PROJECTS COST BENCHMARKING DATABASE
This application has been structured as a reference in estimating project costs for project managers and estimators, within the context of the Oil and Gas Project Management.
Knowing that projects are budget intrinsically uncertain and that, regardless of the stage of a project, there will be incomplete information on which to base the project estimate. The objective is to establish a set of project parameters, undertake the departmental risk management process to assign contingencies and convey meaningful information on the reliability of the figures provided.
Benchmarking helps organizations compare with their peers, identify the best quartile interpreters, learn about internal and external best practices, and make the necessary changes to become or remain an industry leader. Measuring and comparing is a key way to improve and grow your business. The answers are in the data.
Organizations that believe that cost estimation should be exercised in the broader context of project and program management to ensure that the estimated values are continuously reliable.
Cost Benchmarking is an integral part of a system of basic interdependent contributions of scope, time, risk, cost and quality.
Benchmarking is the process of comparing one's business processes and performance metrics to industry bests and/or best practices from other industries. Dimensions typically measured are quality, time and cost. In the process of benchmarking, management identifies the best firms in their industry, or in another industry where similar processes exist, and compare the results and processes of those studied (the "targets") to one's own results and processes. In this way, they learn how well the targets perform and, more importantly, the business processes that explain why these firms are successful.
“Learn from the successes of others and ourselves
TYPES OF BENCHMARKING:
- Internal Benchmarking
- Competitive Benchmarking
- Industrial or functional Benchmarking
- Process or generic Benchmarking
- Construction Project Cost & Metrics Benchmarking
Activities and similar projects in different places, departments, etc.
- “Share” – Communication
- Data easy to find
- Good results, immediate benefit
- Good practices
- Limited interest
- Internal bias
- “Miss the train”
Made with direct competitors, the same customer base
- Directly relevant
- Comparison of practices and technologies
- History of the information
- Difficulties in data collection
- The ethical conflicts
INDUSTRIAL OR FUNCTIONAL BENCHMARKING
Made with leaders of similar Industries
- Willing partners
- Easily transferable
- High Cost
- Some “Willing partners” not too Willing!
PROCESS OR GENERIC BENCHMARKING
State of art of Processes, products and services. Divide the company into generic functions
- State of art of Processes, products and services
- Divide the company into generic functions
- It is difficult to do it!
- Transfer of practices (Learning!)
- Some of the information is not transferable
➢Focused on data for example, from a database of a particular industry.
➢Process focused on following the steps of the model.
➢Focused on the population designed by the participants.
➢Focused on the strategy each step deployed from the strategic plan.
➢Focused on a hybrid Strategy / people
Project management Benchmark is the process of continuously comparing the project management practices of your organization with the project management practices of leaders anywhere in the world; its goal is to gain information to help you improve your own performance. The information obtained through benchmarking might be used to help you improve your processes and the way in which those processes are executed, or the information might be used to help your company become more competitive in the marketplace. Benchmarking is a continuous effort of analysis and evaluation. Care must be taken in deciding what to benchmark. It is impossible and impractical to evaluate every aspect of project management. It is best to decide on those few critical success factors that must go right for your business to flourish. The project cost estimation process must be subject to a continuous review with regard to the process itself, and above all the results. In the field of best practices framed in Project Management, the cost estimating quality assurance and review of the process is included together with the activity itself of validation and defense of the cost estimate.
The Project Cost Benchmarking Exercise allows to Managers and the design team to understand where and how the funds have been allocated. Cost Benchmarking Provides an essential framework in which the design and allocation of costs can be considered and balanced between different elements and priorities in light of the information available from other similar projects. Cost Benchmarking is a support of the decision-making process, identifying the factors that determine the value, cost, time and quality, the areas of improvement, while guaranteeing a better estimate. the process consists in to draw on a large amount of statistical data collected from previous comparable projects and current information on market costs. These data allow to carry out cost benchmarking exercises against functional and elementary cost breakdowns. These data can be presented in graphic form to facilitate the analysis of any difference and allow the reallocation of costs to achieve the best value for money.
Project Cost Benchmarking is a process by which the estimated performance (often time, cost and technical metrics) of a project is compared to other similar projects. This can highlight areas of design that are not offering good value for money and can help in the assessment of tenders from suppliers and contractors. These practices of Benchmarking are increasingly being carried out on public and private projects, where the “Owner” government or private company has access to large amounts of cost data for similar projects. In the private sector, comparable cost information may not be so readily available. However, large organizations may have access to in-house cost information, and some cost information is published. Comparative information can also be purchased.
It is important, however, that benchmarking does not simply consider construction costs, as these are only a small proportion of whole-life costs, and setting a low benchmark for construction could result in higher operating, maintenance and refurbishment costs throughout the of the project’s life.
SCHEDULE, COST AND TECHNICAL METRICS BENCHMARKING KEY PROCESSES:
All the referred processes are based on the use of past information to assist or support future estimates by:
- Use of statistical measures to evaluate the estimated figure in case data are not available in a specific project.
- Verification against relationships (Reasons / Ratios) known from other similar projects.
- Provide a validity check.
- Data collection must be done in appropriate formats throughout the life cycle of the project, from design to the awarding of contracts.
Project Cost Benchmarking Process – Benchmarking Sub-Processes
There are many ways to focus the Project Cost Estimation as a Cost Benchmarking activity, and there is a very close interaction between them:
- Estimating accuracy always depends of a very strong database collection
- Database collection is the result of a Benchmarking Process
For Cost Estimation – Benchmarking, the standard approach used for the top runners in Oil & Gas Industry. Despite the that the main purpose of Cost Benchmarking in this business is more focused in the Gatekeeper approval, the information gathered in the process is very valuable for Cost Estimation purposes.
Oil & Gas Industry Project Cost is a very sensitive and specialized subject. organizing information about Cost of any Project Component is mainly delegated to worldwide recognized corporations based on confidential agreements.
Since the very strategical sensitivity of the data to be share, Professional Cost Estimating Databases has to be always non-personalized, it means, all information related to the identification of the Project and Company must be removed to protect the “Confidentiality” and solve the objective of having “Professional Cost Estimating Databases” in order to provide tools to give to Managers strong “Decision Make Tool” as part of the “Project Cost Life Cycle” process.
Project Cost Benchmarking Process – Benchmarking Cycle
COST ESTIMATION METHOD - FACTORS - CURVES
LANG FACTORS METHOD
HAND FACTORS METHOD
WROTH FACTORS METHOD
HAND FACTORS METHOD
PETERS AND TIMMERHAUS METHOD