Speaking The Same Language in Cost Engineering

Clear communication is essential for successful projects. In cost engineering and project controls, standardized terminology ensures that professionals, clients, and decision-makers are aligned. Recognizing this, AACE International developed Recommended Practice 10S-90: Cost Engineering Terminology, that defines key terms within the Total Cost Management (TCM) Framework.

This blog explores the purpose and value of the 10S-90 RP, how it promotes clarity and consistency, and highlights key updates from the latest revision, including terms like risk capacity, hybrid risk analysis, production, and earned value management. We also share how CMC Project Solutions applies these standards to support our clients and reinforce our commitment to industry best practices.

The Importance of Standard Terminology in Cost Engineering and TCM

In large projects, professionals from various disciplines – estimators, schedulers, risk analysts, project managers, contractors, and owners – must collaborate closely. Misunderstandings over terminology can lead to errors, disputes, or flawed decisions. The AACE 10S-90 Recommended Practice was created to prevent that by standardizing the language of cost engineering. As stated in its introduction, this practice “provides clear and concise definitions” for terms as they are used in cost engineering, identifying their common usage within the context of AACE’s TCM framework. By adhering to a common vocabulary, project teams ensure that a term like “estimate,” “float,” or “contingency” means the same thing to everyone involved.

Standardized terminology enhances clarity and consistency across project communications, enabling teams to express complex ideas without ambiguity and make faster, more informed decisions. As the leading authority in cost engineering and total cost management, AACE International sets the global benchmark for industry best practices. Its rigorously maintained 10S-90 glossary is a foundational reference that replaces outdated definitions and ensures the industry speaks a unified language.

Key Updates from the 2024 Revision of AACE RP 10S-90

Industry terminology is not static; it evolves as new methodologies emerge and practices mature. The July 2024 revision of RP 10S-90 introduced updates and new terms that reflect current trends in cost engineering, risk management, and project controls. Below we highlight a few of the most relevant new or updated definitions that project professionals should know:

Risk Capacity: Risk capacity is a brand-new term in the latest revision, defined as “the maximum adverse impact that could be borne by an organization or ongoing business entity”. In simple terms, it’s the upper limit of risk exposure an organization can absorb without jeopardizing its existence or core objectives. This concept is tied to an organization’s risk management maturity and performance capabilities. Understanding risk capacity helps companies and project teams gauge how much risk they can take on. It complements the notion of risk tolerance, which was also refined in this revision as the level of risk impact an organization is willing to accept in pursuit of its goals (typically a threshold lower than the absolute capacity). By quantifying risk capacity and tolerance, teams can make informed decisions about which risks to pursue, mitigate, or avoid, aligning risk-taking with the company’s strategic comfort zone.
Hybrid Risk Analysis: Modern risk management often requires more than one analytical approach. The updated hybrid risk analysis definition reflects this reality. It is described as “a quantitative risk analysis performed by employing more than one method” for a few purposes: using the best-suited method for each specific risk, establishing a cross-check or comparative control, or combining complementary approaches. For example, a project team might use Monte Carlo simulation for overall cost uncertainty (systemic risks) while also modeling specific event risks separately, a hybrid approach ensures neither aspect is overlooked. This new term is particularly relevant to risk managers and decision analysts who deal with both systemic and project-specific risks in complex projects. Embracing hybrid risk analysis can lead to more robust risk quantification and management strategies, since it leverages multiple perspectives and techniques to capture uncertainty.
Production: In scheduling and cost estimation, understanding output is essential. AACE added the term “production” to clarify it as the measurable amount of manufacturing or construction output. This definition supports consistent discussions around productivity and forms the basis for related concepts like production rates. Schedulers and managers use these rates to estimate activity durations based on how quickly crews or equipment can perform tasks. A clear definition of production ensures that all stakeholders interpret progress and performance targets consistently, aligning assumptions in both scheduling and cost estimating.
Earned Value Management (EVM): A cornerstone of project controls, EVM is defined as “a project progress and performance control system that integrates work scope, schedule, and resources to enable objective comparison of earned value to actual cost and planned schedule.” It allows project managers to measure performance by comparing what’s achieved (earned value), what’s spent (actual cost), and what was planned (baseline). AACE’s updated definition aligns with the ANSI EIA-748 standard, reinforcing consistency around key concepts like Budgeted Cost of Work Performed (BCWP), AC, and PV. For professionals and clients, this ensures clearer, standardized performance reporting and underscores EVM’s lasting role in effective project control.

Reducing Ambiguity in Contracts and Communication

Standardized terminology delivers real-world value in project environments, especially in contracts and cross-functional collaboration. Complex contracts often include technical terms that, if interpreted differently by each party, can lead to disputes or delays. AACE’s 10S-90 provides clear, shared definitions, like “Request for Equitable Adjustment (REA),” which defines a contractor’s right to adjust contract terms under applicable change clauses. This clarity helps owners and contractors align upfront, reducing risk of conflict. Beyond contracts, the 10S-90 glossary improves communication across disciplines. Whether it’s a scheduler, estimator, or project manager discussing concepts like “float” or “risk exposure,” standardized definitions eliminate ambiguity. The guide also distinguishes terms by context, for example, clearly labeling whether a definition applies to planning or cost estimating. This ensures consistent interpretation of reports, metrics, and project controls, enabling quicker, more confident decision-making and preventing costly miscommunication.

CMC Project Solutions’ Commitment to Best Practices

At CMC Project Solutions, we believe industry best practices, including standardized terminology, are essential to delivering consistent, high-quality results. As specialists in cost, risk, and change management for construction and engineering projects, we align closely with AACE International standards in every engagement. Our project controls professionals apply the AACE 10S-90 definitions when developing estimates, schedules, and risk analyses to ensure clarity and consistency. For example, when discussing risk, we reference terms like “risk capacity” and “tolerance” exactly as defined by AACE, helping clients understand their risk thresholds and make informed decisions. This approach minimizes miscommunication and ensures our recommendations align with client objectives.

CMC’s methodologies and training are rooted in Total Cost Management principles and fully aligned with AACE’s industry standards. Our services include cost estimation, budgeting, scheduling, risk mitigation, and change control, all built on a shared, well-defined vocabulary that fosters effective collaboration across disciplines. Clients frequently commend the clarity of our documentation, which stems from our commitment to precise, standardized communication. As a visionary project management firm, we integrate cutting-edge technology and forward-thinking practices to deliver not only accurate insights but sustainable, high-impact solutions that help shape the future of the industry. It’s not just about using the right software or techniques, but also about communicating insights in the clearest way possible.

Conclusion – Embrace Clarity in Project Controls

CMC Project Solutions is proud to leverage these industry standards in all our project engagements. We believe that when everyone involved speaks the same language of cost engineering, projects are more likely to be on time, on budget, and successful. If you’re looking to enhance your project controls, improve cost and schedule performance, or simply ensure that your team is using best-in-class practices, we’re here to help. Connect with CMC Project Solutions to learn how our expertise, grounded in AACE’s globally recognized standards, can benefit your organization. Let’s work together to achieve your project goals with clarity, consistency, and confidence.