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Supporting Frameworks for Successful Program Management - Cost Estimating

April 16, 2008 | Author: admin | Filed under: Cost Management, Cost Estimating, Program Management

Supporting Frameworks for Successful Program Management - Cost Estimating (#13 in the series Foundations, Frameworks and Lessons Learned in Program Management)
By Robert Prieto

Program management involves determination of the probable system total installed cost (TIC). Probable system costs include consideration of all project uncertainties on a probabilistic basis using Monte Carlo risk assessment techniques.

In a large complex program this cost analysis must consider cost correlation across multiple elements of supply and multiple projects. Examples of such cost correlation include:

  • overall local and regional labor and specialty craft supply and attendant cost
  • fuel cost, impacting not only operating costs associated with direct construction but also material transport and manufacture costs
  • steel availability and costs that may impact not only project structural steel but cost and supply times for major manufactured components, forgings and potentially logistical and supporting infrastructure of the project
  • project bonding availability and costs associated with weak financial performance by sureties

Total installed cost includes cost elements typically not seen at a project level such as:

  • working capital
  • client furnished materials (CFM)
  • project finance costs
  • initial project startup and testing materials
  • initial spares
  • property acquisition costs
  • environmental permitting and mitigation costs
  • program manager and owner costs
  • legal support costs
  • excess insurance costs
  • programmatic currency or commodity hedges

Robert Prieto, Senior Vice President

Robert Prieto is senior vice president for Fluor, where he leads strategy for Fluor’s Industrial and Infrastructure group. Mr. Prieto focuses on the development and delivery of large, complex projects worldwide.

Prior to joining Fluor, Bob served as chairman of Parsons Brinckerhoff Inc. As head of PB’s board of directors, he was responsible for overseeing management performance, establishing top-level policies, and ensuring the firm’s continued long term success.

He is a member of the executive committee of the National Center for Asia-Pacific Economic Cooperation, a member of the board of directors of the Business Council on International Understanding, a member of the board of the Civil Engineering Forum for Innovation, and co-founder and member of the board of the Disaster Resource Network. He currently serves on the National Research Council’s committee framing the challenges on Critical Infrastructure Systems. Until 2006 he served as one of three U.S. presidential appointees to the Asia Pacific Economic Cooperation (APEC) Business Advisory Council (ABAC) and served as chairman of the Engineering and Construction Governors of The World Economic Forum and co-chair of the infrastructure task force formed after September 11th by the New York City Chamber of Commerce. He is also a member of the board of trustees of Polytechnic University of New York, and was previously selected as alumni of the year by its New York Chapter.

He has had an executive sponsorship role in the World Trade Center Transportation Hub; West Coast Rail Modernization; Train Protection and Warning System; Level 3 Communications Long Haul Network and Superconducting Super Collider.

Prieto holds a master of science in nuclear engineering from Polytechnic University of New York and a bachelor of science in nuclear engineering from New York University.

Fluor Corporation (NYSE: FLR) provides services on a global basis in the fields of engineering, procurement, construction, operations, maintenance and project management. Headquartered in Irving, Texas, Fluor is a FORTUNE 500 company with revenues of $14.1 billion in 2006. For more information, visit www.fluor.com.

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