Cost Engineering and Compliance – A new vision in Brazil
As we are facing an enormous corruption case in Brazil institutions, we should bring the cost engineering importance and how it can impact the compliance that the companies are now looking for, a new phase of the engineering and construction business in Brazil, for the owners and contractors.
Recently I attended a panel discussion about Compliance in Capital projects Sponsored by AACE Brazilian section. The audience was mainly from engineers and lawyers, and was clear that the Cost engineering does not have a important role in the Financial entities, Owners and Contractors.
I will try to list some responsibilities a Cost Engineer may have in some key process toward compliance, from financial stewardship to audit compliance.
The cost engineer has some functional responsibilities. They include, and are not limited to the following.
· Financial reporting;
· Internal controls;
· Fraud prevention;
· Contracts management and audit compliance.
The work process of a cost engineer directly affects financial reports by impacting the following items.
· Period expenses;
· Cash flows;
· Value of fixed assets.
Some of the key cost engineering functional responsibilities and related process are:
· Segregating capital vs. Non-capital;
· Controlling/Reporting costs
· Projecting/managing cash flows;
· Assessing risks;
· Managing CAPEX program;
· Preventing/Detecting fraud
· Contract management;
· Monitoring controls for audit compliance;
As you can see the Cost Engineer has a capital importance toward build a compliance environment, but I will now focus in the Construction Fraud and Audit Compliance, as it has been the main discussion in the last 3 years in Brazil, and how the COST ENGINEERING must play a new role in the future.
The construction fraud has many forms and faces, and include the following:
· Illegal kick-backs;
· Embezzlement by project managers or contract administrators;
· Corruption in trades;
· Bid rigging;
Prevention of fraud is the primary objective for a compliance program, the companies cannot rely only in internal audits . The cost engineer must be involved in fraud prevention and detection, as he took part in important cost/financial process and can identify failure in those process, that can culminate in some action/inaction toward prevention of frauds.
It is important to mention that the Cost Engineer is not their role to be an Internal Auditor. His role is to proactively be involved and expected to prevent audit exceptions from occurring.
The Brazilian construction community must improve the education, training and certification of Cost Engineers, as the Brazilian business in capital projects will be changing. The financial entities, Owners and contractors must be prepared to face tougher requests for compliance.
The knowledge of the process and practices involved, specially the use of AACE Recommended Practices and protocols, should be propagated and new teams, trained and certified must be prepared for this, as the lack of those professionals in Brazil is clear. Brazil should not continue to be assisted by foreign companies, and create a new Brazilian Cost Engineering environment, and propagate its importance.
You can find other interesting articles here:
Reference: Sarbanes -Oxley and Cost Engineering – W. Doug Creech, CCC – Cost Engineering Vol. 48 / No. 7 July 2006.
The PM role and the Fourth Industrial Revolution
Is your team prepared for the Fourth Industrial revolution? As the automation, 3D printers, AI and IoT becoming each day more present in the industry, we can see those that used to develop technologies beginning to move toward leading the adoption and the digital transformation.
How can see you as a 4.0 team? Are you still managing your projects in Excel or legacy systems? Or you moved already to the cloud using Big data ? Are you already familiar with the development of IoT or still seeing it with something of the “future”? Are you using mobile devices as your first interface? Do you are a push or pull user of analytical data?
If you don´t know some of the answers or even the question above, you are in trouble.
You need to be ready to a new era with smart factories and how it will change most of the process that occur today in the manufacturing sector, especially for operations, maintenance, and logistics.
I can say that some of the strategic decisions to build a factory will change dramatically in the future. The need for professionals to run a factory will change and the presence of great amount of workforce will diminished. The factories will be located next to the market, logistical hub , or next to energy for some industries, but something new will occur. Probably the dense presence of industries in some places will change. Probably we will be able to clone those industries as easier as today, as most of the production will be done automated with few workers.
And who will be those workers? Most will be high educated professionals, that will know about cloud technology, IoT implementations, data analysis science and cybersecurity experts. Those will be the main workforce of the 4.0 industry. They will deal with descriptive, predictive and prescriptive data analysis to operate, maintain e project the production demands.
The project manager will be someone with a broader view, become less tactical and more strategical, understanding how all those technologies should be placed toward a leaner and streamer production. He will work remotely, with cloud based systems and with a high understanding of data analysis, to make decisions on the fly with less entropy in the entire system.
So…are you prepared?
You (Yes..you will be affected) and The Fourth Industrial Revolution
As the pace of change is accelerating and the technology is becoming each day the center of our lives, we need to be prepared.
Besides the changes in the curricula and the education process, the process will lie in the same technology that is moving us toward a new society. But will have to make it more inclusive and not just for few, as we can begin to create even more islands of development and income.
Now, as the technology advances more rapidly than the countries and even the governments change the way they deal with the subjects, the companies will need to invest in new models to attract, train and keep this new group of professionals, some with unique capabilities and knowledge.
The mindset will need to change. Some skills will arise and change how to organize, process and deal with the teams and how the work will be done. Probably special teams will be created, with a broader range of duties but supported with AI, augmented and virtual reality. We expected to run factories with just a tenth of the actual number of people.
The jobs displacement will occur faster and faster. The professional will need to keep changing their skills many times during his career. The number of lays between the vendor and the customer will reduce, and those positions that now intermediates, will vanish from the job market. We already see this happening in many areas like traveling, retail stores, transportation, and each year another sector is hit with an innovative technology, that disrupts not just the players, but also the people that works in that sector.
As the companies begin to shrink, as consequence of the technology, a small number of professionals will rise, with knowledge and skills very different from what we have in the companies right now. They may become a new social class that will encompass wealth and embedded technology skills.
The question: How will be prepared for this turn? What can we do right now? How the education sector will deal with this as we still laying in the foundations of the first industrial revolution curricula.
- Drop a letter.
The Dark Factories of the (near) Future or the present?
The technology is evolving in a pace that is beyond the futurologists could predict some 15 years ago. Beyond the microprocessor development the combination of software, hardware and specially education, have been improving different areas of knowledge.
The effects of this development of technologies in Genetics, Drones, Blockchain, Big Data, Augmented reality, 3D printing, Virtual Reality, Artificial (general) Intelligence, Robots and Internet of things is occurring in all parts of the society, with some unknow consequences in economies, education, culture, financial and specially how the society will change in the future.
The jobs will change, as some already changed since the beginning of the Information era. The tasks tend to be automated and the AI is going to play a central role in the jobs soon.
The manufacturing is coming to a complete automation, with robots and a limited human presence. The dark factories, where light won’t be needed comes to be a reality.
Now, we should understand that the jobs will not come back to the factories. As an example, in the USA a worker costs USD 25/hour and the robot costs just USD 8/hour. The rust belt in USA needs to understand that the communities there will change and that training and education must prepare the present and future workforce for new skills. It this will need to happen all over the world with new curricula and different approaches in education and training.
The companies must work even more with some shareholders that till now would be just some spectators, but will face very difficulties in the future, as the communities will be even more affected by the technologies and the lack of jobs.
The effects in the society will be huge. The hours of work will tend to be even more shorter, with less positions available and a huge impact in the society, not only financially but specially in the culture of work.
A Brazilian Approach on Claims Prevention July 19th, 2016
- The Claim
- Defective and Deficient Contract Documents and Implied Warranty Claims
- The Claim Process
The number of construction claims in Brazil, especially in the Oil&Gas sector, increased in the last 10 years due mainly to the numbers of projects conducted by Petrobras in refining, exploration and production business areas, and the lack of prevention from owners and contractors.
In this paper the author reviews the main causes of construction claims and how to mitigate their affects, and proposes a way to increase awareness of claim prevention techniques by means of the implementation of training, certifications, procedures and usage of AACE International Recommended Practices. The success of this approach will depend of the fair relationship between the parties and good project management in all phases.
Due to the numbers of complex infrastructure projects in Brazil in recent years, construction claims have become a common practice in almost all projects. Until a couple of years ago, most of the settlement occurred based on negotiations held between the parties. However, with the increasing technical complexity of the projects and the amounts involved, the disputes resolution has been moving towards mediation, arbitration and even litigation.
Unfortunately, the parties are not prepared for this new situation, because of the general low level of skills and knowledge of the internal teams in preparing claims and counterclaims and using the proper techniques in schedule validation, delay analysis and proving loss of productivity, just to mention a few common issues. Even the entitlement for the claim is not clear for most contractors. In this situation, the claims preparation becomes expensive with the need of external legal and technical support.
On the Owner side, claim prevention should become a new modus operandi in the construction industry, thus enhancing the use of a new contract language, as well as raising the standard of the preliminary design, technical specifications and drawings. On the Contractor side, bid preparation, request for information and risk assessment should become an important part of claim prevention process.
This paper lists the main types of claims that have arisen in the last years and proposes some steps to their mitigation.
The Brazilian construction community must improve the education, training and certification of the workers involved in construction projects, especially in EPC and with Lump Sum contracts.
The numbers of projects that has been going to litigation has increased in the recent years, with higher costs involved in the preparation and discussion in the arbitration chambers.
The knowledge of the process and practices involved, should be more propagated through the community, with participation of Owners and Contractors, as an on opportunity to reduce or mitigate the claims.
Author: Andre Fiuza - AACE Member #118840
My 10th LinkedIn Anniversary profile. What I learned in 10 years.
Published on June 1, 2017
My LinkedIn 10th Anniversary – What I did learn in 10 years.
Next July 8th I will complete 10 years as a LinkedIn Member. At that time LinkedIn was just 4 years old and was just beginning the public profiles. For me, in Brazil, it was far for be useful, as we had just a few members here. But since that time, I found that it will become a success and I always believed that It will be the main source for the professional interaction and job marketplace.
The photo profile became available only in September 2007. As Announced by Adam Nash
“September 27, 2007
We're excited to announce that starting tomorrow (Friday 28, 2007) LinkedIn members will have a new option available: the ability to add a professional photo to their profile.
Adding a profile photo is one of the most commonly requested features for the LinkedIn profile, primarily because many people (like me) tend to recognize their colleagues and classmates more reliably by face than by name. They say that a picture is worth a thousand words, and with this feature we hope to make it easier for people to form richer professional connections online.”
Many things changed in the world, and specially in social media and technology. Those trends changed the job marketplace in many aspects. Look at the Top jobs in America in 2007 compared from 2017. Source Fast Company magazine.
Top Jobs in America in 2007 – Source Fast Company
1. Experience Designer:
2. Medical Researcher
3. Web Designer
4. Security Systems Engineer
5. Urban Planners
6. Viral Marketers and Media Promoters
7. Talent Agents
8. Buyers and purchasing agents
9. Art Directors
10. News Analysts, Reporters, and Bloggers
The list for 2017 is the following.
Top Jobs in America in 2017 – Source Fast Company
1. Data scientist
2. Dev ops engineer
3. Data engineer
4. Tax manager
5. Analytics manager
6. HR manager
7. Database administrator
8. Strategy manager
9. UX designer
10. Solutions architect
We can see that the main word in those jobs is DATA. And I think it will continue in the next years. With the use of AI, Blockchain, biotechnology, Proteomics/genomics, all the jobs will be impacted using data. Those responsible for mining, organizing, managing, securing and using the DATA will be the job positions that will fill the stream of the recruiters and headhunters.
But what I learned and how I used LinkedIn in all those years?
I think LinkedIn have many things to evolve. After those years many aspects from the LinkedIn continues in the initial stages. Even with the possibility to interact with people from over the world and with globalization, the job marketplace continues to operate in silo bases. The jobs continue to change, with the skills being melted in many areas, bringing together skills that used to be found is very specific people. Today the workforce need to become each day more generalist, with skills that in the past was just from one profession but today is mixed in many. And this is not found easily when you try to find those people in LinkedIn. That is one of the problem Linkedin. It extremely difficult to find people with this different skill using the filters in LinkedIn.
Other problem that I see is the location. With the globalization, the job positions pops-up all over the world, and the people with the skills are not available in one place. It is all over the world. The LinkedIn is not able to provide the tools necessary to meet the supply and demand targets. How difficult could be to be open for the world, or maybe just Europe, or Latin America?
The lack of real time chat, or even the possibility to announce that you are online, creates a barrier of online contact. With the world running in a fast pace, the message looks like is in the Second Industrial Revolution, waiting the postman deliver the letter or post. We don´t know even if the post/message was read. I think this one of the main changes that LinkedIn should implement.
And getting back to DATA, with some many DATA, why LinkedIn is not able to improve the search capabilities? The options that we have is very short. We could be much more assertive in our research with many others information. Today demands many phases to meet our goals in finding some people with specific skills, connected with some industry, in some place, but able to move to other. How to find those people today, easily, in LinkedIn?
As we can see, the Linkedin have many things that could improve and become even the main stream for professional relations, in all aspects. I could list many others improvements, but I hope that Linkedin is working on it, and in 10 years it will be a complete different platform for professional interactions.
I am a Generalist - Let me connect the dots
I always wondered if I should be a specialist or a generalist. But this always just represented two seconds.
After almost 30 years from graduation as a mechanical engineer, I am sure that I did choose the right path. And some attitudes helped me on it.
Since my childhood I was a challenger. In almost everything, from the school to the the family. I was never satisfied with the "reality" and my main word was Why? It came with also the intellectual curiosity. I needed to understand, learn and sometimes (un)learn different subjects, in a broad spectrum.
And it continued during the university and when a began to work as a trainee. I was full of new ideas, working with people almost 2 times my age, but always questioning why?.
I worked in many different business processes, from sales, IT, Financial, Procurement, controlling. And I think one thing was the most important. An attitude of "I can do" and motivation to change something, that could be a process, the teams or even the company.
But I had alwas in mind that I would helping the other people to move ahead, with new experiences, new achivements and different view of his/her work. That this DOT would make a difference in his own future and in the others. With new perpectives and ideas that came from different people in the teams.
And we need the people to solve the problems, change processes or introduce new business models. Cross funcional teams will be enough? Or we need someone with agile skills, holistic view, practices empathy and can lead by influence and collaboration?
That is the moment for the Generalist and his vision, communication, ideas and how he see the world with different perpectives and with experiences of other worlds (not an ET!!).
Nice to meet you. I am a Generalist and I would like to help you!!!