Industry-government collaboration tackles tough cost issues
Cost 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.
The workshop identified issues with cost engineering in four main areas:
- risk management
- communication and coordination
- 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.
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