Z94.4 - Cost Engineering & Project Management

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CALENDAR. Time schedule of project activities. l The calendar identifies working days, holidays, and the length of the working day in time units and/or shifts.

CALENDAR RANGE. The span of the calendar from the calendar start date through the calendar end date.  The calendar start date is unit number one.  The calendar range is usually expressed in years.

CALENDAR UNIT. The smallest time unit of the calendar that is in use to estimate activity duration. This unit is generally in hours, shifts, days, or weeks. Syn. Time Unit.

CALENDAR START DATE. The date assigned to the first unit of the defined calendar; the first day of the schedule.

CAPACITY FACTOR. (l) the ratio of average load to maximum capacity; (2) the ratio between average load and the rated capacity of the apparatus; (3) the ratio of the average actual use to the rated available capacity. Also called Capacity Utilization Factor.

CAPITAL BUDGETING. A systematic procedure for classifying, evaluating, and ranking proposed capital expenditure for the purpose of comparison and selection, combined with the analysis of the financing requirements.


CAPITAL, FIXED. The total original value of physical facilities which are not carried as a current expense on the books of account and for which depreciation is allowed by the Federal Government. It includes plant equipment, building, furniture and fixtures, transportation equipment used directly in the production of a product or service. It includes all costs incident to getting the property in place and in operating condition, including legal costs, purchased patents, and paid-up licenses. Land, which is not depreciable, is often included. Characteristically it cannot be converted readily into cash.


CAPITAL, OPERATING. Capital associated with process facilities inside battery limits.

CAPITAL, SUSTAINING. The fixed capital requirements to (l) maintain the competitive position of a project throughout its commercial life by, improving product quality, related services, safety, or economy, or (2) required to replace facilities which wear out before the end of the project life.

CAPITAL, TOTAL. Sum of fixed and working capital.

CAPITAL, VENTURE. Capital invested in technology or markets new at least to the particular organization.

CAPITAL, WORKING. The funds in addition to fixed capital and land investment which a company must contribute to the project (excluding startup expense) to get the project started and meet subsequent obligations as they come due. Working capital includes inventories, cash and accounts receivable minus accounts payable. Characteristically, these funds can be converted readily into cash. Working capital is normally assumed recovered at the end of the project.

CASH COSTS. Total cost excluding capital and depreciation spent on a regular basis over a period of time, usually one year. Cash costs consist of manufacturing cost and other expenses such as transportation cost, selling expense, research and development cost or corporate administrative expense.

CASH FLOW. The net flow of dollars into or out of a project. The algebraic sum, in any time period, of all cash receipts, expenses, and investments. Also called cash proceeds or cash generated. The stream of monetary (dollar) values — costs and benefits — resulting from a project investment.

CASH RETURN, PERCENT OF TOTAL CAPITAL. Ratio of average depreciation plus average profit, to total fixed and working capital, for a year of capacity sales. Under certain limited conditions, this figure closely approximates that calculated by profitability index techniques where it is defined as the difference, in any time period, between revenues and all cash expenses, including taxes.

CAUSATION. An explanation or description of the facts and circumstances that produce a result, the cause and effect for which the contractor claims entitlement to compensation from the owner under the contract.

CHAIN INDEX. An index which globally measures the price change of a range of commodities.

CHANGE. Alteration or variation to a scope of work and/or the schedule for completing the work.

CHANGE, CARDINAL. Work that is beyond the scope of that specified in the contract and consequently unauthorized. The basic tests for a cardinal change are whether the type of work was within the contemplation of the parties when they entered into the contract and whether the job as modified is still the same basic job.

CHANGE, CONSTRUCTIVE. An act or failure to act by the owner or the engineer that is not a directed change, but which has the effect of requiring the contractor to accomplish work different from that required by the existing contract documents.

CHANGE IN SCOPE. A change in objectives (either in quality or quantity of the specifications and/or material), work plan, or schedule that results in a material difference from the terms of an approval to proceed previously granted by higher authority. Under certain conditions (normally so stated in the approval instrument), a change in resource applications may constitute a change in scope.

CHANGE ORDER. A document requesting a scope change or correction. It must be approved by both the client and the contractor before it becomes a legal change to the contract.


CHANGE IN SEQUENCE. A change in the order of work initially specified or planned by the contractor. If this change is ordered by the owner and results in additional cost to the contractor, the contractor may be entitled to recovery under the changes clause.



CHEMICAL ENGINEERING PLANT COST INDEX. An index tailor-made specifically for chemical plant construction, composed of many subindexes for the various components of a chemical plant.

CLAIM. A written statement requesting additional time and/or money for acts or omissions during the performance of the construction contract. The contract must set forth the facts and circumstances for which the owner or the engineer is responsible to be entitled to additional compensation and/or time.

CODE OF ACCOUNTS. A systematic numeric method of identifying various categories of costs incurred in the progress of a job; the segregation of engineering, procurement, fabrication, construction, and associated project costs into elements for accounting purposes. Syn. Chart of Accounts.

COMMITMENTS. The sum of all financial obligations made, including incurred costs and expenditures as well as obligations, which will not be performed until later.

COMMODITY. In price index nomenclature, a good and sometimes a service.

COMPLETED ACTIVITY. An activity with an actual finish date.

COMPOSITE PRICE INDEX. An index which globally measures the price change of a range of commodities.

CONCEPTUAL SCHEDULE. A conceptual schedule is similar to a proposal schedule except it is usually time-scaled and is developed from the abstract design of the project. This schedule is used primarily to give the client a general idea of the project scope and an overview of activities. Most conceptual schedules contain between 30 and 200 activities.

CONFLICT IN PLANS AND SPECIFICATIONS. Statements or meanings in the contract documents (including drawings and specifications) that cannot be reconciled by reasonable interpretation on the part of the contractor and which may require the owner to provide an interpretation between alternatives.

CONSENT OF SURETY. An acknowledgment by a surety that its bond, given in connection with a contract, continues to apply to the contract as modified; or, at the end of a contract, permission from the surety to release all retainage to the contractor.

CONSTANT BASKET. A set of goods and services with quantities fixed in relation to a given time period, used for computing composite price indexes.

CONSTANT BASKET PRICE INDEX. Price index which measures price change by comparing the expenditures necessary to provide the game set of goods and services at different point in time.

CONSTANT DOLLARS. Dollars of uniform purchasing power exclusive of general inflation or deflation. Constant dollars are tied to a reference year.

CONSTANT UTILITY PRICE INDEX. A composite price index which measures price change by comparing the expenditures necessary to provide substantially equivalent sets of goods and services at different points in time.



CONSTRUCTION COST. The sum of all costs, direct and indirect, inherent in converting a design plan for material and equipment into a project ready for start-up, but not necessarily in production operation; the sum of field labor, supervision, administration, tools, field office expense, materials, and equipment.

CONSTRUCTION MANAGEMENT. Project management as applied to construction.

CONSUMABLES. Supplies and materials used up during construction. Includes utilities, fuels and lubricants, welding supplies, worker’s supplies, medical supplies, etc.

CONSUMER PRICE INDEX. A measure of time-to-time fluctuations in the price of a quantitatively constant market basket of goods and services, selected as representative of a special level of living.

CONTINGENCY. An amount added to an estimate to allow for changes that experience shows will likely be required.  May be derived either through statistical analysis of past project costs or by applying experience from similar projects. Usually excludes changes in scope or unforeseeable major events such as strikes, earthquakes, etc.

CONTRACTOR. A business entity that enters into contract to provide goods or services to another party.

CONTRACT COMPLETION DATE. The date established in the contract for completion of all or specified portions of the work. This date may be expressed as a calendar date or as a number of days after the date for commencement of the contract time is issued.

CONTRACT DATE. Any date specified in the contract or imposed on any project activity or event that impacts the activity/project schedule. Syn. Scheduled Date.

CONTRACT DOCUMENTS. The agreement, addenda (which pertain to the contract documents), contractor’s bid (including documentation accompanying the bid and any post-bid documentation submitted prior to the notice of award) when attached as an exhibit to the agreement, the bonds, the general conditions, the supplementary conditions, the specifications and the drawings as the game are more specifically identified in the agreement, together with all amendments, modifications and supplements issued pursuant to the general conditions on or after the effective date of the agreement.

CONTRACT PRICE. The monies payable by the owner to the contractor under the contract documents as stated in the agreement.

CONTRACT, "READ AS WHOLE". Reading an entire contract document, instead of reading each clause in the contract in isolation. If a clause is ambiguous and can be interpreted in more than one way, the meaning that conforms to the rest of the document is usually the accepted meaning.

CONTRACT TIME. The number of days within which, or the dates by which, the work, or any specified part thereof, is to be completed.


CONTROL. Management action, either preplanned to achieve the desired result or taken as a corrective measure prompted by the monitoring process.

CORRECTION PERIOD. The period of time within which the contractor shall promptly, without cost to the owner and in accordance with the owners written instructions, either correct defective work, or if it has been rejected by the owner, remove it from the site and replace it with nondefective work, pursuant to the general conditions.

COST. The amount measured in money, cash expended, or liability incurred, in consideration of goods and/or services received.

COST ACCOUNTING. The historical reporting of disbursements and costs and expenditures on a project. When used in conjunction with a current working estimate, cost accounting can assist in giving the precise status of the project to date.

COST ANALYSIS. A historical an/or predictive method of ascertaining for what purpose expenditures on a project were made and utilizing this information to project the cost of a project as well as costs of future projects.  The analysis may also include application of escalation, cost differentials between various localities, types of buildings, types of projects, and time of year.       

COST APPROACH. One of the three approaches in the appraisal process. Underlying the theory of the cost approach is the principle of substitution, which suggests that no rational person will pay more for a property than the amount with which he/she can obtain, by purchase of a site and construction of a building without undue delay, a property of equal desirability and utility.

COST AND SCHEDULE CONTROL SYSTEMS CRITERIA (C/SCSC). Established characteristics that a contractor’s internal management control system must possess to assure effective planning and control of contract work, costs, and schedules.

COST CATEGORY. The name and number, or both, of a function, hardware, or other significant cost category for which costs are to be summarized.

COST CONTROL. The application of procedures to monitor expenditures and performance against progress of projects or manufacturing operations; to measure variance from authorized budgets and allow effective action to be taken to achieve minimum costs.

COST ENGINEER. An engineer whose judgment and experience are utilize in the application of scientific principles and techniques to problems estimation; cost control; business planning and management science; profitability analysis; and project management, planning and scheduling.

COST ESTIMATION. The determination of quantity and the predicting or forecasting, within a defined scope, of the costs required to construct and equip a facility, to manufacture goods, or to furnish a service. Costs are determined utilizing experience and calculating and forecasting the future cost of resources, methods, and management within a scheduled time frame. Included in these costs are assessments and an evaluation of risks and uncertainties. Cost estimation provides a basis for feasibility studies, business planning, budget preparation, and cost and schedule control.

COST INDEX (PRICE INDEX). A number which relates the cost of an item u at a specific time to the corresponding cost at some arbitrarily specified time in the past. (See PRICE INDEX.)

COST OF CAPITAL. A term, usually used in capital budgeting, to express as an interest rate percentage the overall estimated cost of investment capital at a given point in time, including both equity and borrowed funds.

COST OF LOST BUSINESS ADVANTAGE. The cost associated with loss of repeat business and/or the loss of business due to required resources and costs.

COST OF OWNERSHIP. The cost of operations, maintenance, follow-on logistical support, and end item and associated support systems. Syn. Operating and Support Costs.

COST OF QUALITY. Consists of the sum of those costs associated with: (a) cost of quality conformance,  (b) cost of quality nonconformance, (c) cost of lost business advantage.

COST OF QUALITY CONFORMANCE. The cost associated with the quality management activities of appraisal, training, and prevention.

COST OF QUALITY NONCONFORMANCE. The cost associated with deviations involving rework and/or the provision of deliverables that are more than required.


COST OF LIVING INDEX. In modern usage, a price index based on a constant utility concept as opposed to a constant basket concept.

CRITERIA. A document that provides objectives, guidelines, procedures, and standards to be used to execute the develop-ment, design, and/or construction portions of a project.

CRITICAL ACTIVITY. Any activity on a critical path.

CRITICAL PATH. Sequence of jobs or activities in a network analysis project such that the total duration equals the sum of the duration of the individual jobs in the sequence. There is no time leeway or slack (float) in activity along critical path (ie, if the time to complete on or more jobs in the critical path increase, the total production time increases). It is the longest time path through the network.

CRITICAL PATH METHOD. A scheduling technique using arrow, precedence, or PERT diagrams to determine the length of a project and to identify the activities and constraints on the critical path.

CRITICALITY. A measure of the significance or impact of failure of a product, process, or service to meet established requirements.

CRUDE MATERIALS. Includes products entering the market for the first time which have not been fabricated or manufactured but will be processed before becoming finished goods (eg, steel scrap, wheat, raw cotton).  Syn: Raw Materials

CURRENT COST ACCOUNTING. A methodology prescribed by the Financial Accounting Board to compute and report financial activities in constant dollars.

CURRENT DOLLARS. Dollars of purchasing power in which actual priceshare stated, including inflation or deflation. In the absence of inflation or deflation, current dollars equal constant dollars.

CURRENT PERIOD (OF A GIVEN PRICE INDEX). Period for which prices are compared to the base period prices.

CUSTOM IN THE INDUSTRY. An established practice in a particular industry in the general area. It may be used to show the practice to be followed in a particular circumstance.

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