Cost Estimation 39f6p
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- Words: 1,937
- Pages: 29
12/2/2016
Capital Cost Estimate Types • 1. Order of Magnitude Estimate (Feasibility) – + 40%, - 20% – BFD , Process Modification
• 2. Study Estimate / Major Equipment – + 30%, - 20% – PFD , Cost Chart
Capital Cost Estimates Types (cont’d) • 3. Preliminary Design (Scope) Estimate – + 25%, - 15% – PFD , vessel sketches , equip. diagrams
• 4. Definitive (Project Control) Estimate – + 15%, - 7% – PFD , P&ID, all vessel sketches, equip. diagrams, preliminary isometrics
1
12/2/2016
Capital Cost Estimates Types (cont’d) • 5. Detailed (Firm or Contractors) Estimate – + 6%, - 4% – Everything included – ready to go to construction phase
• Estimate low so actual cost will be high (+) • Estimate high so actual cost will be low (-) • Why is + # > - #.?
Cost of Estimate Accuracy
If we want high accuracy then it takes a lot of man/woman hours (engineering work).
1 2 3 4
5 Cost of Estimate (Time)
2
12/2/2016
• The first three types serve as a cost indicator at a very early stage of the project design stage. • They are developed with a minimum amount of detailed engineering • Meant only as advise to the client or to management as a first look at project cost.
1372
Cost Estimation - cont • Other types of estimates include: Cost curve estimates Major equipment factor estimates Cost Indices
3
12/2/2016
Cost Curve Estimates • The cost curve method of estimating corrects for the major deficiency illustrated above by reflecting the significant effect of size or capacity on cost. • These curves indicate that costs of similar process units or plants are related to capacity by an equation of the following form: • Plant A cost Plant A capacity x = • Plant B cost Plant B capacity
(
)
• This relationship was reported by Lang, who suggested an average value of 0.6 for the exponent (X). • Cost curves of this type have been presented for petroleum refinery costs in the past.
4
12/2/2016
Major Equipment Factor Estimates • Major equipment factor estimates are made by applying multipliers to the costs of all major equipment required for the plant or process facility. • Different factors are applicable to different types of equipment, such as pumps, heat exchangers, pressure vessels, etc. • Equipment size also has an effect on the factors.
• It is obvious that prices of major equipment must first be developed to use this method. • This requires that heat and material balances be completed in order to develop the size and basic specifications for the major equipment.
5
12/2/2016
• This method of estimating, if carefully followed, can predict actual costs within 10 to 20%. • A shortcut modification of this method uses a single factor for all equipment. • A commonly used factor for petroleum refining facilities is 4.5. • The accuracy of this shortcut is of course less than when using individual factors.
Estimating the cost of oil and gas facilities • Regardless of accuracy, capital cost estimates are typically made-up of direct and indirect costs. • Indirect costs consist of project services, such as overhead and profit, and engineering and istrative fees. • Direct costs are construction items for the project and include property, equipment, and materials.
1379
6
12/2/2016
Using historical costs As mentioned previously capital cost estimates of industrial process plants can be made using previously obtained equipment costs of similar size and then can be scaled to reflect current costs using cost curves and
•
• Adjusting for different sizes • Adjusting for different time periods
1380
• The preparation of a preliminary estimate is based on – – – –
assessment of the design, past cost estimates, in-house estimating information, and previous contracts and purchase orders.
• It is not normal to obtain formal quotations from equipment manufactures in of a preliminary estimate. • Informal telephone budget quotations on identified major equipment such as vessels, filters, etc. are acceptable.
1381
7
12/2/2016
• However, even these types of expedient quotations are time consuming. • Sophisticated estimating software are available.
1382
• Definitive and detailed cost estimates are full-blown exercises that are undertaken to produce a competitive bid submission or otherwise produce an accurate (plus or minus 10% or better) cost estimate, for appropriation of funds.
1383
8
12/2/2016
1. Rule Of Thumb Estimates • Produce only an approximation of the order of magnitude of cost. • These are simply a fixed cost per unit of feed or product. • Some examples are: – Complete coal fired electric power plant: $2,500/kW – Complete synthetic ammonia plant: $200,000/TPD – Complete petroleum refinery: $25,000/BPD
1384
• These rule of thumb factors are useful for quick ballpark costs. • Many assumptions are implicit in these values and the average deviation from actual practice can often be more than 50%.
1385
9
12/2/2016
The Rule of Six-tenths • Approximate costs can be obtained if the cost of a similar item of different size or capacity is known. • A rule of thumb developed over the years known as the rule of six-tenths gives very satisfactory results when only an approximate cost within plus or minus 20% is required.
1386
The Rule of Six-tenths
1387
10
12/2/2016
The “N” exponent • An analysis of the cost of individual pieces of equipment shows that the size factor’s exponent will vary from 0.3 to unity, but the average is very near to 0.6, thus the name for the rule of thumb. • If a higher degree of sophistication is sought, Table 1 below can be used.
1388
• It lists the value of a size exponent for various types of process equipment. • The Table 1 values have been condensed from a vast, comprehensive tabulation of estimating cost data
1389
11
12/2/2016
• Using Table 1 size exponents transforms the previously presented formula into,
1390
1391
12
12/2/2016
1392
1393
13
12/2/2016
Cost Indices • Cost indices are useful when basing the approximated cost on other than current prices. • If the known cost of a piece of equipment is based on, for instance 1998 prices, this cost must be multiplied by the ratio of the present day index to the 1998 base index in order to proportion the value to present day dollars.
1394
Cost Indices
1395
14
12/2/2016
• The following example illustrates a combined use of both of these ratio and proportion methods to produce an approximate cost. • Please note that the costs presented here are purely hypothetical and should not be used as a basis for anything other than an illustration.
1396
• Let us assume that a rough estimate is being prepared for a project in which a 5,000-gallon capacity stainless steel pressure vessel is involved. • Let us further assume that our past project purchasing data shows that a 2,000-gallon stainless steel pressure vessel, very similar to that currently required, was purchased in 2001 for $15,000. 1397
15
12/2/2016
• We now have all of the necessary components to approximate the present day cost (CB ) of a 5,000-gallon vessel. • We have, two dates, past and of course current; two known capacities (SB and SA ); and one historical cost (CO ) (that of the 2001 purchased vessel).
1398
• The first step is to determine the cost index for our two dates. • Consulting a recent issue of Chemical Engineering magazine, the M & S Equipment Cost Index for 2001 is found to be 1093.9 (our base index for this example). • In like fashion, the 2006 4th Quarter index is found to be 1353.8 (the current index). 1399
16
12/2/2016
• The student may be interested to know that the M & S Cost Index’s base is 1926 = 100; this provides an astonishing indication of the amount of inflation that has taken place.
1400
This complicated data allows us to substitute,
1401
17
12/2/2016
• Therefore, the 4th Quarter 2006 cost of the 2,000-gallon capacity vessel is estimated to be $18,565. • Now, having determined the current estimated cost of the smaller capacity vessel, we need to adjust this amount to correspond to the larger volume (5,000 gallons).
1402
• Referring to Table 1, we find a size exponent corresponding to stainless steel vessels equal to 0.68.
1403
18
12/2/2016
Substituting in the equation presented earlier results in,
1404
• The unit, ten, and hundred places in this figure are irrelevant. • A “rough” estimate of $34,617 is ridiculous and implies a degree of accuracy that has no basis in this case; • $35,000 is more sensible and just as likely to be correct in the context of a plus or minus 20% estimate. 1405
19
12/2/2016
Cost Indexes • Estimating Process Costs From Existing Operations • No costs remain stable due to inflation and deflation. • As a result, in our estimates we must adjust any cost relative to some basis or index.
1406
• A number of cost indexes exist • Data for two of the indexes for the period 1973 to 1984 are used for the example. • These years were selected because they represent a period of rapidly rising inflation followed by a leveling-off phase 1407
20
12/2/2016
Cost Indexes
1408
Data from Two Cost Indexes
1409
21
12/2/2016
• Cost as a function of capacity for centrifuges for inorganic service. These data are for solid bowl, screen bowl, and pusher types
1410
• Cost as a function of capacity for centrifuges for organic service. These data are for solid bowl, screen bowl, and pusher types.
1411
22
12/2/2016
4. Definitive Estimates • Definitive cost estimates are the most time consuming and difficult to prepare but are also the most accurate. – These estimates require preparation of plot plans, detailed flow sheets and preliminary construction drawings. – Scale models are sometimes used. – All material and equipment are listed and priced. – The number of man hours for each construction activity is estimated. – Indirect field costs, such as crane rentals, costs of tools, supervision, etc., are also estimated. • This type of estimate usually results in an accuracy of ±5%.
1412
Summary Form For Cost Estimates •
The items to be considered when estimating investment from cost curves are: Process units Storage facilities Steam systems Cooling water systems Subtotal A Offsites Subtotal B Special costs Subtotal C Location factor Subtotal D Contingency Total
1413
23
12/2/2016
1414
1415
24
12/2/2016
1416
1417
25
12/2/2016
1418
Intratec Plant Construction Cost Index (IC Index) comprises a series of specific and general price indexes, evaluated by Intratec consultant's as fundamental for the construction of chemical plants, which are combined to reasonably reflect generic chemical plants capital costs. Most of the price indexes are obtained from Bureau of Labor Statistics (BLS) website and measures the behavior of selling prices received by U.S. producers during time
1419
26
12/2/2016
1420
1421
27
12/2/2016
Lang Exponent • The exponent used in scaling the cost for different plant capacities. – Promoter calculates the cost of the project facilities from the reference plant by applying the following formula: C = Cb x [Qa / Qb] pow ( x) where Ca = Cost of the Plant, – Cb = Base Case Cost, – Qa = Capacity of the Plant, – Qb = Base Case Capacity, x = the Lang cost capacity exponent.
• The Lang exponent is usually between 0.6 and 0.7 and can vary from one process to another.
1422
28
Capital Cost Estimate Types • 1. Order of Magnitude Estimate (Feasibility) – + 40%, - 20% – BFD , Process Modification
• 2. Study Estimate / Major Equipment – + 30%, - 20% – PFD , Cost Chart
Capital Cost Estimates Types (cont’d) • 3. Preliminary Design (Scope) Estimate – + 25%, - 15% – PFD , vessel sketches , equip. diagrams
• 4. Definitive (Project Control) Estimate – + 15%, - 7% – PFD , P&ID, all vessel sketches, equip. diagrams, preliminary isometrics
1
12/2/2016
Capital Cost Estimates Types (cont’d) • 5. Detailed (Firm or Contractors) Estimate – + 6%, - 4% – Everything included – ready to go to construction phase
• Estimate low so actual cost will be high (+) • Estimate high so actual cost will be low (-) • Why is + # > - #.?
Cost of Estimate Accuracy
If we want high accuracy then it takes a lot of man/woman hours (engineering work).
1 2 3 4
5 Cost of Estimate (Time)
2
12/2/2016
• The first three types serve as a cost indicator at a very early stage of the project design stage. • They are developed with a minimum amount of detailed engineering • Meant only as advise to the client or to management as a first look at project cost.
1372
Cost Estimation - cont • Other types of estimates include: Cost curve estimates Major equipment factor estimates Cost Indices
3
12/2/2016
Cost Curve Estimates • The cost curve method of estimating corrects for the major deficiency illustrated above by reflecting the significant effect of size or capacity on cost. • These curves indicate that costs of similar process units or plants are related to capacity by an equation of the following form: • Plant A cost Plant A capacity x = • Plant B cost Plant B capacity
(
)
• This relationship was reported by Lang, who suggested an average value of 0.6 for the exponent (X). • Cost curves of this type have been presented for petroleum refinery costs in the past.
4
12/2/2016
Major Equipment Factor Estimates • Major equipment factor estimates are made by applying multipliers to the costs of all major equipment required for the plant or process facility. • Different factors are applicable to different types of equipment, such as pumps, heat exchangers, pressure vessels, etc. • Equipment size also has an effect on the factors.
• It is obvious that prices of major equipment must first be developed to use this method. • This requires that heat and material balances be completed in order to develop the size and basic specifications for the major equipment.
5
12/2/2016
• This method of estimating, if carefully followed, can predict actual costs within 10 to 20%. • A shortcut modification of this method uses a single factor for all equipment. • A commonly used factor for petroleum refining facilities is 4.5. • The accuracy of this shortcut is of course less than when using individual factors.
Estimating the cost of oil and gas facilities • Regardless of accuracy, capital cost estimates are typically made-up of direct and indirect costs. • Indirect costs consist of project services, such as overhead and profit, and engineering and istrative fees. • Direct costs are construction items for the project and include property, equipment, and materials.
1379
6
12/2/2016
Using historical costs As mentioned previously capital cost estimates of industrial process plants can be made using previously obtained equipment costs of similar size and then can be scaled to reflect current costs using cost curves and
•
• Adjusting for different sizes • Adjusting for different time periods
1380
• The preparation of a preliminary estimate is based on – – – –
assessment of the design, past cost estimates, in-house estimating information, and previous contracts and purchase orders.
• It is not normal to obtain formal quotations from equipment manufactures in of a preliminary estimate. • Informal telephone budget quotations on identified major equipment such as vessels, filters, etc. are acceptable.
1381
7
12/2/2016
• However, even these types of expedient quotations are time consuming. • Sophisticated estimating software are available.
1382
• Definitive and detailed cost estimates are full-blown exercises that are undertaken to produce a competitive bid submission or otherwise produce an accurate (plus or minus 10% or better) cost estimate, for appropriation of funds.
1383
8
12/2/2016
1. Rule Of Thumb Estimates • Produce only an approximation of the order of magnitude of cost. • These are simply a fixed cost per unit of feed or product. • Some examples are: – Complete coal fired electric power plant: $2,500/kW – Complete synthetic ammonia plant: $200,000/TPD – Complete petroleum refinery: $25,000/BPD
1384
• These rule of thumb factors are useful for quick ballpark costs. • Many assumptions are implicit in these values and the average deviation from actual practice can often be more than 50%.
1385
9
12/2/2016
The Rule of Six-tenths • Approximate costs can be obtained if the cost of a similar item of different size or capacity is known. • A rule of thumb developed over the years known as the rule of six-tenths gives very satisfactory results when only an approximate cost within plus or minus 20% is required.
1386
The Rule of Six-tenths
1387
10
12/2/2016
The “N” exponent • An analysis of the cost of individual pieces of equipment shows that the size factor’s exponent will vary from 0.3 to unity, but the average is very near to 0.6, thus the name for the rule of thumb. • If a higher degree of sophistication is sought, Table 1 below can be used.
1388
• It lists the value of a size exponent for various types of process equipment. • The Table 1 values have been condensed from a vast, comprehensive tabulation of estimating cost data
1389
11
12/2/2016
• Using Table 1 size exponents transforms the previously presented formula into,
1390
1391
12
12/2/2016
1392
1393
13
12/2/2016
Cost Indices • Cost indices are useful when basing the approximated cost on other than current prices. • If the known cost of a piece of equipment is based on, for instance 1998 prices, this cost must be multiplied by the ratio of the present day index to the 1998 base index in order to proportion the value to present day dollars.
1394
Cost Indices
1395
14
12/2/2016
• The following example illustrates a combined use of both of these ratio and proportion methods to produce an approximate cost. • Please note that the costs presented here are purely hypothetical and should not be used as a basis for anything other than an illustration.
1396
• Let us assume that a rough estimate is being prepared for a project in which a 5,000-gallon capacity stainless steel pressure vessel is involved. • Let us further assume that our past project purchasing data shows that a 2,000-gallon stainless steel pressure vessel, very similar to that currently required, was purchased in 2001 for $15,000. 1397
15
12/2/2016
• We now have all of the necessary components to approximate the present day cost (CB ) of a 5,000-gallon vessel. • We have, two dates, past and of course current; two known capacities (SB and SA ); and one historical cost (CO ) (that of the 2001 purchased vessel).
1398
• The first step is to determine the cost index for our two dates. • Consulting a recent issue of Chemical Engineering magazine, the M & S Equipment Cost Index for 2001 is found to be 1093.9 (our base index for this example). • In like fashion, the 2006 4th Quarter index is found to be 1353.8 (the current index). 1399
16
12/2/2016
• The student may be interested to know that the M & S Cost Index’s base is 1926 = 100; this provides an astonishing indication of the amount of inflation that has taken place.
1400
This complicated data allows us to substitute,
1401
17
12/2/2016
• Therefore, the 4th Quarter 2006 cost of the 2,000-gallon capacity vessel is estimated to be $18,565. • Now, having determined the current estimated cost of the smaller capacity vessel, we need to adjust this amount to correspond to the larger volume (5,000 gallons).
1402
• Referring to Table 1, we find a size exponent corresponding to stainless steel vessels equal to 0.68.
1403
18
12/2/2016
Substituting in the equation presented earlier results in,
1404
• The unit, ten, and hundred places in this figure are irrelevant. • A “rough” estimate of $34,617 is ridiculous and implies a degree of accuracy that has no basis in this case; • $35,000 is more sensible and just as likely to be correct in the context of a plus or minus 20% estimate. 1405
19
12/2/2016
Cost Indexes • Estimating Process Costs From Existing Operations • No costs remain stable due to inflation and deflation. • As a result, in our estimates we must adjust any cost relative to some basis or index.
1406
• A number of cost indexes exist • Data for two of the indexes for the period 1973 to 1984 are used for the example. • These years were selected because they represent a period of rapidly rising inflation followed by a leveling-off phase 1407
20
12/2/2016
Cost Indexes
1408
Data from Two Cost Indexes
1409
21
12/2/2016
• Cost as a function of capacity for centrifuges for inorganic service. These data are for solid bowl, screen bowl, and pusher types
1410
• Cost as a function of capacity for centrifuges for organic service. These data are for solid bowl, screen bowl, and pusher types.
1411
22
12/2/2016
4. Definitive Estimates • Definitive cost estimates are the most time consuming and difficult to prepare but are also the most accurate. – These estimates require preparation of plot plans, detailed flow sheets and preliminary construction drawings. – Scale models are sometimes used. – All material and equipment are listed and priced. – The number of man hours for each construction activity is estimated. – Indirect field costs, such as crane rentals, costs of tools, supervision, etc., are also estimated. • This type of estimate usually results in an accuracy of ±5%.
1412
Summary Form For Cost Estimates •
The items to be considered when estimating investment from cost curves are: Process units Storage facilities Steam systems Cooling water systems Subtotal A Offsites Subtotal B Special costs Subtotal C Location factor Subtotal D Contingency Total
1413
23
12/2/2016
1414
1415
24
12/2/2016
1416
1417
25
12/2/2016
1418
Intratec Plant Construction Cost Index (IC Index) comprises a series of specific and general price indexes, evaluated by Intratec consultant's as fundamental for the construction of chemical plants, which are combined to reasonably reflect generic chemical plants capital costs. Most of the price indexes are obtained from Bureau of Labor Statistics (BLS) website and measures the behavior of selling prices received by U.S. producers during time
1419
26
12/2/2016
1420
1421
27
12/2/2016
Lang Exponent • The exponent used in scaling the cost for different plant capacities. – Promoter calculates the cost of the project facilities from the reference plant by applying the following formula: C = Cb x [Qa / Qb] pow ( x) where Ca = Cost of the Plant, – Cb = Base Case Cost, – Qa = Capacity of the Plant, – Qb = Base Case Capacity, x = the Lang cost capacity exponent.
• The Lang exponent is usually between 0.6 and 0.7 and can vary from one process to another.
1422
28
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