The [AACE] Estimate

Classification System Applied

to the DOE CD Process
Michael R. Nosbisch,
CCC PSP
President - Elect

Outline
Introduction
AACE International
Estimating-specific
DOE Relationship

DOE Cost Estimating Guide (413.3-21)

Estimate Classification
CD Requirements

Mapping Recommendations
Conclusion

Introduction
Key AACE members present to be recognized
Michael Nosbisch Background
VP of Project Controls for Parsons Government
Group (2005 2009)
Became active in EFCOG PMWG during this time

VP of EVM for SM&A (2009 present)

Lead EVM Instructor for DOEs PMCDP
Consultant to several DOE contractors

President Elect of AACE (2010 present)

Presented on AACE to this group a few years ago in Idaho
Falls
Current BoD sponsor for cooperative agreement with
DOE

AACE International
Founded in 1956, currently largest global
organization dedicated to furthering
concepts of total cost management and
cost engineering
8 regions
91 sections
7,708 members
According to 2010 Membership Survey, 22% of
respondents were Estimators by primary job
function

AACE International
Cost Engineering defined as the collective set of
practice areas that includes the following:

Business and program planning

Cost estimating
Economic and financial analysis
Cost control
Program and project management
Planning and scheduling
Cost and schedule performance measurement
Change control

Total Cost Management (TCM) is the "process"

through which these practices are applied
TCM Framework free download from website
Will soon be available as web-enabled, process flow diagram
tied to all AACE technical products

AACE International
Estimating-specific
Certified Estimating Professional (CEP)
One of four specialty certifications currently offered
Introduced in 2008, currently there are 110 CEPs in database
Intent is to recognize specialists who meet established set of
estimating criteria by examination, experience, education and
ethical qualifications

Recommended Practices (RPs)

17R-97: Cost Estimate Classification System
18R-97: Cost Estimate Classification System: As Applied in
Engineering, Procurement, and Construction for the Process
Industries (JAN 2011)
19R-97: Estimate Preparation Costs: As Applied for the Process
Industries
31R-03: Reviewing, Validating and Documenting the Estimate
34R-05: Basis of Estimate
40R-08: Contingency Estimating: General Principles

AACE International
DOE Relationship
Cooperative agreement first signed in 1997
Reauthorized in 2002 and 2007

Current DOE sponsor is OECM

Key elements:
Advance state-of-the-art of TCM through
increased communication and dialogue
Apply established cost engineering/cost management
principles, proven methodologies, and latest technology
Develop new cost engineering/cost management
methodologies and technology in pursuit of optimum
resource utilization
Encourage utilization of cost management standards
and practices and their continual
improvement/advancement

DOE Estimating Guide

(413.3-21)
AACE Estimate Classification System (1998
version included as Appendix J)

Reprinted from AACE RP No. 18R-97, Cost Estimate Classification System As Applied
in Engineering, Procurement and Construction for the Process Industries

DOE Estimating Guide

(413.3-21)
DOE Suggested Estimate Classifications

Only difference lies in specific Techniques (DOE) vs. Methodology

(AACE)

Additional table included in Guide showing secondary characteristics is an exact reprint

from the AACE RP

Reprinted from Table 4.2, U.S. Department of Energy Cost Estimating Guide

DOE Estimating Guide

(413.3-21)
AACE Estimate Classification System (2011
version)

Reprinted from Figure 1, AACE RP No. 18R-97 (2011), Cost Estimate Classification System As
Applied in Engineering, Procurement and Construction for the Process Industries

DOE Estimating Guide

(413.3-21)
Critical Decision (CD) Requirements
CD-0
Cost estimate range (i.e., order of magnitude)
Due to lack of detail or design during early project formulation

An estimate of costs to be incurred prior to CD-1 could also

be required
For developing Conceptual Design for project

CD-1
Prior to approval of CD-1, project team should develop
definitive estimate of near term preliminary design cost
For PED funding request

Life-cycle cost estimate (LCC) of likely alternatives that are

being considered
After selecting alternative, project team develops total
project cost (TPC) range

DOE Estimating Guide

(413.3-21)
Critical Decision (CD) Requirements (contd)
CD-2
Single point estimate that will represent entire project,
utilizing current scope and associated design
parameters
70-90% confidence level (CL)

CD-3
Cost estimate based on Final Design [or sufficiently
mature to start construction]
May incorporate actual bids received from contractors used to
establish projects requirements for construction or execution

CD-4
Final Estimate at Completion (EAC)
In accordance with projects approved WBS

Mapping
Recommendations

CD-0:

Cost estimate range: Class 5

Rationale:
At best, will use stochastic methods to develop cost
ranges
Assumptions will be made for drivers having significant
impact on project cost

Estimate of costs to be incurred prior to CD-1:

Class 3
Rationale:
Resources needed to support Conceptual Design effort
should be known within range of -20% to +30%
Acquisition strategy and scope of work for Conceptual
Design should also be known

Mapping
Recommendations

CD-1:

Estimate of near term preliminary design cost: Class 3

Rationale: Class 3 is minimum requirement to be definitive
estimate; for less complex projects Class 2 would be
appropriate

LCC of likely alternatives that are being considered:

Class 5
Rationale: Data for some of life cycle costs will be available,
but most will be projections, which will be applied to Class 5
estimate of project

TPC range: Class 4

Rationale:
This estimate uses as its basis scope that is at best only 15%
defined
There is still an overabundance of unknowns that will require
allowances rather than definitive estimates

Mapping
Recommendations

CD-2:

Single point estimate representing entire

project:
Low risk projects (left of 50% below): Class 3
High risk projects (right of 50% below): Class 2
Rationale: Class 3 requires 10-40% of full project
definition; Class 2 requires 30-70% of full project
definition

Reprinted from Figure 3, DOE O 413.3B

Mapping
Recommendations

CD-3:

Cost estimate based on Final Design [or

sufficiently mature to start construction]:
Low risk and final design complete: Class 1
If low risk and final design not complete: Class 2
If high risk (final design or not): Class 2
Rationale: For high risk, one of a kind or complex
projects, some of detail will still not be fully developed

CD-4:
Final Estimate at Completion (EAC): N/A
Rationale: Based on actual costs (no longer an
estimate)

Conclusion
Currently soliciting input from:
AACE (Estimating Committee)
EFCOG (Cost Estimating Subgroup)

Once received/compiled, goal will be to

formalize
New AACE RP or Addendum to existing?
Revision to DOE Estimating Guide?

Questions?