With shrinking margins in a brutally competitive landscape, every company wants to achieve cost efficiency in its operations. They are increasingly looking at aspects like cost engineering to ensure that they get a competitive upper hand and continue running a thriving business.
What is cost engineering?
Estimating any project is fraught with a lot of unknown variables. If careful planning and proven principles are not applied, then the project may incur cost overruns. Or worse, the exorbitant costs may simply make the project infeasible. This is why many forward-looking companies want to undertake cost engineering and make sure that the project is completed without risks of increasing costs.
An expert in professional cost engineering will be able to achieve complex financial objectives like cost control, budgeting, and cost forecasting to ensure complete project success. This specific branch of engineering practice is meant to manage project costs to help it move towards successful fruition.
This way, we see that a cost engineering expert adds immense value to the overall project. Right from investment appraisal to risk assessment and budget monitoring, a cost engineer has various areas of responsibility. His dedication and involvement in the project enable the project to be completed smoothly and without any hiccups.
Since the cost engineer keeps a close eye on every cost aspect, he can easily alert management in case of cost overruns or potential delays in the project. Such proactive alerts help the management to undertake course corrections and ensure that there is no cost inflation or delays in executing the project.
Key contribution to total cost management
The cost engineer has a major responsibility of optimizing total cost management. It is the specific area within an engineering project that has a singular focus – to solve financial budgeting and planning problems. Professional cost engineering experts will show skills by applying judgment and expertise for various areas like planning, scheduling, monitoring, and performance assessment for total cost management initiatives.
Their area of expertise also spans cost estimation and economic analysis to ascertain the project’s financial viability, cost optimization, and change control.
Any project spans many weeks or months. It also has many participants who work collectively to take the project to successful completion. With the help of total cost management, the professional cost engineer will be able to manage costs at every milestone and every step of the project lifecycle. Any unplanned move may lead to cost overruns within an extremely short period of time. To avoid such unpleasant changes to cost, it is better to have a cost engineer provide his expertise on optimizing cost and forecasting the future likelihood of the cost staying on track.
We can say that the cost engineer applies a systematic approach to manage cost and bring down the risks of cost overruns across the lifecycle of any project, enterprise, or production process. He does so based on his experience, sound management philosophies, and proven methodologies. As a result, stakeholders will be able to steer the project towards a successful conclusion without delays or without any scope creep.
Benefits of engineering cost
1 – Manage Scope Creep
It might happen that some activity or milestone would not be factored in initial costing. Such new changes might come up during actual execution. This is known as scope creep. An expert in professional cost engineering will take care to ensure that there is minimum risk of scope creep by planning the project costs at the onset to an accurate degree. Doing so will ensure that no new changes come in the middle of project execution, potentially derailing the cost and budget.
2 – Manage the budget of the project
With multi-team involvement, poor communication and lack of planning can result in a bad budgeting process. A cost engineer will liaise with the necessary team members to understand what the project is going to entail. The honest and transparent conversation will help in coming up with a more realistic budget that the team can stick to.
3 – Manage on-time delivery
Because of the many external touchpoints, it becomes difficult to ensure that there are no delays in completing the project. A cost engineer will ensure sufficient buffer when estimating approvals, permits, and other regulatory paperwork from government or municipal officials. This way, he will plan with these factors in place so that eventually, there is no delay.
This way, the cost engineer will factor in the cost of human labor, materials, machinery, tools, and equipment needed to complete the project satisfactorily. Such a detailed level of planning ensures that the project is executed on time. He manages to stick to the original budget as much as possible.
To sign off
Cost engineering can be considered a triple blend of managing costs, adhering to quality expectations, and ensuring on-time project delivery. When these three factors are optimized, the cost engineer is said to have done a good job.
