Model [6]

Working with a consultant with demonstrated experience in estimating model development,

Project Knowledge Management System (PKMS) [16,17]

Q4 2008 2009 2010 2011 2011-2017

Project Scope Definition Tool [18]

Phase C- Journey after Systems Implementation (2010-2011)

Cost Estimating Model Calibration

Figure 54: Basis of Cost Estimating Model Calibration

Phase D- Continuing the Journey (2012 and Beyond)

Contingency Tool Calibration

Figure 65: Validation of Contingency Tool Accuracy

Implementation of Estimating Software

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