chapter 5
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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