By Katrina Roberts, Darren Penley and Peter Braxton
Traditionally, those who have pursued an education in actuarial science seek employment in the insurance and financial industries while also working toward their accreditation via the CIA. In today’s dynamic employment marketplace, the tools and skill sets afforded by an education in actuarial science can offer candidates a much vaster and more varied career path. One such career path that may be of interest to those educated in actuarial science is cost estimating.
Cost estimating is a field that draws from multiple disciplines and may not be familiar to everyone. It’s often confused with budgeting or cost accounting – but is neither.
Cost estimating involves determining the required funding for a project based on its elements, as opposed to allocating funds to elements under a fixed budget. In short, cost estimating translates requirements into resources. It encompasses various degrees of complexity, from simple line-item sums to in-depth analyses considering numerous variables and uncertainties.
One aspect of complex cost estimating is considering the variability of elements in a project. For instance, if the price of a particular material or component varies over time or depends on certain conditions, cost estimators need to account for these fluctuations to provide accurate cost projections. They must also consider factors such as inflation, repetition and quality associated with project implementation.
In major cost estimating projects, teams of accountants, mathematicians, economists, engineers, statisticians, data scientists, programmers, physical scientists and actuaries come together to analyze large data sets involving materials, labour rates, economic factors and more. They must also consider the risks involved in every aspect of the project to ensure the total estimated cost accurately reflects these risks.
The skills of cost estimators
Cost estimating offers an intriguing intersection of skills commonly found in actuaries, including economics, interest theory, risk analysis and forecasting, data analytics and computer programming. It also presents non-traditional challenges for actuaries, who often focus on life insurance or pension calculations.
Imagine working side by side with the shipyards to determine the cost of a new fleet of vessels.
“Instead of analyzing large data sets to determine mortality rates, these professionals analyze financial and schedule risk, volatility in commodity pricing and labour market challenges amongst other considerations.”
They play a key role in supporting data-driven decision-making, by ensuring resources are efficiently and effectively used.
When hiring cost estimators, recruiters seek those who hold a university degree, with specialization in accounting, finance, business administration, commerce, economics or other fields related to costing, including engineering and actuarial science. Recruiters also look for people with the following skills:
- Advanced skills in Microsoft Excel and other data analytics tools.
- The ability to analyze large data sets, undertake risk analysis and provide sound recommendations.
- Effective team skills.
- Effective oral and written communication skills and the ability to not only derive the cost estimate but also explain it to decision makers.
- Advanced statistical analysis and computer programming skills (not necessary but certainly valuable).
In Canada, cost estimators play a variety of roles in both the private and public sectors. These roles include, but are not limited to:
- cost consultants working within a consultancy firm;
- cost estimators or cost control officers working to support the advancement of capital acquisition projects and programs within the public or private sectors; and
- third-party cost estimators providing an independent cost estimate for comparison against internally generated cost estimates to assess reasonableness, completeness and accuracy.
The more complex and expensive a project is, the greater the need for cost estimating to ensure adequate funding, effective planning and efficient management of inevitable changes. Cost estimators work within the engineering or finance departments of major system developers, contracting organizations within the public and private sectors and within procurement groups responsible for buying everything from ships to satellites to infrastructure and from software development to engineering services.
The impact and rewards of being a cost estimator
Organizations across various sectors are recognizing the significance of cost estimating and are actively investing in programs to groom future leaders in this field. Actuaries, with their diverse skill sets, including quantitative reasoning and the ability to model risk and uncertainty, are particularly well suited for the role of cost estimator.
Actuaries’ expertise and collaborative efforts, alongside other specialists, play a crucial role in generating accurate estimates that benefit a wide range of stakeholders. As a result, pursuing a career as a cost estimator or cost analyst holds great promise, offering both impactful and rewarding opportunities.
Cost estimators in Canada make a meaningful difference in the following ways:
1) Using their skills to help serve Canadians
Imagine getting up every morning for a job as important as ensuring the Canadian Forces have the programs, equipment and infrastructure they need to keep Canadians safe. This is just one example of the work that can be done by a cost estimator.
Some positions afford cost estimators the opportunity to work on high-profile and complex cases and the chance to do work that has visibility and impact in Canada and around the world.
2) Driving solutions to costing problems in a challenging and rewarding work environment
In the costing community, you are encouraged to apply your expertise in analysis and statistical methods to understand costing problems and your communication skills to engage others in finding creative solutions.
Cost estimators put their curiosity and diversity of thought to work in collaboration with colleagues who think rigorously and aren’t afraid to challenge assumptions to ensure that employers are positioned to make informed and accountable financial decisions.
3) Working in a diverse and supportive culture with high job satisfaction
Looking to the future, many organizations, like the Department of National Defence, are actively exploring the potential of machine learning, artificial intelligence and other automation technologies to optimize their costing systems and models.
This strategic initiative aims to not only enhance the accuracy and efficiency of cost estimating processes but also elevate overall job satisfaction among cost estimators across various sectors. This concerted effort to embrace technological advancements underscores the commitment to creating a fulfilling and impactful career path for professionals in the field of cost estimating.
The professionalization of cost estimating
If you’re curious about cost estimating and would like to learn more, you are encouraged to visit the International Cost Estimating and Analysis Association (ICEAA) website. Did you know that ICEAA has an active Canada chapter based in Ottawa? ICEAA has been championing the professionalization of cost estimating for the past ten years, but its heritage organizations extend back decades earlier. Through its annual international workshop, publications, chapter activities and partnerships with other professional associations in fields as diverse as project management and software sizing, ICEAA provides opportunities for learning, innovation and professional development. Membership includes access to the Cost Estimating Body of Knowledge (CEBoK®), which helps practitioners prepare for formal certification. By perusing the Papers Library, you can gain an immediate appreciation for the breadth and relevance of the field.
As both the private and public sectors move towards more data-driven decision making, and the proliferation of available financial, technical and operational data continues, the need for qualified cost estimators in all sectors is growing. Annually there are hundreds of opportunities at all levels within the broader cost estimating domain.
If you are looking to be at the forefront of a growing, data-driven sector, cost estimating is a dynamic field full of diverse opportunities and long-term growth potential. Are you specifically interested in using your skills to make a lasting impact on the future of Canadian procurement and investment? Contact the Department of National Defence in Canada at email@example.com to explore this multidisciplinary career path!
Katrina is the Manager of Costing Community Development at the Department of National Defence (DND), focusing on recruitment, retention and community development opportunities for its costing community. She has been a cost estimator at DND since 2009, providing cost and risk analysis support for a wide variety of projects within the Defence Programme, including infrastructure projects, programs and capital acquisitions (i.e., Canadian Surface Combatant).
Darren’s formal education is in aerospace engineering, and he has worked primarily with remotely piloted aerial systems before turning to a career in cost estimating. In the past five years he contributed to the Canadian Coast Guard portfolio with the Department of Fisheries and Oceans, and then moved to the Treasury Board Secretariat’s Costing Center of Expertise. He currently works with the Department of National Defence.
Peter is a senior analyst at Technomics, providing independent cost and risk analysis for the National Shipbuilding Strategy. He previously served on the board of directors for ICEAA.
This article reflects the opinion of the authors and does not represent an official statement of the CIA.