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A NewGuideto
Copyright © 1977 CAPITAL COST

THE INSTITUTION OF CHEMICAL ENGINEERS
All ri g hts rese rved ESTIMATING
Reprinted 1980
Reprinted 1982
Reprinted 1984
Reprinted 1985
Prepared by a joint working party of

The Institution of Chemical Engineers and
The Association of Cost Engineers
ISBN 085295 088 a

Published by I ChernE Services fo r
The I nstitution of Chemical Engineers
George E. Davis Building,
165-171 Railway Terrace, Rugby,
Warwickshire, CV21 3HQ England.
THE INSTITUTION OF CHEMICAL ENGINEERS
GEORGE E. DA V IS BUILDING,
165-171 RAILWAY TERRACE, RUGBY
WARWICKSHIRE, CV21 3HQ, ENGLAND
CONTENTS
1. INTRODUCTION (B.A.J. Jones) 1

PREFACE
2. PROJECT DE V E L O P ME NT (H.A. Anson) 3
Since the publication in 1969 of A Guide to Capital Cost Estimation and Notes 2.1 Time and Cost - The Balance 3
on Project Evaluation th e economic climate affecting particularly the western 2.2 Feasibility Studies and Reports 3
world has changed considerably: rapid increase in th e costs of raw materials, 2.3 Project Implementation 4
fuels and labour have resulted in a general down-turn of industrial activity,
COST E S TI MA TI O N I N RELATION TO PROJECT
accompanied by pressures on the profits and liquidity of companies. Investment 3. DE V E L O P ME NT (B.A.J. Jones)
decisions have become much more difficult to take in view of th e greater 8
3.1 Introduction 8
uncertainty of markets and costs. To meet these circumstances more sensitive
3.2 Order of Magnitude Estimate 8
techniques of project appraisal, and more flexible approaches to project
3.3 Study Estimate 9
management, have been developed. At the same time a change in social climate
3.4 Budget Estimate 9
has resulted in a significantly greater emphasis being placed on safety and 3.5 Project Control Estimate 10
environmental effects of processing units. 3.6 Detail ed Est imate 11
An attempt has been made in this book to reflect these changes. Moreover,
3.7 The Cost of Cost Estimates 11
although the first book was well received, it was felt that the cost engineering Reliability of Estimates
3.8 12
aspects should be further developed, and th e Institution of Chemical Engineers
accordingly invited th e Association of Cost Engineers to collaborate in this 4. ESTIMATING METHODS (A.W. Putnam) 13
revision. 4.1 Introduction 13
This book is therefore a major revision whilst retaining th e original purpose - 4.2 Exponential Cost E,stimating Method 13
to be a guide to th e student or young practising engineer to th e processes of 4.3 Factorial Cost Estimating Method 16
capital cost estimation and project development as they are practised. It tries to 4.4 Typical Distribution of Costs 16
indicate th e areas which need to be studied and the approaches used for this. 4.5 Firm Price Estimates (Based on Detailed Design) 16
Whilst th e cost information has been updated, presented in SI units, and the 4.6 Use of Computers 20
data basis recorded, the data are still indicative only, and show pri marily how 4.7 Updating of Cost Information 21
costs change with size for particular types of equipment. As specifications can
vary greatly within any equipment type with very great changes in cost, the 5. COMPOSITION OF ESTIMATES (A.W. Putnam) 26
graphs do no t necessarily correlate with each other. This guide is not intended 6. SELECTION OF COMPONENTS A ND M A TE RIA LS
to be a presentation of real cost data for direct use in estimating - for this the (A.W. Putnam) 30
engineer should always refer to specialists in this field.
The emphasis adopted throughout is on good current practice, rather than on 7. REVIEW OF APPROXIMATE COMPONENT COSTS
a theoretical discussion of the underlying principles. Commercial and time (V. Th ompson and B.A.J. Jones) 33
pressures frequently prevent these principles from being rigorously appl ied, to 7.1 Introduction 33
be replaced by the judgement of experienced members of th e organisation. 7.2 Costs of Basic Metals 34
Nevertheless, it is hoped that this guide will help the reader to understand the 7.3 Costs of Vessels, Tanks and Plant Items 35
factors which enter into a project study and to guide him in the areas of 7.4 Materials Supply and Construction Costs 44
quantitative assessment.
8. PROJECT E V A LUA TION (G.L. Wells) 55
H.A.Anson 8.1 I ntrod uction 55
Chairman,IChemE/ACE 8.2 Review of Existing Knowledge 55
Working Party 8. 3 Study of Past Achievement 55
8. 4 Size and Complexity of the Plant 55
8. 5 Operating Costs 56
8.6 Assessment of Project Profitability 60
8.7 Sensitivity of Process Economics to Various Parameters 61
9. AN EXAMP LE OF A PROJECT EVALUATION (G.L. Wells) 64
10. SOURCES OF COST IN FORMATION (D.J. George) 70 1. INTRODUCTION
10.1 Survey of Sources 70
10.2 Some Key References 71 Th e chemical industry has been a major growth industry during th e period 1948
to 1973 except for relatively minor pauses. In th e four succeeding years a general
Appendix: TYPICAL ESTIMATING CHECK LIST· 74 levelling-off and th en down-turn in world tr ad e has inevitably been reflected in th e
chemical ind ustry: in this period th e index of output for th e chemical and allied
ACKNOWLEDGEM ENTS industries fell approximately 10%. However, when th e present:recession conditions
are overcome, it is forecast that chemical industry output wi II/again grow
The membership of the working party established by the Institution of Chemical Engineers and
the Association of Cost Engineers to prepare this new guide comprised: substantially through to th e mid-1980's, 21beit at annual rates below those
experienced in th e 1960's.
H.A. Anson (Chairman)
D.J. George May & Baker
Cremer Ltd, Dagenham.
& Warner, Hertford. Forecasting th e UK chemical industry growth pattern over th e n ex t five to ten
B.A.J. Jones (Editor) B.A.J. Jones & Associates, London. years is complicated by several new factors. Of considerable influence will be th e
& ENTEAM, Technical & Management Services. World competition fo r energy supplies. Although th e UK will obtain a steadily
A.w. Putnam Humphreys & Glasgow Ltd, London increasing proportion of basic energy supplies from th e North Sea and other
V. Thompson Imperial Chemical Industries Ltd, London
surrounding offshore "fields", these are high-cost production areas with limited
G.L. Wells University of Sheffield
production life and they will inevitably be developed under strong political
The support and encouragement of their employing organizations in this work is gratefully
"guidance". Again, th e UK is no w a full member of the EEC and undoubtedly
ac knowl edged.
In addition, the working party wish to record the valuable contribution by L.F. Williams major decisions ab o u t chemical industry investment will be affected to an even
(Humphreys & Glasgow Ltd) during the preparation of the text and to acknowledge the detailed greater extent than previously by th e European scene. Further, major production
and.constructive comment on the draft text provided by several members of the Institution and facilities ar e often nowadays much larger than the average size unit built in th e
the Association: however, responsibility fo r the contents remains with the authors and the
1960's with th e result th at, whilst th e extra benefits of increased scale of operation
editor.
Finally, several companies provided cost data which has been most helpful in th e preparation are th e target, th e penalty for error when planning and implementing such
of this new guide and their interest and contribution is happily acknowledged. investments is also magnified. Th e impact of factors such as these on th e planning
APV-Mitchell Lt d of new chemical industry investments will be to require even greater attention to
Chemineer Lt d be paid to capital cost estimates and th e scheduling of decisions and actions
T. Giusti and Son Ltd necessary to achieve profitable production from new facilities.
Humphreys and Glasgow Lt d
I n common with a number of other major industries, th e chemical industry
Imperial Chemical Industries Ltd
Johnson-Hunt Ltd employs large expensive plant which must be planned several years in advance.
John Laing Construction Lt d Typically th e procedure from th e in itial concept of a project, moving through the
Welding Technical Services Ltd stages of board consideration, board approval, detailed design, p r o cu r emen t,
The Editor
construction, commissioning and th e eventual establishment of full production
1979 - 1st Revision level will occupy three to five years. Preferably therefore, there is a firm plan for
On the occasion of the first major reprint the opportunity has been taken to make some minor three to five years ahead and provisional plans for the following tw o or three years.
amendments by way of correction and clarification suggested by users of the guide; the Editor Proceeding beyond this point, plans might be vague, bu t nevertheless planning
happily acknowledges their help and interest. must be projected in order to provide a secure basis fo r research and development.
In addition, some data has been revised to accord with latest practice. In order that this planning may be effective, economic forecasts must be
In Tables 4.4 and 4.5 the indices are calculated to the base 1975 = 100, the base date no w
used by the Department of Industry for this data. produced at an early stage and reviewed regu larly in th e I ght of current techno
The fundamental data presented in Tabl e 7.1 Basic Metal Costs, and Table 8.1, Typical logical an d economic trends. These economic forecasts will be built up from
Energy and Utility Costs, have been extend ed to show current typical costs. analysis in th e following areas:
Section 7.4.2, Civil and Building Work, has been updated with current cost data, because
there is no set of indices in the guide directly related to such work . • The market. Raw material costs, demand for product, extent of competition,
The importance of energy costs in project evaluation, first headlined by the 1973 oil price maintenance of share of market or entry thereto, acceptable product selling
increases, has been increasingly emphasised during the succeeding five years. The dramatic
price, effectiveness of advertising, etc.
changes in Iran in late 1978 have not only underlined the continued upward trend for energy
costs bu t have also indicated the vulnerability of the continuity of oil products supply. On a • Technology. Advances in scientific knowledge, technical research and
national scale this will result in the search fo r the provision of alternative sources of energy development of process routes and equipment.
coupled with a steadily enlarged program fo r achieving improved efficiency of energy usage. • Engineering. Plant design, cost and timing.
At the plant scale this will be reflected in considerable attention being directed to maximis
ing the overall efficiency of process plant operation, to the provision of equipment able to use • Production. Capacity, cost and timing.
alternative fuels and the provision of fuel storage. • Resources. Financial, management and technological manpower.
All such schemes will require engineering and economic studies involving the preparation of • Profitability. Th e efficient use of th e investment.
cost estimates: the succinct presentation of the principles and good practice of capital cost
estimating and project development as a guide to the young engineer remain the objectives of
this book.
The Editor
2. PROJECT DEVELOPMENT
From among these many items to be considered in th e development and
evaluation of a project, th e main purpose of this booklet is to provide a guide to
2.1 Time and Cost - The Balance
the methods used to estimate the capital cost of process plant and th e key factors
affecting such estimates. A commentary on th e overall evaluation of a project and 2.1:' In order to assist th e young engineer to appreciate his role in a new venture
an example of the economic assessment of a chemical process are included in and to enable him to make th e greatest contribution to its success, it is necessary
Chapters 8 and 9. Suggestions for further reading complete the guide. for him to understand something of the manner in which a new project is
developed in a commercial organisation and of th e vitlal influence of time during
all steps of this development. Although his more immediate concern is likely to
be the reliability of future production, first cost and operating costs, improve
ments in any of these areas will usually require the allocation of further skilled,
frequently scarce, manpower resources, and will often result in delay to the
project. Th e balance of these factors is a matter of experienced judgement. It
should be understood that th e same overall considerations apply whether t he
project involves the production of a ne w product by a manufacturing concern, or
by a contractor working' for th e manufacturing industry, although there are
considerable differences between the approaches of these interests.
2.1.2 In recent years not only has th e rate of technological innovation increased
rapidly bu t this has been accompanied by sharp fluctuations in market conditions,
interest rates, raw materials prices and, at times, rapid escalation of labour and
materials costs. One immediate result of these factors is th e increasing i n a b i l i t y ~
to make quantified predictions with any confidence for more than a very limited
period ahead of an y decision point in time. Th e corollary of this is that it is
becoming rarer for design development effort aimed at achieving complete data
and "perfection" in design to be justifiable. Not only may th e delay in reaching
this design stage lead in most instances to higher capital costs, bu t th e increasing
imprecision caused by this delay on other relevant factors make any close decision
of questionable validity. Time-consuming and costly effort by th e design team to
achieve "elegance" or "perfection" of design must be guarded against.
2.1.3 Feasibility studies must often be carried ou t before development work is
complete and, with increasing frequency, investment decisions are taken at this
stage and funds released. As illustrated by th e example in Chapter 9, inaccuracies
in estimating costs at this time are'often less serious than errors in estimating time
to production. For this reason it is important for th e engineer to ensure that th e
time estimates submitted are as realistic as possible.
2.2 Feasibility Studies and Reports

2.2.1 All new capital facilities projects involve th e following phases:
Design
Procurement
Construction
Commissioning
Most companies appoint a project manager to ensure th e effective coordination of
these activities and of th e many special ist departments (safety, accounts, legal etc)
directly and indirectly concerned. However, he is often not appointed until funds
have been allocated and in this case th e engineer preparing th e f ~ } l s i b i l i t y study
would be well advised to consult fully with an engineer having such experience to
ensure that he takes the relevant factors into account (see Chapter 5).
3
2
2.2.2 In developing the process flowsheet and layout, and particularly if develop-
ment work has not been completed and can still be influenced, the design 2.3.3 Lump-sum contracts are sought when all main design work is completed
engineer must be aware of th e effects of h is decisions on th e project timetable before contractors are invited to tender for th e work on a competitive basis for
even more than its cost. completion by a specified date. The contract price includes no t only the direct
cost of the works, but also that of any outstanding detail design, overheads and
2.2.3 The value, of using standardised items of equipment and fittings, and readily
profit, and a provision for the contractor's risk involved. Provision is made in th e
available materials of construction whenever practicable, cannot be over
contract for price adjustments arising from variations or other factors outside the
emphasised: these normally permit a choice of vendors and therefore of price
contractor's control.
competitiveness and some reliability of delivery dates. Specially designed equip
ment, or items made of exotic construction materials need to be designed,
A lump-sum contract based on full design generally leads to th e best defined
fabricated, proved and then sometimes modified with possibly disastrous effect
programme and lowest direct cost. However, the time required for this approach
is often unacceptable, particularly fo r major capital projects, and in uncertain
on project time. This would be particularly so where a large item is involved
having many auxiliaries and located centrally in a plant, where its late delivery economic cond itions such as 1975/76 few contractors are prepared to accept
would prevent progress on a substantial amount of other work on site.
business on such terms.
2.2.4 These, and similar considerations, enable th e engineer to submit a feasibility 2.3.4 Cost-reimbursible co ntracts are appropriate when a contractor is appointed
before design work is complete and when, therefore, a final cost of th e work
report where alternatives have been properly studied in respect of efficiency,
cannot be established with any accuracy. With contracts of this type it is usual
cost, time an d safety. Th e report is intended to demonstrate the technical and
for part of th e cost to be on a fixed fee or percentage-of-works basis, with all th e
commercial viability of th e proposed venture. Th e report should state on what
remaining costs incurred by th e contractor directly reimbursed by th e client.
assumptions th e estimates of time are made and what the margins of error are
When negotiating a contract of this type the main elements to be considered are
likely to be, as these considerations may influence a decision. Time estimates fo r
any or all of the following:
design and development and the parameters on which they are based must be
Profit and overheads Site supervision
agreed with th e relevant departments to ensure that they are realistic and will be
adhered to . Time control for the total project must begin at this stage and must ~ ~ ~ ~ ~ t ~ ~
Project managemen t Construction and erection
include th e time to approval of funds, as time lost in this interval cannot be
Procurement and inspection Commissioning
recove red lat er.
The amount of detail incorporated is usually a matter of company philosophy 2.3.5 A negotiated contract of the cost-reimbursible type is often adopted for
bu t it should always include a process flowsheet identifying main equipment process plants to obtain th e greater flexibility (e.g. to accept design 0 r specification
items, an d sizes, type and extent of control instrumentation and materials of changes) offered by it and ye t achieve th e shortest overall time to commissioning
construction. Th e scale of manufacture and expansion potential must be stated, of th e new facilities. At a time of rapidly changing costs, this type of contract has
as well as th e demands on company resources.of space (including storage), the further advantage that the tenderer does no t need to guess at the I kely effect
services and personnel. Operating costs must include no t only labour and of time on h is costs, as he must do when bidding on a lump sum basis. As a result,
materials but, where significant, also items such as effluent t'reatment. Safety reimbursible type contracts are frequently adopted at th e present time, even in
and environmental factors must also be assessed (see also Chapters 5 and 8). cases where design work is complete. These contracts are more costly and difficult
to administer and are therefore sometimes converted to lump-sum contracts when
2.3 Project Implementation risks have been reduced during th e course of th e project.
2.3.1 As has been indicated above, once a decision has been taken to proceed and 2.3.6 Th e choice of contract route and negotiation with and final selection of a
funds approved th e control of th e project is usually vested in a project manager contractor require th e appl ication of considerable experience and judgement, th e
(or project engineer) who must coordinate th e many different activities, and discussion of which is outside th e scope of this book: bu t useful information will
often conflicting priorities, to ensure that an efficient and safe plant is handed be found in the Institution of Chemical Engineers' publication The Organisation
over for production, on time and within th e funds allocated. The framework for of Chemical Engineering Projects [Out of print. Copy for reference in IChemE
detail design, cost contr,ol and plan n ing will be established at th is time. Library].
For process plants it is usual fo r the client and contracting organisations to
2.3.7 In th e case of cost-reimbursible type contracts construction on site
appoint a project manager (or project engineer) each, to coordinate activities
commences at a stage when design is sufficiently advanced to ensure that
within their own companies and between them to ensure good liaison throughout
construction work can proceed smoothly and efficiently to completion. As th e
th e project.
site establishment costs (supervision, clerical, hutting etc.) are a significant
2.3.2 One of th e earliest decisions to be taken is the type of contractual arrange- proportion of the total cost of th e work and are incurred i r r e s p ~ p t i v e of work
ment to be adopted. Although many variations are possible, construction contracts load on site, close control of design and procurement is necessary to avo id partial
are essentially of two types, lump-sum or cost-reimbursible. suspension of work arisi ng from design changes, late information, late deliveries
and similar causes. For this reason th e pressure to open up a site early to
4
5
demonstrate activity to management must be resisted. It should be recognised Training programmes should ensure that operators, safety crews and main
that gearing design and procurement to a progressive pattern will somewhat tenance personnel are familiar with operating procedures, special process an d
increase th e cost of these activities to achieve the overall benefit of shorter plant features and control systems, as well as with th e layout of the plant and its
project time. Th e natural inclination of design engineers to seek improvements operating points, before commissioning begins.
must be recognised and controlled if the programme is not to be put at risk. Th e engineer must ensure that these activities take place at agreed stages in the
project development and he would be well advised to allow some further time
2.3.8 With lump su m contracts control of all th e features listed above is essential
and resource for dealing with items arising from discussion of these matters.
to ensure that the project proceeds on time and within budget and that no Unless these aspects are given adequate and timely attention during th e project
"surprises" arise. In this case the detailed monitoring of costs is carried ou t implementation stage, significant delays and additional expenditure are likely
within th e contractor's organisation but the client must still exercise effective to be incurred during commissioning and start-up of the plant.
management control of the time taken in making decisions, th e authorisation
of changes an d th e detailed design an d progress of work.
2.3.9 When developing the construction programme the possibility of achieving
earlier completion by accelerating certain activities (at increased total project
cost - e.g. by overtime working) may need to be evaluated against th e total
financial benefit to the company arising from earlier production. If th is course
is adopted, particularly in respect of early a c t i v i t i e ~ on site, there must be
reasonable assurance that any time advantage gained will not be lost by slippage
of later work.
2.3.10 Delays at the commissioning stage are not only amongst th e most
frequently encountered but are also th e most expensive as by this time most of
th e funds have been expended, operating personnel engaged and process materials
employed. Considerable effort to minimise these delays is therefore justified and
includes th e following (in addition, of course, to adequate development, design
work and operability studies):
40t Provision of additional instrumentation, sampling points an d means of
withdrawing or recycling streams in th e event of failure of certain items
to perform to specification.
• Early proving of compone'nts and circuits under simulated conditions to
identify shortfall of performance and operating problems, leaving
sufficient time for their rectification if required.
() Adequate provision of construction materials, fittings, operating spares,
instruments and some equipment items additional to those required to
construct th e plant as designed. Although increasing th e apparent project
cost they enable modifications to be carried ou t promptly and if not
required will become the basis of the operating plant's maintenance stock.
2.3.11 In order to ensure a smooth transfer from construction, through

commissioning to routine operation, adequate consultation and training of
personnel must be arranged with in th e project implementation period.
Consultation must include safety reviews to identify, for instance, necessary

additional safeguarding control devices, possible abnormal service conditions to
which equipment or fittings may be subjected, emission or noise control, or the
need for modifications to increase th e safety of operating procedures. Reviews
with maintenance engineers may indicate design changes desirable to reduce down
time and cost during th e service life of the plant. Where appropriate, consultation
with Trade Union and Safety and Welfare Committee representatives must also
be given timely consideration.
6 7
3. COST ESTIMATION IN RELATION TO

Relatively little effort will be expended achieving this type of estimate: th e
PROJECT DEVELOPMENT cost of th is effort is unlikely to exceed 0.1 % of the final project cost and will
usually be substantially less than this amount. This first, rough estimate is used
3.1 Introduction only as a very coarse screen to gauge th e degree of further interest. The probable
At an early stage after conception of a new process route or when a ne w or error range is over ± 30%: some authorities will say that no confidence level can
extended production facility is contemplated th e experienced engineer will reasonably be applied to such estimates.
prepare a quick appraisal of costs. If th e project goes beyond this early stage "Confidence Level" is a measure of the probability that th e range of values
then th e initial cost appraisal will be developed until it is finally a very detailed with in wh ich the estimate may fall is a true statement. Most managements wi II
and accurate listing of anticipated expenditure against which actual expenditure expect an estimate to be withi n the range of values stated and rigorous enquiry
can be monitored. is likely if th e final cost is outside these limits. With the type of information
Th e purpose of this Chapter is to set ou t a typical scheme describing and available as described for subsequent estimate stages and with competent
defining stages of development of a cost estimate by consideration of: estimating based on a sound bank of cost data, a confidence level of 90 - 95%
is usually achievable.
• The stage of project development and data available when th e estimate
is prepared. 3.3 Study Esti mate
• A summary of th e techniques used in preparing the cost estimate. Also known as: Evaluation estimate, Predesign estimate, or Preliminary estimate.
• The approximate cost of preparing the estimate. When a scheme has been developed to th e stage of preliminary flowsheets,
• Th e probable order of error in th e estimate. and th e duty rating of principal items of equipment and a geographical location
• The purpose fo r which th e estimate is generally suitable. are specified for the construction of th e facility, then it is feasible to prepare
Commonly used synonyms applied to each estimate stage have also been listed a cost estimate based upon estimates fo r each main plant item or groups of items
bu t great caution must be exercised before accepting th e equivalence of an y obtained by applying appropriate exponents to previously established plant costs
terminology until th e basis on which a particular estimate was prepared and its to account for differences in d u ty rating or size and to include for minor
purpose has been established. components, ancillaries and electrical, instrument, piping, civil and structural
Only rarely will all th e stages of estimating, described below, be followed in work. An example of exponent estimating applied to elements of a process plant
the development of an estimate for a particular project. Sometimes a large project is set ou t in subsection 4.2.2. Th e cost of getting this estimate is likely to
return on capital is foreseen, subject to a rapid entry into th e market. It may be between 0.1 and 0.2% of th e total project cost and for this expenditure the
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then be decided to accept a more hurried estimate having wider tolerance and
to enter into th e engineering phase, includ ing ordering of long delivery items and
site preparation works. I n such cases it is usual fo r a detailed estimate to be
probable order of error will be within ± 30%.
It will be usual for th e degree of interest in th e project to be reviewed at this
stage. All the principal factors summarised in Section 3.1 affecting a decision to
built up in stages as soon as practicable. Again, in the case of a company (either proceed beyond this stage will be re-assessed. There may be a hold placed on
! , 1' owner or contractor) involved in a repetition of a very similar, recently progress du e to failure to identify a suitable site or source of raw material;
constructed unit, estimates within ± 10% and often within ± 5% can be rapidly possibly further laboratory results are required. If, as a result o f t h e review, a
prepared avoiding much of th e preliminary work and associated cost. However, decision to proceed further with th e project is made, then a marked increase in
I there is generally some progression from initial estimating, based on limited

information, to a more detailed estimate as th e project is more fully defined:
th e stages of estimate development described below provide a guide to the type
the rate and amount of expenditure on engineering an d associated activities wi II
result. This effort wi II yield, as on e of its results, a much more detailed and
accurate estimate upon which the important decision to sanction funds will
of estimate in relation to the level of information available. depend.
l
3.2 Order of Magnitude Estimate 3.4 Budget Esti mate

Also known as: Sanction estimate, Funding estimate, or Scope estimate.
t ,r'l. Also known as: Ratio estimate, "Seat-of-the-pants" estimate, "Ballpark" estimate,
l ~, or "Guesstimate". Following acceptance of a study estimate the further ~ ~ g i n e e r i n g work then
'
An approximate forecast of fixed investment may be obtained without flowsheet, authorised will aim at obtaining and presenting the following information:
l layout or equipment analysis by applying overall ratios (to account for differences • Preliminary mass and energy balances, P & I diagrams, equipment list
I in scale of production) and appropriate escalation factors to published cost data and material specifications, duty rating and sizing of equipment,
,
i ;1 1 for previous installations considered to be broadly similar in nature to th e scheme instrumentation and control equipment.
under consideration. An illustration of th e use of power factor cost estimating is • A basic site layout of main plant blocks, roads, railways';Jsupport
given in Section 4.2. buildings and a site survey.
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• Preliminary general arrangement of plant.
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• Buildings approximately sized and form of construqtion stated including 3.6 Detailed Estimate
outline architectural sketches and main structural frame diagrams. Also known as: Tender estimate, Firm price or Final estimate.
• Piping and insulation standards based on preliminary flowsheets. This estimate is prepared when all design, drawing and specification work is
• Preliminary utilities diagrams. substantially complete and bills of materials have been prepared which enable very
• Preli minary electrical single line diagram , motor list, substation list detailed estimates to be compiled by applying unit charges to each item. To
and lighting specification and scheme. these estimates are added purchased equipment costs (derived from competitive
• Programme of work to achieve a stated date for production. vendor quotations or from purchase orders), sub-contract estimated costs
• Engineering manhour forecast to complete th e project. and all other project estimated costs (see Chapter 5 and Appendix check list)
With such data available a cost estimate having a probable error of less than to arrive at the total estimated cost for the project.
± 20% may be prepared. If th e data is too "preliminary" and incomplete then The probable order of error is less than ± 5% for an estimate prepared in
even a ± 20% estimate will not be achieved: effort must be made to get th e this way and, with most of the design engineering completed, between 5 and 10%
project defined and if this is successful then estimates in the range ± 15% to of the total project cost will have been expended (see also Section 4.5).
± 10% ma y be ach ieved at th s stage.
For several items, such as pipework, insulation, electrical and instrumentation 3.7 The Cost of Cost Estimates
work, estimates will be derived by applying factors to th e estimated costs of The cost of preparing an estimate (at an y desired level of accuracy) tends to
main items of equipment. Specifying the principal materials of construction decrease as a pementage of project total cost the greater th e size of project
will aid in selecting th e appropriate factor for piping cost. A ~ a i n , th e electric under consideration. Analysis of a number of projects, none of which were
motor list an d preliminary total of installed power will enable the nature of closely repetitive of one another, and ranging in value up to £10M, yielded
electrical work to be more clearly foreseen and the appropriate cost factor th e envelope of data presented in Fig. 3.1. Th e cost of preparing an estimate
selected. But much of th e estimate will be able to be determined by considering includes engineering, draughting and costing payroll, associated travel expenses,
! th e cost of individual items, small groups of equipment, structures and buildings. survey work and office overhead. Research and development, and market
I
A cost estimate is now in being which has considered almost all major equipment survey and research costs are no t included.
on an individual basis and is related to a quantitative and q.ualitative description Extended project study periods, frequent changes of scope of work,
of the equipment. Th e factorial estimating method is discussed further under uncertainty of basic data, development into new areas of technology for the
Section 4.3. organisation, or inadequate management associated with the project, will often
Th e cost of th e effort so far expended will typically total between 0.4% and result inthe cost of preparing an estimate exceeding th e upper curve shown in
1!'i
1
" 0.8% of project final cost; but for this expenditure a comprehensive statement of Fig. 3.1. But repetitive project work (of th e nature illustrated by the example
forecast cost to carry ou t the project will'be available. This cost estimate will set ou t in Table 4.1) will enable estimates to be prepared at costs substantially
form part of a report to management on all aspects of th e intended project less than the lower boundary of th e "cost of estimate" envelope.
II! including th e benefits which are anticipated to arise from th e investment and,
10·00 ?
most importantly, th e premises on which the JEPort is founded. It is on th e basis
of this type of report that approval from management to proceed should be . h Envelope of ty p ic a l cost
5·00 ¥estimate pr epar at i on cost s,
sought and provision of funds made. u for process plant pr oj ect s
. ~ costing up to £.10M
II All subsequent actions and decisions should be compared to this source
document; all proposals to change Trom the original plan in terms of money, time 2·00 ,
or method should be analysed by reference to th e original intentions.
3.5 Project Control Estimate

Q ·00
. ~ "
Da ta reported by
Pa r k 35
l '
i !
Also known as: Definitive estimate.
Following authorisation to proceed and allocation of project funds based upon ::: ~ . ' t
th e budget stage estimate, it will be usual to further define and refine estimates
as design work proceeds and decisions are made. At a point short of complete
drawings and specifications bu t with th e benefit of substantial detail being known 0·10 ~ ~ .
!
II:
and having held discussions with vendors and, when appropriate, with engineering
0'051 I I I I
and erection contractors, th e manager of the project will require a definitive o 1020 30 40 50
estimate to be drawn up. This estimate will normaHy aim for a probable error Accuracy of est i m at e ("to plus or minus)
of less than ± 10% and will be a key cost contro!' document used by th e project
1.1 manager to monitor all future expenditure against autho.rised funds. By th e time Fig. 3. 1 - Estimating the cost o f cost est imate preparation
11:
1
1
this project control estimate is prepared between 1 % and 3% of th e final project
1
1
cost is likely to have been spent.
1 .,111,
'
1
10 11
3.8 Reliability of Estimates
4. ESTIMATING METHODS
Th e precision of an estimate will be aided by a clear definition in advance of its
ex ten t and programme. A few guidelines may be helpful:
4. 1 Introduction
• An estimate is only as good as th e technical information upon which it is
based. A check list must be used so that all necessary information is considered The type of estimate called for is determined by the degree of accuracy that is
to ensure that the estimate allows for the full scope of th e work. (see also required and it is axiomatic that, as stated in Chapter 3, accuracy is related to the
Chapter 5 and th e Appendix). information provided.
• The estimate should be related to prices at a fixed time and an escalation
formula should be agreed with th e sanctioning body. 4.2 Exponential Cost Estimating Method
• The rate of exchange used for foreign currency purchases should be 4.2.1 This type of method is generally used for evaluating new processes and th e
stated. profitability of a project, and to help establish the best design route to take or guide
• The estimate should be tied to a reasonably firm programme of construction the direction of research when alternatives are available. When historical data is
which clearly shows that it commences from authorisation to proceed available on a similar type of plant is has been found that the cost of a new plant of
with th e project. Normally th e rate of expenditure will be planned by differing size is proportional to th e ratio of the relative capacity raised to an expon
years, quarters and months (as appropriate) from the date of full authori ential power. The factors used vary from plant to plant. Overall plant cost factors
sation to proceed. which are used for rough order-of-magnitude cost estimation of ne w facilities are
• An appropriate contingency allowance must be added to th e estimate; generally in th e range of 0.5 to 0.8. For rough order-of magnitude costs an overall
contingency should always be shown as a separate item. Th e overall plant exponential factor may be chosen based upon experience. In the case of an
I I
contingency may be built up from varying percentages on different sections
of the project, depending on the state of knowledge and when this is done
this development should be shown. The contingency may well vary between
electrolytic cell hall complete with its auxiliaries th e ex p o n en t might be 0.8.
In th e following example the cost is required in January 1976 for a 1500 to n n e/
day ammonia plant to be erected in the UK on a green field site.
25% for projects where new process development is involved down to 5% Scope: Battery limit, process plant; feedstock, natural gas.
r where there is a substantial degree of repetition of previous experience.
l (See Section 5.5). Process Units consist of a single reformer furnace; CO conversion; Benfield
CO 2 removal; ICI NH3 synthesis and recovery (single train compressors);
• Almost certainly there will be a "client-contractor" relationship involved,
even if this is only between tw o sections o f th e same company. It is boiler feedwater and steam raising: bu t excluding offsites, storage and
1 important that the philosophy and scope of the design is clear to the auxiliary services.
I
'client'. Known costs 1000 tid ammonia plant on the same basis in February 1975
",I
I • Th e estimate must be th e overall responsibility of th e project manager, was £2 8 M.
III and he must have available a good system of cost returns, technical and
I ! progress reports in order to be able to exercise cost control. During th e Power Factor Equai,0n 0.66
course of the project, monies will pass from th e contingency to definite
!II,I" items of plant; th e project manager must plan his commitments to prevent X Y \ ~ i J x CF
!
!II!
his contingency sum from disappearing to o rapidly and unknowingly.
• At the stage when th e detailed estimate is produced, the design wi II have Where X Required cost of new plant
II, been subject to critical technical and cost analysis. Once the design basis
:1 1
C1 Capacity of plant with known cost
has been established changes in project requirement must be very thoroughly C2 Capacity of plant for which cost is required
vetted and obtain the approval o f th e project manager before implementation CF Correction factor for up-dating from February 1975
!
as they will almost always have a significant (and usually undesirable) effect to January 1976, based on subjective assessment by
upon cost and programme. During th e course of the project, critical analysis th e engineer using such data as given in Table 4.4 for
1
II will continue in order to control expenditure. trend forecasting.

y Actual cost of plant C1
I
I
1
Finally, th e end objective of th e project should be kept under review. Markets
change and so do process econom ics. Even at a late stage in a project programme
a major redesign or even termination of a project may be a 'best' course in th e
long run"
x £28 x 10 6 (1 5 0 0 ) 0.66
1000
£ 3 6 5 9 0 400 x 1.22
£44640200
x 1.22
',l i Say £44500000

IiI
I
Ii "1
12
13
,II!
[
4.2.2 This method, widely known as th e "six tenths rule", can be used also for TABLE 4.1 EXPONENTIAL COST ESTIMATING APPLIED TO INDIVIDUAL
estimating the cost of items of equipment from historical data for similar equipment. COST CODES
It is a valuable aid in th e rapid development of preliminary estimates used for the
evaluation of new processes and projects. Exponential cost factors are published for Cost Cost
Cost Feb. 1975 Feb. 1975
various items of equipment but should preferably be built up within each company Power Cost
for components in regular use. Some typical power factors in use for cost versus
Code Descri ption 1000 tid 1500 ti d
Factor Factor
capacity are: Ammonia Ammonia
Tanks, rectangular 0.5
£M £M
spherical 0.7 F Furnace Heaters etc. 3.20 0.7 1.328 4.25
Pumps 0.7 - 0.9
G Package Plant 0.50 0.75 1.355 0.68
Compressors, reciprocating 0.75 H Heat Exchangers 2.70 0.65 1.302 3.52
turboblowers 0.5
K Compressors & Fans 1.50 0.75 1.355 2.03
Electric motors 0.8 P Pumps 0.50 0.8 1.384 0.70
Towers (constant diameter) 0.7 Q Turbines 1.10 0.7 1.328 1.46
(constant height) 1.0 T Tanks 0.50 0.65 1.302 0.07
Evaporators 0.5 V Vessels and Columns 2.30 0.65 1.302 3.00
Heat Exchangers 0.65 - 0.95 Miscellaneous Items 0.15 0.6 1.274 0.19
1
Piping 0.7 - 0.9

The application of appropriate exponential cost factors against various cost code TOTAL EQUIPMENT 12.00 0.68 1.325 15.90
items can be illustrated by considering the example of the 1500 ti d ammonia plant E Electrics 0.90 0.7 1.328 1.20
.1
i, in greater detail. The working-up of the exponential cost estimate is set ou t in J Instrumentation 1.20 0.6 1.274 1.53
Ii'
I Table 4.1. L Piping 3.20 0.7 1.328 4.25
1';1
4.2.3 It must be stressed that this method should never be used blindly and great S Structural Steel 0.80 0.65 1.302 1.04
'I'~,' care should be taken to ensure that the proper comparisons and relationships are U Insulation & Painting 0.20 0.65 1.302 0.26
being made. Due to th e large diversity in process units, elements such as civil works, Z Catalysts & Chemicals 0.40 1.0 1.50 0.60
I
:'!II:
plant and equipment, and bulk items like piping, electrical work and instrumentation 2 TOTAL BULK ITEMS 6.70 0.7 1.328 8.88
~.ri~ are present in different proportions. Consequently, th e exponent will vary from
'"'·I
plant to plant but with a mean figure of around two-thirds. 1 Total Equipment 12.00 0.68 1.325 15.90
Great care mu st b e taken that, in factorising upwards, physical and practical 2 Total Bulk Items 6.70 0.7 1.328 8.88
I limits are no t exceeded. It is also very important to establish, before applying any 3 Civil Works 1.00 0.65 1.30 1.30
Jl.~ factor, whether an increase in plant capacity is going to be achieved by an increase in 4 Construction 5.30 0.61 1.28 6.80
" plant dimensions or by a multiplication of units or streams. Also it must be borne 5 Engng & Procurement Fee 3.00 0.45 1.20 3.60
in mind, when factorising downwards, that there are commercial limits to be con
TOTAL C OS T - FE B 1975 28.00 0.66 1.3 36.48
sidered which will influence th e choice of exponent.
When comparing possible new green field projects, a much larger productive plant
may require very little extra by way of ancillary site services such as roads, railways, PLANT COSTS FOR 1500 tId AMMONIA
site drainage, amenities and service buildings.
Iii!
I
A satisfactory estimate may be compiled if th e previous historical data are broken Total Costs February 1975 £36480000
down into sections and a suitable exponent is applied to each. Fo r example, one Correction Fac tor 1.22
might decide that the services items listed in th e previous paragraph might only need
" I to be increased by, say 15% for a new plant of double th e productive output. Total £44500000
I
Other types of plant might require intermediate stages, for example feed prepar TOTAL COSTS JANUARY 1976 44.5M
I il j ation or reactant recovery sections, before feeding into a reaction section. The cost
of th e productive reactors might, therefore, be a relatively small proportion of the Capacity factor is th e capacity ratio between the two plants under consideration
'I,II"I!
; 1
ancillary units, so that these auxiliaries may determine the overall plant cost factor. which is 1.5 in this example.
L:l
"1.' ' .1 Power factor is th e exponential factor decided for the partiCular "cost area".
Cost f ac t or is the arithmetical calculation of power factor applied to capacity
1:1 1~
,!II! factor as explained in the example given in Subsection 4.2.1.
~Hi1 · ' l r ~ .
14
~lt:1
W
4. 3 Factorial Cost Estimating Method (0
CON l!l <;I l !l C OO 0 COCO C O ~ O J C O C OOl !l l !l
;Uo 0 OOCO 0 "-
4.3.1 In this type o f estimate it is necessary to make an assessment of the value of ,, 0 0 <:J:",:<:J: '-': ~ o q ~ ~ " ' : < : J : ~ ~ ~ ~ ~ : " ' : ~ ~ " ' :
e: l !l '
:::> ....
the direct equipment. Having established the equipment costs, it is expanded by th e
r - - N co r-- OJ NCO t .rl r--r--l !l l !l l!lCO M
costs of th e electrical, piping, instrumentation, structures, insulation, painting and 88
l!l0
8' ~ ~ " " " " :
N <;I'MN
~ o q , , " " " :
CO < ; I'NM r-
~ , - , : ~ r - : " ' - : C V ? ~ ~ < : J : ~ " ' : < : J : ' - ' : ~
<"I
' - : ~ ~ ~
E
site erection elements. It is desirable to use one's own company cost data and feed- 8
o
back.
Consider th e case of a carbon steel heat exchanger which costs £10,000 and is to
0 0
0
o 0
'0
.
0
0
, 0--
COO<;l' <;I N l!lCO
~ , - , : r - :
OJ OJOJCON
" ' : ~ < : J : ~
COr--<;I' CO
<:J:
co O
~ < : J :
<;I'<;I'OCON
~ " ' : < : J : < : J : r - :
COl"-LO
~ - : ~ ~
M ...
be located at ground level. Appropriate factors to allow for installation costs might
88 <;I<;IM N r-- Or--COCO Ln--<.C f o- < ; I'N M ~ M C J ) o r - l ! l ~ < ; I ' O
be as follows:
g , ~ ~ ~ " ' : ~ ' - ' : r-: " , : ~ M < : J : ",:M ~ " ' : ~ ~ ~ C ! - : - : ~
0'0' '
... N
Piping 0.35
0
0 0 0 MCOO CO COON OJ OJ l!lCOCOl!l r- ~ l ! l N C O l ! l ~ O
Instrumentation 0.15 00 0 ~ ~ " ' : <:J: ~ " ' : ~ ~
M C OO
C ? " ' - : ~ N ~ ~ ~ ~ ' - ' :
MCOCON
o ~ ~ " ' :
0'0'
Civil 0.1 NLtl
'
Structures an d buildings 0. 0
08
00 0 NCOCO 0 < ; I ' O ~ CO M MOCOCO N ~ < ; I ' 0 COr- NC OOJ M OJ NMl! lCO
Insulation 0.15 ~ . o · ~ " ' : ~ ~ " ' - : " " " : ~ ~ r : " " " : ~ ~ " ' : ~ ~ ~ ~ ~ ~
Electrical (lighting only) 0.05 L t l ~
Painting 0.05 o
These factors, when summed, give an overall factor of 0.95. To allow for engineering 1;;8 0 ~ < ; I ' C O <;I Nl!lM CO 0 N!'Ol!l NCOO l!l CON ,-LO-LOLO -NMlO
~ ~ " ' : ~ " ' : ~ ~ - : - : ~ ~ ~ ~ ~
and overhead charges a further factor, of say 0.15 in the present case, is applied to
olif N ": ~ ~ " ' - : " ' - : C ? ~ " ' " :
w ...
arrive at the overall installed cost. Hence, the total cost of th e installed heat exchanger !:: tW
I- ...:
is estimated as follows: Z &! "'NM <;I l !l C O!' co
: : ~ ~ : !
OJ 0
... N
...
N
NM<;I'l!lCO
NNNNN ~ ~ g J g
«
£10,000 (0.95 + 1) (0.15 +1) = £22,425, or say £22,400. ...J
Q.
2 (I)- "'u...
A wider selection of approximate factors for use in preparing process plant capital
cost estimates are set ou t in Table 4.2(A). Use of these factors requires that (a) all 2 ) 0. - E
::l
_< 11
Ole: <11 ... cO
,I
::l - e:o-
main plant items of a scheme be listed and separately considered, and (b) all main ai
COlO
C C U
- : ~ ~ ~ 8 E
... 0.
N C)t-o c :C'l 'm':; 01
C
plant items be costed on a common basis, namely that all fabrication is in carbon ... 01
,g C . ~ . g . ~ cn'g () 0. -g
::l 01
C
steel; and this should be done before applying factors to main plant item costs to . . 2 ! ~
iE
C
. J
C
'i:
-
'0. ~ ' - 3 ,,'"
O '+-° ::l
arrive at total installed costs. Table 4.2(B) lists some typical conversion factors from I - , ~ :5 -g , ~ , g (I)+-
CIlE
L..-":'
...:J
<11 .0
o .0
::l
<11 ::l
0' CIl al <11 - O Q ) ~ Oro ... c CIl
other materials to carbon steel fabrication for three classes of plant items. An example u
• .: Q) Q)
3lLff :'=U)O'-1 i)
0)
0' -
'--..c: ..c 'E C
E 0. g1 (; ' ~ m 2 ~ 2 (I).fit
2
1;; .<: ()
of the application of this approach is set down in Table 4.3. ,g. [3 , g en -g
"C
1i 3l
a. ~ - t E : O " * ()
g ~ ~ " - 5 ~
:::J Q) Q)
.e : . ; : ; ~ co 1G
°
Q)
4.3.2 It should be emphasised that to obtain reliable results by factorial methods, (I ), "
0'
QJ
<11
Cl
01
C
"C
co - 5 ; g ' ~ >' - 0 ,' = CIlo ... <11 (I) >
e,j::r c ..... -g:c 01
experience is required in selecting the correct factors as the overall values ca n range w g"* atn 0' - :
] '- ~ '"C ~ E E ~ ~ ~ ~
1i ;Q
()
en '+- .0 5 ~ u i Q)Q . C'J <11
from 2.5 to 5.5. Th e mean could be around 4.0 for a UK construction project, bu t it 8 0
en Q)
~ ] ~ ] , +-. _ > <11
ai
~ ~ ~ g . ~ Q ) c: CJ C 0.
o -g,g.
« ,- '" 3 g g E ai ,E E -
C l ~ O C / ) O
~ ' ~ ; . : '0. C
()
0.
is no t unusual for large overseas complexes to see the factor approaching 10.0.
Used by experienced engineers th e factorial method of estimating can give, in a
I-
E
K! i0.16
:~ :~ ,~
'0
~ ~ ; ~
°0. 01 fit
()
c
~ :fl"-
E ~ a.L.,.Q.
' ~ ~ '
[3
t ; E & l ~
2 ~ ~ . E
~ ~ " § s
:.cV)
@,E
Co
c
Q)
g.
o.C
c
°
01 en
1;;
fraction of the time, estimates comparable in accuracy to those obtained by more 16 , ~ ' o . , [ 1;
c. (l) '0.
E0 E "CCo.co.
c:.= <1IE
= ..1 : :
.0
: : : J . ~
:r ... ,- 0
Q) 0
C '0,
° 01 (I) 8
iii
*- Q
.. 0(5 E
detailed and elaborate methods. ' ~ ' ~ c n J ! l ~ " " ~ " " ~ - g Q ) ~ ; g C l
... c c
g : § ~ ~ ~
coO 0 "' " co> : J :J C % ' ~ ]
Q. e:
E g B ,S! 3 l ' ~ U 1; >
C (1)'-
Q . u . u ~
~ ~ ~ ~ ~ ° 01 > Q)
e::E
,- E & l ~ Q . ~ > ~ § ] ~ - 5 ~ ~ ~ -= ~ " T 
~ ~ ~ ~ g>
~ § ~ ~ E
4.4 Typical Distribution of Costs
:
C uoo>
By way of illustration, Fig. 4.1 shows the distribution of costs for different process .2 ( I 0) ~ ~ - g ~ ~ B ()
Q) c: co c u
g ~ ~ ~
U ) . ~ . - =
':.s ,:: :r: E. o
. =; ";; E r o ~ : C 6 ! B
~ C l . ~ C J ~
' c . ~ ;;
Q) '+- 0 a.
'iii
01
,::
plant ranging in value from £6M - £100M. The typical costs distributions should be
,,'
.:: £:
~ w g' ~ - ~ 5 C 8 l - J 5 E !0 ~ : r ~ : r ~ : [ ~
... "C "C
WCro+-'
E ~ ~ g
c:
°
' °
o.o.co.c
°
E E
<11 ° <11 ~ . ~ : ~ ~ ~ ~ ~ ~ ~
,S!
m
Cc E 0.
C c !9
% - g - g ~ - g ~ ~ ~ . ~
used with caution and mainly as a guide in the preparation of preliminary estimates. e: ::
_u , , ~ ~ ' ~ r ~
"'00.,-0.,-0.0.
e e'Q. u
o co co co co co Q,Ja.o.V)c
OJ
'+- Q)QJQ)coQ) t::ooe ClClClEClE ill to ill 81 Q)

01°<11°<11°> c: ' - ' - 0 . ~ . ~ . ~ 01<11
t , [ ~ , [ ~ i ~ ~ ~ :':ccE . ...............
~ . = . = 1....= ' .0
4. 5 Firm Price Estimates (Based on Detailed Design) ro 0 0 "-

0
. . c. . c. c"+-J: '+
. 0
~ ~ ~ ~ ::l .- c c ..........
' ~ ~ ~ ~ B
-<11
'">-
UQ) : : : JC I ' ) : : : : J' + - " O
""«w w «
> 0' 0' ... g E ~ r o g ; ! ~ ~
O (/)« ...J < L J 2 :
guu ° ClO 1 C'l
:.:i:.:i:.:i :.:i
Cl >. 0
«« 2:
c;.,Q)QJCC
Q)o.o.CIlCll
zooc:::c::: ro>.oo ()
These are generally required to enable a contractor to make a firm commitment to > . . . J ~ N M ...J««u
his client, and, therefore, have to be estimated to a greater degree of accuracy. To

achieve this accuracy a considerable amount of engineering work has to be done.
E E 01
e:
'P
U () ]
Here, very significant costs can be incurred in th e preparation of the information ::l <11 Q) ()
0"'01
::l c 01
01
C
gi6 'g C
w
I
,2
U
::l
. J
o
CO Z
16
4.6.4 Computer programs are finding increasing use for planning pipe and
like piping, it is a cost element where definition is very difficult and the estimating
requires a high degree of skill. If sufficient definition is available with regard to cable routes, including the preparation of orthographic print-outs, schedules of
pipe or cable sizes, bends, fittings, supports, etc. Th e outputs from these
quantities, data sheets, material take-offs and layout drawings then construction
programs may be presented in suitable form for input to corresponding costing
specialists can be invited to bid on a sub-contractor basis.
programs.
4.6 Use of Computers 4.6.5 One effect of computer use for cost estimation is that the functions of
process design and costing are no longer separated. Immediate feedback is
4.6.1 A part of the estimator's work consists of the collection and storage of data,
achieved so as to produce improved design and lower costs. For such work,
its updating and the rapid retrieval of the required information from previous plant
involving a variety of process plants, costing data may be prepared in such a
costs. Generally, in the p;otst, these activities have been handled manually. Whilst this
way as to facilitate feed-in as a sub-routine in design programs.
may continue to be the practice in smaller undertakings, this work is more economically
handled on th e larger scale by computer techniques. 4.7 Updating of Cost Information
At the most elementary level, th e computer may be used as a machine for the Historical records of plant and equipment costs can be brought up-to-date by the
storage of a wide range of costing data. Given the numbers and types of compon use of appropriate indices. Preferably the job should be broken down into various
ents, costs can be abstracted rapidly, updated if necessary, added or adjusted for cost categories of materials and labour. Each category can then be adjusted by
special factors. the use of the appropriate indices. Published indices by sources such as HMSO from
the UK Department of Trade and Industry and th e Department of Employment,
4.6.2 For process plant, the computer will usually be put to greater use than the British Electrical and Allied Manufacturers Association (BEAMA) and the
simply to supply stored data. A whole plant or a particular component can be French Bulletin Officiel Services des Prix rBOSP) are extremely useful as a basis
optimised commercially. Consider, for example, a vacuum distillation column. fo r checking th e trend of price movements. Some typical indices are illustrated
A lower working pressure may give a better separation factor and hence require in Tables 4. 4 and 4.5.
a smaller number of theoretical plates and lower reflux ratio. Against this, the For some industries, composite indices have been produced in wh ich the average
cross sectional area of th e plates will be larger. The computer may be programmed relative contribution from each index is taken into account. Such an index for th e
with the physical data as well as th e design equations and th e unit costs for
process plant industry is published monthly in Process Engineering, and an example
packing and shells. Output may be in th e form of a cost of plant for any given of this data is shown in Fig 4.2. Other regular sources of cost data can be found in
set of operating conditions for minimum total cost together with a breakdown of the Oil and Gas Journal and Chemical Engineering, in these cases th e data are a l m o ~ t
that cost and a summary of leading plant dimensions. wholly based on practice in th e USA.
4.6.3 The estimate of capital cost may be integrated into an economic assess- It should be understood, however, that such indices do not always reflect the
ment incorporating costs and revenue. For example, consider a pressurised true situation of market forces, supply and demand, premium payments and the
catalytic reactor. The program will allow for increased reaction rate as temperature change in th e value of sterling relative to other currencies. Moreover, th e weighting
and pressure are increased, thus possibly reducing vessel size and catalyst of th e various commodities used in the make-up of an index may not be fully
quantity. Against this, the yield may be reduced, thus adversely affecting representative or sensitive enough for a particular piece of equipment or material.
operating revenue. The computer allows both a design and a capital cost estimate Therefore the emerging index number could well be unrepresentative of the true
to be produced simultaneously in such a way as to achieve th e minimum overall pattern of price movements.
cost.
Great care should be exercised to avoid improper optimisation. Sometimes a
local optimisation can set up a particular chain of further steps such that the
overall costs are greater than if a more expensive item had been selected at the
location in question. This is particularly true for reactors where savings at this
point may lead to higher separation costs.
flowsheeting
Increasingly
evaluation large computer
of chemical processes.packages
In such are being used
programs for the input is in th eand
th e process
form of an information flow diagram detailing the type of units and inter
connecting streams. Data on the components, input flows, unit parameters and
utility costs are provided. The program then evaluates the system to derive th e
capital and operating costs. By observing key costs the user can then modify
unit parameters or even eliminate items altogether. In this way, an overall
attempt is made to move closer to an optimum solution.
20 21
10 0
90
t om e Office Costs
80 Mechanical
Erection
..... 'v Civils

Miscellaneous
u 60 Structural Steel
o PIping
-0 50 Instrumenta io n
+- ' Electrical
......
o 40
N -;!!
N
30
20L Equipment
10
0
Plant A B C D E
Cost £32M £20M £6'OM £6·5M £100M

Fig. 4.1 - Typical distribution o f costs
A. UK green field site. Battery limit ammonia plant, including storage.
B. Overseas green field site. Small refiner y including tank farm an d partial offsites.
C. UK existing site. Phosphate rock fertiliser plant with maximum client participation.
D. UK existing site. Acid plant with interconnecting facilities to th e existing plant.
E. Overseas existin g plant. Fertiliser complex, including offsites an d handling facilities.
I
eII.::t:."
cu C
~ ' ' : : : ' ' : : :
28 5
275 r omposite index -m onth by month (Jonuary 1970=100)
1= 0'371 M +0 0 8 I E +0·10I e +01915+02610
Ctlt:c
2 .g .. 26 5
..... c" C
- g 255
g'u. 0
(J .- ....
C. CtI
g LOml'-I'- mo m
245
:::I :;
C .... c u . c ..- 235
o (J (J 0 c . O o ) . . t o o c.Oooo
LOLO(OOOO..-MLO (0
l- £ l : ~ ~ l -
:::::> 225
c.. ell
cu
l-
:::::> co
(I ) 21 5
0 cu
en
C 20 5
E
0
(I )
:::t: 195
·S 1;; '<::1'<::1'0'<::1' 001'-0 00 N 0 J F M A M J J A S 0 N
u (J'-
u en "C
:::I
NLrio)NO L r i ~ . . t 1976
a: ....ll _cc (O(O(OOOO"-M'<::I'
M
LO 320
W W_ co
c.. :::I
"C
s:: Component indices - m o n t h by month (January 1970=100)
W 30 0
-I ..:
<C ..... '>
e--e--. --e--e-. --e 10
(I ) 0 _e n
c: 280
..... - r . : : : : " ' - - - - - - = - - -----

W CtI C - 1M
~
ell /.. - - = '__ _
(J'-
-I
0
.... 'cCtlcu
t !: 26 0
-
~ Ie
0
:::t:
(J
cu ..c:.= ;
....
MO..-N (01'-00 (0 / - - - -"""'- _ ~ ~" . . ' ..-- . I5
s: (I) (J en "C c.Oo..tooo r'c.ON
LO(o(oI'-O..-MLO
.. t
(0 24 0 ---=:!----....... ...___ • - - - - IE
"C ~ J 1 - =
~ . - - - - . - - - . ~ .
U.
.---
CtI
0 22 0
-
I) al
------.-.--
W: .....
0 en 20 0
al .... .§]
2 :::I N 0 J F M A M J J A S 0 N
: >
c.
....
C
= 1;;
cu·-·-
ali
<C N . . -M O ooom 32 0
1976
:2 :::I
.- :::I
LO Values of the indices
0 en "C "C c .Oo) Mr 'O r'c.ON .. t
X Historical index fo r Nov em ber 1976
l
cu C C C LOLO(oI'-O..-MLO (0 290
W WCtI_
..c: (January 1970 =100)
c ....
..... 26 0 1M (mechanical engineering )=268'0
:2
0
ell
cu
23 0 IE (electrical engineering )=24"7
:::::> (J
....
:s ell
u VI 20 0 e (civil engineering )=265-8
LO
-t::i - C
cu 'Q);
.;::
....
"-I'-LOM 0'<::1'1'-
CX!
::J
"0
.E 170 IS (site engineering )=258·3
W
(J
cu"C oooLrir'O O ~ . . t ..- .....
''::: .... C '<::I'LOLOI'-O N'<::I'LO (0
-I
.. (1)- 0 140 10 (overheads)=280' 6
al ....
<C c
- cu 110 I (composite index) =267-1
E
.... -
tI 80 1968 1970 1972 1974 1976
0.
cu
a:; a:; a:; a:; Fig. 4. 2 - Composite cost inde x for UK process plant (November 1976)
m
I'-..c::
.c.c
EE
°
00..c::
.c.c
EE Qj
(Based on Process Engineering, by kind permission of the Editor)
1.00 ..- NM ' <: : I ' LO (OI'-OOmO..-N mucu.$cu mUQ).$Q) U Process Engineering's composite plant construction cost index is the sum of five com-
,,0 1'-1'-1'-1'-1'- 1'-1'-1'-1'-000000 .. - I- C o .U .. - I- C o .U I-
c : n ~
mmmmm mmmmmmm ~ : : J c u ~ ~ : : J c u Q )
::J ponent indices. Al l these indices have the same base of 100 atCJanuary 1970. T he
II . . - . . - . . - ........ ..- ........ ..-..-.......... - ,Cf J -,CfJO 0
CfJ composite index applies to a 'typical' process plant comprising 37% mechanical
engineering, 8% electrical engineering, 10% civil engineering, 19% site engineering and
26% overheads. The derivation of the indices is explained in an article in Process
Engineering, January 1973, page 18.
24
25
5. COMPOSITION OF ESTIMATES These risk areas should be examined in detail and appraised statistically and final
addition made to the base estimate. A method commonly used in assessing such a
5.1 Projects may vary in character from a new research development to a duplication contingency is based on th e probability distribution by th e use of the normal curve
of an existing plant; from a green field project to a major modification of an operating and standard deviation.
plant; from improving utilities to upgrading a main production line; from a simple to a
highly complex, integrated project. Nevertheless, the same estimating procedures are 5.6 Forward Escalation
fundamentally applicable to all cases, albeit to a greater or lesser extent. From the methods outlined above an assessment of the cost involved fo r carrying ou t
th e contract work can be calculated. These costs will have been assessed asing prices
5.2 The validity of an estimate depends upon inclusion of all relevant items. This is ruling at a date of any quotation received or on statistics that have been updated to
particularly important when evaluating new processes resulting from research and current price levels. However, it will be necessary to make an assessment of the forward
escalation throughout the life of th e contract. It will be essential to establish trends
development as over-optimistic estimates are frequently produced without a true using th e typical indices suggested in Tables 4.4 and 4.5 or to utilise th e various contract
realisation of the various ancillary services which are almost certainly required. These
omissions produce th e classic cases of projects whose costs increase dramatically during price adjustment formulae available, again using the appropriate indices as necessary.
development. Equally important is th e need to avoid high estimates, wh ich may arise
from the inclusion of unnecessary refinements, possibly causing a project to be rejected, 5.7 Working Capital
erroneously. This item may be influenced by company policy in its extent of provision. It can be
generally defined as th e funds, in addition to the fixed capital and land investment,
5.3 Some costs relating directly to the purchase and use of th e job site will be which a company must provide a project (excluding start-up expense) to get it started
incurred and must be added to th e engineering and home office costs. Such items and meet obligations as they come due. That is the sum of cash, accounts receivable,
include inter alia, salaries, wages, payroll burden, company corporate overheads, and and inventory, less taxes and accounts payable. Accountants define working capital
as current assets less current liabilities.
expenses for general administration costs, site selection and purchase charges, wayleaves
compensation and legal charges. Credits may also derive from investment grants,
It could typically include: wages, salaries and purchased services for a period of
one to three months, stock in stores, feed tank and b unkers half full of raw materials,
employment premiums, taxation allowances and other Government legislative pro
materials in process, stock of finished product equal to one half of storage capacity
cedures. In the case of overseas contracts, th e price will have to be modified to take
and fuel fo r a period of one to three months.
into account financing, short and long terms credit arrangements, import duties, local
taxes, rules, laws, ways of doing business and the political and social systems. on Working capital
th e nature of th einproduct percentage
terms ofand of manufacture.
its cost of annual sales may
Whenvary widely
working depending
capital,
5.4 The sub-division of cost estimates is a matter for company policy and will be
expressed as a fraction of total annual sales becomes significantly high it plays an
related to the type of plant and the company code of accounts. A typical estimating important part in th e calculation of profitability by most methods.
check list is given in the App endix.
5.8 Commissioning Costs
5.5 Contingency These should be estimated in as much detail as possible an d a deci.sion taken as to
The checklist given in the Appendix is extensive and its systematic application whether they should be charged to capital or revenue, or apportioned between the
should lead to a reliable estimate. However, every estimate must have a margin of two. They consist of fixed cost and variable cost. Fixed costs include operating,
error associated with it and no matter how much detailed work has been carried ou t maintenance and supervisory staff and overhead charges. Variable costs include raw
th e end result is an estimate, not a cost. The magnitude of the error depends on a materials (assuming a low efficiency in the early months of the plant) and services
number of factors and the most significant should be considered quite separately, such as water, steam, compressed air and power. In th e earfy period, materials and
namely: services may be used on trials or attempts to make product without actually achieving
any good make. The net cost of start-up is a sum of fixed and variable costs less the
• Process uncertainty, th e quality and reliability of data available for the estimate. value of any good product made up to the time when the plant is producing
• Extent of mechanical design and material take-offs carried ou t for th e estimate.
• Extent of market cover, the validity of any quotations received and th e esti economically.
In Fig. 5.1 four plant sections are shown, it being assumed that pre-commissioning
mating methods used.
and commissioning will proceed sequentially partly to spread the work load on the
• Location and nature of the site, th e local labour problems and regulations, and commissioning staff: th e typical pattern of project cash flow is also plotted. No time
such problems as unexpected foundation difficulties. scale is shown on this chart as times can vary widely from a few days to several
• Adverse weather during construction, labour shortages and disputes and months, depending on the type of plant, its novelty and th e exp:arience of the
subcontractors' delays. commissioning staff. Equally it is not possible to lay down any standard data for
• Organisational complexity of project (particularly overseas projects). estimating start-up costs. They may vary from 1% to 10% of the capital cost
• Currency exchange rate fluctuations. dependant upon th e size, complexity and novelty of the plant. Wherever possible
26 27
7/28/2019Time table cost estimate.pdf
commissioning costs should be estimated from a breakdown of th e records of costs
for previous plants of similar nature, preferably referring to th e performance of the
A
same or comparable contractors.
B Contractors prefer to carry out the commissioning and start-up of plants utilising
Plant
section s their own experienced personnel and charge on a pe r diem basis as it is extremely
c difficult to quantify th e length of time they are likely to be involved. A typical
weekly rate in 1976 for an experienced commissioning engineer would be in th e
o order of £500* plus expenses at cost. Therefore it is no t difficult to understand why
on a highly complex plant the commissioning costs can be high. *£850 in mid 1979.
It is common practice for the contractor in collaboration with th e process licensor
to provide training facilities for th e Purchaser's operating and maintenance personnel
Fixed plus especially if the Purchaser is inexperienced in the use of highly technological
processing plants. Limited numbers of th e Purchaser's key operating and maintenance
Fixed and variable !
plan,ned costs plotted I staff would undergo training at the various works of the process licensors. This
against value of would include process familiarisation comprising classroom instruction training with
good product made th e aid of a process simulator and various plant visits and specific on-site training in
operations procedures.
5.9 Changes of Scope and Cost Control

iAddi!ional pr In the development of any process it should always be th e aim to establish definitive
Imaintenance personnel basic data before starting design of th e process plant. This aim is not always achieved
of good product in practice so that it is wise to make a contingency allowance to cover for changes
in scope during the project life. Major changes in the basic data will usually involve
S t a rt of
I
' major rethinking of th e whole plant. This should be avoided as this can never be
p r e - c o m m i s s i o n i n g ~ I I handled by th e normal contingency allowance in an estimate, and would rather call
for a complete reappraisal and amended authorisation.
Plant handed over to works having .. ;
~
••.
completed 30 days at 2/3 f l o w s h e e t J , Changes in scope fall into tw o basic categories - additions or deletions to th e
, ,I
I ,
I project, and variations in the project consequent on design developme nt. Changes in
programme follow upon delay in delivery schedules of materials related to th e late
I Br e a k even point '
development or finalisation of design. Both the purchaser's and plant builder's
I i I Plant at steady I project teams should endeavour to restrict variations and changes of scope to a
Mechanical -. ;
I I lowsheet r a ~ " minimum but inevitably they will arise and usually result in an increase in costs.
I The Project Manager should be responsible for the continuing surveillance and
completion date
, I cost control to keep these changes of scope to an absolute minimum. It cannot be
date ---J I
nI I
Production emphasised strongly enough, and it must be continually borne in mind, that cost
' control can only be achieved by management and this means management of the
Hand over date I entire project.
Monthly, or more frequently if circumstances warrant, systematic reporting and
scrutiny of th e progress of the work are necessary to enable effective control to be
carried ou t on any project. The details highlighted in such reviews shoul.d point to the
areas where corrective action is needed. It is th is action, taken promptly, that is the
real contribution to cost control. As soon as an unfavourable trend is discovered
management should take action. If action is delayed time and money will have been
expended, which usually, cannot be recovered later.
It is not unusual to see costs of changes of scope range up to 20% of the total
original capital cost of the plant. This may be justifiable in t h e ( : ~ i r c u m s t a n c e s of a
particular project: bu t generally it will be unsatisfactory if a change in cost of this
extent is no t foreseen in a timely and accurate manner.
Fig. 5.1- Plant commissioning and project cash flow
28 29
whose failure would cause the shut-down of a major plant, bu t these same standards
6. SELECTION OF COMPONENTS AND MATERIALS
should not automatically be carried forward into other places, where similar com
6.1 Economi c design is achieved more readily if th e design engineer and th e ponents are used yet the situation is much less critical.
estimating engineer collaborate from an early stage in th e process of evaluation. This
will assist in th e selection, wherever possible, of manufacturer standard component 6.8 Choice o f Material o f Construction
sizes or will show th e cost penalty for th e use of non-standard components. In process design and subsequent planning it should be general practice to specify th e
Expensive fabricating features or costly materials may be avoided. materials most suited to th e service conditions, although a cheaper material might be
employed if allowances were made in design, wall thickness, replacement costs etc.
6.2 Manufacturers of some items of equipment adopt standard sizes in order to An example of this is an electrically heated pipe line carrying molten lead at 773K
simplify their production lines and stockkeeping procedures. Frequently, they will (500°C). On creep considerati on a low alloy steel (Cr Mo V) might be selected or,
better still, an 18/8 austenitic steel. Regular and thorough inspection would be
also supply
cost. non-standard
An enquiry items to special
for a non-standard order which
component may bewill clearly
met carry additional
with advice to adopt needed to ensure that there was no danger to plant personnel duri ng th e lifetime of
th e nearest standard size, but this will not always be th e case. The onus must rest th e pipeline. The Flixborough and Seveso disasters serve to underline th e paramount
with the purchaser to confirm whether or not the size requested is standard. importance of safety in process plant design considerations.
Frequently th e next larger standard component will be cheaper than th e specially The relative costs of th e pipeline including fittings in carbon steel, low alloy steel
made item. and 18/8 may be 1 : 3 : 6. An economic and safe solution therefore, might be to use
carbon steel, with greater wall thickness to reduce stress, and to replace it completely
6.3 Performance margins should also be considered when taki ng standard sizes. every one or two years.
The designer may, quite arbitrarily specify a 10% margin on t h r o u g h p u t ~ The
suppliers, having one component 2% below specification may offer one 10% 6.9 Ammonia P l a n t - Case Study
above. If, in fact, an 8% margin would have sufficed, then a lower cost item could An examination of costs may lead to conclusions which suggest ways of improving
have been offered. process economics (see also Chapter 8). The development of the ammonia synthesis
process provides an interesting case study.
6.4 Another, sometimes costly example, may be found in tube wall thickness. In 1963 a radical improvement to th e process economics was made possible by th e
Some manufacturers may supply certain sizes and materials with wall thickness development of reUable high pressure centrifugal compressors. This in turn led to a
much better use of process waste heat to generate steam for driving these compressors.
specified in inches
stress designer or millimetres,
usually whilst others
arrives at a thickness will prefer
in inches standard gauges. The
and may round up to the next Consequently, expensive electric motor driven reciprocating compressors, generally
standard gauge. The supplier, using inches, may offer his next standard size. Thus, provided with installed spares to cope with th e known operational problems of these
double rounding up may have occurred where none is required. Metrication may units, gave way to single centrifugal machines with no installed spares. Since centri
eliminate this problem. fugal compressors work better with large throughputs this also led to a rapid increase
in plant size. Before 1963 most plants were in th e capacity range 30 0 - 40 0 tid; a
6.5 Sometimes a non-standard item is justified, particularly when this is larger few were being supplted up to 600 tid using reciprocating compressors. It was at
than the maximum standard size and where th e alternative would be duplication. 600 ti d output that the first ammonia plants with centrifugal compressors were
Each case should be examined for minimum overall cost. supplied. However, within two or three years plants of 1000 tid capacity were on
order and by 1970 th e world's largest plant of 1550 tid had been ordered.
2
6.6 Many engineering components are the subject of national and international The first centrifugal compressors were limited to 15 MNm- (2200 psig) bu t
specifications (for example, British Standard Specification). I n some cases more even at this low pressure it was possible to design a very successful ammonia loop
than one classification may be available, as in th e case of the precision of which is still being supplied today in spite of higher pressure compressors being
instruments. Wherever practicable, items confor ming to these specifications available. Other drive systems like gas turbines are considered for various ammonia
should be used and the appropriate classification should be assessed. plant applications but the following Tables 6.1 and 6.2 will show why so few have
been chosen.
6.7 Some industries adopt higher standards than are usual, or may insist upon By careful application of the best driver and compressor system, and by increasing
their own standards. Usually this entails extra cost in order to eliminate a particular the size and efficiency of the plant there has been a considerable improvement
risk. Each case shoul d be examined critically. A company may have developed in th e economics of ammonia production as can be seen from th e data set ou t in
special practices for flame-proofing electrical gear at a time when their sole product Table 6.3. In this Table the feedstock and utility figures are expressed as a unit
involved a particular fire hazard. It would be unreasonable to carry similar specifi consumption per tonne of ammonia p r o d u c e d . }
cations into a new separate factory manufacturing a different product where no such
hazard existed. Similarly, exceptional standards may be specified for a component
30 31
TA B LE 6.1 OPERATING COSTS OF VARIOUS DRIVERS 7. REVIEW OF APPROXI MATE COMPONENT COSTS
$/kW year
kJ/kWh cal/kWh 7.1 Introduction
1963 1976
In this Chapter examples are given of the costs of various types of plant and equip
Electric Motor 50.5 241.5 ment, and constructional work wh ich often arise in the construction of process
Gas Engine 10.61 2534 16.1 146.0 plants. These cost data are included to give an indication of the orders of magnitude
Gas Turbine (open) 16.28 3886 24.7 222.0 and serve to indicate a way of building up a cost data file. If used for th e preparation
Gas Turbine (heat of study estimates (and this cost information is unsuitable for th e preparation of
recovery) 10.61 2534 16.1 146.0 more detailed estimates) this data should be updated by cost indices as discussed
Back Pressure Steam in Section 4.7.
Turbine 4.25 1014 6.45 57.6 in is
Condensing Steam cost information
Themetal
Basic provided
costs (7.2), Vessel, this plant
tank and item grouped
chapter under
costs (7.3), three headings:
Materials supply
Turbine 15.57 3717 23.6 212.0 and construction costs (7.4). These cover the items listed below and constitute a
TA B LE 6.2 APP ROXI MAT E FIRS T COST OF COMPRESSORS AND DRIVERS
Installed 1963 1976

kW $/kW $/kW
COST DATA FILE
Centrifugal Compressors 7457 40.3 159.0
Steam Turbine (including condensers) 7457 27.0 99.0
BtMic constructional materials
Gas Turbines 2983 80.6 196.0
Vessels and tanks
Motor Driven Reciprocating
Jacketed reactors
Compressors 1491 94.0 246.0
Rubber lining
Refractory lining
TA B LE 6.3 CHANGES IN AMMONIA PLANT OPERATING AND CA P ITA L
COSTS 1965 to 1976 Tubular heat
Standard exchangers
compressors
Package boilers
Year of Order 1965 1965 1970 1976 Ribbon blenders
Capacity (t/d) 30 0 1000 1000 1000 Turbine agitators
Natural Gas (GJ/t N H3 ) 34.5 37.7 35.2 34.8 Centrifugal pumps
Electricity (MJ/t NH 3) 2650 20 90 108 Civil and building work
Cooling Water (t/t NH 3 ) 221 330 300 280 Structural steelwork
Erected Cost USA ($M) 6 13 18 56 Site built storage tanks and spheres
From 600 to 1500 ti d the conventional 0.66 power factor rule gives a reasonably Plant item installation
accurate idea of the variation of cost with size. Pipe work
Electrical cabling
Insulation (pipework and vessels)
Surface coatings (structural steel-
It is immediately obvious that most of the advance in efficiency was made with work, pipework and plant
the introduction of centrifugal machinery. This also led to a reduction in th e plant items)
cost per tonne of product. However, present day efficiency gains are almost always
obtained by spending more money. Consequently, ammonia plants have moved from
the innovative era of the mid-60's to a development phase in the early 70's. As th e
theoretical minimum energy requirement of the modern catalytic system is closely
approached by modern plants, it is obvious that the next major step forward will
require another innovative step of similar magnitude to that of the mid-60's.
32
33
7/28/20197.2 Costs of Basic Metals cost estimate.pdf
7.3 Costs of Vessels, Tanks and Plant Items
As a guide to trends in fabrication costs it is often useful to examine th e change in
th e cost of basic metals over th e period concerned. Table 7.1 sets ou t a selection 7.3.1 Estimation of Cost o f Vessels
of such data. A preliminary estimate of the cost of a vessel is frequently made on th e basis of cost
per unit weight, this preferably being obtained from records of vessels of similar size
TABLE 7.1 BASIC METAL COSTS and complexity.
Whenever possible, for all subsequent stages of estimate preparation (see Chapter 3)
April 1976 July 1979 competitive quotations for vessels should be sought because of the many factors
Approxima te Cost Factor Approximate Cost Factor which can significantly affect th e item cost. Important factors affecting cost will be:
Prices ex Mill Relative to Prices ex Mill Relative to
METAL £ per tonne Carbon Steel £ per tonne • The availability of dished ends to suit th e vessel diameter.
Carbon Steel
• Whether the tangent length corresponds to a standard plate width or
Carbon s.teel whether intermediate seams are needed.
Rolled Plates
• The number of manholes and other connections.
BSS 1 501-1 51 /1 54 140 1.0 200 1.0 • Worki ng pressure.
Fully killed carbon steel
(low temperature) • Welding quality requirements.
Series LT50 • Special tolerances and surface finish.
151 1.08 220 1.1
Series LT1 00 • The extent of inspection and test requirements.
168 1.2 240 1.2
Low Alloy Steels • The length of fabricators order books.
Series Cr-Mo 280 2.0 400 2.0 For vessels having a nominal number of inlets and a single manhole, approximate
9% nickel costs, inclusive of delivery, are shown in Table 7.2. In making preliminary assessments
(low temperature) 560 4.0 80 0 4.0 of vessel costs, th e weight of the vessel skirt and simple internals may be added to
Austenitic steels th e basic vessel weight and th e resultant cost derived from the total weight. This
304 S15 835 5.96 1345 6.72 approach would not be appropriate for complex distillation trays or extensive internal
321 S12 95 0 6.78 1475 7.37 pipe coils.
316 S16 1138 8.13 1870 9.35
Copper 802 5.72 900 4.5 TABLE 7.2 APPROXIMATE COST OF VESSELS, INCLUDING DELIVE RY
Aluminium 1136 8.11 730 3.65
Monel 40 0 3470 24.78 5500 27.5 Non Pressure Vessels Pressure Vessels
Titanium 3695 26.39 10000 50.00 Nominal
to BSS 1500 Pt. 1
Material Capacity
(m 3 )
Weight (t) Cost (£) Weight (t) Cost £
Notes: 1.0 All molybdenum bearing steels are subject to surcharge of between
£200 and £400 per tonne at Ju Iy 1979 Carbon Steel 0.25 0.26 312 0.38 500
2.0 The price of titanium is based on small quantities, but prices are 1.00 0.65 780 0.90 1300
subject to wide fluctation in th e range £9000 to £12500 5.00 1.86 1860 2.95 2976
10.00 2.76 2208 5.03 3312
Stai nl ess Steel 0.25 0.22 48 4 0.38 1748
(304L) 1.00 0.65 1430 1.00 4600
5.00 1.55 3100 3.03 11514
10.00 2.54 4826 5.10 18870

Monel ADD £2500 per tonne of vessel weight to Stainless Steel cost.
Aluminium ADD £200 per tonne of vessel weight to Stainless Steel cost.
Costs for vessels of other capacities may be obtained by interpolation.
April 1976
34
35
7/28/2019 TABLE 7.3 DETAILED COST ANALYSIS FOR A RANGE OF JACKETED 7.3.2
cost estimate.pdf Storage Tank Costs
AGITATED STAINLESS STEEL (316 S 16) LOW PRESSURE DUTY VESSELS These items may be estimated by weight as for vessels, but it is usually more convenient
3 to estimate on th e basis of storage volume and to record data on a volume cost basis.
Nominal Capacity m 0.250 0.500 0.750 1.000 1.500 2.000
3
See also Section 7.4 for data on site constructed tank costs.
Brim Full Capacity m 0.310 0.565 0.860 1.240 1.665 2.480
Overall Dimensions - Diameter 7.3.3 Jacketed Reactors
mm 80 0 990 1140 1220 1300 1370
- Depth mm 760 90 0
In Fig. 7.1 an indi catio n is given of the increase of cost with size for three 'typical'
1030 1270 1560 1900
Diameter of Bottom Outlet mm 75
material specifications for this class of equipment. It should be noted that the
50 75 75 75 100
Power of Agitator Drive (single speecH MJ 4 4
detailed design of apparently similar units can vary a great deal and substantially
5 5.5 8 8
Power of Contra-Rotating Agitator MJ 4 affect unit cost. An indication of how cost varies with size and improved equipment
8 8 13.5 13.5 20
Power of Emu Isifier MJ 13.5 27 27 40
specification for a range of small stainless steel, low pressure duty vessels is shown in
40 65
Price of Basic Vessel £ 3195 3974 4768 5854 6981 7289 Table 7.3.
316 SS inner, CS Jacket, fixed speed anchor type agitator with PTFE scrapers, dished and clamped
SS cover, all SS dull polished; internal spiral in jacket space; fo r full vacuum or 170 kNm -2 with 40 000
275 kNm -2 in jacket). 35 000
30 000
OPTIONAL EXTRAS
All costs in Pounds Sterling
25 000
Emulsifier 1366 1475 1475 1617 1617 1750
(SS head with mechanical seal, 3000· rev/min - 20 000
unit bolted to bottom or side!.
Contra-Rotating Agitator 1395 2190 2468 3038 3122 4039
tt..I
(Anchor with PTFE scrapers, three contra-rotating : 15 000

3 If)
paddles, 1m and above with bottom steady 0
bearing) u
Variable Speed Drive 388 603 603 833 833 1042

(For either rotational or contra-rotating 10 000
gear boxes, single
giving infinitely variable speeds in
Carbon steel, glass lined
range 5 - 25 rev/min.) 8000
304 SS Shell with CS jacket
Stainless Steel Jacket 336 428 648 776 860 964 Al l carbon steel I
6000
(321, dull polished finish & legs or brackets)
5000
Insulation 1 2 3 5 7 10
755 877 928 1204 1308 1411 100
(38mm of fibreglass with 321 SS sheath, dull
Capacity (m 3)
polished)
I nstrument Panel 320 320 320 320 320 320 Fig. 7.1 - Approximate cost of acketed agitated reactors (April 1976)
(Two starters with ammeters and wired to motors. (Moderate pressure, 1 MNm- 2 ; including motor)
Pressure and temperature gauges. 380/440/3/50
only)
7.3.4 Rubber Lining of Tanks and Vessels
Tw o Year's Spares 165 191 214 290 387 550 There are a number of different specifications for lining material and standard of
Emulsifier Pad
79 workmanship, an d the work may be carried ou t either in a rubber liner's workshop,
105 105 105 105 105 if the vessel or equipment is transportable, or at site. Naturally, these factors affect
Blank Flange 52 79 79 79 79 79 th e final cost. The approximate cost for lining a simple vessel is £22 pe r square metre
Packing and F.O.B. London 182 226 258 308 366 446
(April 1976).
March 1976
36 37
7.3.5 Refractory Linings 7.3.7 Compressors
The costs of these linings can vary very widely depending on the duty, material The variation of cost with output for a range of compressors (excluding motors) is
specification, accessibility, complexity and size of th e contract to be let. As a first provided in Fig 7.3.
approximation of cost £120 per tonne oflining material should be allowed (July
1976).
7.3.6 Tubular Heat Exchangers

Figure 7.2 shows the variation of cost with change in surface area for three material 2500
specifications. An indication of overall cost increase with pressure is also provided.
1000
100 o o o ~ II LJ ,0 B H
80000 (Y); 500
1 Al l carbon steel, 1 MN rating m I c
60000 2 Tubes in stainless steel Ql
50000 3 5hellside - C5 clad with 55
250
Tubeside - C5 lined with epoxy resin Q
-0
40000
Tubes and tubeplates, 55 L- 150
0 J
30000 Ql
100
LL I A E M p
20000 50
25
10, I I II II II I
0 0 0 o 0 o o o o ~ 1.0 N (T) 1.0 0 1.0
L() 0 1.0 o 0 000, N N
V; o1.0 .,:...
~ .., - , .., (V)
1 8000 0 0 0 0 1 ~
I '" N C-COO)
o kN m- 2 MN m':"' 2
- - - - - ~
u P r e ~ ~ ~ r e
6000 Fig 7.3 - Prices fo r standard compressors (March 1976)

50001 ~ ~ ~ Pressure Cost factors £/kW £/m 3 h- 1
MN m 2 fo r pressure A* Non rolling drum rotary 28 1.5
1 1· 0 B* Blower 35 0.9
2 1'2 C* Sliding vane rotary 28.5 2.2
4 1· 5
E Single stage vertical 43.5 5.1
6 2'0
8 2·3 H Two stage double acting vee 52.8 4.8
2000
12 ·5 -i J Two stage vertical 37.5 7.7
16 3' 5 L Three stage hor izontal 40 8. 8
32 3·8 M Three stage horizontal 54 12
N Three stage vertical 188 71
I !I II II
P Four stage vertical 231 81
1000'
10 20 30 40
__
60 80 lOU
I
I
I
200
I
300
I
400
I 600 8001000 * Can be used as exhausters
Surface area (m 2 )
Fig. 7.2 - Approximate cost of tubular heat exchangers (March 1976)

(Floating head; T ubes 5 m)
38 39
7.3.8 Package Boilers (i.e. shop built) 7.3.9 Ribbon Blenders
Figure 7. 4 shows th e typical variation of unit cost with steam generation capacity The approximate cost of these widely used solids mixing devices can be obtained
for two ranges of generating pressure. from Fig 7.5.
>
.....
10000
'0
5 8000
ro
u
c:
o 6000
.;:;
ro 5000
o4
0-
ro 4000
"f -
4·5 to 6·0 MN m- 2
o 3000
....
i: 3 ,. 5 to 4·5 MN m- 2
-
C1
t; 2000
Q) 0
0- u
<+.I
- 2' I
20 25 30 35 40 45 50 55 60
u
Maximum evaporation rate (kg h -1 x 10 3 )
1 0 0 0 ~ 7' Al l carbon steel construction
Fig 7.4 - Basic prices ofpacka ge boilers (March 1976) 800 2 55 contact surf aces
(Saturated steam conditions) Basic boiler unit complete with burners, oil heating and
pumping set, economiser, FD fan, and motor, integral valves, fittings and piping, 12 - 600
15 m stack, safety interlocks, feed water controls and indicating instruments. 5 0 0 L ' - - - - - - ~ - - ~ - - ~ ~ ~ ~ ~ ~ - - - - ~ ~ ~
Terminal points: feed regulator inlet, oil inlet to pump and heating set, main steam o·z 0-3 0·5 1 2 3
stop valve, blow down and drain valves. Delivery cost excluded. 3
Blender capacity (m )
Fig 7.5 - Approximate cost of ribbon blenders (July 1976)

Costs include geared mo to r drive, outlet valve, mot.:>r push-button starter, lid fittr.d
with motor cut-out switches, all mounted on a steelwork frame allowing space for
bin/bag discharge beneath and access steps and platform on one side of unit.
Excluded: dust or fume extraction; charging devices.
40
41
7.3.10 Turbine Agitators 7.3.11 Centrifugal Pumps
From Fig 7.6 the cost of units in carbon steel and stainless steel, suitable for open Figure 7.7 shows the approximate cost for a range of process pumps. A TEFC,
or closed vessels, may be estimated. 2900 rpm motor with class B insulation is included in the cost.
10000,"""" =l
2 0 0 1 r - - - - - - - ~ - - _ . - - _ r - - r - ~ ~ " . _ - - - - - - ~ - - ~
8000
6000 _
5000
1 / // 7 - 100
4000 I-
QI
80
0
3000 0.
0. 60
E 50
::J
2000 0.
.....
0
40
:y 30
E I-
~
Q)
1000 0.
Q)
'-Ii 20
:::J
cr
800
......
I-
1fI
0 0
600 u
500
10
400
10 20 30 40 50 60 80 100 200 300
Carbon steel; fo r open top vessels Pump power requirement ( k ~ ) at maximum efficiency point
300 2 Stainless steel; fo r open top vessels
3 Carbon steel plus mechanical seal Fig 7. 7 - Approximate costs o f single stage en d suction centrifugal pumps, excluding
fo r use in a pressure vessel drive (October 1976)
200
4 As curve three but stainless steel (Specification: Generally to API 610 fo r continuous service at fluid temperatures up
to 698K (425° C) steel casing, cast iron overhung impeller; coupling; soft packed
\ gland shaft seal; baseplate; two pole drivers)
Multiplying Factors:
100' , , CS casing/CI impeller 1.0 All 13Cr 1.7
o .---
10uu ----
2000 3000 4000 5000 6000 7000 8000 All steel 1.15 All 316S 16 2.0
Cost (£ ) CS and 13Cr internals
Silicon iron
1.2 Monel 3.3
1.25 Nickel 4.5
Fig 7.6 - Approximate cost of turbine agitators including drive an d gearbox (April Rubber I ned steel 1.4 Hastelloy 6.0
1976)
Note: The break point in the curves arises from a change in the construction of the
gearbox and drive.
42 43
7.4.3 Structural Steelwork 500
7/28/2019
The schedule of unit costs for structural steelwork is an average cost for projects cost estimate.pdf
400
which require approximately 1000tonnes of steel for main frame, subsidiary steel
work and vessel and plant item supports. 300
TABLE 7.5 COST OF STRUCTURAL STEELWORK

Including supply, fabrication, erection and surface preparation. 0 200
0
Excluding painting on site.
;:?
x
ITEM COST (£ft)
Main framesteel
Subsidiary 425
513 0 100
u
Plant item and vessel supports 550 80
Staircases and handrailing Lump sum
60
Gantries 425
50
Supports for pipework (major) 650
Testing lifting beams 5 40
Holorib decking (per square metre) 8.5
30
1 2 3 4 5 6 7 8 10 20 30 40 50 60 80
A pri l 1976
Capacity (m 3 x 100)
7.4.4 Site Built Storage Tanks and Spheres
Some typical costs fo r larger sizes of floating roof storage tanks are shown on Fig 7.8 Fig. 7.9 - Cost of spheres suita ble fo r LPG storage (June 1976)
and the cost of spheres suitable for products such as LPG and butane are se t ou t in
The cost of tank construction is considerably influenced by the size of the contract:
costs allow for the basic tank or sphere construction only. Th e complete
Fig 7.9. Th ecost one or two tanks constructed alone are likely to be more expensive than th e figures
installation may be obtained by mUltiplying by a factor varying between 1.8
and 2.2 depending on the extent and complexity of th e work. obtained from the charts which relate to major tank farm contracts.
7.4.5 Plant Item Installation
Th e costs for installation of plant items may be broken down into two distinct ele
ments: Moving and lifting items into position, Installation and fitting work. Th e
2 0 , ~ - - - - - - ~ - - - . - - - . - . - - . - , , - . . - - - - - - - - . - - - - . - - ' - - ' - - r - r T i n first element will be greatly dependent on the type of cranage required: the second
d is labour intensive.
A combined cost of these two elements is approximately 10% of the total cost
II
d ..
u
of supply of process plant items when a substantial number are involved and when
,II c
1 d all plant of metal construction is costed as if constructed in carbon steel. An
;::: 10 indication of the range of installation costs for individual items of equipment may
o
E 8 be found in Table 7 ~ 6 .
1:1
"1",,
'- 7.4.6 Pipe work
I:
6 Th e rates given in Table 7.7 cover th e supply, fabrication, erection and testing to
ill
1 i ....
lfl
5'
1 2
I I
3
I
r-
I I I I
e n ' ) "
I
1: " en
I I I I
on 1n
achieve a complete installation. Th e costs include for the supply and erection of all
piping, flanges and fittings, supports, hangers and brackets, and for the erection of
o
I U valves, steam traps, strainers, orifice plates et c which would be made "free issue"
to th e piping contractor. The cost data were obtained by analysis of a number of
I I
Fig 7.8 - Cost of floating roof storage tanks (June 1976) contracts where total quantities of pipe ranged between 2000 Q1 and 20,000 m.
I
iii
46 47
I
l 1
,
TABLE 7. 6 PLANT ITEM INSTALLATION COSTS 7.4.7 Electric Cabling
Electric cable installation contracts are of two main types, "fix only" or "supply and
WEIGHT COST fix". In th e first type the plant owner (or main contractor) purchases the cable and
ITEM
(tonnes) (£) makes it "free issue" to th e electrical contractor to install. In the second case the
electrical contractor provides the necessary cable as well as all accessories and carries
Pump complete with motor, baseplate coupling and out the installation and testing.
guard 0.35 350
Th e data presented in Tables 7.8 and 7.9 are based on the following allowances:
CS Tank 29 m2 capacity complete with agitator,
drive unit etc. 14.75 1850 • Cable runs varying in length between 25 m and 80 m, and an average run
3 80 0 of about 50 m;
CS Vessel 35 m capacity 7.00
• The cable being continuously supported over its entire length by cable tray,
CS Vessel 2.1 m 3 capacity 2.5 500 I 1-
Weigh Scale 0.60 200 • brackets

Cable andsupplie
being fabricated steelwork;
d in lengths and m minimum.
of 150
Discharge Chute 1.5 160
"Fix only" Rates (see Table 7.8) in addition to th e points above these rates
Autoclave 18 m 3 capacity complete with agitator allow for:
drive unit etc. 29.10 3150
• Running ou t cable;
3 1.63 290
PVC Water Tank 18.4 m capacity • Terminating cable at each end;
CS Scrubbing Tower complete with ceramic saddles 9.50 1680 • Cable tray, clips and strapping;
• Fabricating and erecting support steelwork and brackets for cable tray;
• Proportion of "Preliminaries"; and
April 1976
• An element of "Daywork".
Terminating includes such items as fixing cable ferrules, cable markers, proprietary
TABLE 7.7 PIPEWORK SUPPL V, FABRICATION, ERECTION AND terminals, PVC shrouds for external protection etc.
TESTING COSTS "Supply and ~ i x " Rates (see Table 7.9) allow for all the items mentioned above
Nominal size Material and the supply o'f th e cable.
2
of pipe Plastic For cables up to 16 mm cable manufacturers purchase, in bulk, sufficient copper
mm CS ANSI 150 SS ANSI 150 Copper CINP16 (UPVC/GFR) to enable them to set prices for three month periods and only exceptional circumstances
will affect prices. Larger size cable prices are determined by the daily price of copper
£/m £/m £/m £/m £/m
per tonne as fixed on the London Metal Exchange and as a result the price of such
15 34.95 43.40 26.00 cables continually fluctuates. It is for this reason that Tables 7.8 and 7.9 are presented
20 35.30 43.80 27.40 in two sections.
2
25 32.50 42.30 28.80 35.75 In th e case of smaller size cables (up to 16 mm ) quantity does not greatly affect
40 32.40 42.15 30.20 35.64 the unit price: for the larger cable sizes the order quantity has an important effect
50 40.70 50.90 32.00 44.77 on the unit price and for th e largest cables (and those of special construction) these
80 52.60 75.50 37.68 57.85 may only be available "t o 0 rder" and special quotation.
100 61.60 94.00 41.40 67.76
7.4.8 Surface Coatings
15 0 77.00 137.00 49.15 84.70
The aggressiveness of a plant environment and the nature of the surface to be pro-
200 92.20 56.90 101.42
tected will determine the surface protection process required. Unless exceptionally
250 104.10 114.51
aggressive cond itions abound on a particular project it is often found that surface
300 143.20
coating costs amount to about 1% of the capital cost of the project. A guide to unit
350 166.50 costs fo r some painting specifications when applied to various surfaces is provided in
ADD for: CS ANSI 3005%; SS ANSI 3005%; CS ANSI 600 10%; Table 7.10.
Rubber lined 10%; Polypropylene lined 35%. 7.4.9 Insulation
The wall thickness fo r carbon steel pipe is: The rates for insulation of pipework are set ou t in Table 7.11; vessel insulation costs
schedule 80 up to 40mm nominal size; schedule 40 50 to 150mm nominal size; are dealt with in Table 7.12. In both cases the rates quoted al16w for all costs incurred
in achieving a complete installation for the specification stated.
schedule 30 200mm nominal size and above.
Wall thickness for stainless steel and copper is 3.25mm in all cases.
April 1976
48 49
7/28/2019 TABLE 7.8 "F I X ONLY" RATES FOR ELECTRIC CABLE
cost estimate.pdf
Cable Description: 600/1000 Volt grade multicore cable, plain annealed copper conductors, insulated with general purpose
PV C type 1 to BSS 6746 : 1969, coloured fo r identification purposes; multicores laid-up together with PVC fillers and
bedded with extruded PVC; single wire armoured and sheathed overall with black extruded PVC, type 1. To comply with
BSS 6346 : 1969 fo r armoured PV C insulated cables. (Cables of 16 mm 2 to 300 mm 2 conductors to be shaped.)
Nominal Area mm 2 Nominal Area mm 2

No. of Cores 1.5 2.5 4 6 10 16 25 35 50 70 95 120 150 185 240 300
Cost per Metre (£) (Cost per Metre (£)
2 1.00 1.06 1.15 1.27 1.29 1.38 1.21 1.38 1.53 1.79 1.96 2.13 2.28 2.39 2.74 3.11
3 1.02 1.13 1.27 1.32 1.38 1.44 1.38 1.53 1.61 1.87 2.02 2.25 2.36 2.54 2.94 3.26
4 1.07 1.19 1.32 1.38 1.44 1.53 1.53 1.64 1.78 1.99 2.13 2.39 2.45 2.68 3.17 3.46
April 1976
(J'1 TABLE 7.9 "SUPPLY AN D F I X " RATES FOR ELECTRIC CABLE
o
Cable Description: as fo r Table 7.8

2
Nominal Area mm Nomi nal Area mm 2
No. of Cores 1.5 2.5 4 6 10 16 25 35 50 70 95 120 150 185 240 300
Cost per Metre (£) Cost per Metre (£)
2 1.40 1.56 1.98 2.28 2.93 3.37 4.55 5.22
6.27 7.84 9.67 11.20 13.06 15.63 19.6423.43
3 1.53 1.70 2.23 2.77 3.51 4.30 5.34 6.40 7.91 10.01 12.54 14.80 17.6921.0326.6831.84
4 1.65 1.86 2.65 3.12 4.09 5.37 6.24 7.83 9.85 12.21 15.66 18.77 22.1626.6533.8040.80
Supply cost of cable Supply cost of cable on which above rates are based
on which above rates are based (copper price ·£802 per tonne)
Cable cost (£ /1 OOOm) Cable cost (£/1000m)
2 233 291 400 491 737 899 1314 1548 1907 2504 3172 3736 4379 5348 7467 9079
April 1976
7/28/2019 TABLE 7.11 COST OF PIPEWORK
cost estimate.pdf INSULATION
Description and Thickness of Insulation Nominal Size o f Pipe (mm)

mm I 15 20 25 40 50 80 100 -150 200 250 300
Cost (£ per metre)
N lflam Rigid Moulded Sections finished

spirally wrapped with PVC tape. 25 15.10 5.40 5.70 5.90 6.20 7.60 8.9010.2011.3312.4813.63
Nilflam rigid moulded sections finished
with Glass Scrim Cloth embedded in
Aluminium mastic and the whole
covered in a further coat of mastic 25 17.46 7.96 8.46 8.79 9.28 11.6013.7515.90 17.70 19.5021.30
Nilf lam rigid moulded sections finished
with BD6 cement 25 I 6.12 6.48 6.84 7.08 7.44 9.12 10.68 12.24 13.62 15.01 16.40
01
I\.)
Asbestos free Magnesia sections
finished with Glass Scrim Cloth/
Aluminium Mastic (as before
described) 38 17.90 8.42 8.90 9.20 9.7111.8613.8816.1017.9519.8021.70
Asbestos Free Magnesia sections
finished with BD6 cement 38 16.56 6.94 7.28 7.49 7.87 9.38 10.81 12.44 13.26 14.61 15.98
Calcium Silicate sections finished
with Glass Scrim Cloth/Aluminium
Mastic (as before described) 38 19.08 9.68 10.23 10.58 11.16 13.63 15.96 18.28 19.60 21.58 23.25
Calcium sections finished with
BD 6 cement 38 17.74 8.20 8 .6 1 8 .8 7 9 .3 2 1 1 .1 5 1 2 .8 9 1 4 .6 2 1 5 .5 2 1 7 .0 9 1 8 .3 5
(continued)
8. PROJECT EVALUATION
TABLE 7.12 COST OF VESSEL INSULATION
7/28/2019 All rates as £/m2 vessel surface cost estimate.pdf
8.1 Introduction
Whilst the main purpose of this booklet has been to describe good practice in capital
Thickness of Insulation 25 mm 37 mm 50 mm
cost estimation, some mention must be made of project evaluation. The chemical
engineer initiating a new project must consider the overall profitability of th e
Radius of Surface Under Over Under Over Under Over
proposal as well as capital cost.
1m 1m 1m 1m 1m 1m
8.2 Review of Existing Knowledge

Nilflam slabs finished in Chemical process technology is advancing rapidly with th e result that a ne w
Glass Scrim Cloth em- project will not normally be th e most economic if it is a replica of an existing plant.
in
bedded Aluminium 12.19 9.40 16.44 12.69 17.38 14.78 Before the start o fa project evaluation, new scientific and technical information
Mastic and the whole should be gleaned from both inside and outside the company and the profitability
covered in a further coat
of major technical innovation assessed: th e availability and cost of resources and
of Mastic
whether size benefits on major items of equipment are possible should also be
considered. After critical analysis and collation, this knowledge should be compiled
Nilflam slabs finished
into a project data manual. Gaps in requisite knowledge should be defined, and
with Aluminium 13.89 11.11 18.75 15.00 25.30 20.24
specific time-related programmes agreed with the Research Department for their
cladding
resolution.
Alongside th e rapid technical changes there may be rapid commercial changes.
Calcium Silicate slabs
A product for which there was little demand a few years ago may be subject to
with Glass Scrim Cloth/ 16.28
11.69 8.91 15.78 12.03 21.30 substantial growth in consumption whilst a long established commodity may be
Mastic (as before
almost unsaleable in a few years time. A critical review and analysis of sales trends
described)
over recent years ma y establish the pattern to be expected in th e futu reo There may
also be knowledge of competitiors published expansion plans which will indicate
Calcium Silicate slabs
the proportion of the market available and total and regional production demands.
finished with BD6 10.19 8.15 13.76 11.00 18.58 14.85
cement
8.3 Study of Past Achievement
April 1976 A feature of investment criteria is that once th e investment is made and the plant
installed, they no longer apply. Once capital is spent, providing th e plant makes a
profit under marginal costs it probably will remain in operation. Despite this it is
important to maintain comprehensive histories of technical and commercial
achievement within the company. These serve as a guide in th e future and may help
to avoid expensive mistakes of installing processes or components which, despite
initial promise have given disappointing performance.
Th e engineer who has profited from reliable records of past achievement (or
suffered from inadequate records) should ensure that the history of his present
project becomes available in th e best form fo r use in the future: this record should
make use of modern data storage, collation, retrieval and analysis techniques when
these are available.
8.4 Size and Complexity of the Plant

8.4.1 Th e technical and commercial study will examine several specific cases of
plant production rates, in relation to the potential demand for the product as
determined by a preliminary market survey. One extreme case ie\ th e small plant
which will suffer proportionately higher depreciation charges ari"d manpower
costs resulting in higher unit production costs. It will, however, have a reasonable
assurance of a high plant loading throughout its life. A much larger plant, on the
55
54
other hand, may need to be run at reduced capacity initially bu t may prove sub
stantially more profitable subsequently. It ma y also permit the company to increase 8.5.1 Raw Materials and Process Yield
7/28/2019
or develop its share of the market readily. Although, because of th e higher capital Preliminary estimates of raw materials cost may be assessed from published prices, but,
cost estimate.pdf
investment, the larger plant carries the greater risk capital, th e smaller plant suffers for firm economic analysis, quotations must be obtained from suppliers. These quo
from limited maximum potential profit. Factors such as market development, tations may be influenced by:
technological innovation and competitors' efforts may modify the commercial • Purity. Is a low quality acceptable, or is normal commerical purity or exceptional
climate in which th e plant will operate. These and other factors will be relevant to standard required?
the decision determining plant size. This decision will consider not only th e profit • Quantity. Discounts may be available fo r larger quantities (but this may be off-
ability of the venture but the availability of resources and th e effort which th e set by higher storage costs).
company is prepared to invest in exploitation and expansion of the market and its • Seasonal Variatio n. A lower price may apply for a uniform delivery rate.
gross potential. • Contract. Long term contracts may attract better prices.
8.4.2 Throughput on a plant may be reduced by operating problems. Th e •• Containers.
Delivery. Delivery distance and method of transport.
planned stoppages which are incorporated in maintainance and operating schedules Special containment may prevent deterioration in transit an d
are relatively easy to assess. Problems arising through product being off-specification affect storage and handl ing costs.
and requiring reprocessing, or failure of a plant item causing shut-<lown of th e • Condition. Choice may be available between mass solid, fine powder, solutions
process are more difficult to quantify. On continuous plants with little inter of various concentrations, compressed gas, refrigerated Iiquified gas, etc.
mediate storage, chain reactions to other plants can be established. Particularly in Frequently,the decision on the purchase of raw materials can necessitate th e modi
th e early stages of plant operation process availability may be reduced to values as fication of the proposed plant offsites. Such a study should consider the reliability of
low as, say, 40%. supply as it affects storage and future trends in availability and price.
8.4.3 The chance of simultaneous success of three systems, for the alternative Often raw material is available from another section of the company at an internal
structu res of series and parallel is: transfer price. The full benefit to the company of utilising th e material must be
allowed in the evaluation rather than simply accepting a current market value. This
series: Rs Rl R2 R3 is particularly important when th e producing plant would otherwise be working under
capacity.
parallel: Rp 1 - ( 1 - R d (1-R2) (1-R3) Th e raw material requirements for a process are determined from a realistic
estimate of plant yield. Th e yield is made up of the theoretical chemical yield after
where each R is the reliability measured as th e successes divided by the trials. allowing for undesirable side reactions, less allowances for plant losses such as arise
Thus, for three plants in series each separately giving 96 successes per 10 0 trials, the through vented materials, spillage, carry-over, reprocessing of material produced off
combined reliability assuming negligible intermediate storage is 0.88 or an avail specification, processing error, etc. If, due to low conversion, a high recycle of raw
ability of 88%. A corresponding figure for th e same systems operating in parallel is material occurs, then what are very small losses pe r pass can become appreciable in
greater than 99%. terms of product actually produced. Studies of existing an d similar processes can
An assessment of th e likely plant availability should be made by reference to usually provide suitable information to determine ne t yield an d th e plant capacity
existing plants operating on identical or similar manufacturing processes. Poor relia may then be scaled accordingly.
bility is often inherent in certain processes which are still economic to operate. 8.5.2 Energy Requirements
Increasingly, reliability data is being recorded fo r use in assessing overall process
ELECTRICITY
availability.
Each Electricity Board publishes its own tariffs and these are shown collectively in
8.5 Operating Costs the annual Electricity Supply Handbook. In some cases, alternative tariffs are
Operating cost under varying operating conditions must be evaluated at th e same available. Generally, industrial tariffs have a two part structure; the maximum
time as the capital cost and the designer must study th e interaction of capital and demand component reflects th e capital cost of generation and distribution equip
operating costs to determine the optimum process. Among the items to be included, ment to meet that demand, whilst the unit charge reflects the cost of producing
detailed in th e following subsections, are: and supplying the electricity. The effect of this tariff is t h a t a lower average unit cost
is achieved by an installation having a high load factor and avoiding excessive peak
• Raw Materials and Process Yield demands. In all areas , tariffs include a premium fo r reactive load and the installation
• Energy Requirements of power factor correction equipment should always be evaluated. Some Area Boards
• Additional Utilities and Raw Materials offer lower industrial unit charges fo r night load.
• Manpower
FUEL
• Maintenance
• General, Overhead and Sales Expenses. The delivered cost of solid fuels is influenced by: Quality of fuel (ash and moisture
content etc. Delivery distance. Method of transport. Quantity. Du ration of contract.
56
57
Similar considerations apply to the cost of fuel oil; in this case quality is related
largely to viscosity. TABLE S.1 TYPICAL ENERGY & UTI LI TY COSTS
7/28/2019Gas is frequently available to industrial users under terms negotiated by the local cost estimate.pdf
Fuel Oil 102p/GJ 148p/GJ
Gas Boards. These terms generally include guaranteed minimum consumption, an
agreed maximum with a premium for exceeding this amount, and also usually a Natural Gas 115p/GJ 190p/GJ
clause to allow interruptions to the supply for several weeks in anyone year. As Electricity 433p/GJ 615p/GJ
Mains Water 3
a result, standby fuel supplies must be provided unless intermittent operation is 11 - 16p/m 14 - 19p/m 3
acceptable.
Fuel quotations fo r a new project will result from negotiations with the supply Mid 1976 Mid 1979
and transport undertakings. Table 8.1 sets ou t some typical energy costs in 1975. S.5.4 Manpower
Energy costs may well be under-estimated by considering only "on-stream Manpower cost assessments will start by making comparisons with the manpower
any is
energy" full production it foreseen that production rates will be less used on existing plants, bu t it is always wise to enquire whether or not improve
than th e at
maximum design, rate.
then If additional fuel requirement resulting from ments can be obtained by the introduction of automatic control, especially as some
this should be taken into account. Some plants also will be started-up frequently older plants may frequently be over-manned relative to that which could be expected
or possibly held on ho t standby and this may lead to additional fuel demands. for future plant. Manpower requirements are frequently dictated by start-up or
Further energy demands will be incurred by off-site heating loads and distribution shut-down requ ire ments rathe r th an co nd iti ons of steady operation.
losses. Attention must be given to th e impact of trade union agreements, particularly if
The engineer should consider the installation of dual fuel supplies enabling an the new project calls for merging of trades, extension of th e activities of any trade
attempt to be made to ensure continuity of supply. or changes in working conditions.
S.5.3 Other Utilities and Miscellaneous Raw Materials Th e estimates of basic manpower cost should take account of holidays, sickness,
Other utilities include steam, inert gases, compressed gas supplies, such as air, incidental overtime, pensions, health contributions, statutory deductions, costs of
hydrogen and oxygen, special quality process water, and chilled water and recruitment, company welfare services etc. Adjustments may also be needed in
refrigerant services. Examples of miscellaneous raw materials are filter bed media, respect of employment premiums or taxes. Non-process personnel must be included
acids and alkalis, catalyst renewal and solvent make-up fo r gas scrubbing. in the total manpower estimate.
Steam generation can be based upon the primary fuels cited above, by com S.5.5 Maintenance
bustion of process wastes and through heat recovery systems. Occasionally, steam In assessment of repairs and maintenance cost, comparison with existing similar plant
may be bought "over the fence" i.e. from an adjacent plant. When it is possible is of very great value. Examples can be found where maintenance levels are as low as
to install an integrated energy scheme whereby medium or high pressure steam is 1%, whilst at the other end of the scale, annual maintenance costs may exceed 25%
generated, passed through a turbo-generator set and the lower pressure steam of the initial capital investment: a value of 5% of capital cost (replacement basis)
used for process and space heating, then maximum efficiency in utilisation of may be considered typical for non-corrosive continuously operated plants making
energy is achieved; such schemes should always be given proper consideration. of the order of 1 0 0 0 0 tonnes per annum of bulk chemicals. In the case of capital
For any scheme using steam careful attention must be given to condensate intensive processes, failure to make proper allowance for repair costs could have a
recovery and the process credited with the savings. serious effect upon the overall economics.
Large amounts of heat can be required for amenity space heating in buildings, Initially, maintenance allowance can be based on fractions of the capital cost.
and preferably these costs should be kept as a separate item in the estimate. If possible, estimates can be more fully developed to make separate allowance for
Cooling water or make-up to an evaporative cooling system can be obtained routine servicing, periodic overhauls and unscheduled breakdown: the cost under
from a river, estuary, th e sea, town main supply, or borehole. The use of town each heading may be further sub-divided between maintenance manpower, materials
main supply for direct cooling service is often prohibited and usually expensive. and external contract work.
The use of air cooled heat exchangers should be considered to reduce or eliminate
water requirements: the noise from these units must be fully considered and may
S.5.6 General, 0 verhead and Sales Exp enses
General expenses are those directly incurred as a result of th e process. They include
restrict their use.
Process water may be obtained from town main supply or by purification of rates and insurance, laboratories (process control and direct research), site charges
such as internal transport and rubbish disposal, and some administration. A reason
raw water supplies; the determining factor may be availability or cost.
able estimate is 3% of capital per annum fo r new projects.
Negotiations with water companies and river boards will normally be necessary
to establish the cost and quantity of water supplies available for a new industrial
Overhead expenses apply for the directorate, long term research, commercial
department, accountancy, canteen, etc, say 4% of capital per anf;1um for new
application.
projects. It may seem unfair to burden a new plant with such expense if this is
installed on a fully serviced site, but the next plant might involve a new site with
services to be supplied. It could never pay for these by itself and other plants of
the company must contribute.
58
59
TABLE 8.2 CASH FLOWS OF DI FFERENT PROJECTS
Selling expenses, such as packaging and containers, product formulation, freight
and distribution, must be incorporated. Th e quoted selling prices must make du e Scheme A Scheme B Scheme C
allowance fo r these costs.
CASH discounted discounted discounted
FLOW at 10% at 10% at 10%
8.6 Assessment of Project Profitability
Year 0 -100.00 -100.00 -100.00 -100.00 -100.000 -100.00
8.6.1 There are many different systems in use fo r measuring th e profitability
of a process. No matter which method is used and regardless o f th e elegance of th e Year 1 + 70.00 + 63.64 + 36.66 + 33.33 + 11.00 + 10.00
mathematics involved any decision is based on a considerable degree of uncertainty Year 2 + 30.00 + 24. 79 + 40.33 + 33.33 + 50.00 + 41.32
and depends fo r its success on th e hard commercial judgement of th e Board. Usually Year 3 + 15.40 + 11.57 + 44.36 + 33.33 + 64.80 48.68
th e chemical engineer will bebound by company accounting procedures and there
Net Present
fore systems best suiting th e experience of those involved in decision making should Value 0.0 0. 0 0. 0
be used.
8.6.2 Time Value of Money If it is assumed that all cash flows are inflating at th e same rate, th e amo u n t at
An appreciation of the variation with time of th e purchasing power of money is the present basis, C, would increase to C(1+f)n which when discounted at th e
important: also money can be reinvested to increase in amount. Thus, th e time at higher rate gives th e previous factor value of 1/( 1+r)n. This means that it is approxi
whi-ch a cash flow arises should always be taken into account in th e financial analysis mately correct to base th e analysis upon prices prevailing at the date of th e analysis
of a project. Early profits earned by a plant have greater value than a similar amount w ith o u t allowing for inflation. Alternatively, th e inflated values can be used in th e
earned later in a plant's life. analysis and a higher rate of return sought. This does allow fo r inflation no t affecting
If it is possible to invest a su m of money at 10% p.a. interest then £1 00 today all items at th e same rate du e to effects of supply and demand. The chemical engineer
will return £ 1 1 0 i n one year's time. Alternatively, £100 earned in one year's time is is bound by th e practice in his company as to which method is used. For post-mortem
worth £100/1.1 at the present time at 10% p.a. interest rate. A generalised expression purposes the actual earnings must be corrected for inflation.
fo r the worth of £1 earned in n years time at th e present time is:
8.6.4 Taxation
Taxes and capital allowances must be allowed for in economic evaluation. Legislation
changes from year to year and in th e Un ited Kingdom information is readily obtained
(1 + r)n
from th e appropriate Government Department.
Th e overall company tax position determines the taxation on the project. I f th e
where r equals the annual percentage rate of interest divided by 100. company is making a loss it will no t pay tax; if has no t been paid then no taxation
Th e above factor can be used to convert all th e futu re ea rni ngs of the plant to rebate will be obtained. However, assuming th e company is profitable, taxation will
present value. Then the su m of all these discounted annual returns is used to estimate follow a pattern similar to th e following:
th e gross revenue return or ne t present value (NPV) o f th e process. If th e value of r
• Corporation Ta x at around 45/55% will be paid on profits, normally 1 or 2
is selected such that th e NPV of future earnings is zero then the rate of return is
years after the profit has been made.
significant and is termed th e discounted cash flow (DCF) rate of return. This may be
• An initial allowance of 100% will probably be obtained which allows th e asset
used to assist companies to assess th e financial merit of various projects. However, by
to be depreciated for tax purposes in th e first year.
itself DCF is insufficient as it is also necessary to study the pattern of cash flows. Th e
• Various o th er grants may also be available according to th e location of th e
three projects shown in Table 8.2 all give th e same DCF rate of return bu t have vastly
plant and current Government policy.
different cash flow patterns examined over a three year period. Only by incorporating
th e cash flow of the project with th e projected overall Company cash flow pattern can
8.7 Sensitivity of Process Economics to Various Parameters
a decision be made on the project.
8.7.1 Th e results of a project economic assessment are used by management as a
8.6.3 Inflation as
Future earn ings also vary as a result of inflation. At a constant annual inflation rate, basis on which
a feedback and to formulate
consider policies.
whether The chemical
modification engineer
of capital should
items view
might leadthem
to a
f(expressed as a decimal), a cash flow, no w of C, would need to be C( 1+f) after one worthwhile gain in overall profitability. Design is a cyclic activity and it will be
year in order to maintai n a constant real value. Converselv, a cash flow C occurrinq found useful to carry ou t a sensitivity analysis to examine th e relative effect of
n
n years ahead has a real value in current monetary terms of Cn (1+f)n. If this value is changes in items contributing to cash flow on th e economic viability o f th e project
discounted we have a revised discount factor of : as a whole.
(1+r)n(1+f)n {1+r+ f)n
VI/len thA tp.rm "rf" is small.

61
60
8.7.2 In Table 8.3 the sensitivity of cash flow and DCF rate of return to a selection TABLE 8. 4 EFFECT OF REDUCTION IN CAPITAL COST EXPENDITURE BY
of factors is indicated for a number of projects. Assuming a project is profitable, VARIOUS ACTIONS
7/28/2019the best level of capital investment for a manufacturing chemical company for cost estimate.pdf
different cash flow circumstances may be considered: an example of such an analysis EFFECT OF CHANGE ON PROCESS
is shown in Chapter 9. cu
cu E
E i=
o!-'
en
TABLE 8. 3 SENSITIVITY ANALYSIS OF SOME PROJECTS 0
u i= Cl
C
i-'
c i-'
cu c c
> en
C) 0
PERCENTAGE CHANGE > > .-
i-' cu 0 c '+=i
0
i-'
-
i-'
E C)
ro C) 'in
in parameter in DCF rate of in cash flow over :.a
..Q C en C :J
en
:.a > ....

'E
cu
0 cu
REDUCE CAPITAL co
.... '+=
PARAMETER return project life 'x .- i-' i-'
.-
co
'ro
i-'
.s: '"0 C en
c E
cu cu
C
COST BY THESE «> 0 0
cu co '+=i co
Selling prices ± 10 ±3 to 20 ± 20 to 60 ACTIONS a: u:: U) w >= ::J U U
Sales volume ± 10 ± 2 to 10 ± 10 to 15 Main items at minimum

Raw materi als cost ±1 0 ± 1 to 15 ± 3 to 15 cost P P ? P P
Yield ± 2 ± up to 3 ± 1 to 10 Units of minimum size P ? G G P
Operating costs ±1 0 ± up to 2 ± 1 to 3 Buy units abroad ? ?
Capital Costs ±1 0 ± upto 2 ± upto 3* Purchase of new innovation ? G ? ? G ? ?
Delay to significant output ± 20 ± up to 2 ± up to 1* Reduce installed spares P P P P P P ? G P
Purchase standard items G ? G ? G G G
* Short term values are many magnitudes higher and may exceed all other values
Omit non-essential
in this column.
itemst G ? G ? P P G G G
8.7.3 Generally, making a rapid investment decision is desirable to contain inflation- Less intermediate
ary trends. It also meets the requirement to enter the market earlier than competitors, storage P ? P ? G G P
or to use raw materials otherwise being wasted, or to provide back-up for an earlier Reduce process/
mechanical standards P P P P
investment. But inadequate pre-investment studies may result in underestimating P P P G G ?
costs such as for environmental and site aspects and no t providing suffic ient spare Reduce installation
parts, off-sites and infrastructure. standards ? P P P P
8.7.4 If medium and longer term cash flow are more important then market factors Reduce ancillaries P P P P P ?
tend to dominate. Selling price and sales volume have the greatest effect on cash flow. Reduce instrumentation P P P P P P P ? G P
Clearly capacity of the plant must be correct. Also plant must be reliable and flexible.
Reduce safety standards P P P P G
Reliable, in that goods should be delivered on time and to the required specification;
Less construction
flexible, in that various qualities, output rates and differently packaged goods should .. *
supervIsion P ? P P P
be able to be readily produced. Raw material requirements may be reduced in cost
by producing intermediates and by having plant which can process a range of raw Congest the plant layout ? P ? P P
materials. Process yield may be increased by improved control. Operating costs can Purchase intermediate
be minimised by appropriate equipment selection. products G P G G G
8.7.5 For a company with short term cash flow problems, the emphasis should be on
P = Poor; G = Good; ? = Uncertain.
trying to reduce
However, both incapital
reductions costand
capitalcost by the delayactions
various to achieving
can givesignificant
a serious output.
and lasting * Does no t necessarily reduce capital cost and may well increase this cost.
effect on the performance of plant and, also, will often delay the achievement of t An example would be the omission of an exchanger not essential for making the
flowsheet production. Some of the measures which can be taken to reduce capital product bu t which saves energy.
cost and the possible effect on the process operation are set out in Table 8.4.
62
63
TABLE 9.1 DDT PRODUCTION COSTS DIRECTLY RELATED TO OUTPUT
9. AN EXAMPLE OF A PROJECT EVALUATION
7/28/2019 cost estimate.pdf SIMPLE PLANT INTEGRATED PLANT
9.1 The manufacture of DDT is selected as an example of the type of project evalu-
ation which confronts the chemical engineer. Th e assessment is of interest in that it Unit Unit Cost Unit Unit Cost
must consider no t only the optimum size of production unit bu t also whether manu Usage Price of Usage Price of
facture should be based upon primary materials or upon purchased intermediates. Data of DDT of DDT
quoted in the example will necessarily be imprecise but, within th e context of this DDT DDT
booklet this is unimportant. Because this example is further detailed in The Economic Item ti t £/ t £/ t Item ti t £/ t £/ t
Evaluation of Projects by D.H. Allen no changes have been made in prices which are
1969 values. The effect of inflation has been ignored for the same reason. Chloral 0.45 20 0 90.0 Benzene 0.9 25 22.50
Chlorobenzene 0.90
9.2 Plant Complexity Oleum 2.00 100
14 90.0 Ethanol 0.35 55 19.25
28.0 Salt 3. 0 3.5 10.50
DDT can be manufactured in a simple plant by the reaction of chloral and chlorobenzene Sulphur 1.0 10 10.0
with oleum all of which can be purchased on the open market. Alternatively, th e
intermediates themselves may be manufactured from primary materials in an integrated Minor process materials
plant. Chloral may be made from ethanol, chlorine and sulphuric acid, chlorobenzene Steam and water
from benzene and chlorine. The chlorine may be produced from salt. The sulphuric acid Minor services 16.0 43.0
and oleum can be produced from elemental sulphur. Power
The costs of production will tend to be more stable for the integrated plant, since
Maintenance
all the prime materials are readily available from competitive and alternative sources.
Costs for th e simple plant could be seriously influenced by any shortages in supply of Packing and freight
the two essential intermediates; and there are likely to be fewer sources of supply for Credit
the chloral and chlorobenzene. Caustic soda 1.8 20 (36.0)
9.3 Capital Cost and Working Capital TOTAL, (£/t of DDT) 22 4 TOTAL, (£/t DDT) 69.25
cost estimates been made for the two plants production
Capital of 3 0 0 0 0 tonnes/annum.
capacity have The simple plant would assuming a design
cost £3.5 M and th e inte
grated plant £12 M. Working capital would be respectively £0.5 M and £1.0 M.
Taxation plays an important part in any economic evaluation, so th e following
9.4 Produ ction Costs provisions are made:
The costs which must be charged against the product fall into three groups. First, there
are capital costs. Second, there are those fixed works costs which are independent of • All taxation and allowances arise one year in arrear of th e earnings or expen-
diture.
the quantity of saleable product. Th ird, there are production costs which are directly
related to the plant output. • Corporation tax is at 52% on profits.
Fixed works costs are assumed here to include labour, maintenance and overheads
• There is an initial taxation allowance of 100% on all capital investment apart
from working capital.
and are taken as £ 9 1 9 0 0 0 for the simple plant an d £1 9 6 4 0 0 0 for th e integrated
plant. Production costs which are directly related to output, i.e. variable costs, ar e • The plant operates within a large company operating at an overall profit.
shown in Table 9.1. Cash flows are discounted at an arbitrary rate of 15% which represents the. rate of
borrowing plus a company margin. Also, th e DCF rate of return for the tw o projects
9.5 Basis o f Economic Assessment is evaluated.
The
flow two schemes,
technique. simple
The and
plants willintegrated
be assumedmaytonow be assessed
produce only 15using
000 atonnes in the cash
discounted first 9.6 Financial Analysis
operating year and this will reach 3 0 0 0 0 tonnes in th e second year. Thereafter, the The financial analysis is shown for the two schemes in Tables 9.2 and 9.3.
assumption is made that, with experience, production can be increased gradually to A comparison will reveal several features:
36 000 tonnes without requiring increased capital investment.
• The alternative schemes break even at about the same t i m ~ . , i.e. the cumulative
present value discounted at 15%, changes from negative to'"positive in th e
same year. Both show a similar pattern of cash flow return although values are
much higher for the integrated plant.
64
65
• The discounte d cash flow rate of return is higher for the integrated plant which
shows a slightly better return on capital than the simple plant. -5
7/28/2019
• The integrated plant represents a greater opportunity for investing capital.
cost estimate.pdf
'0
Th is is good or bad accordi ng to the cash avai lable to the company and the L!) C") co o:;t L!) o:;t L!) 0 en N I'- 0 "*-
. . P VI C O < O C " )C O I'-encoCOC")co N
number of other projects open to the company as an active entrepre neur. resent a ue at L!) I '- e n c o C") <0 c o I '- c o 0
• A large proportio n of the cash flow for the simple plant is the cost of raw DCF Retu rn of f6 t8 co 0 L!) f6 L!) Q)
materials. Thus, relatively small increases in raw materials costs would either 25.16% C") N <0 0) ro N
force a rise in selling price or substantially alter the profitability. There is a '7 '7 '7 +-'
similar susceptibility to competitive marketing conditions which might force -g

a reductio,n in selling price, The integrated plant is much less sensitive to Cumulative Present N I'- cg I'- [0 R
market prices. V ' I'- 0) C") co L!) co I'- co co C") co co o:;t (I)
' d I 'I h i ' I h' h ' , k 'f '.j:i alue Discounted o:;t co co co co C") I'- o:;t I'- N I'll
IS at ns I I'- I'- en L!) o:;t 0) L!) o:;t

• Th e Integrate p a n t Invo ves muc arger capita out ay w IC
the process should fail in its early life for technical or commercial reasons. .8.
ii at Annual Rate 0 f NC")O)
L!) :: 0 co N C") L!)
0
co
0)
0)
+-'~
It also relies on a large revenue profit margin to offset the large capital out- CI) 0 I I '7 0..
lay, '0
0000000000000 Q)
;> 00 0 coco o:;tO<o<O<O<O<oo:;t :::l
9.7 Sensitivity Analysis Cash Flow 0 0 0 0 N N N co co
All o f t hese f eatures must b e taken 'Into account by management when d etermlnlng
' , c Aft T
er ax
0 0 .... co L!) co
L!) o:;t C") o:;t 0
N N N N N o:;t
I'- L!) I'- I'- I'- I '- I'- 0)
>
Q)
the preferred type of plant to be installed. These relative susceptibilities may be ;: :: N co co 0) co co co co 00
quantified by making a sensitivity analysis. F or this, a series of calculations are I I
made, similar to those in Tables 9.2 and 9.3 bu t with variations in individual factors. ...I -0
For example, one series would show the effect upon overall return of raw materials tl.. . 0 0 0 g g
price increases of 5%, 10%, 15% and 20%. Another series would examine the effect Tax on. Profit I'- M
of gross output being limited to 95%, 90%, 85% and 80% of the planned quantities. ( ~ ; ~ ) V I O U S Year t; co <0 ~ ~ ~ ~ o:;t 0)
Further analyses would explore write-off periods of 8, 9, 11 and 12 years in place Ci) 0 I ...... or I I I I I §
of the planned 10 y e a r s . . a: Tax allowance 'B
Other factors include selling price, delay in commissioning, variation in capital 0 Ca ital I t on t 0 0
cost and variable inflation r ~ t e s . In Table 9.4 some of these cases are considered ( 5 2 ~ Tax ~ ~ ~ e ) e n 0 0 0 0 0 0 0 0 0 0 0
and the consequent change In the DCF rate of return measured for both plants. s:
o
...I O ~ ~ C " ) L ! ' ) I ' - I ' - I ' - I ' - I ' - I ' -
9.S Monte Carlo Simulation u.. Operating gj L!) 00 co 00 00 00 co '0.
It is also possible to measure the effect on the DCF rate of return of several factors Profit 0 0 0 . . . . . . . . 0
woo
all acting at the same time. To do this requires a knowledge of the distribution to « I g'
which the deviations refer and to have access to a computer routine known as (.) Sales
Monte Carlo Simulation. Then a random value is selected within th e range for each Revenue C! C!:! "'! CC! CC! CC! ddd 0
parameter and the overall DCF rate of return calculated. Th is process is repeated :;t 0) 0) 0 0 0 0 '+-
many times, say 2000, unti I: Each parameter has been fully sampled such that the C::. 0 0) 0) L!) C") C") C")
values used, if plotted, give a good representation of the distribution of that « Production g C") co co g g
parameter, and: The DCF rate of return over a range is obtained. I- Cost 0 0 .::f ,...: cri cri ~ ~ ~ ~ ~ 0 e
To illustrate the technique the case studies have been reworked varying invest- ID
ment, fixed costs, variable costs, material costs, selling price of DDT and output by Capital L!) L!) L!) .; :
± 10% and assuming these limits represent the 95% confidence limits of a Gaussian Expenditu re 0 0 0 0 0 0 0 0 0 0 CC! -i
distribution. The results are plotted in Fig 9.1 and show the relative risks and I I P E0
0
rewards of the two projects. ;: ..::

This method works quite well except when the projects are very similar and so Production +-' 0 0 L!) 0 N o:;t <0 <0 <0 <0 <0 <0 0 §
become hard to distinguish. However, great care should be taken that the sophisti- C") C") C") C") C") C") C") C") C") E
cation of the mathematics does not blur the fact that the initial data may be highly I'll ;:
inaccu rate often being derived from_personal judg ement rat her than objective Year N C") o:;t L!) <0 I'- co 0) 0 ;: : N C")
measurement. For further information see Ross(42). Q.
66
7/28/2019 cost estimate.pdf PLANT (inflows are positive)
TABLE 9.3 CASH FLOWS FOR INTEGRATED
-< ""0 m ( ') ( ') " " 0

o
:J J U) ""00 -(')--1
CJ1Q)Q)
-CJ1::JQ)
- . --I »(')
-t.Q)
»<(')
::J Q) C
"':JJ""O
CD X Q) P : > ~ m
Q) 0
0... "CD0 " _.
0
V> 0
.-+0... <
CD
CD §,16
-.
"'"0 X
?fi. ;:::t.. »
"'""Ox .-+ V>
CD::r ::J C ' 3
~ c ~
os C
V>
Smo C CD C
~ ~
C ::J '-+Q)
::J (") .-+ - - 1 ~ - < ::J Q) - ? f i . 3 ~
(")
0...- C -OQ)
.-+ ::J
0 .-+
C
~0
::J
. CD
to
Q)
X ::J 0"
-
o·
C
V>
""0
0
Q)
x
0 :JJ (ii'
Q) (") < o
- t <
. ~
::J :JJ(5Q) .-+0 CD
CD Q) V> ::J - < ~ CD C ""0 C
CD
.-+'-+(") CD .-+ o ::J
~ 3 C D Q) -t..-+CD Q)
- - > C D ~ .-+
CD 0
::J ::J CJ10...::J 0
.-+ ~ Q ) ' - +
o .-+ (' )
11
kt £M £M £M £M £M £ £ £ £
1 0 -6 0 0 0 0 0 -6.000000 -5 217 391 - 4664710
2 0 -6 1.000 0 -1.000 3.120 0 - 3880000 -8 151 229 -7 009900
3 15 0 3.00275 4.500 1.497 25 3.120 0 4617250 -5 115312 - 4840 180

4 30 0 4.041 5 9.000 4.9585 0 - 778570 4 179930 - 2725423 . -3 313 100
5 32 0 4.180 9.600 5.420 0 - 2578420 2841 580 -1 312656 - 2506002
6 34 0 4.3185 10.200 5.881 5 0 - 2818400 3063 100 11 607 -1 829606
7 36 0 4.457 10.800 6.343 0 - 3058380 3284620 1 246417 -1 265711
8 36 0 4.457 10.800 6.343 0 - 3298360 3044640 2241 715 - 859340
9 36 0 4.457 10.800 6.343 0 - 3298360 3044640 3 107 192 - 543406
10 36 0 4.457 10:800 6.343 0 - 3298360 3044640 3859780 - 297783
11 36 0 4.457 10.800 6.343 0 - 3298360 3044640 4514205 - 106823
12 36 0 4.457 10.800 6.343 0 - 3298360 3044640 5083270 41 639

13 0 *2.2 0 0 0 0 - 3298360 -1 098360 4904756 0
*This amount comprises return of working capital (see Section 9.3) and salvage value of plant, assumed to be 10% of the
plant capital cost.
10. SOURCES OF COST INFORMATION Electrical Services Price Book. Other useful sources of similar cost data are periodicals
such as Civil Engineering an d Building Trades Journal. These are intended principally
10.1 Survey of Sources for th e building, civil and structural engineering trades where Bills of Quantities are
drawn up and priced. They do, however, contain a great deal of cost data of general
10.1.1 This booklet has been concerned with th e principles of cost estimation: no
use, such as approximate cost of different types of building on an area or volumetric
attemp t has been made to provide a handbook of cost data, although some examples
basis.
have been included particularly in Chapter 7. It will be seen, however, that th e
estimator must have access to comprehensive and reasonably accurate cost information 10.1.7 Technical Literature and Textbooks
if well founded cost estimates are to be prepared. The contracting organisations, and One of th e largest sources of generalised cost data for process plants is th e chemical
many of the larger chemical manufacturing companies, are able to justify having fully and allied industry technical press. It is true to say t h a t cost information has,been
staffed and equipped estimating departments. Such departments are responsible not published for most equipment items and project cost elements of the type encountered
only fo r estimating, bu t also for th e gathering, compiling and up-dating of th e in a chemical project. However, this information is widely spread in th e literature.
necessary cost data. Some cost estimating bibliographies and certain key references are presented at the
There are a large number of companies, however, wh o can n o t justify full-time end of this chapter, which should provide a starting point for a search of th e cost-
estimating departments. The engineer is often required to make his own estimates data literature.
based on his experience and cost information retrieval. Th e methods adopted to A deficiency of this type of published cost data is that, in the interest of presenting
prepare a cost estimate depend to a large ex ten t on th e degree of definition of th e the data in a concise or correlated form, th e specifications of the items are no t fully
project under consideration and th e form and source of cost data available, as discussed defined. Another drawback is t h a t much of the data relates to costs in th e USA.
in Chapters 3 and 4. A number of sources of cost data are available to the engineer However, with judicious use, published cost d ata can provide a reasonable basis for
faced with th e task of preparing a cost estimate on his own account and a guide to cost estimation.
such d ata is presented below. 10.1.8 Personal Cost Boo ks
10.1.2 Suppliers Detailed Quotations Many engineers keep their own cost d ata books into which they jot down pertinent
For main equipment items, the most accurate costs will be obtained from suppliers items of cost information gathered over th e years.
quotations submitted against detailed specifications. If th e normal practice of
10.1.9 Government Departments
obtaining quotations from several suppliers is followed, even this method may result
Various Government departments maintain statistics of wages, productivity and
in a wide spread of quoted costs, requi ring detailed technical and economic analysis
material costs which are of value in compiling general cost indices and cost indices
before selection can be made. for specific projects 19 . Similar data fo r other countries are often available from th e
10.1.3 Suppliers Budget Quotations applicable Embassies, Trade Delegations, etc.
Th e above method is time-consuming and is usually o n l i applicable for project
10.1.10 Computer Data
execution after authorisation. At the project study stage, however, suppliers will
Th e Institution of Chemical Engineers has recently published a report on th e state
frequently be willing to give budget prices, rapidly and without commitment, which,
of the art of the application of computers to capital cost estimation 29 .
in general, will be more accurate than published data.
A number of programmes have been developed for capital cost estimating by the
10.1.4 Company Records contracting industry and by some of the major chemical manufacturers, and a few
Company records of past projects and purchases usually contain a wealth of useful of these have been made generally available through bureaux services. Th e programmes
cost information. If such information is systematically recorded and filed, together available through bureaux services give access to sophisticated cost estimating
with a suitable retrieval system, this forms a good basis for cost information. In methods but do not provide cost data; this normally has to be 'user' supplied for the
many companies, however, cost information gets buried with th e project records, programme to be operable. In some cases th e cost estimation programmes are sub
discouraging any search for cost data on a particular piece of equipment. routines to broader process flow-sheeting and optimisation systems.
In addition to the general bureau programmes a number of the equipment vendors
1 0 . 1 ~ 5 Trade Literature
have developed cost estimating programmes for their particular range of equipment
Costs for standard items of equipment such as valves, pipe fittings, etc., are often
programmes been made 29 .
circulated, or published in trade journals by traders in these items as part of their and a few of these have available through bureaux
sales and advertising efforts. The usefulness of these lists is often negated by being
10.2 Some Key References
undated. Because of the inflationary climate, th e practice of publishing price lists
has declined in recent times. 10.2.1 Bibliographies
1 "A ready Reference I ndex of Cost Engineering I nformatiol t)", The Cost
10.1.6 Unit Pricing Literature
Unit prices for measured work are published annually in Laxton's Building Price
Engineer, Vol '13, No 3, 1974.
Book, Spon's Architects and Builders Price Book and Spon's Mechanical and 2 "A Bibliography of the Cost Engineer Decennial Index, 1962-1972" (London:
Th e Association of Cost Engineers) and supplements, 1972.
70
71
25 "Costs of Chemical Process Plants Abroad"; Bauman, H.C., In d & Eng Chem,
3 "Cost Engineering - Select Bibliography", and supplements (London: CJB Vol 54, No 9, Sept 1962.
Information and Library Service), 1970.
26 "Comparative Investment Costs in Western Europe", Stallworthy, E.A.,
10.2.2 Cost Estimating Methods - Review Papers
7/28/2019 cost estimate.pdf The Cost Engineer, published in Chem & Proc Eng, Vol 44, No 7, 1963.
4 "Rapid Estimation of Plant Costs", Gallagher, J.T., Chem Eng. Vol. 74,
10.2.7 Complete Chemical Plan t Costs
No 26, 1967.
27 "Up-dated Investment Costs for 60 Types of Chemical Plants", Haselbarth,
5 "How to Estimate Capital Costs", Holland, F.A., Watson, F.A., Wilkinson,
J.E., Chem Eng, Vol 74, No 25, 1967.
J.K., Chem Eng, Vol 81, No 7, 1974
28 "Capital and Operating Costs for 54 Chemical Processes", Guthrie, K ~ M . ,
6 "The Development of an Improved Pre-design Cost Estimating Method for
Chem Eng, Vol 77, No 27, 1970.
Chemical Plants", Allen, D.H., and Page, R.C., Paper A 1 pres ented at the
Third International Cost Engineers Symposium, 6 to 9 Oct. 1974 (London: 10.2.8 Use of Computers in Capital Cost Estimating
The Association of Cost Engineers), 1975. 29 "The application of Computers to Capital Cost Estimation", Liddle, C.J.,
7 "Rapid Cost Estimation in Chemical Process Industries", Bridgewater, A.V., and Gerrard, A.M., (London: The Institution of Chemical Engineers) 1975.
Paper A6, Ibid, 1975. 10.2.9 Economic Evaluation of Projects
10.2.3 Module and Factorial Estimating 30 "A Guide to th e Economic Evaluation of Projects", Allen, D.H., (London:
8 "The ICI Fac-test Factorial Estimating System", Kay, S.R., Paper A3, Ibid, The Institution of Chemical Engineers) 1972.
1975. 31 "The Finance and Analysis of Capital Projects", Merrett, A.J., and Sykes,
9 "New Ratios for Estimating Plant Costs", Chem Eng, Vol 70, No 22, 1963. A., (London: Longmans Green and Co. Ltd.) 1963.
10 "New Cost Factors Give Quick, Accurate Estimates", Miller, C.A., Chem Eng, 10.2.10 Miscellaneous
Vol 72, No 2, 1965. 32 "Cost Engineering Terminology", (London: The Association of Cost
11 "Rapid Calculation Charts", Guthrie, K.M., Chem Eng, Vol 76, No 1, 1969. Engineers) 1968.
12 "Data and Techniques for Capital Cost Estimating", Guthrie, K.M., Chem 33 "Estimating Check List for Capital Projects", Ibid, 1970.
Eng, Vol 76, No 6, 1969. 34 "Fundamentals of Cost Engineering in the Chemical lndustry", Bauman, H.C.,
10.2.4 Equipment, Etc, Costs (New York: Reinhold Pub. Corp.) 1964.
13 "Cost Data Files for Chemical Engineers", Brit Chem Eng, May 1966 to 35 "Cost Engineering Analysis", Park, W.R., (New York: Wiley-Interscience)
Feb. 1972 (a series). 1973.
36 "Process Engineering
1973. with
10.2.5 Cost Indices Economic Objective", Wells, G.L., (London:
Leonard Hill)
14 "I ndices of Erected Costs of Chemical and Allied Plant", Eady, C.W., and
37 "Strategy of Process Engineering", Rudd, D.F., and Watson, C.C., (New York:
Royd, N.G., Chem & Proc Eng, Vol 45, No 3, 1964. John Wiley & Sons Inc.) 1968.
15 "Revisions of CPE Productivity and Cost Indices", Chem & Proc Eng,
38 "Investment Decisions in the Nationalised Industries", Bates, R., and Fraser,
Vol 51, No 8, 1970.
N., (Cambridge University Press) 1974.
16 "Process Engineering's Indices Help E stimate the Cost of New Plant",
39 "Chemical Process Economics", Happle, J., (New York: Wiley) 1971.
Cran, J., Proc Eng, Jan 1973.
40 "Plant Design and Economics for Chemical Engineers", Peters, M.S., and
17 "Comparison of Cost Indices", Chem & Proc Eng, Vol 45, No 6, 1964.
Timmerhaus, K., (New York: McGraw-Hili) 1968.
18 "Plant Construction Cost Indi ce s - How We Compare with the US",
41 "Economics", Samuelson, P.A., (New York: McGraw-Hili) 1970.
Cran, J., Proc Eng, Mar 1973.
42 "Uncertainty Analysis Helps in Making Business Decisions", Ross, R.C.,
19 "Formulating Composite Cost Indices for Specific Projects", Hardman,
Chem Eng, Vol 79, Sept 1971.
J.N., The Cost Engineer, Vol 13, No 3, 1974.
43 "Modern Cost Engineering Techniques", Popper, H., (New York: McGraw
10.2.6 Costs Overseas Hill) 1970.
20 "Location Index Compares Costs of Building Process Plants Overseas",
Cran, J., Proc Eng, April 1973.
21 "Estimating Plant Costs in Developing Countries", Yen-Chen Yen,
22 "Costs of Overseas Plants", Johnson, R.J., Chem Eng, Vol 76, No 5, 1969.
23 "Efficient Estimating of Worldwide Plant Costs", Gallagher, J.T.,
24 "Equipment and Material Costs Abroad", Bauman, H.C., Ind & Eng Chem,
Vol 54, No 5, May 1962; and No 7, July 1962.
73
72
http://slidepdf.com/reader/full/cost-estimatepdf Appendix 40/44

SERVICE PLANT AND EQUIPMENT
T ~ P I C A L ESTIMATING CHECK LIST Steam raising plant and auxiliaries
Electricity connection charges
SITE Transformers and switchgear
Land purchase plus all associated costs arising from legal requirements Cabling
Soil su rvey Starters
Survey of special site hazards such as earthquakes, susceptibility to flooding and Standby power suppl ies
abnormal meteorological conditions Plant and pipework for storage and handling of water for process, cooling and
Road improvements and diversions potable supplies
Railway improvements . W:!ter tr eatmen t plant
Pipe track and other wayleaves Internal transport, conveying an d storage of raw materials, intermediate, finished
Dock and wharfage requirements products and fuel
Water supply contribution Heating and lighting
Sewage disposal works Cranes, jigs, maintenance equipment
Test equipment
Lightning protection
Compressed air services
Refrigeration, local or centralised
Inert or special gas supplies
PROCESS PLANT Operating and maintenance manuals, drawings etc.
All process plant and equipment from detailed schedules Spares (msofar as chargeable to capital account)
Special erection costs - e .g . c le an conditions etc Telephones an d communications
Costs of special materials
Costs due to special manufacturing techniques or pressure on manufactu ring capacity
Inspection and test
Delivery, particularly considering heavy, long or wide loads, heavy lifts an d special
restrictions or consents
Catalysts etc., if they are to be charged as capital C IVIL WORKS
Safety equipment Piling and soil stabilisation
Containment of any hazardous operation Foundations
Ventilation, with particular reference to ho t conditions, toxic gases and vapours, Main Plant Buildings
dusts and fire risks Plant structural steelwork
Fire protection equipment Chimneys
Equipment to meet requirements of Alkali I nspector, Factory I nspector, et c Buildings fo r service plant
Effluent tr eatmen t plants (inclu d ing development costs) Stores, storage buildings, warehousing,
I nstrumentation and control Laboratories, workshops, offices
Development of Instrumentation Medical and first aid centres, fire station
Pipework and valves Canteen, change rooms, lavatories
I nsulation and painting Site security, fencing, gate houses
Costs ·of process development and prototype testing Garages, car parks, cycle sheds
Allowance fo r modification after erection Customs and excise offices, weighbridge
Standby plant Drainage - surface, chemical and soil water
Mechanical handling facilities Pipe and cable ducts
Land reinstatement, landscaping etc.
Compliance with Local and National Regulations
74
75
OVERHEAD COSTS
Engineering Costs
Process and detailed design, purchasing, and inspection
7/28/2019
Use of consultants or specialists
cost estimate.pdf
EFFECTIVE MANAGEMENT
Departmental overheads
Construction of models The Dolphin Group is an association of technical specialists
Lloyd's or special inspection
Travel a highly professional approach to the problems
o f f e r i n ~ ~
Engineering involvement in commissioning
encountered by Clients in the Petrochemical and General
Process Industries in the conception and execution of new
or expanding manufacturing facilities.
Temporary Facilities Required for Construction
Site Engineer's office and furniture Dolphin expertise can provide valuable assistance and
Temporary power and water supplies
show considerable economic advantage in the fields of:
Temporary access and storage areas, fencing - site security
Construction workshops (can main project workshops be used?) CAPITAL COST ESTIMATING
Site fabrication facilities and consumable materials
Labour camp - canteen PROCESS DESIGN AND EVALUATION
Major construction equipmen t (purchase or hire)
EQUIPMENT DESIGN AND SELECTION
PROJECT ORGANISATION AND MANAGEMENT
Direct Construction Costs
PROJECT COST CONTROL
Direct labour or contract labour
Subsidies to labour - travelling, canteen etc. PURCHASING AND CONTRACTUAL PROCEDURES
Specialists
Transport costs CONSTRUCTION ORGANISATION
Overtime working, abnormal weather conditions, local customs and regulations
COMMISSIONING AND HAND-OVER
Information on a comprehensive range of services can be

Miscellaneous Overhead Items obtained from the following group offices
Process or Patent Fees
Agent's fees Dolphin Development Company ENTEAM, Technical &
ConsuItants' fees Drews Park Management Services,
Proportion of company's research expenditure Beaconsfield 78, Third Avenue
Proportionof company's central admin istration expenditure BUCKS. Enfield, EN 1 1 BY
Miscellaneous local or federal taxes tel. 04946 2482 tel: (01) 367 1343
Insurance telex: 261507 (ref. 3577)
Financin g charges
Legal costs
Import duties THE DOLPHIN GROUP
Special freight costs
Contractors overheads and profit
76
LAING- Punman K e / l o g g ; s p , r o i ~ c r f n a ~ \ ?
me,ntpay
that teams
o f f e r l ' t l i l n Y 1 ~ a n . , ' i j ·
off for ol,lfclienlS.,
THI COMPRIHINSIVI
Consider, for instance, otIr
abilities in organizing complex
project financing packages utilizing
various world financing organiza-.
tions. Including governmental
agencies for lending and
guaranteeing loans, and commerCial
CONTRACTORS
and investment banks.
A Pullman Kellogg project
managemenrteam has the financial
expertise required to arrange tOOay's
enormous financial packages. And,
at the same time, to optimize the
profitability of your project.
It does riot matter whether you are contemplating a For example,in IndoneSia, the
government awarded us contracts
small factory or a multi-million pound contract. totaling more than a a l f ~ b i l l i o n
John Laing Construction can tackle the job from dollars.
We worked closely with Indones/an
the initial planning stages right through to you officials in coordinating the efforts of
all lending institutions involved. In
turning the key in the lock.

We are a truly comprehensive organization with
addition
other to Bank
leading Bumi Daya
commerCial and
banks,
institutions involved in project
financing included the International
a network of local offices, and a spread of Development ASSOCiation of the
World Bank (IDA), the U.S. Agency
management and financial resources that cannot for International Development (AID),
the Asian Development Bank (ADB),
easily be matched. and Japan's Overseas Economic
Cooperation Fund (OECF).
Call us in at the beginning on your next project. Our point is this. Pullman Kellogg
project management is a part of an
experienced multi-national firm, with
proven expertise in planning and
John Laing Construction Limited handling today's larger, more
complex prOjects.
Page Street, Mill Hill, London NW 7 2ER So when you have a complex
problem, anywhere in the world,
Telephone: 01-959 3636 consider our single-source
capability. Call the pros of
project managernent.
Pullman Kellogg.
LAING
BUILDING TOMORROW, TODAY
Pullman. Kellogg
Engineers of Energy
Pullman Kellogg DiviSion of Pullman Incorporated, Three Greenway Plaza East, Houston, TX 77046
Kellogg International Corporation, London W1M 2AD; Eff. May 1977, Wembley, Middlesex HA9 OEE, U.K.
Kellogg Continental, De Boelelaan 873, Arnsterdam, The Netherlands
The Canadiari Kellogg Company, Ltd., 20 Eglinton Avenue West, Torontd, OntariO, Canada M4R 1K8
Other Kellogg offices in: Buenos Aires, Hackensack (New York Area), Hong Kong, Jakarta, Maracaibo,
Moscow, Paris, Tehran, Tokyo .
7/28/2019 DESIGN ENGINEERING AND cost estimate.pdf
PROJECT M A N A G E M E N T OF
PROCESS A N D '_. ~ ~
INDUSTRIAL 'dIilr
~ ~ ~ , "
PROJECTS
FEE, RE-IMBURSABLE OR LUMP

SU M CONTRACTS UNDERTAI<EN
P•
I•P• S Mill Hill . North West Ind. Estate
~
Peterlee . Co. Durham
LIMITED Telephone: Peterlee 5713
A MEMBER OF THE GROUP, MERSEYSIDE

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7/28/2019 cost estimate.

Copyright © 1977 CAPITAL COST

Prepared by a joint working party of

ISBN 085295 088 a

1. INTRODUCTION (B.A.J. Jones) 1

2.2 Feasibility Studies and Reports

2.3.11 In order to ensure a smooth transfer from construction, through

Consultation must include safety reviews to identify, for instance, necessary

3. COST ESTIMATION IN RELATION TO

I there is generally some progression from initial estimating, based on limited

3.2 Order of Magnitude Estimate 3.4 Budget Esti mate

Iii http://slidepdf.com/reader/full/cost-estimatepdf 8/44

or method should be analysed by reference to th e original intentions.

3.5 Project Control Estimate

II will continue in order to control expenditure. trend forecasting.

',l i Say £44500000

Piping 0.7 - 0.9

'+- Q)QJQ)coQ) t::ooe ClClClEClE ill to ill 81 Q)

4. 5 Firm Price Estimates (Based on Detailed Design) ro 0 0 "-

his client, and, therefore, have to be estimated to a greater degree of accuracy. To

..... 'v Civils

Cost £32M £20M £6'OM £6·5M £100M

..... - r . : : : : " ' - - - - - - = - - -----

5.9 Changes of Scope and Cost Control

TA B LE 6.2 APP ROXI MAT E FIRS T COST OF COMPRESSORS AND DRIVERS

Installed 1963 1976

10.00 2.54 4826 5.10 18870

(Anchor with PTFE scrapers, three contra-rotating : 15 000

Variable Speed Drive 388 603 603 833 833 1042

7.3.6 Tubular Heat Exchangers

6000 Fig 7.3 - Prices fo r standard compressors (March 1976)

Fig. 7.2 - Approximate cost of tubular heat exchangers (March 1976)

Fig 7.5 - Approximate cost of ribbon blenders (July 1976)

TABLE 7.5 COST OF STRUCTURAL STEELWORK

ITEM COST (£ft)

Weigh Scale 0.60 200 • brackets

Nominal Area mm 2 Nominal Area mm 2

Cable Description: as fo r Table 7.8

Description and Thickness of Insulation Nominal Size o f Pipe (mm)

N lflam Rigid Moulded Sections finished

8.2 Review of Existing Knowledge

8.4 Size and Complexity of the Plant

(1+r)n(1+f)n {1+r+ f)n

VI/len thA tp.rm "rf" is small.

:.a > ....

Selling prices ± 10 ±3 to 20 ± 20 to 60 ACTIONS a: u:: U) w >= ::J U U

Sales volume ± 10 ± 2 to 10 ± 10 to 15 Main items at minimum

similar susceptibility to competitive marketing conditions which might force -g

IS at ns I I'- I'- en L!) o:;t 0) L!) o:;t

the preferred type of plant to be installed. These relative susceptibilities may be ;: :: N co co 0) co co co co 00

quantified by making a sensitivity analysis. F or this, a series of calculations are I I

rewards of the two projects. ;: ..::

measurement. For further information see Ross(42). Q.

-< ""0 m ( ') ( ') " " 0

3 15 0 3.00275 4.500 1.497 25 3.120 0 4617250 -5 115312 - 4840 180

12 36 0 4.457 10.800 6.343 0 - 3298360 3044640 5083270 41 639

http://slidepdf.com/reader/full/cost-estimatepdf Appendix 40/44