The price volatility of the past few years highlighted the need for greater scrutiny around cost estimates. If the estimate is too large, capital is tied up and other necessary projects may not be funded. If the estimate is too small, the project could overrun, eroding the capital effectiveness and rate of return. IPA has developed tools, models, and metrics that can be used to validate or check estimates. In addition, IPA has consultants who are former cost engineers that can provide training through private (company only) or public courses.
With membership in IPA’s Cost Engineering Committee (CEC), clients receive a number of metrics that can be used to validate estimates prepared by internal cost engineers or contractors. These metrics are developed from data provided by clients and provide for the end user an unbiased snapshot of Industry. For example, a cost engineer may want to double check labor hours per foot of pipe. The CEC provides a metric that will tell the cost engineer, on average, how many construction labor man-hours are needed per linear foot of pipe. The types of metrics provided include ratios to equipment, ratios to total field cost, engineering costs to materials costs, material quantity ratios, and labor rates, among others.
Clients use these metrics to validate because they come from an unbiased source. While your organization may store historical costs in a database, they are just the costs from your organization. The CEC’s value is the mutual collaboration across owner organizations―by sharing data, you receive metrics based off data that everyone has contributed. This provides opportunities to benefit from experience with scopes and locations that you may be unfamiliar with. The unbiased industry metrics also allow owners to effectively validate bids from contractors.