39R 06 PDF
39R 06 PDF
39R 06 PDF
Management
Framework:
Total Cost
Management is a
systematic approach
to managing cost
throughout the life
cycle of any enterprise, program, facility, project, product or service.
AACEs agship publication, the TCM Framework: An Integrated
Approach to Portfolio, Program and Project Management, is a
structured, annotated process map that for the rst time explains each
practice area of the cost engineering eld in the context of its
relationship to the other practice areas including allied professions.
Visual TCM
Framework:
Visual TCM graphically
demonstrates the
integration of the
strategic asset
management and
project controls
process maps of the TCM Framework. The Visual TCM application has
been designed to provide a dynamic view of the TCM processes, from
the overall strategy process maps to the mid-level processes and
detailed activities. The processes are hyperlinked, giving the user the
ability to move to and from related process maps and reference
Recommended Practice
Certification:
Virtual Library:
Members receive free
access to the Virtual
Library, an online
collection of over 5000
complete technical
articles on virtually
every aspect of cost
engineering. Search
this extensive database and immediately retrieve the best techniques
and potential solutions to the problems confronting you and your
organization.
Recommended Practice
Professional
Practice Guides
(PPGs):
Online Learning
Center:
Professional Practice
Guides contain the
most worthwhile
contributions to the
eld of total cost
Conferences:
AACE Internationals
Annual Meeting brings
together the industrys
leading cost
professionals in a
forum focused on
learning, sharing, and
networking. Over 100
hours of technical presentations and an industry tradeshow that will
challenge you to better manage, plan, schedule, and implement
technology for more eective and ecient business practices.
The International TCM Conference is a similar event that is held outside
of North America complete with technical presentations, seminars
and exhibits.
Recommended Practice
Discussion
Forums:
The discussion forums
encourage the
exchange of thoughts
and ideas, through
posting questions and
discussing topics. They
provide a great means for networking and interaction with your peers.
Participate anytime at your convenience and receive automatic e-mail
notications on topics that are of interest to you. With several thousand
users, if you have questions or concerns about a technical subject,
program, or project - the forums are a great resource for you.
Mentoring
Program:
Looking to gain more
knowledge from an
experienced
professional or an
opportunity to help
another professional?
Included with your membership, AACE oers a comprehensive
mentoring program for individuals interested in sharing knowledge with
others or advancing their own careers to the next level.
Recommended Practice
Career Center:
Periodicals
Members receive a
complimentary
subscription to the
Cost Engineering
journal, AACEs
bi-monthly
professionally
peer-reviewed publication. It contains best-in-class technical articles on
total cost management related subjects.
It is published as both a print version and an online version.
Our bi-monthly digital publication, Source, focuses on AACE activities
and items of interest to the total cost management community, with
special features for our members.
Salary and
Demographic
Survey:
Conducted annually,
salary survey is a great
resource for
employers that want
to gain a better
understanding of the competitive marketplace for talent and for
employees interested in knowing how their compensation compares
with their peers in the profession.
Recommended Practice
Recommended Practice
Contributors:
Edward E. Douglas III, CCC PSP (Author)
Peter W. Griesmyer (Author)
Christopher W. Carson, PSP
John O. Evans III, PSP
Earl T. Glenwright Jr., PE
John Hollmann, PE CCE CEP
Donald F. McDonald Jr., PE CCE PSP
Jose Noe
Glen R. Palmer, CFCC PSP
Copyright AACE International
APPLICABILITY
This recommended practice is intended to provide guidance for the planning process as it pertains primarily to
capital project planning. Project planning is a critical and important step in commencing a project and the
subsequent preparation of the project execution schedule.
Project planning as outlined in TCM is a process comprised of a series of integrated steps which begin with
conceptual planning, continues with project scope development and execution planning, schedule planning and
Copyright AACE International
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schedule development, resource and procurement planning, cost estimating and budgeting, risk management,
value management and after approval ultimately concludes with project controls implementation. Other key
components of the planning process for construction that need to be understood are logistics planning and
planning documentation.
OVERVIEW
Project planning, as defined by AACE is the determination of a projects objectives with identification of the
activities to be performed, methods and resources to be used for accomplishing the tasks, assignment of
responsibility and accountability, and establishment of an integrated plan to achieve completion as required. [1, 2]
Project planning consists of:
Identifying project stakeholders and their roles, responsibilities and their affect on the scheduling
planning process.
Identifying contract requirements including project delivery methods under the terms of the contract. The
contract delivery method will determine the extent of the planning effort by the project team.
Identifying the constraints, and variables that will allow the project team to begin the planning process.
Establishing a planning process to determine the scope of work, client requirements, schedule hierarchy,
division of responsibility, project plan review and approval requirements and distribution.
Identifying major work activities (phases) and deliverables (goals) and the preferred sequence in which
they are to be accomplished.
Identifying project management coordination necessary to establish cost/schedule areas for the further
definition of the scope of work.
Development of non-schedule related planning methodologies such as logistics planning including but not
limited to: site access plan, heavy lift plans, placement of cranes, long lead material/equipment
procurement plans, owner provided material/equipment planning, and other such specific purpose plans.
These planning methodologies are not discussed in detail in this RP however an effort will be made to
identify the major non-schedule planning methods that are required on most engineering and capital
construction projects.
RECOMMENDED PRACTICE
Schedule Planning and Schedule Development
Planning and scheduling are distinctively different but related processes for capital construction projects. Schedule
planning and schedule development usually require a different set of skills and knowledge.
Planning consists of planning the work, the resources, and the estimated cost over time to complete the scope of
work defined in the early phases of project. Schedule planning includes the identification of many elements that
are associated with the scope of work which is developed into work packages, sequenced into phases and then
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discrete activities. The means, methods and resources have iterative planning processes as the project plan is
developed prior to the project execution phase. Schedule planning continues evolving during the life of the project
and puts emphasis on the experience and knowledge gained from previous project successes and failures.
The purpose of planning by a project management team is to establish an acceptable course of action ("plan") to
perform the defined scope of work of a project in an efficient, coordinated manner based on a review of project
requirements and responsibilities. Included in this planning effort is the identification of stakeholders, contract
requirements, and the project delivery method that are key elements in the initial planning effort.
The purpose of scheduling by a project management team is to develop a time phased management tool that will
help implement the approved plan and guide the project toward the desired results using the outputs of the
planning process. Planning should precede the scheduling effort and while it may become less formal in later
stages of the project, planning is a continuous process that never stops until the project is completed. The project
schedule is detailed during the schedule development phase of the project. There is a relatively seamless transition
from project planning to schedule development while the project plan document is finalized and reviewed by the
appropriate stakeholders.
Planning Responsibilities
Key participants in any planning team are those who have expertise in the planning process and the ability to
conceptually schedule work. The planning team should include participants familiar with the key project work and
expertise in their organizational functions and disciplines. These planning capabilities are needed in both the early
conceptual planning and subsequent construction execution phases.
Planners must understand the work to be performed and also be prepared to coordinate and communicate with
those individuals who lack full understanding of the proposed project work. The planning process for data input
requires an understanding of the constraints and significant considerations specific to the end product and/or
project. Equally important is identification of the stakeholders who will be involved throughout the various phases
of the project.
Effective project planning begins and ends with the efforts of the project team. How well the project team
identifies the scope of work and develops the associated project plan will contribute to the success or failure of the
project. The planning effort must be the collective product of the project team in order to optimize the
opportunities for project success.
Effective schedule planning depends on the project teams commitment to the concept of the plan prior to
implementation. Once the plan is developed and accepted, the detailed schedule development process is
implemented. The schedule development processes are described in separate AACE planning & scheduling
recommended practices.
The planner/scheduler is responsible for development of the project schedule, while the project management
team is responsible for the overall project planning effort. The planner/scheduler provides professional assistance
and guidance to the project team in developing and implementing the project plan, monitoring project progress,
and recording/reporting the impact of changes monitoring, statusing and forecasting an integrated project
schedule (a cost and resource-loaded schedule) so that a project may be executed in an efficient manner. The
planner/scheduler must also incorporate changes as efficiently as possible while maintaining and updating the
schedule as the project progresses.
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Planning Process
The objective of planning by a project management team is to:
Project planning begins as soon as the project is identified and continues as the project progresses through the
various phases of the project life cycle from project conception to project completion and closeout. Rather than a
definitive sequential process, it is best thought of as an evolving planning cyclical process. Scheduling is the process
of creating discrete activities, durations and relationships between activities that represent the plan chronologically
and that can be communicated effectively.
Project planning essentially consists of planning development (input) and planning product (output).
Project management professionals generally agree that there is a basic five-step process involved in developing a
project plan. Essential questions that are answered during project planning:
Identify stakeholders.
Identify the contract requirements, project objectives and project delivery method.
Define the project scope of work (SOW).
Establish the work breakdown structure (WBS) of deliverables.
Identify resources availability (people and capital assets).
Identify the constraints and variables and their potential impact on the project.
Establish the preliminary timeline and sequence of deliverables (phases).
Determine the rough order of magnitude (ROM) cost estimate for each component phase, work package,
or group of tasks. Include estimated quantities, planned production rates and pricing.
2.
Identifying the contract requirements and project delivery method. Both the contract requirements and
the project delivery method will influence the efforts of the planning process. The project delivery
method will determine the time and planning effort required by the project team due to the different
aspects of the delivery method utilized.
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3.
Determining the client requirements, scope of work (SOW), technical documents and specifications, and
other project requirements.
4.
Establishing the work breakdown structure (WBS) and organization breakdown structure (OBS).
5.
Identifying major activities (phases) to be performed and the preferred sequence in which they are to be
accomplished.
6.
Developing the planning elements such as logistics planning, heavy lift planning, etc. Include all key nonschedule planning that is integral to project success or failure.
7.
8.
Establishing the initial project sequencing and phasing including the initial development of the foundation
for the project baseline.
9.
Establishing, communicating, and transferring the integrated plan to achieve project execution and
completion, project plan review and approval and appropriate distribution.
10. Developing the planning basis document with all the assumptions and exclusions identified and
reconciled. Developing the basis for potential project risks and mitigation plans.
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management plan (PMP) and the construction management plan (CMP) and as the project implementation plan.
Regardless of the title, the plan is a key product from the project planning process. The topic formats, sections and
titles vary among organizations and are also project dependent.
Suggested components of the project execution plan are listed below:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Executive summary
Scope of work
Project objectives, goals & strategy
Contract requirements
Safety, health, environmental & security
Quality assurance / quality control
Execution approach, work plan
Change control
Risk management
Internal (project) requirements
Public & community relations
Organization, roles & responsibilities
Communications & reporting
Documentation requirements
Identification of Stakeholders
Any party that has an interest (stake) in the endeavor or project is a stakeholder. Stakeholders may directly or
indirectly affect or become involved in the day-to-day management and execution of work.
There are many different stakeholders on a project and each has different goals and objectives. These stakeholder
goals and objectives influence the development of the plan and the interaction between the team implementing
the plan and the various stakeholders.
Stakeholder interests may be positive or negative as related to the planning process therefore obtaining consensus
among the stakeholders during the planning process is important to project success.
Stakeholder Considerations
Stakeholder considerations and constraints must be identified, evaluated and reconciled as part of the planning
process. Stakeholders large and small will have a significant impact on the success or failure of a project.
It is important for the planner and the project team to communicate the project plan, goals and objectives to all
stakeholders and ensure the stakeholders fully understand the plan, goals and objectives of the project as various
stakeholders will have different views that are not always in agreement with other project stakeholders. It will
then be the planner and the project team responsibility to mediate any differences that may exist between
stakeholders to ensure the plan is implemented as developed and agreed upon. Failure to resolve any differences
may result in failure or cancellation of the project.
Stakeholders include but are not limited to the following:
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Contract Requirements
The primary focus of the project team during the planning phase is to understand the total scope of the contract
documents. It is important for all project team members to know and understand contract terms, conditions,
project delivery method, technical requirements, and their relationship to the work.
Identification of the baseline scope of work is critical to the planning effort. This is the basis for the initial planning
process. This scope of work should be defined by the project owner and communicated to the project team for the
planning effort.
Fixed price
Unit price
Project Delivery Methods: These project delivery methods influence the roles and responsibilities of the project
participants:
Design-bid-build
At risk construction management
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Multi-prime contracting
Design-build
EPC (engineering-procurement-construction)
Design-build-operate
Integrated project delivery (IPD)
Variations of the above
The contract delivery method will influence the extent to which the planning occurs. Each delivery method will
have its own process as described in the two examples:
In a traditional owner designed owner contracted construction method the early aspects of planning are
undertaken between the owner/architect/engineer-designer. Only when the construction contract is
awarded does the builder generally acquire a planning responsibility.
In an EPC project the designer/builder is given a much broader responsibility for planning because of their
earlier entry into the project.
Type of project
Throughput/capacity
Technology
Global market conditions
Labor resources
Project team organization
Lessons learned
Actual cost and schedule data
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Resource Planning
Resources planning is critical to the planning process and if not considered can adversely impact the project.
Planners must identify the key resources in relation to the overall objectives of the project. Resources include the
various assets used to accomplish the specified work during the life of a project. Resources include but are not
limited to the following:
People
Equipment
Materials
Technology
Capital funding
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Planning Assessments
Value engineering and constructability assessments are important elements of the planning process.
While constructability reviews focus on the optimal execution of the current plan, value engineering is concerned
with the re-design of the project to meet stated performance criteria in a less costly manner than previously
envisioned.
Value Engineering
Value engineering (VE) often begins during design and focuses on maximizing value, which can be formulated as
the sum of design item functionality and quality, per unit cost.
Value engineering during project design planning is intended to optimize product and production system design in
consideration of the effective performance of manufacturing and related activities. Alternate materials, or
technologies and standardization (e.g., use common parts for different products) are some of the considerations.
In its relationship to the planning process value engineering must consider stakeholders requirements, prioritize
required functions, and evaluate their cost and schedule impact.
Constructability
Constructability is the application of construction knowledge and experience during project planning, design,
procurement and field execution to consider methods that achieve the most effective performance of construction
activities. Alternate materials, installation construction sequencing, safety, and construction technologies are all
considerations. Constructability analysis during the planning process examines the methods and cost of installed
equipment and materials, technology, site conditions, resources, and related infrastructure.
Constructability assessments should begin during the initial planning phase and continue throughout the entire
planning cycle and into the implementation phase of the project. The constructability assessment can reduce both
time and cost impact to a program or project. Constructability analysis is often continued throughout the life of a
project to optimize the cost and schedule planning while mitigating risk. It has the most significant positive impact
when implemented during the earliest planning stages of the project.
(Refer to AACE Recommended Practices No. 30R-03, Implementing Project Constructability and 48R-06, Schedule
Constructability Review for additional details.)
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Risk may be reduced as the plan is refined. Conversely, project risk may increase as new variables are identified,
the plan is revised, or scope changed. Risk must be continually monitored as the project scope and planning
evolve. The project team should continue to perform risk assessment to determine the feasibility of the plan. In
some cases risk may be too great for the project to proceed, thus resulting in the cancellation or major
restructuring of the program/project.
Schedule risk should be evaluated once the scope of work and the project plan have been finalized and the initial
cost estimate and schedule models have been developed.
(For more on risk planning and management please reference the AACE International Recommended Practices
(RPs) on the AACE website or to Chapter 7.6 Risk Management in the TCM Framework.)
Lack of understanding by the project team to fully comprehend the scope of the project.
Failure or poor execution by the project team in developing and implementing a comprehensive plan.
Failure by the project team to revise the plan when major changes have been identified and incorporated
into the scope of work.
Major stakeholders (owner or underwriter) are unable to financially support the project.
Stakeholders having different interpretations of the project plan and/or goals and failure by the project
team to reconcile these differences.
The project team failing to perform essential non-planning methodologies during project development
and execution.
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The project plan is a baseline document, which is fixed unless modifications or changes to the scope of work (SOW)
cause significant changes to the project. Significant scope changes may require modification of the current plan or
creation of a new plan. Any revised project plan should be agreed to by appropriate stakeholders to the extent
that those stakeholders have a contractual basis to provide such input. However, input from non-contractual
stakeholders should also be carefully and appropriately considered.
Once the project plan is identified, an initial schedule risk assessment/analysis should be completed to determine
the feasibility and risk(s) associated in meeting the timeframe identified in the project plan.
Phase Definition
A phase is a significant period or grouping of work within a project. A phase may encompass several stages of
planning and work. Phase definition involves the initial identification and outlining of major relationships and
sequence planning, as defined by the scope of work. As the scope of work is refined, planning includes the
identification or breakdown of the project scope into various tasks that may likewise be expanded to encompass
the entire project.
Phase definition will lead to the initial development of the cost estimate, control level schedules and the
identification of risk to achieving success in those defined phases.
Phases are based on and derived from the scope of work, sequence of work, phase relationships and the work
breakdown structure (WBS). Phases might be defined/ modeled by a fragnet and can have distinct start and finish
milestones.
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The WBS must balance between complexity required for control and simplicity for accurate progress reporting.
Rules of thumb for defining activity complexity and number are:
A work package is the lowest level WBS and OBS where resources/cost can be budgeted or estimated.
The cost account is the intersection of WBS and OBS components where actual costs can be forecasted
and collected.
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Impacts associated with resource constraints and considerations influence the timeline and budgeting process.
Contract documents may dictate how and when the cost estimate is developed. They may outline the type and
timing of various detailed estimates for the entire project or for specific phases or deliverables.
The work breakdown structure (WBS) and organizational breakdown structure (OBS) are integrated into the
preliminary cost estimate and this integration should form the basis for the schedule WBS/OBS model.
Cost estimates plus contingencies and other risk factors should lead to budget estimates. Budget development and
evolution drives development of the project schedule. The budgetary process provides the underlying basis of cost
and schedule baselines used for monitoring, controlling and reporting.
During the planning process, alternatives for resource options are developed and evaluated based on timelines
and the projected budget considerations. These time versus cost considerations include value engineering and
constructability assessments in addition to revisions to the project scope.
The planning timeline and associated budget are developed concurrently. At the point major elements of the work
scope are known in sufficient detail to graphically depict on a timeline allowing an analysis of cash flow, overall
resource utilization and further optimization of the plan. If necessary, revisions are developed and evaluated to
reflect meeting the overall program/project goals.
Baseline Plan
The baseline plan is the final output of the initial planning process for a project. The baseline provides the
framework for all progress and measurement evaluation as the plan is implemented.
Unless significant modifications to the scope of work occur, the baseline plan is a fixed or unchanging document.
Significant changes to the scope of work can cause the previous baseline to be an inadequate representation of the
work and of little value for work progress reporting. When that occurs, a planning effort to re-baseline is
recommended. Budget, schedule, and percent complete status are all typically affected. This revised baseline
should be agreed to by the appropriate stakeholders (contracting parties).
The planning timeline evolves during the planning process. At this final stage in the planning process goals,
objectives and overall scope of work are defined in sufficient detail.
Sequencing and phasing of major tasks allow planning to evolve into conceptual schedule model development. Key
milestones can be identified and established. The project schedule model begins with a planning timeline and
conceptual budget. These high level presentations allow stakeholders to evaluate the project planning status and
likelihood of meeting desired goals.
The baseline planning timeline and cost estimate/budget for completion are evaluated to determine feasibility of
meeting stakeholder requirements. If necessary revisions are developed and evaluated to reflect meeting overall
project goals.
Each organization manages to its own baseline plan and schedule requirements. That is, an owner/ client may not
need or want to manage the project execution plan to the same level of detail as a contractor. Likewise, a
subcontractor focuses primarily on only the breadth of its scope of work and interfaces with related trade work
and/or phasing and may not need any further level of detail.
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Stakeholder Review
Stakeholders influence the entire planning process. It is important to the project team to manage all stakeholder
interests and concerns. This does not mean that all stakeholder concerns should be acted upon. However all
concerns should be actively listened to and documented. Stakeholder input and review throughout the planning
process is critical.
The key stakeholders detailed review and decision making must be documented. Their concerns may result in
positive or negative actions requiring re-planning or stoppage.
Minor stakeholders review and input is also important to project success. Failure to embrace these stakeholders in
the planning process may cause social or political issues that should not be over looked. Otherwise, additional
planning and potentially significant cost and schedule impacts may be the result.
Not all stakeholders contribute resources. Some may only have opinions or may be activists. Their involvement
costs them little or nothing in resources. Commitments and obligations to stakeholders are critical to the planning
process.
CONTRIBUTORS
Edward E. Douglas III, CCC PSP (Author)
Peter W. Griesmyer (Author)
Christopher W. Carson, PSP
John O. Evans III, PSP
Earl T. Glenwright Jr., PE
John Hollmann, PE CCE CEP
Donald F. McDonald Jr., PE CCE PSP
Copyright AACE International
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Jose Noe
Glen R. Palmer, CFCC PSP
Donald E. Parker, PE CCE
Perry Petersen
Wesley R. Querns, CCE
Hannah E. Schumacher, PSP
Carmelita Thorndike, PSP
Ronald M. Winter, PSP
David C. Wolfson
James G. Zack Jr., CFCC
REFERENCES
1.
Hollmann, John K., PE CCE, Editor, Total Cost Management Framework: An Integrated Approach to Portfolio,
Program and Project Management, AACE International, Morgantown, WV, 2006.
2. AACE International Recommended Practice No. 10S-90, Cost Engineering Terminology, AACE International,
Morgantown, WV, (latest revision)
3. AACE International Recommended Practice No. 14R-90, Responsibility and Required Skills for a Project
Planning and Scheduling Professional, AACE International, Morgantown, WV, (latest revision)
4. Greismyer, Peter W., Editor, PSP Certification Study Guide, 1st Edition Revised, AACE International, Morgantown,
WV, 2008.
5. Baker, Sunny, and Ken Baker, On Time/ On Budget: A Step-By-Step Guide for Managing Any Project, Prentice
Hall, New Jersey, 1992.
6. Bechtel Group, White Paper: EN-3 Project Execution Planning, http://bsii.bechtel.com/BNI, World Wide
Web, December 2, 1997.
7. Dinsmore, Paul C., Editor, Human Factors in Project Management, Revised Edition, AMACOM, New York,
1990.
8. Douglas, Edward E. III, CCC, Project Planning Then Scheduling, 2004 AACE International Transactions,
PS.07, AACE International, Morgantown, WV, 2004.
9. Knutson, Joan, and Ira Blitz, Project Management, AMACOM, New York, 1991.
10. Lewis, James P., Fundamentals of Project Management, Second Edition, AMACOM, New York, 2002.
11. Silvestrini, Remo J., The Planning Engineer A Human Element of Planning and Scheduling, 1983 AACE
Transactions, E.3, AACE International, Morgantown, WV, 1983.