The IPA Institute

Cost and Schedule Analysis Services

For more than a decade, IPA has provided cost benchmarks that help companies understand the competitiveness of their projects. IPA is expanding the cost analysis services provided to our clients; the new services are designed to further enhance our clients’ cost effectiveness.

Detailed/Quantity-Based Cost Benchmarking

Cost indices tell us how efficiently equipment has been engineered and installed. To better understand cost effectiveness, IPA has developed a methodology to provide a deeper understanding of the elements of cost. These analyses explore cost components in detail to understand how a given project’s cost components differ from an industry benchmark. This service encompasses:

1. Equipment cost index: Compares the cost of equipment installed to that of similar projects.
2. Materials cost index: Breaks down cost performance of materials by category, such as piping, concrete, and steel.
3. Labor cost analysis: Includes an evaluation of hours to design and install the equipment and bulks relative to other comparable projects.

Understanding the Impact of Price Escalation

Price escalation, which has been fairly constant in the 1990s, has become a major source of price volatility since mid-2003. Recent IPA research has found that equipment prices increased almost 50 percent from the beginning of 2004 to the end of 2005. Time needed for fabricating equipment has lengthened considerably.

IPA is in a unique position to understand what is happening in the marketplace; we evaluate hundreds of projects’ cost estimates per year, so we understand the most recent price trends. We use the information we collect to provide our clients with indices that highlight the effects of price escalation of cost components, such as materials and labor. We will also provide an update on recent market trends and their effect on cost and schedule.

Workshops on Understanding the Project Controls Process

For many owner organizations, internal project control resources are insufficient to serve the capital portfolio on a consistent basis. Historically, these functions include cost estimating, project scheduling, and management of project controls through execution. Each of these functions are essential sub-systems that need to be effectively managed within an organization’s overall capital project system.

To assist clients in developing effective owner cost estimating and project controls capabilities, IPA offers multiday workshops. The objective of the workshop is to compare the owner’s current project control structure and process against those of Industry. As a first step, the owner’s cost estimating and project controls process is quantified through an “as-is” mapping. This process identifies gaps in Best Practice. Then, working with key members of the organization, a work process is developed that is tailored to company needs and incorporates practices shown to improve project outcomes.

Consortiums to Share Practices and Metrics

Since 1998, IPA has hosted the Cost Estimating Consortium. Participation is open to all members of the Industry Benchmarking Consortium. Two consortiums focusing on cost metrics and practices are held each year, one focusing on the exploration and production industry and the other tailored to the needs of the processing industries. The consortiums provide participants with:

• Cost and schedule metrics and tools to support estimate and schedule review, preparation, and validation
• Research and special studies to identify Best Practices
• Forum for practitioners to share information and network

For more information about IPA services to improve understanding of cost and cost drivers, contact Robert Brown at rbrown@ipaglobal.com (Phone +1 703-729-8300).