Total Cost Management (TCM) Process

TCM is a step-by-step process map that integrates all the practices of cost engineering and project control. It can serve as a high-level generic model upon which to build company-specific processes. For those who follow the PMI Guide to the Project Management Body of Knowledge (PMBOK), TCM is consistent with its basic principles, but is considered an improvement in many areas, including strategic asset management which ties together portfolios, programs, and projects.

Strategic Asset Management Process

Owner cost engineering practices have the most effect on improved bottom-line capital performance (i.e., return on assets) before projects are initiated. The strategic asset management process (a sub-process of TCM) involves monitoring and measuring  he performance of the owner assets throughout the asset life cycle, identifying opportunities for performance improvement (capital or otherwise), analyzing alternative investment options, and making investment decisions (which may or may not involve initiating a capital project). This process is led by and supports business management. Most of this process cannot be effectively outsourced by owners.

Project Control Process

Once a decision is made to invest in a capital project, the project control process (a sub-process of TCM) establishes baseline control plans, monitors, measures and assesses project performance, identifies corrective actions, develops forecasts, manages change, and so on throughout the project life cycle or phases through completion. This process is led by project management and supports the project team. While many of the tasks are performed by contractors, owner's must maintain core capabilities to manage the process.

Cost Engineering

This professional field of practice encompasses cost estimating, planning and scheduling, cost/schedule control, value engineering, risk management and all the other areas included in the TCM process. Cost engineers work side-by-side with the owner's technical and business staff to deliver assets and projects that not only work, but are cost effective. Research has shown that cost engineering is an owner core competency (i.e., a skill to keep in-house).

Owner Cost Knowledge

Owners who outsource the knowledge of the cost of their assets and projects are, in effect, outsourcing their investment decisions. It is irrational behaviour, but all too common in the name of cutting overhead. The penalty for poor investment decisions and poor control have increased with Sarbannes Oxley. In addition to strong processes and cost engineering competency, owners need historical databases regarding their assets and projects so they can make better investment and control decisions and plans in the future.

Decision and Risk Management

Capital project success begins with considering risk in planning and making good decisions in consideration of risk. It later depends on effectively managing risks during execution and then learning from history. Many companies are familiar with basic risk management processes and practices (e.g., the risk register). However, most are weak in quantifying risks because they lack in-house Cost Engineering competency. Effective decision and risk management therefore must combine all of the foundation elements found on this page.