...From Wikipedia, the free encyclopedia When estimating the cost for a project, product or other item or investment, there is always uncertainty as to the precise content of all items in the estimate, how work will be performed, what work conditions will be like when the project is executed and so on. These uncertainties are risks to the project. Some refer to these risks as "known-unknowns" because the estimator is aware of them, and based on past experience, can even estimate their probable costs. The estimated costs of the known-unknowns is referred to by cost estimators as cost contingency. AACE International, the Association for the Advancement of Cost engineering, has defined contingency as "An amount added to an estimate to allow for items, conditions, or events for which the state, occurrence, or effect is uncertain and that experience shows will likely result, in aggregate, in additional costs. Typically estimated using statistical analysis or judgment based on past asset or project experience. Contingency usually excludes: 1. Major scope changes such as changes in end product specification, capacities, building sizes, and location of the asset or project; 2. Extraordinary events such as major strikes and natural disasters; 3. Management reserves; and 4. Escalation and currency effects. On 7/27/11, he wrote: Contingency cost are the additinal cost that happen while we are running a project and this cost have effect to the project that we have to spend some of budget...
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...San Sebastian College – Recoletos de Cavite Inc. College of Engineering, Computer Studies & Technology IEP.4: Risk Management Activity No. 1 Risk Assessment Submitted by: COLINA, Mary Ann S. TAN, Jenna S. Submitted to: Engr. Jannet M. Anit, MEng-IE Instructor Date Submitted: August 12, 2015 Value Engineering (VE) (also called value analysis, value management, or value methodology) is a systematic process used by a multidisciplinary team directed at analyzing the functions of a project, product, process, system, design, or service (hereafter referred to as project) for the purpose of achieving the essential functions at the lowest life cycle cost consistent with required performance, reliability, availability, quality, and safety. Job Plan - The VE Job Plan provides the structure for the VE study and consists of the following phases: A. Phase I: Preparation / Planning B. Phase II: Information Gathering C. Phase III: Function Analysis D. Phase IV: Creativity E. Phase V: Evaluation F. Phase VI: Development G. Phase VII: Presentation / Implementation Planning Figure 1: Company Logo This activity focuses on the application of Value Engineering functions to Signature Packaging Co. A. Preparation / Planning – Plan, organize, and establish the objective for the VE study. The general objective of this project is to establish a manufacturing company of secondary packaging material out of sugarcane’s bagasse. Table 1: Project Time Table Development...
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...performance. It has a well-structured management control system through Indicated Outcome Reports which help Turner to identify and manage not only the risks but also potential savings in the projects. We recommend that Turner could release $200,00 of C-holds and balance $300,000 from construction contingency. This is keeping in mind that it is a new customer and releasing the funds would help Turner in further nurturing the relationship. However, it needs to keep a close watch on scope enhancements being approved by owners and cost control. Turner: Background and Simon’s perspective Core Values Turner’s business model revolves around the following core values: • Make clients your partners It works very closely with the owners and makes them partners in managing the project. Through regular status updates, it keeps them informed about potential risks and cost savings that might incur. It uses customer engagement as an effective medium to manage not only project risks but also reputation risk in the market. • Employee Empowerment Decentralized organization structure in Turner empowers its employees to capture and report accurate information. There are various control systems in place that encourage...
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...CHAPTER 2 QUANTITY TAKE-OFF The quantity “takeoff” is an important part of the cost estimate. It must be as accurate as possible and should be based on all available engineering and design data. Use of appropriate automation tools is highly recommended. Accuracy and completeness are critical factors in all cost estimates. An accurate and complete estimate establishes accountability and credibility of the cost engineer, therefore, providing greater confidence in the cost estimate. The estimate contingencies for programming purposes reflect the estimate confidence. 2.1 Importance of Quantity Takeoff and Required Documents The quantity of material in a project can be accurately determined from the drawings. The estimator must review each sheet of the drawings, calculate the quantity of material and record the amount and unit of measure. Each estimator must develop a system of quantity takeoff that ensures that a quantity is not omitted or calculated twice. A wellorganized check-list of work will help reduce the chances of omitting an item. The estimator must, also, add an appropriate percentage for waste for those items where waste is likely to occur during construction. The material quantity takeoff is extremely important for cost estimating because it often establishes the quantity and unit of measure for the costs of labor and contractor’s equipment. 2.1.1 Contract documents The contract is defined by the contract documents, which are developed from...
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...Software Cost Estimation and COCOMO II ❚ Park, Jung-Won ❚ Univ. of Southern Cal. (USC) ❚ Center for Software Engineering (CSE) ❚ Systems Engineering Research Institute (SERI), Taejon, Korea ❚ December 29, 1997 What is COCOMO? ❚ COnstructive COst MOdel ❚ estimating software development effort and cost ❚ function of the size of the software product in source instructions ❚ function of the most significant software cost drivers Importance of Software Cost Estimation - problems ❚ Software project personnel have no firm basis for telling a manager, customer, or salesperson that their proposed budget and schedule are unrealistic. ❚ Software analysts have no firm basis for making realistic hardware-software tradeoff analysis during the system design phase. ❚ Project managers have no firm basis for determining how much time and effort each software phase and activity should take. USC-CSE Affiliates ❚ Commercial Industry (9) AT&T, Bellcore, EDS, HP, IDE, Motorola, Rational, TI, Xerox ❚ Aerospace Industry (9) E-Systems, Hughes, Litton, Lockheed, Loral, Northrop Grumman, Rockwell, SAIC, TRW ❚ Government (3) DISA, USAF Rome Lab, US Army Research Labs ❚ FFRDC’s and Consortia (5) Aerospace, IDA, JPL, SEI, SPC Partial List of COCOMO Packages ❚ ❚ ❚ ❚ ❚ ❚ ❚ CB COCOMO COCOMOID COCOMO1 CoCoPro COSTAR COSTMODL GECOMO Plus ❚ ❚ ❚ ❚ GHL COCOMO REVIC SECOMO SWAN Steps in Software Estimation ❚ 1. Establish Objectives * Rough Sizing * Make-or-Buy * Detailed Planning ❚ 2. Allocate...
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...Term paper On COCOMO Model Introduction The original COCOMO stands for Constructive Cost Model. The word "constructive" implies that the complexity of the model can be understood because of the openness of the model, which permits exactly to know WHY the model gives the estimates it does. The model was first published by Dr. Barry Boehm in 1981, and reflected the software development practices of these days. The name of this model was COCOMO I or COCOMO ’81. Since this time many efforts were done in the improvement of the software development techniques. Some of the changes were moving away from mainframe overnight batch processing to real time applications, strenuousness in effort in building software for reusing, new kind of system development in including off-the-shelf software components (COTS) and spending as much effort on designing and managing the software development process as was once spent creating the software product. This advanced version at present time is known as COCOMO II. The work for COCOMO II has been supported financially and technically by the COCOMO II Program Affiliates: Aerospace, Air Force Cost Analysis Agency, Allied Signal, DARPA, DISA, Draper Lab, EDS, E-Systems, FAA, Fidelity, GDE Systems, Hughes, IDA, IBM, JPL, Litton, Lockheed Martin, Loral, Lucent, MCC, MDAC, Microsoft, Motorola, Northrop Grumman, ONR, Rational, Raytheon, Rockwell, SAIC, SEI, SPC, Sun, TASC, Teledyne, TI, TRW, USAF Rome Lab, US Army Research Labs, US Army TACOM, Telcordia...
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...A Case Study on the California High Speed Rail System (CAHSR) - Is It Feasible? By Hardeep Ramesh, MS ISE Engineering Economics (ISE 460) University of Southern California December 3, 2010 Abstract: California High Speed Rail (CHSR) system is a mega project planned by the California High Speed Rail Authority (CA HSRA), connecting the major metropolitan areas of California. The project finalized in mid 2000, is estimated to be one of the most expensive of its kind. It is in the lines of the high speed rail systems existing in France, Japan and China. The cost of the total project, which will cover around 800 miles, is estimated to be around $45 billion as of 2008. At this time of economic instability and no proper funding expected the big question is that - is the project economically feasible? This case study evaluates the financial benefits of the project. It will show the various sources from which the project will be benefited. Since it is a public investment if the total benefits are more than the total costs it is said to be economically feasible. This case study uses the benefit-cost analysis as an evaluation to establish this. It uses only the benefits and costs which are quantifiable and those which are not duplicative. Introduction: California’s burgeoning population and increasingly congested highways and airports demanded new transportation solutions. Highway construction The California High Speed Railway...
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...Economic Environment of Business Report On “COST EFFECTIVENESS AND INDIAN INDUSTRY” Course Instructor: Dr. S.P. Das Economic Environment of Business Report On “COST EFFECTIVENESS AND INDIAN INDUSTRY” Course Instructor: Dr. S.P. Das Submitted By: | Astha MathurSection C | Roll No.: | UM15135 | Submitted By: | Astha MathurSection C | Roll No.: | UM15135 | CONTENT Sr. No | Title | Page No. | 1 | Abstract | 4 | 2 | Introduction | 4 | 3 | Overview of Indian Industry | 4 | 4 | Implementing Cost Effectiveness | 6 | 5 | Implications of Cost Effectiveness | 7 | 6 | Break-Down of Indian Industrial Sector | 8 | 7 | Government initiatives to support for Cost Effectiveness in Indian Industry | 11 | 8 | Conclusion | 16 | ACKNOWLEDGEMENT We would like to express a whole-hearted gratitude to all those who have helped with the report or have been associated with the report in any which way and made it a worthwhile experience. We are greatly indebted to our batch mates and our seniors for having shared their invaluable experience that went a long way in the successful completion of our report. We are also grateful to Dr. S.P Das who has given us the opportunity for working on such a project and incessant support & guidance leading it to successful completion. Thank you. We would like to express a whole-hearted gratitude to all those who have helped...
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...(a) |Activity cost pool |Estimated overhead |Cost drivers per activity |Total cost driver activity |Activity-based overhead rate | |Market analysis |$1,050,000 |Hours of analysis |15,000 hrs |$1,050,000 =$70 | | | | | |15,000 hrs | |Product design |2,280,000 |Number of designs |2,500 designs |2,280,000 =$912 | | | | | |2,500 designs | |Product development |3,600,000 |Number of products |90 products |3,600,000 =$40,000 | | | | | |90 products | |Prototype testing |1,400,000 |Number of tests |700 tests |1,400,000 =$2,000 | | | | | |700 tests | (b) |In house manufacturing |Market analysis time |Amount of designs |Amount of products developed|Engineering prototype tests...
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...Utility Management System Cost and Time Benefits and Implications from the Local Agency Perspective Downloaded from ascelibrary.org by Indian Inst of Technology - Mumbai (IITM) on 05/11/16. Copyright ASCE. For personal use only; all rights reserved. Mark Lee, P.E. 1; Jorge A. Rueda-Benavides 2; Douglas D. Gransberg, Ph.D., P.E., M.ASCE 3 Abstract: Utility management systems (UMSs) have become more common for government agencies, and their use has recently been advocated by AASHTO on a statewide basis. By identifying current utility locations and correlating utility-related information between ongoing and upcoming projects, UMSs can reduce the occurrence of unexpected delays and cost overruns resulting from unforeseen utility conflicts found during construction. This paper presents an analysis of a two-part survey of local agency professionals in the transportation industry, regarding perceptions of UMS cost and time benefits and implications associated with implementation. The paper evaluates two hypotheses regarding local agencies’ perception on two key areas: (1) impact of UMS cost and time implementation requirements on implementation decisions; and (2) difference in cost and time benefits and implications for different types of local agencies. The study finds that despite its obvious potential benefits, UMSs are not being widely implemented at the local level because the cost to adopt them is perceived to be high. Additionally, this study found opportunities...
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...* Target costing: * Improve the understanding of the costs of products and services, where issues are identified early in the service development process at a point where action can be taken * Brings a focus on the final users of the service or product * Is multidisciplinary and involves staff from all areas in the cost analysis and encourages them to take responsibility for managing the costs * Provides a framework which encourages a focus on the wider supply chain, in effect a whole systems approach. * Can be used by service organisations to look at the impact which new services have on the existing ones. * Develops specific and real targets which ensure satisfactory financial performance * Highlights other problems in areas such as purchasing which affect the cost of the product or service. * * Advantages: * The main reason why companies use target costing is that in order to plan or project the costs of products before they are adopted and make sure low-margin products are not introduced because of low return. * To reduce costs before they are locked in * To control design specifications and production tech * As an analysis which highlights other problems * As a driver for cost improvement * To encourage a focus on the customer * * Example: ITT Automotive, one of the world largest suppliers of auto parts which produce include brake systems and components, wiper handling systems and components...
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...Engineering Cost Analysis Accurately forecasting the cost of projects is vital to the survival of any business or organization. Cost estimators develop the cost information that business owners or managers, professional design team members, and construction contractors need to make budgetary and feasibility determinations. From an Owner's perspective the cost estimate may be used to determine the project scope or whether the project should proceed. According to the U.S. Department of Labor there were about 198,000 cost estimators in 1994. That of which 58% work in the construction industry, 17% employed in manufacturing industries, and the remaining 25% elsewhere. From this we could conclude that a great deal of cost estimation lies in the construction industry, where multi-million dollar contracts are formed after thorough cost estimation. Cost Analysis is an aspect of estimation that applies both formally and informally to the aspect of costing. Cost analysis is a formal discipline used to help appraise, or assess, the case for a project or proposal, and is an informal approach to making decisions of any kind. It is ultimately an economic tool to aid in logical decision making. In the case of construction cost estimates, the next step would be the cost analysis process. The sole purpose is to determine if the completed estimates are reasonable. Usually comparisons are made with similar projects done in the past to see if the number is within the same vicinity of each other...
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...best value from a purchasing standpoint, he also needs to choose a supplier that satisfies the requisitioner of the pressure vessel, the engineering department of Oceanics, Inc. Another critical issue to be considered would be that pressure vessels are closed containers designed to hold gases or liquids at substantially higher pressure than the atmospheric pressure (Wikipedia, 2011). Pressure vessels are dangerous objects sensitive to pressure differentiations, at which could cause fatal accidents. Therefore, Jack carries the responsibility in acquiring a capital asset that could possibly affect other people’s lives. 2. Summary The engineering department of Oceanics, Inc., had given out a purchase requisition of a pressure vessel to the supply manager, Jack Toole. Out of twenty suppliers, eighteen submitted their proposals, and only two suppliers were left after a preliminary evaluation. The two suppliers, Atomic Products and Nuclear Vessels, differentiated in price, shop facilities, past experience, subcontracting, organization, delivery, and guarantee. After Jack and Oceanics’ engineer, Mr. Holpine and the manufacturing engineer, Mr. Grinn, visited the two suppliers’ plant sites, Mr. Holpine and Mr. Grinn ended up having differing arguments in choosing the better supplier. Jack’s objective is to satisfy Oceanics’ engineering department’s requisition specifications while choosing the supplier with the best value...
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...Applichems’ production locations including: Gary (Indiana/USA), Mexico, Frankfurt (Germany/Europe), Sunchem (Japan). To determine this, a cost analysis must be conducted to verify the benefits of keeping production of Release-Ease in their current locations, or moving production to another location. When determining the cost benefits, transportation and production cost differences must be considered. Recommendations Through careful analysis, it is recommended that Production of Release-ease be maintained in Gary, Indiana. Instead of abandoning the Gary production facility due to its lack of production efficiencies, measures to improve the facility should be implemented. Ceasing production of Release-ease in Japan is also recommended. Although the plant in Japan is more technologically advanced, its high production costs and low productivity levels are valid reasons for eliminating the Release-ease production lines. It is recommended, however, that the plant continues its current production of the other product it manufactures. The plant will also be useful in conducting R&D for other Applichem products. Changes in the production volumes among the various plants are also recommended. These changes will increase production to full capacity for some plants while reducing transportation costs. Analysis Cost Analysis The first observation that can be made about Applichem’s current production is the amount of excess capacity that could be used in its...
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...Abstract Engineering vs. Tech-Ops Any airline operating in the United States must operate under the regulations handed down from the Federal Aviation Administration. While the regulations handed down to U.S carriers come in many forms and cover all areas related to aviation, our discussion is focused on one of the most common regulations related to aircraft maintenance, the AD (airworthiness directive). These ADs are mandatory, however, at times the FAA allows operators to develop their own method of compliance based on a particular companies resources as long as the original safety requirements are met. When they do this it’s called an AMOC (Alternate Method of Compliance). On August 11, 1999 The FAA issued AD: # APA 87-99 FAA, to order insulation replacement on select aircraft. While this directive applied to all U.S. operators we will look at implementation at Delta Airlines. As Delta began reviewing the requirements, the maintenance planning team officials decided to implement it in its own way. We will look at how communication worked and in some cases did not work in this process. When AD 87-99 was issued by the FAA in August 1999 to order the replacement of insulation certain aircraft Delta was hugely affected. In total the AD covered 699 aircraft, 247 of which were operated by Delta. The problem, according to the FAA, was the original insulation blankets were covered with metalized Mylar. Over time this metalized Mylar had become flammable and replacement was...
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