| | K. B. Uppal, Amoco Corporation, Houston, Texas and controlling cost has been an age-old nightmare for every engineer and organization. So, in this ever-changing environment of ‘Total Cost Management (TCM), it is prudent for the estimator to consider all project aspects. This ensures a methodical estimate, so that all work phases are accounted for. Factored estimating provides an easy method to estimate total capital cost. Cost esti- ‘mates prepared by this method are generally classified as 430% estimates, | anaging project development | n| First, let us define cost estimation: pers Cost estimation provides the basis for project management, busine: planning, budget preparation and cost, and schedule control Included in these costs are assessments and an evalua tion of risks and uncertainties. COST RELATED DATA SOURCES During the past four decades, cost estimates have been prepared from basi- cally three sources of cost-related data: * Published cost information * Costs from similar projects and project equipment costs ‘Historical company cost data files ‘and costs from in-house projects ‘To provide consistent quality esti- ‘mates based on available information, basic requirements for estimates to be prepared by this method are: 1. Site location 2. Project completion date 8. Rough sketches of proces diagrams | 4. Sizing and material specifications for all equipment. Estimates prepared by this methed are made by first estimating the deli - [ered “bare” equipment cost and then flow arr a ECONOMICS applying factors to each item to develop additional labor and materi- als required to install each item! Typ- ieally, for most chemical or petro- chemical plants, equipment cost alone represents about 20% to 35% of total capital expenditures. So itis prudent to estimate equipment cost accurately. Any error encountered in the bare equipment cost determination will be amplified many times in the overall Cost estimating made simple | Avold preparing detailed estimate costs using this alternative method ‘estimate. In general, equipment cost ‘can be obtained by any one of the fol- lowing methods: © Previous project equipment costs Preliminary vendor quotations iblished equipment cost data ¢ Firm lump-sum quotes. INSTALLATION FACTORS Once the cost of each equipment piece has been established, the next step is to apply installation factors to each item to determine total installed cost for all equipment. The installation factors for major equip- Project no: A123 Propared by: Name ‘Accuracy: +/-20% Date: August 5, 1906 Estimating - cost summary (SM) Mate! Equipment ‘and labore $200 Factor 185 240 Exchangers (2)" Drums (2) $100 “Towers (Whtrays and internals) $350 200 Pumps (6) $360 140 (Equipment cost rom vendor quotes or computer programs) Total $1,110 31,988 (Material and labor spilt = 609%/40% = $1,200M/S790M) Instrumentation = material (20% of equipment) or ($1,110M X 90%) $003 Instrumentation = inetaation (45% of instrument mater) or ($3330 x 45% 180 ‘Subtotal $1,110 32.482 Sales tax at 7% (depends on location) (Equipmont and material = $1,110M + $1,200M + $339M) x 7% Incirects on labor at 115% ($709M + S1SOMM) » 115% 1,091 Contract engineering (20% of direct cost) or (+ M & L) x 20% re-engineering (when necessary) rmerenineeng man year). sis subtotal Contingency (10%) Grand total ‘ther items to be considered: ‘Spare pars (8% of equipment) Freight (22 of equipment for domestic oF 5% to 10% for overseas) Ennronmental parmits (lee varies for each state) Labor productivity (varies for each location) Escalation (basod on project completion date) Hazardous and operability reviews (HAZO} 7 Ragban oa pets dal nb toast ce 7 ttl onaaber casita mating equpmart cot wh apeooate tintin fat. owance HYDROCANBON PROCESSING /SEPTENBER 1997 168-Csetratescot rt mance yore) ore, ot ‘mg e erannd San wane opr cor Eran "Aron cari et wn contin ri 190 ot oe Bane rotor ring et "esha 2008 sau ment can be determined from Table usé of installation’ tactor’” tor exchangers, drums, towers and pumps. In addition to total installed equipment cost, suggested guidelines that cover other elements of an esti- mate are described. GENERAL GUIDELINES ‘These guidelines will help in preparing any estimate consistently. Material and labor breakdown Material/labor ratios are suggested for different materials: ‘Table 1. Installation factors for major equipment (All factors based on carbon steel material) ‘cooler 17 ‘Aaitator 1a Blower 4 Bole (packaged) ag Butts (pressures) 08 Contrtuge 15 Compressor 12 ‘Coolng tower a8 yctone 15 ‘roms (horizontal) 18 Drums (vertical) 24 Dyer 18 Dust calector 19 Evaporator 22 Exchanger 48s Filter (rotary) 18 Furnace packages) 12 Hopper ooted) 1s Pump (APiwineto) 14 Pump (cher. wimotor tas Refrigeration unit 14 Reactor 2 ‘Serow conveyor 14 Sphere 03 Stack 03 Strainer 15 Tane 03 Tower 20 Transformer 06 Weigh Seale i ‘Ts tacts non tarp, one sacs o ‘hss eat ati engin hare ere a MateriaVabor ‘Table 2. Plant construction cost Carbon steel 60% to 40% index (Base year 1980 = 100) Stainless steel 65% to 35% Year Index Instrumentation 1980 100 Suggested guidelines for instru- 1961 ms 130 | ment materials and labor (does not 982 87 | include DCS contol types): Materials jee 133 {33 | is 20% to 85% of equipment cost and 1985 135 15. | installation labor is 30% to 45% of 1986 139 29 | instrument ma 1987 182 2a esis 1988 148 23 1989 151 34 | Sales taxes 1990 188 48 ‘The sales rate or user taxis different 1991 184 38 | foreach locatic some locatic 1381 14 28 | foreach location. Also, some locations ne a &1 | (uch as Texas) tax the construction 2000 be £2 | labor. Contact the proper agencies to = incorporate current rates and regula- tions during estimate preparation. Labor indirects ‘As abasisforindirects on labor, the U.S. Gulf Coast is suggested. Guide- lines for indirect inthis region are 80% to 135% of direct labor cost. All other locations will be compared with the Gulf Coast to establish indirects pereentage. CONTRACTOR ENGINEERING ‘The following guidelines are sug- ‘gested for costing out contractor engi- neering: ‘Small Projects: 400 to 800 ‘man-hourvitem Grassroots projects; 900 to 1,200 man-hours/tem Retrofits: 25% to 40% of all direct costs (loaded). Included in direct, 168-0 HYDROCARHON PROCESSING SEPTEMBER 197 Table 3. Labor productivity factors (Base U.S. Guif Coast = 1.00) | Nonanion @Proauetty Plat ocaon actor)” Union Decatur Alabama 1.05 1.10 Torrance, California 1.19122 190 400 100105 ‘ole, nos 12000145 Witow Springs, Minols 1181.18 Wood Fiver Minis 1.05 1.00, Whiting, indiana 4.13 1.18 Natchez, Missisippi 1051.10 Marietta, Ohio 1200135 Greenville, SC 4001.00 Mount Pleasant, SC 1.05 1.15 ‘Abin, Texas 1190100 Baytown, Texas 1.00 1.00 Pasadena, Texas 1.00 1.00 ‘Toxas Gy, Texas 00100 [Se romcnton tora conta mae cost are equipment, ‘material and labor. ‘The individual item count includes all numbered equipment, any number spares and individually numbered ‘equipment pieces on a packaged unit. ‘The average man-hour rates are: United States: $50 to $65/hr Goaded) Europe: $56 to $90/hr loaded) Japan: $150 to $300/hr (not loaded). A.secondary check for grassroots projects for contractor engineering will De a 20% to 30% cost range of all direct costs or 12% to 18% of total project costs. ‘Owner engineering ‘The following guidelines are sug- gested for owner personnel: United - ‘iat Yoar OneTdGes some travel) Japan: ‘$475M to $650M/ ‘man year. Asa secondary method, owner engi- neering cost can be estimated as 10% to 12% of all direct costs or 30% of con- tractor engineering. Contingency Contingency for a grassroots pro- Ject is 10% to 15% of the total project cost before escalation, while retrofits are from 20% to 30%,Escalation The plant construction cost index (Table 2) should be ased to calculate escalation. An example is included to, show how to correctly use numbers in the index. ‘reight Freight cost for a project is 2% to 5% of equipment cost. ‘When using factors, freight cost is included for the mate- rial portion. For overseas locations, freight cost will vary from 5% to 10% of equipment cost. Hazardous and Operability (HAZOP) For estimating the cost of the HAZOP review and imple- ‘mentation, use the following guidelines: 1. For projects with total cost > $5.0MM, use 1% to 2.5% of total project cost. Obviously, the higher-cost projects, tend toward the 1% range. 2, For projects with total cost < $5.0MM, use $80M, unless there is a good reason to believe otherwise. Spare parts ‘As a general guideline, spare parts for U.S, installa- tions are 4% to 8% of equipment costs. The percentages are higher for overseas locations, but must be looked at, individually. Plant labor and engineering Each project and each plant location is different. There- fore, no guidelines are suggested. But, some money should be included in the estimate to handle this item, Labor productivity Allestimated labor forthe project should be adjusted by ‘using the proper labor productivity factor (see Table 3 for productivity factors for some U.S. locations both for union and nonunion labor), based on where the project is to be built? For overseas locations, a site visit is suggested to establish the proper productivity multiplier. Environmental permits Fees for air, water and wetlands permits may have ta be paid for each project. These fees vary from state-to-state and should be looked at separately. Also, do not forget to include engineering costs to prepare permits in total esti- mated cost, * amp Ka Waianae ener“ Chagte 2 Maret Debs * Malo, Can K Hse Sours at it ACE ae ‘nein meio Dorr Sarno, Ve i The author || Kul B. Uppal is an engineer at Amoco Corpo- ‘ation, Houston, Texas. Having been there for 28 ‘Years, he hes worked on many grassroots pro) ‘cts as a project engineer, with supervisory ‘esponsioiities in cost onginesring for 8 yoars. : ‘Me Uppal is also a contributing author f0 the A ‘recent publication, The Engineer's Cost Hand- book, by Marcel Dekker He has a BS in mechan ‘cal onginesring and an MBA In management. A registered pro- {fessional engineerin nos and Texas, Me. 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