Cost engineers and transport infrastructure: The vital role cost engineers play in major projects

25th November 2017

In Australia, the Gold Coast Light Rail ran $350 million over budget. Parramatta Light Rail, not officially costed, is reported to have blown out from $2.5 billion to $3.5 billion, and WestConnex Motorway has crept up from $10 billion to $16.8 billion (The Australian December 2, 2016).

The assessment of cost overruns on Australian transport infrastructure projects varies between 5% and 52%, and depends on the number and types of examples undertaken by various studies. However, based on Grattan Institute Report (2016), in the past 15 years Australian transport infrastructure projects valued at $20 million or more, planned or built, have cost $28 billion more than their estimated costs. This is 24% more than announced.

This report also finds that scope changes only account for about 11% of cost overruns and the rest of the 89% attributable to other causes. The above findings represent a substantial gap between estimated and actual costs and demonstrates real opportunities for cost engineering skills. Unfortunately, government agencies do not recognise this skillset or widely utilise it in transport infrastructure projects.

Cost engineering is the application of scientific principles and techniques that are applied to problems of estimation, cost control, business planning and management science, profitability analysis, project management, and planning and scheduling.

The activities of a cost engineer represent four categories: cost estimating, planning and developing cost baseline, progress measurement, and cost control.

To achieve this, cost engineers rely on sound engineering practices such as engineering economics, statistics and probability analysis and employ the Total Cost Management Framework & Process (Figure 1 & 2) as the sum of the practices and processes to manage the total life cycle of cost investment in enterprise portfolio.

Major projects need to employ cost engineering specialist to better control the cost and put in place a comprehensive cost risk assessment system that project managers can’t implement independently.”
Kaveh Kia, Lead Consultant, Australia, HKA