Total cost and value management in XXI century

(presented to the event “NEXT-GENERATION TCM: Il Valore del TCM in un mondo in trasformazione” organized by the AICE on 25/11/2022)

As in the whole field of the project related professions, even in total cost management, starting from the beginning of the present century or, maybe, from the ’90s of the last century, the discipline as s whole is becoming widen and correspondingly there is a widening of the profession itself.
Let’s try to consider this phenomenon in a tridimensional scheme: this does not say that the dimensions of a project are limited to three, in reality the tridimensionality is a characteristic of the human way of thinking.

The first dimension, on the x axis, is the project itself. While in the past we were considering only one project at a time, sometimes dividing the major projects into a limited group of subprojects, now we are integrating a group of projects in some way related each other in a programme and we are grouping the programmes in one or more portfolios. It means new criteria, new parameters to be used as references as well as new sinergies.
In some cases we have the so called metaprojects, that are in part definite but in other parts still stochastic, it means that from time to time we could be forced to adjust planning, scheduling and sometimes also the scope and the objectives of the metaproject. As an example we could consider sending the man to Mars, while the Next Generation EU could be considered
“only” as a multilevel programme.

The second dimension, on the y axis, is time related, namely it is related to the time span used as a reference, that in the modern vision includes for the whole life cycle,

• the making of the idea and the relevant design,
• the development that goes from the approval of the project, namely from the decision to go on with it, to the consolidated authorization given by the competent authorities, and to the following status of ready for construction and, if it is the case, to the financial closing,
• the engineering and construction, that goes from site handing over to EPC contractor to the final taking over or equivalent contractual step,
• the operation and maintenance of the processes that have been originated from the project, and eventually
• revamping, selling, back to greenfield, etc.

The third dimension, the one on the z axis, is also subject to an extension and substantial widening: in the past, we were considering on one side the costs and revenues in term of engineering and construction and on the other side the investment as a whole, without connection between them. Now we consider also the social costs, as a matter of fact in ICMS version 3 the emissions of carbon dioxide have been included into standard construction costs and, as far as the investment is considered, the decisions are subject to a complex analysis of costs and benefits, where the benefits have to be considered from different points of view according to the sometimes contrasting needs of the different stakeholders: in other words, we are managing value more than managing costs. To be noted that, while the costs and revenues in accounting are considered as definite figures, cost and benefits in value analysis are still stochastic numbers with a subjective component in them.