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Capital Cost Estimation

Chapter 5Types of Capital Cost Estimate1. Order of Magnitude Estimate (Feasibility) 2. Study Estimate / Major Equipment 3. Preliminary Design (Scope) Estimate 4. Definitive (Project Control) Estimate 5. Detailed (Firm or Contractors) Estimate

Capital Cost Estimate ClassificationsEstimate TypeAccuraceyDataDiagramsNotesOrder of Magnitude+ 25%, - 15%Existing plantsBFDCapacity + inflationStudy (Major equipment, Factored)+ 30%, - 20%Roughly sized major equipmentPFDGeneralized charts costPreliminary Design (scope)+ 25%, - 15%major equip. + piping + instr. + Elec. + util.PFDGroup projectDefinitive+ 15%, - 7%Prelim spcs for all equipmentPFD + P&IDDetailed (firm or contractor+ 6%, - 4%Complete engineeringCapital 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 CostsVendor quote Most accurate based on specific information requires significant engineering Use previous cost on similar equipment and scale for time and size Reasonably accurate beware of large extrapolation beware of foreign currency Use cost estimating charts and scale for time Less accurate ConvenientEffect of Size (Capacity)

CostEquipment Cost Attribute - SizeCost Exponent

(5.1)where(5.2)

Effect of Capacity on Purchased Equipment Cost

Effect of Size (Capacity) cont.n = 0.4 0.8 Typically Often n ~ 0.6 and we refer to Eq.(5.1) as the (6/10)s Rule Assume all equipment have n = 0.6 in a process unit and scale-up using this method for whole processes Order-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 ScaleEconomy of ScaleExample 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

Equation for Time Effect C = Cost I = Value of cost index 1,2 = Represents points in time at which costs required or known and index values known

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 10061% 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 CostDirect project expenses Indirect project expensesContingency and fee Auxiliary facilities 1. Direct project expenses Factor SymbolCommentsEquipment f.o.b. cost Cp Purchased cost of equipment at manufacturer's site MaterialsCM Includes all piping, insulation and installation fireproofing, foundations and structural supports, instrumentation and electrical, and painting associated with the equipment LaborCL Includes all labor associated with equipment and material installing mentioned above2. Indirect project expenses Factor SymbolCommentsFreight, 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 SymbolCommentsContingency 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 SymbolCommentsSite 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 buildingsOff-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 systemsCapital Cost ModulesTotal Module Cost (Lang Factor)Bare Module CostLang Factor Chemical Plant Type Lang Factor FlangFluid Processing Plant4.74Solid-Fluid Processing Plant

3.63Solid Processing Plant

3.10

Purchased Cost of Major Equipment From Preliminary PFD (Pumps, Compressors, vessels, etc.)Total Module CostLang FactorExample 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 AdvantageEasy to apply.DrawbacksSpecial MOC.High operating pressure.Module Factor ApproachTable 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

Module Factor ApproachBare Module CostPurchased Equipment Cost for CS and 1 atm pressure - Appendix ABare Module Factor (sum of all multipliers)FBM = B1 + B2FpFM

Fp = pressure factor (= 1 for 1 bar) FM = material of construction factor (=1 for CS)

Bare Module Cost

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 23.3Using 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 CostCost MultiplierValue of MultiplierEquipment100.01.0Materials71.40.714Labor63.00.63/(1+0.714)= 0.368Freight8.00.08/(1+0.714)= 0.047Overhead63.40.634/0.368/(1+0.714)= 1.005Engineering23.30.233/(1+0.714) = 0.136

Module Factor ApproachBare Module CostPurchased Equipment Cost for CS and 1 atm pressure - Appendix ABare Module Factor (sum of all multipliers)FBM = B1 + B2FpFM

Fp = pressure factor (= 1 for 1 bar) FM = material of construction factor (=1 for CS)

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

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.4Bare Module Cost FactorFor Heat Exchangers, Process vessels, and pumpsValues 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

If FP is less than 1, then FP= 1.0

For P less than -0.5 barg, FP = 1.25Pressure Factor for Other EquipmentPressure Factor, FP , for other equipment are given in table A.6 along with Figure A.9Constants are given in Table A.2

Module Factor Approach Material Factors

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

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

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 ExampleCompare Costs for 1. Shell-and-tube heat exchanger in 2001 with an area = 100 m2 for Carbon Steel at 1 bar Carbon Steel at 100 bar Stainless Steel at 1 bar Stainless Steel at 100 barEffect of Materials of Construction and Pressure on Bare Module CostPMOCCp

CBM

1 barCS25 K25 K82.3 K82.3 K1 barSS25 K68.3 K82.3 K154 K100 barCS25 K34.6 K82.3 K98.1 K100 barSS25 K94.4 K82.3 K197.4 K

Bare-Module and Total-Module CostsBM Previously Covered TM Includes Contingency and Fees at 15% and 3% of BM

Grass-Roots CostsGR grass-roots cost includes costs for auxiliary facilities Use base BM costs in GR cost (1 atm and CS) since auxiliary facilities should not depend on pressure or M.O.C.

Materials of ConstructionVery important Table 5.9 rough guide Perrys good source CapcostCalculates costs based on input CEPCI use current value of 401 or latest from Chemical Engineering Program automatically assigns equipment numbers