Whether building a new deck on the back of one’s house or the entire infrastructure for a missile defense program, the most basic and complex question in construction is always, “How much is it going to cost?”
Get the answer wrong when building your deck and you may overpay by a couple thousand dollars. Get the answer wrong when you’re building the missile defense infrastructure and it can cost millions, bring projects to a halt and potentially damage your organization’s reputation for years to come.
That is where the critical role of a cost engineer (CE) comes in. In construction organizations, project managers and design engineers get the glory but cost engineers play a critical role behind the scenes. This is especially true in an organization like the U.S. Army Corps of Engineers Transatlantic Middle East District (TAM).
The District provides engineering, construction and related support services to the U.S. military and allied nation partners throughout the Middle East.
CEs usually have a degree in math or economics and within the Department of Defense can be certified via an exam before the Tri-Services Cost Engineering System Board.
In simple terms, a cost engineer, sometimes also referred to as a cost estimator, does an analysis to figure out what a project is going to cost in terms of money, time and resources. It’s this analysis that can be a key factor in TAM’s mission partners choosing to use their services.
“By regulation, we’re not allowed to make a profit,” said Tom Waters, the District’s Director of Programs. “Because of that our partners can be sure we’re giving them the most accurate estimate possible. Our sole motivation is to be an honest broker for those we work with.”
According to Dan Lowry, TAM’s chief cost engineer, the most important piece of information a CE provides is the first cost estimate, usually called a programming cost estimate. That is what establishes a project’s construction budget, and sets the baseline for the future project design.
“Getting that first estimate correct can set the project up for success throughout design and construction or, it can lead to redesign to reduce costs, delays when the project is solicited, or even cancellation if additional funding can’t be found,” said Lowry. “To make sure this is done correctly we should be involved in the project starting at inception.”
Max Von Arnswaldt, also a cost engineer with the District, said the environment the district operates in can lead to challenges but with over 10 years as a CE and 23 in construction, it’s something he’s gotten used to with experience.
“One of our district’s biggest challenges can be the volatility of the markets in the Middle East. It makes construction cost estimating challenging for us. One recent example was the Qatar Embargo by other GCC Nations. There’s also competition for resources (workers and materials) such as the construction in Qatar for the World Cup. We also have to deal with instability caused by bad actors like ISIS,” he said.
Another challenge TAM cost engineers can face is that they are sometimes directed by an allied mission partner to use a particular contractor.
“Because the money attached to some of our projects is coming from our allied partners, they can direct who we work with. Naturally when there’s less competition, things can cost more,” explained Waters. “That doesn’t change the fact that we’re still committed to doing what’s best for our customers.”
That’s where Von Arnswaldt comes in.
“What we do is provide an independent government estimate that serves as a bench mark of where the costs should be. We can then assist in contract negotiations by providing realistic prices for all components of a construction project. Recently we saved one of our partners over $15 million dollars by getting a project awarded for a competitive and realistic price,” he said.
Although they have many tools at their disposal to get the most accurate analysis, all of the cost engineers interviewed said their best tool was experience.
“I use all the tricks I have in my bag,” said TAM CE Donnie Gletner who has over 28 years of experience in that field. “I am lucky because when I started estimating, I was the one doing the work and it’s been a huge help over the years. Since joining the Middle East District, I’ve probably made 40 trips to the Middle East. I was also deployed in Afghanistan for 2.5 years. These trips are especially helpful in gaining the understanding and experience needed in order to prepare the estimates in our Area of Responsibility.”
Gletner said that experience is even more important because most CEs can rely on cost books to assist them in their work. Cost books provide a basic idea of what labor, equipment and materials should cost. USACE has their own and its districts rely on them as a starting point in determining project cost.
“If we simply used those off the shelf books, we would bust every estimate we performed,” he said. “We have to perform market surveys and create our own cost books for the countries where we work.”
While cost estimating is as much an art as it is a science, the District CEs recognize the importance of their role in starting a project off on the right foot.
“Despite all of the issues that can impact project costs over the entire lifespan of a project, at the end of the day all anyone wants to know is that they are paying a fair price. That’s true whether you’re an individual adding a porch to your house or a government building military infrastructure for fighter aircraft you just purchased. Our cost estimators are unsung heroes in getting to that fair number as close as possible the first time,” said Waters. “Because at the end of the day, most people will only remember that first number you gave them.”