1 The world s first integrated process for portfolio, program, and project management! A Process For Applying the Skills and Knowledge of Cost Engineering Copyright © 2006 by AACE International 209 Prairie Avenue, Suite 100 Morgantown, WV USA

2 TCM Is a Process For Applying the Skills and Knowledge of Cost Engineering …the effective application of professional and technical expertise to plan and control resources, costs, profitability and risks. Simply stated, it is systematic approach to managing cost throughout the life cycle of any enterprise, program, facility, project, product, or service This is accomplished through the application of cost engineering and cost management principles, proven methodologies and the latest technology in support of the management process …the effective application of professional and technical expertise to plan and control resources, costs, profitability and risks. Simply stated, it is a systematic approach to managing cost throughout the life cycle of any enterprise, program, facility, project, product, or service. This is accomplished through the application of cost engineering and cost management principles, proven methodologies and the latest technology in support of the management process. AACE Internationals Constitution

3 Cost Is Everything It costs time It costs time It costs resources It costs resources It costs money It costs money EVERYTHING invested in assets and projects is a COST That is why it is called TOTAL COST Management (TCM)

4 For Business, TCM is An Integrated Recipe for Managing Portfolios, Programs, and Projects in Alignment with Business Strategy! Effective Portfolios, Programs, Projects Assets Better Decisions Better IRR Cost Engineering Skills & Knowledge Time Risk Cost Resources Better Control

5 For AACE, TCM is a Framework For Its Technical, Education and Certification Products Recommended Practices (RPs) Professional Practice Guides (PPGs) Cost Engineers Notebook Skills and Knowledge (S&K) CCC CCE PSP EVP… TC M

6 Presentation Outline Understanding TCM Applying TCM TCM Benefits

7 Top-to-Bottom Business Benefits Profitable Asset PortfoliosProfitable Asset Portfolios –Makes sure your resources go where theyll get the best IRR/RONA/EVA Integrated/Aligned ProgramsIntegrated/Aligned Programs –Makes sure your projects are all integrated, aligned and coordinated Controlled ProjectsControlled Projects –Makes sure each project gives business the results that were planned for …and, makes sure everything is aligned with Business Strategy!

8 TCM Combines Asset and Project Life Cycle Management Return on Assets is largely driven by practices used before projects beginReturn on Assets is largely driven by practices used before projects begin –With TCM, owners understand and manage the costs of their asset base over the entire asset life cycle Successful Projects are required if the planned return is to be achievedSuccessful Projects are required if the planned return is to be achieved –With TCM, owners and contractors control the costs of their projects over the entire project life cycle

9 TCM Has Breadth and Depth Strategic Functional Builds on AACEs Depth: We Know How Things Really Work Builds on AACEs Breadth: We Cover More Than Just Projects

10 Presentation Outline Understanding TCM Applying TCM TCM Benefits

11 TCM Starts With a Simple Concept Plan-Do-Check-Assess (PDCA) Based on the time-tested Deming or Shewhart cycle. In essence, TCM is a quality management process.

12 TCM Attributes Continuous Improvement Every TCM process employs feedback and improvement! Integrated Every TCM process has P,D,C & A steps that are All linked back to business strategy!

13 TCM Covers the Entire Asset and Project Life Cycle

14 TCM: Level 1 Process Map Project Control is a Recursive Process Within the Strategic Asset Management Process Portfolio of Assets Portfolio of Projects (Programs)

15 The Framework Is Organized By Process The Framework includes the Basis, Functional Processes, and Enabling Processes

16 The Framework Functional Process Sections II. STRATEGIC ASSET MANAGEMENT PROCESS CHAPTER 3PLANNING 3.1 Requirements Elicitation and Analysis 3.2 Asset Planning 3.2 Asset Planning 3.3 Investment Decision Making 3.3 Investment Decision Making CHAPTER 4PROJECT IMPLEMENTATION 4.1 Project Implementation 4.1 Project Implementation CHAPTER 5MEASUREMENT 5.1 Asset Cost Accounting 5.1 Asset Cost Accounting 5.2 Asset Performance Measurement 5.2 Asset Performance Measurement CHAPTER 6ASSESSMENT 6.1 Asset Performance Assessment 6.1 Asset Performance Assessment 6.2 Asset Change Management 6.2 Asset Change Management 6.3 Asset Historical Database Management 6.3 Asset Historical Database Management 6.4 Forensic Performance Assessment 6.4 Forensic Performance Assessment III. PROJECT CONTROL PROCESS CHAPTER 7PLANNING 7.1 Scope & Execution Strategy Development 7.1 Scope & Execution Strategy Development 7.2 Schedule Planning and Development 7.2 Schedule Planning and Development 7.3 Cost Estimating and Budgeting 7.3 Cost Estimating and Budgeting 7.4 Resource Planning 7.4 Resource Planning 7.5 Value Analysis and Engineering 7.5 Value Analysis and Engineering 7.6 Risk Management 7.6 Risk Management 7.7 Procurement Planning 7.7 Procurement Planning CHAPTER 8PROJ. CONTROL PLAN IMPLEMENTATION 8.1 Project Control Plan Implementation 8.1 Project Control Plan Implementation CHAPTER 9MEASUREMENT 9.1 Project Cost Accounting 9.1 Project Cost Accounting 9.2 Progress and Performance Measurement 9.2 Progress and Performance Measurement CHAPTER 10ASSESSMENT 10.1 Project Performance Assessment 10.2 Forecasting 10.2 Forecasting 10.3 Change Management 10.3 Change Management 10.4 Project Historical Database Management 10.4 Project Historical Database Management Each section has a process map and narrative that describes the process

Plan Do Assess TCM Level 2 Process Map Strategic Asset Management Check

Strategic Asset Management Deploys Business Strategy

Each Block is a Working Level Process Map Example: Investment Decision Making

TCM Level 2 Process Map: Project Control Plan Do Assess Check

An Example Project Control Working Level Process Example: Estimating

22 The Framework Also Covers Enabling Processes 11.1 The Enterprise in Society11.1 The Enterprise in Society 11.2 People and Performance Management11.2 People and Performance Management 11.3 Information Management11.3 Information Management 11.4 Quality and Quality Management11.4 Quality and Quality Management 11.5 Value Management and Value Improving Practices (VIPs)11.5 Value Management and Value Improving Practices (VIPs) 11.6 Environment, Health, & Safety Management11.6 Environment, Health, & Safety Management

23 Presentation Outline Understanding TCM Applying TCM TCM Benefits

24 How Business Can Use the TCM Framework Use it as a guide for process development or re-engineeringUse it as a guide for process development or re-engineering –A go-by that can be modified to suit each company's processes, phasing, org., lexicon, etc. –Can be applied in parts, but take care that the resulting process is integrated Use it as a business referenceUse it as a business reference

25 How Educators/Trainers Can Use the TCM Framework Use it to structure your programsUse it to structure your programs –A go-by that can be modified to suit your institutions programs, lexicon, etc. –Can be used in parts, but its main value is in the integration of practice areas –Uniquely covers cost engineering as an integrated professional discipline Use it as a course text or referenceUse it as a course text or reference

26 How Individuals Can Use the TCM Framework Use it to broaden your perspectiveUse it to broaden your perspective –Examples: Contractors will better appreciate their owner clients point of view Specialists will gain understanding of how their field fits in the bigger scheme Study it in piecesStudy it in pieces –Read Chapters 1 & 2 through –Then tackle other sections of interest

27 Let Us Know What You Think! To comment:To To contact the editor:To contact the To contact key contributors: see text AcknowledgmentsTo contact key contributors: see text Acknowledgments To obtain copies:To obtain copies: To read online:To read online: