Industry-government collaboration tackles tough cost issues

Posted in: Energy, Military, Water


A_LanphereCost engineering for construction is a major challenge for Department of Defense agencies, including the U.S. Air Force Civil Engineer Center (AFCEC), the Navy Facilities Engineering Command (NAVFAC) and the U.S. Army Corps of Engineers (USACE). Independent cost estimates, acceptable construction pricing, and authorized amount for projects often vary so much that projects are delayed or canceled. This puts our nation at risk.

In an attempt to mitigate this risk, the Tulsa Post of the Society of American Military Engineers (SAME) held a workshop on cost engineering for military construction projects.

SAME was founded in the aftermath of WWI in an attempt to preserve lessons learned in the war and facilitate engagement between industry and government professionals. This engagement serves to enhance our nation’s security; SAME continues this mission today.

The workshop brought together private sector members from the architecture-engineering and construction industries, and government members from USACE and AFCEC to form two moderated panels on cost engineering—one from a governmental perspective, and one from a private sector perspective. Through this collaboration, solutions were uncovered that neither group may have come to alone.

 

Cost engineering challenges

The two primary estimates used by the government are the budget estimate and the current working estimate (CWE). The budget estimate is developed 3-4 years prior to construction and is documented in a DD 1391 military construction project data form used to justify a Congressional appropriation for military construction. Once appropriated, the budget becomes the programmed amount (PA). Once design begins, the DD 1391 form is finalized using a conceptual design and any changes need formal approval up to Congress.

The CWE development begins when design begins to ensure that the design cost is within the PA documented in the DD 1391. If the CWE exceeds the PA, the design team must halt design and develop options for the scope of work and redesign, or seek reprogramming through Congress. The CWE eventually becomes the Independent Government Estimate (IGE).

Because PAs are based on DD 1391s developed years prior, CWEs often exceed the PA. To avoid difficult reprogramming or project cancellation, there is added pressure to minimize costs in the CWE. This leads to inaccurate CWEs, which in turn leads to a lack of awarded construction contracts. This is just one example of a cost engineering challenge that requires both private and the public sector perspective to solve.

 

Government and Industry perspectives

Both government and industry panels recognize the problems associated with cost estimating in the industry. These problems—estimating from a poorly written SOW, lack of market research, neglecting the impact of contractor risk—cannot be solved with expertise from only one side. To implement effective solutions to these problems, the industry and government perspectives need to converge. Through this collaboration, a number of potential solutions were identified.

 

Conclusions

The workshop identified issues with cost engineering in four main areas:

  1.  programming
  2. risk management
  3. communication and coordination
  4. market conditions

Several solutions were identified that can be implemented locally, while others will require support at the higher Headquarters and Congressional Levels. I will be working with Tulsa District’s Cost Team Lead, Amber Lanphere, to develop a white paper detailing the results of this workshop and recommended future action. This collaboration between government and industry professionals is vital to the continued safety of our nation.


Miro Kurka, PE, PMP

About the Author

Miro Kurka, P.E., PMP, knows water is an incredible resource. “I like leading teams and managing water infrastructure projects that make our citizens safer, wealthier and happier.” A retired U.S. Army officer, he managed the Corps of Engineers’ program in Tulsa, Portland and Afghanistan for 30 years. He enjoys traveling and meeting people.

Read more posts by Miro Kurka, PE, PMP

One response on “Industry-government collaboration tackles tough cost issues

  1. Four big factors that I have experienced in my career are:
    1 Lack of flexibility to accommodate changes in the Construction Marketplace.
    2 The apparent need of some high level bureaucrats and politicians to make a needed facility into a monument to themselves or someone else.
    3 Inflexibility of the original design when it comes to cost/value engineering in the final “Design and Construction” phases.
    4 Top Heavy administration costs.

    I have seen Government facilities constructed for twice the cost they should have been simply to appease someone’s sense of opulence. Quite often methods and materials are used that will provide for beautiful facilities that could have been constructed just as functional and long lived for close to half the cost. Some excessive cost factors such as “Davis Bacon” are unavoidable, but Egos shouldn’t be.

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