Capital Cost Estimation

Chapter 5

Types of Capital Cost Estimate 1. Order of Magnitude Estimate (Feasibility) 1. Order of Magnitude Estimate (Feasibility) 2. Study Estimate / Major Equipment 2. Study Estimate / Major Equipment 3. Preliminary Design (Scope) Estimate 3. Preliminary Design (Scope) Estimate 4. Definitive (Project Control) Estimate 4. Definitive (Project Control) Estimate 5. Detailed (Firm or Contractors) Estimate 5. Detailed (Firm or Contractors) Estimate

Capital Cost Estimate ClassificationsEstimate Type Accuracey Data Diagrams Notes

Order of Magnitude

+ 25%, - 15%+ 25%, - 15% Existing plants BFD Capacity + inflation

Study (Major equipment, Factored)

+ 30%, - 20%+ 30%, - 20% Roughly sized major equipment

PFD Generalized charts cost

Preliminary Design (scope)

+ 25%, - 15%+ 25%, - 15% major equip. + piping + instr. + Elec. + util.

PFD Group project

Definitive + 15%, - 7%+ 15%, - 7% Prelim spcs for all equipment

PFD + P&ID

Detailed (firm or contractor

+ 6%, - 4%+ 6%, - 4% Complete engineering

Capital Cost Estimate Classifications

Example 5.1 The estimated capital cost from a chemical plant using the study estimate method (Class 4) was calculated to be $2 million. If the plant were to be built, over what range would you expect the actual capital estimate to vary?

For a Class 4 estimate, from Table 5.2, the expected accuracy range is between 3 and 12 times that of a Class 1 estimate. A Class 1 estimate can be expected to vary from +6% to -4%. We can evaluate the narrowest and broadest expected capital cost ranges as: Lowest Expected Cost Range High value for actual plant cost ($2.0 x 106)[1 + (0.06)(3)] = $2.36 X 106 Low value for actual plant cost ($2.0 x 106)[1 - (0.04)(3)] = $1.76 x 106

Highest Expected Cost Range High value for actual plant cost ($2.0 x 106)[1 + (0.06 )(12)] = $3.44 x 106 Low value for actual plant cost ($2.0 x 106)[1 - (0.04 )(12)] = $1.04 x 106

The actual expected range would depend on the level of project definition and effort. If the effort and definition are at the high end, then the expected cost range would be between $1.76 and $2.36 million. If the effort and definition are at the low end, then the expected cost range would be between $1.04 and $3.44 million.

Example 5.2 Compare the costs for performing an order-of-magnitude estimate and a detailed estimate for a plant that cost $5.0 x 106 to build.

Solution :For the order-of-magnitude estimate, the cost of the estimate is in the range of 0.015% to 0.3% of the final cost of the plant:

Highest Expected Value: ($5.0 x 106)(0.003) = $15,000 Lowest Expected Value: ($5.0 x 106)(0.00015) = $750 For the detailed estimate, the cost of the estimate is in the range of 10 to 100 times that of the order-of-magnitude estimate

For the lowest expected cost range

Highest Expected Value: ($5.0 x 106 )(0.03) = $150,000 Lowest Expected Value: ($5.0 x 106)(0.0015) = $7500

For the highest expected cost range: Highest Expected Value: ($5.0 x 106)(0.3) = $1,500,000 Lowest Expected Value: ($5.0 x 106)(0.015) = $75,000

Estimating Purchased Equipment Costs

Vendor quote Vendor quote Most accurate Most accurate

- based on specific information based on specific information - requires significant engineering requires significant engineering

Use previous cost on similar equipment and scale for Use previous cost on similar equipment and scale for time and size time and size Reasonably accurate Reasonably accurate

- beware of large extrapolation beware of large extrapolation - beware of foreign currency beware of foreign currency

Use cost estimating charts and scale for time Use cost estimating charts and scale for time Less accurate Less accurate ConvenientConvenient

Effect of Size (Capacity)n

b

a

b

a

A

A

C

C

Cost Equipment Cost Attribute - Size

Cost Exponent

naa KAC

bn

b

CK

A

(5.1)

where

(5.2)

Effect of Capacity on Purchased Equipment Cost

where

a

b

na

nb

C K A

K C A

Effect of Size (Capacity) cont.

nn = 0.4 – 0.8 Typically = 0.4 – 0.8 Typically Often Often nn ~ 0.6 and we refer to Eq.(5.1) as the ~ 0.6 and we refer to Eq.(5.1) as the

(6/10)’s Rule (6/10)’s Rule Assume all equipment have Assume all equipment have nn = 0.6 in a = 0.6 in a

process unit and scale-up using this method process unit and scale-up using this method for whole processes for whole processes Order-of-Magnitude estimateOrder-of-Magnitude estimate

Effect of Capacity on Purchased Equipment Cost

Example 5.3 : Use the six-tenths-rule to estimate the % increase in purchased cost when the capacity of a piece of equipment is doubled. Using Equation 5.1 with n = 0.6:

Ca./Cb = (2/1)0.6 = 1.52 % increase = (1.52 -1.00)/1.00)(100) = 52%

The larger the equipment, the lower the cost of equipment per unit of capacity.

Economy of Scale

Economy of Scale

Example 5.4 Compare the error for the scale-up of a heat exchanger by a factor of 5 using the six-tenth- rule in place of the cost exponent given in Table 5.3.

Using Equation 5.1: Cost ratio using six-tenth-rule (i.e. n = 0.60) = 5.00.6 = 2.63 Cost ratio using (n =0.59) from Table 5.3 = 5.00.59 = 2.58

% Error = (2.63 -2.58)/2.58)(100) = 1.9 %

Effect of Capacity on Purchased Equipment Cost

Rearranging equation 5.2

1

n

n

C K A

CK A

A

Equation for Time Effect

CC = Cost = Cost II = Value of cost index = Value of cost index 1,2 = Represents points in time at which 1,2 = Represents points in time at which

costs required or known and index values costs required or known and index values knownknown

1

212 I

ICC

Effect of Time on Purchased Equipment Cost

Effect of Time on Purchased Equipment Cost

Example 5.6The purchased cost of a heat exchanger of 500 m2 area in 1990 was $25,000. a. Estimate the cost of the same heat exchanger in 2001 using the two indices introduced above. b. Compare the results.

From Table 5.4: 1990 2001 Marshal and Swift Index 915 1094 Chemical Engineering Plant Cost Index 358 397 a. Marshal and Swift: Cost = ($25,000)(1094/915) = $29,891 Chemical Engineering: Cost = ($25,000)(397/358) = $27,723 b. Average Difference: ($29,891 -27,723)/($29,891 + 27,723)/2)(100) = 7.5%

Marshal & Swift and CEPCI

Table 5.5: The Basis for the Chemical Engineering Plant Cost Index    

Components of Index Weighting of Component (%)

Equipment, Machinery and Supports:   (a) Fabricated Equipment (b) Process Machinery (c) Pipe, Valves, and Fittings (d) Process Instruments and Controls (e) Pumps and Compressors (f) Electrical Equipment and Materials • Structural Supports, Insulation, and

Paint

   

37 14 20

7 7 5

10 100 61 % of total

Erection and Installation Labor 22

Buildings, Materials, and Labor 7

Engineering and Supervision 10

Total 100

Example 5.7The capital cost of a 30,000 metric ton/year isopropanol plant in 1986 was estimated to be $7 million. Estimate the capital cost of a new plant with a production rate of 50,000 metric tons/year in 2001.

Cost in 2001 = (Cost in 1986)(Capacity Correction) (Inflation Correction)

= ($7,000,000)(50,000/30,000)°.6(397/318) =($7,000,000)(1.359)(1.248) = $11,870,000

Factors affecting Capital Cost

• Direct project expenses

• Indirect project expenses

• Contingency and fee

• Auxiliary facilities

1. Direct project expenses

Factor Symbol Comments

Equipment

f.o.b. cost

Cp Purchased cost of equipment at manufacturer's site

Materials CM Includes all piping, insulation and installation fireproofing, foundations and structural supports, instrumentation and electrical, and painting associated with the equipment

Labor CL Includes all labor associated with equipment and material installing mentioned above

2. Indirect project expenses

Factor Symbol Comments

Freight, insurance, and taxes

CFIT transportation costs for shipping equipment and materials to the plant site, all insurance on the items shipped, and any purchase taxes that may be applicable

Construction overhead

CO Includes all fringe benefits such as vacation, sick leave retirement benefits; etc.; labor burden such as social security and unemployment insurance, etc.; and salaries and overhead for supervisory personnel

Contractor engineering expenses

CE salaries and overhead for the engineering, drafting, and project management personnel on the project

3. Contingency and fee

Factor Symbol Comments

Contingency CCont A factor to cover unforeseen circumstances. These may include loss of time due to storms and strikes, small changes in the design, and unpredicted price increases.

Contractor fee

CFee fee varies depending on the type of plant and a variety of other factors

4. Auxiliary facilities Factor Symbol Comments

Site development

CSite land; grading and excavation of the site; installation and hook-up of electrical, water, and sewer systems; and construction of all internal roads, walkways, and parking lots

Auxiliary buildings

CAux administration offices, maintenance shop and control rooms, warehouses, and service buildings

Off-sites and utilities

COff raw material and final product storage & loading & unloading facilities; all equipment necessary to supply required process utilities; central environmental control facilities; and fire protection systems

Capital Cost Modules

1. Total Module Cost (Lang Factor)

2. Bare Module Cost

Lang Factor

Chemical Plant Type Lang Factor FlangFluid Processing Plant 4.74

Solid-Fluid Processing Plant 3.63

Solid Processing Plant 3.10

n

ipiLangTM CFC

1

Purchased Cost of Major Equipment From Preliminary PFD

(Pumps, Compressors, vessels, etc.)

Total Module Cost

Lang Factor

Example 5.8:

Determine the capital cost for a major expansion to a fluid processing plant that has a total purchased equipment cost of $6,800,000.

Capital Costs = ($6,800,000)(4.74) = $32,232,000

Lang Factor

• Advantage

1. Easy to apply.

• Drawbacks

1. Special MOC.

2. High operating pressure.

Module Factor Approach

• Table 5.8

• Direct, Indirect, Contingency and Fees are expressed as functions (multipliers) of purchased equipment cost at base conditions (1 bar and CS)

• Each equipment type has different multipliers

• Details given in Appendix A

opC

Module Factor Approach

Bare Module Cost

Purchased Equipment Cost for CS and 1 atm pressure - Appendix A

Bare Module Factor (sum of all multipliers)

FBM = B1 + B2FpFM

Fp = pressure factor (= 1 for 1 bar)

FM = material of construction factor (=1 for CS)

1 2oBMF B B

op p p MC C F F

BMopBM FCC

Bare Module Cost

0 1 1BM M L FIT L O EF

0BMF

0BMC

Example 5.9The purchased cost for a carbon steel heat exchanger operating at ambient pressure is $10,000. For a heat exchanger module given the following cost information:

Item % of Purchased Equipment CostEquipment 100.0Materials 71.4Labor 63.0Freight 8.0Overhead 63.4Engineering 23.3

Using the information given above, determine the equivalent cost multipliers given in Table 5.8 and the following:a. Bare module cost factor, b. Bare module cost,

a. Using Equation 5.8: = (1 + 0.368 + 0.047 + (1.005)(0.368) + 0.136)(1 + 0.714) = 3.291b. From Equation 5.6: = (3.291)($10,000) = $32,910

Item % of Purchased Equipment Cost

Cost Multiplier Value of Multiplier

Equipment 100.0 1.0

Materials 71.4 0.714

Labor 63.0 0.63/(1+0.714)= 0.368

Freight 8.0 0.08/(1+0.714)= 0.047

Overhead 63.4 0.634/0.368/

(1+0.714)= 1.005

Engineering 23.3 0.233/(1+0.714) = 0.136

M

L

FIT

O

E

0BMF

0BMC

Module Factor Approach

Bare Module Cost

Purchased Equipment Cost for CS and 1 atm pressure - Appendix A

Bare Module Factor (sum of all multipliers)

FBM = B1 + B2FpFM

Fp = pressure factor (= 1 for 1 bar)

FM = material of construction factor (=1 for CS)

1 2oBMF B B

op p p MC C F F

BMopBM FCC

Bare Module Cost Factor

For Heat Exchangers, Process vessels, and pumps

0 01 2

01 2

BM P BM P M P

BM

C C F C B B F F

F B B

Material Factor, FM, for these equipment are obtained from Figure A.8 along with Table A.3.

Values of B1 and B2 are given in Table A.4

Bare Module Cost FactorFor Heat Exchangers, Process vessels, and pumps

Values of B1 and B2 are given in Table A.4

Module Factor Approach – Pressure Factors

Pressure Factor for vesselsPressure Factor, FP , for other equipment are given in table A.6 along with Figure A.9

,

( 1)0.0315

2 850 0.6( 1)0.0063

0.0063P vessel vessel

P DP

F for t m

If FP is less than 1, then FP= 1.0

For P less than -0.5 barg, FP = 1.25

Pressure Factor for Other Equipment

Pressure Factor, FP , for other equipment are given in table A.6 along with Figure A.9

Constants are given in Table A.2

2

10 1 2 10 3 10log log logPF C C P C P

Module Factor Approach – Material Factors

Bare Module Cost FactorFor equipment not covered in table A.3

Material Factor

Material Factor, FM , for other equipment are given in table A.6 along with Figure A.9

Purchased Equipment Cost

2010 1 2 10 3 10log log ( ) log ( )pC K K A K A

Where A is the capacity or size parameter for the equipmentK1, K2, and K3 are given in table A.1

These data are also presented in the form of graphs in Figures A.1-A.7

Illustrative Example

Compare Costs for Compare Costs for 1. Shell-and-tube heat exchanger in 1. Shell-and-tube heat exchanger in

2001 with an area = 100 m 2001 with an area = 100 m2 2

for for Carbon Steel at 1 bar Carbon Steel at 1 bar Carbon Steel at 100 bar Carbon Steel at 100 bar Stainless Steel at 1 bar Stainless Steel at 1 bar Stainless Steel at 100 barStainless Steel at 100 bar

Effect of Materials of Construction and Pressure on Bare Module Cost

PP MOCMOC CCp p CCBM BM

1 bar1 bar CSCS 25 K25 K 25 K25 K 82.3 K82.3 K 82.3 K82.3 K

1 bar1 bar SSSS 25 K25 K 68.3 K68.3 K 82.3 K82.3 K 154 K154 K

100 bar100 bar CSCS 25 K25 K 34.6 K34.6 K 82.3 K82.3 K 98.1 K98.1 K

100 bar100 bar SSSS 25 K25 K 94.4 K94.4 K 82.3 K82.3 K 197.4 197.4 KK

opC o

BMC

Bare-Module and Total-Module Costs BM – Previously Covered BM – Previously Covered TM – Includes Contingency and Fees at TM – Includes Contingency and Fees at

15% and 3% of BM15% and 3% of BM

all equip

1.18TM BMC C

Grass-Roots Costs

GR – grass-roots cost includes costs for GR – grass-roots cost includes costs for auxiliary facilities auxiliary facilities

Use base BM costs in GR cost (1 atm and Use base BM costs in GR cost (1 atm and

CS) since auxiliary facilities should not CS) since auxiliary facilities should not depend on pressure or M.O.C. depend on pressure or M.O.C.

all equip

0.50 oGR BM TMC C C

Materials of Construction

Very important Very important Table 5.9 – rough guide Table 5.9 – rough guide Perry’s – good source Perry’s – good source

Capcost

Calculates costs based on input Calculates costs based on input CEPCI – use current value of 401 or CEPCI – use current value of 401 or

latest from latest from Chemical Engineering Chemical Engineering Program automatically assigns Program automatically assigns

equipment numbersequipment numbers