A Second Opinion is Worth the Cost - 12479
- Project Time and Cost Inc. (United States)
This paper, 'A Second Opinion is Worth the Cost', shows how a second opinion for a Department of Energy (DOE) Project helped prepare and pass a DOE Order 413.3A 'Program and Project Management for the acquisition of Capital Assets' Office of Engineering and Construction Management (OECM) required External Independent Review (EIR) in support of the approved baseline for Critical Decision (CD) 2. The DOE project personnel were informed that the project's Total Project Cost (TPC) was going to increase from $815 million to $1.1 billion due to unforeseen problems and unexplained reasons. The DOE Project Team determined that a second opinion was needed to review and validate the TPC. Project Time and Cost, Inc. (PT and C) was requested to evaluate the cost estimate, schedule, basis of estimate (BOE), and risk management plan of the Project and to give an independent assessment of the TPC that was presented to DOE. This paper will demonstrate how breaking down a project to the work breakdown structure (WBS) level allows a project to be analyzed for potential cost increases and/or decreases, thus providing a more accurate TPC. The review Team's cost analyses of Projects identified eight primary drivers resulting in cost increases. They included: - Overstatement of the effort required to develop drawings and specifications. - Cost allocation to 'Miscellaneous' without sufficient detail or documentation. - Cost for duplicated efforts. - Vendor estimates or quotations without sufficient detail. - The practice of using the highest price quoted then adding an additional 10% mark-up. - Application of Nuclear Quality Assurance (NQA) highest level quality requirements when not required. - Allocation of operational costs to the Project Costs instead of to the Operating Expenses (OPEX). OPEX costs come from a different funding source. - DOE had not approved the activities. By using a Team approach with professionals from cost, civil, mechanical, electrical, structural and nuclear disciplines and by performing a Line by Line, WBS element by WBS element review of the Projects' CD-2 baseline package helped the DOE Project Team experience success. The second opinion that PT and C provide by conducting a Pre-EIR review of the Project baseline package and the cost review of the TPC helped the DOE Team pass the CD-2 EIR and reduced the TPC. The Line-by-Line review of the DOE Project identified opportunities to reduce the TPC from $1.1 billion to $740.8 million, thus realizing a saving of approximately $359.2 million, or roughly 32% of the original TPC. This significant cost savings underscores the cost in obtaining the second opinion. This same Line by Line review can be applied to any DOE project in the Energy Management or Weapons complex. In the case of this DOE Project a second opinion was worth the cost. (authors)
- Research Organization:
- WM Symposia, 1628 E. Southern Avenue, Suite 9-332, Tempe, AZ 85282 (United States)
- OSTI ID:
- 22293703
- Report Number(s):
- INIS-US-14-WM-12479; TRN: US14V1359115227
- Resource Relation:
- Conference: WM2012: Waste Management 2012 conference on improving the future in waste management, Phoenix, AZ (United States), 26 Feb - 1 Mar 2012; Other Information: Country of input: France; 2 refs.
- Country of Publication:
- United States
- Language:
- English
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