COST ESTIMATION - University of Oklahoma

1 COST ESTIMATIONF ixed Capital investment : Cost of equipment and facilitiesFCI= (Direct Costs) + (Indirect Costs)Direct Costs: 1. Purchased equipment: Columns, Heat Exchangers, pumps, tanks, etc. 2. Equipment Installation 3. Piping (includes insulation) 4. Instruments and Control 5. Electrical Equipment. 6. Buildings: Process, Administration, Maintenance shops, etc. 7. Site Preparation 8. Service Facilities: steam, water, air, fuel, etc. Waste treatment, fire control, offices, etc. 9. LandChE 4253 - Design IChE 4253 - Design ICOST ESTIMATIONI ndirect Costs: 1.

2 Engineering and Supervision: Administrative and Design. Supervision and Inspection. 2. Construction Expenses 3. Contractor's fee 4. Contingency. 5. Start up expenses ChE 4253 - Design IChE 4253 - Design ICOST ESTIMATIONT ypes Of Cost Estimates1. Order of Magnitude estimate. Extrapolate similar plant cost Accuracy: over 30%2. Study Estimate. Knowledge of major pieces of equipment Accuracy: 30%3. Preliminary Estimate. Enough for budget authorization. Accuracy: 20%4. Definitive Estimate. Based on basic Engineering and quotes from suppliers and contractors.

3 Accuracy: 10%5. Detailed on Detailed : 5%ChE 4253 - Design IChE 4253 - Design ICOST ESTIMATIONCost IndexesPresent Cost=(original cost at time t)* Marshall and All industry-equipment index. Arithmetic average of 47 equipment types. 2. Process-industry equipment index. Weighted average of 8 of these: cement 2%paint5%chemicals48%paper10%clay products 2%petroleum22%glass3%rubber8%M&S was 100 in 1926. Published in Chemical Engineering . ttimeatvalueindexnowvalueindexChE 4253 - Design IChE 4253 - Design ICOST INDEXES Engineering News-Record Construction Cost , lumber, labor, in Engineering News-record.

4 ENR value reported based on 100 in 1913, 1949 or 1967. Nelson-Farrar Refinery Construction Cost and common labor, iron and steel, building materials, miscellaneous in Oil and Gas Journal .N-R value of 100 in 1946. Chemical Engineering Plant Cost Index. Chemical , machineryEngineering and supervision supports 61% 10%Installation labor 22% Buildings, material, labor 7% Published in Chemical Engineering .PCI value of 100 in 4253 - Design IChE 4253 - Design ICOST INDICES (as inflation indicators)ChE 4253 - Design IChE 4253 - Design IFrom Turton et al.

5 , 1998 COST INDICES (as inflation indicators)ChE 4253 - Design IChE 4253 - Design IFrom Turton et al., 2009 Methods For Estimating Capital Investment1. Detailed-Item items in the direct and indirect cost are evaluated with as much detail as possible. All specs are known.( 5% accuracy, contractor s estimate)ChE 4253 - Design IChE 4253 - Design IMethods For Estimating Capital Investment2. Unit-Cost Estimate. Prices from quotations or index-corrected p. 250 in Peters et al., 2003).(10-20% accuracy, definitive or preliminary estimate)()()[]FndeeLyxxLfdfHfMfMfEEC +++++=ChE 4253 - Design IChE 4253 - Design IE: delivered equip.

6 CostEL: labor for equipment cost for field laborfx : material unit costfe: unit cost for engineeringfd: drawing cost fF: field expense factorMethods For Estimating Capital Investment3. Percentage of Delivered-Equipment items in the direct and indirect cost are evaluated as a percentage of the delivered-equipment cost.(definitive estimate in certain cases, 10% )See Table 7-8, p. 194 in TBW&S4. ESTIMATION based on Lang factors . Named after Lang (1947). The Fixed Capital investment is found by multiplying equipment cost by a factor (see Table 7-7, p.)

7 192 in TBW&S)( 30% accuracy, order of magnitude estimate)()[]IfEfEfEfEC ++++=K321 ChE 4253 - Design IChE 4253 - Design IMethods For Estimating Capital InvestmentChE 4253 - Design IChE 4253 - Design IFixed Capital investment Cost (Peters et al, 2003)FluidDirect Costs ProcessingOnsitePlantPurchased Equipment E =15-40%IFEE=15-40% IFInstallation 6-14% IF47 % E 25-55 % E Instrumentation 2-12% IF36 % E 8-50 % E Piping 4-17% IF68 % E 10-80 % E Electrical 2-10% IF11 % E 10-40 % EOffsiteBuildings

8 2-18% IF18 % E 10-70 % E Yard Improvement 2-5% IF10 % E Included inService FacilitiesService Facilities 8-30% IF70 % E 40-100 % E Land 1-2% IF6 % E 1-2 % IF(or 4-8 %E)ChE 4253 - Design IChE 4253 - Design IFixed Capital investment CostFluidIndirect Costs ProcessingPlantEngineering4-20% IF33 % E5-30% DConstruction 4-17 % IF41% E Included inContractor s feeContractor s Fee 2-6 % IF22 % E 10-20 % IFContingency 5-15% IF44 % E 5-15% IFWorking Capital10-20% IF15 % TCI10-20% TCIChE 4253 - Design IChE 4253 - Design IMETHODS OF PROFITABILITY EVALUATIONR eturn of investment (ROI)The formula is.

9 CFROITCI=ChE 4253 - Design IChE 4253 - Design IMETHODS OF PROFITABILITY EVALUATIONNet Present WorthThe formula is:IRR it is the interest rate that makes NPW=0()()TCIiWCVCFiCFNPWnSnnkkk +++++= =1111 ChE 4253 - Design IChE 4253 - Design IMETHODS OF PROFITABILITY EVALUATIONPay Out Time, POTM inimum time needed to recover the names: Payback time, Cash Recovery value of money can be taken into account with the inclusion of a minimum acceptable rate of return on TCI:In this case the annual cash flow is viewed as an annuityFlowCashAverageVFCIPOTS =()()AnnuitySFlowCashAverageniTCIVFCIPOT **+ =ChE 4253 - Design IChE 4253 - Design I