Determination of Foreign Country Estimating Factors

Werner Pehlke HGCS aacei Meeting February 8th, 2011 - Houston

Determination of Foreign Country Factors Occasion

Globalization of industrial production is increasing Increasing investments in new production sites in foreign countries Challenge for Cost Engineering Constantly extension of data bases Maintenance of foreign country cost data

Determination of Foreign Country Factors

Basic Model

FC costs are function of material price level and labor costs Material costs most often follow world market price levels Labor costs are function of hourly rates and productivity Labor costs are specific for the region or even country specific
Labor Labor

Material

Material

Western World

Low Cost Countries

Data collection challenging

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Determination of Foreign Country Factors

Advantages for Factor Approach

Significant less data required for foreign country estimates Less effort for data maintenance Available data for certain items can be used for similar other items were no data is available (e.g. similar equipment types) Analogies for different countries with similar economical boundary conditions possible BASF maintains factors for approx. 40 countries w/ up to 165 factors per country

Factor approach more economically

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Determination of Foreign Country Factors

Granularity of Factors

Bezeichnung Civil
Kanle Straen Parkpltze Grnanlagen Gleise Weichen Rohrbrcken Pfahlgrndung Erdarbeiten (incl. Erschlieung) Betonbau Stahlbau Ausbau (Fenster, Tren, Dachdeckarbeiten) Sureschutz Brandschutz Technische Bearbeitung Bauleitung Bauhilfsarbeiten

DomAnteil
100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00%

Imp.Ant.
0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00%

Dom.Fakt.
1,19 1,19 1,19 1,19 1,19 1,19 1,19 1,20 1,20 1,20 1,32 0,84 0,84 0,84 1,26 1,26 1,14

Importzusa Anteile in tzkosten Gruppen

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 2,33% 1,00% 1,00% 1,00% 0,33% 0,33% 4,33% 2,00% 0,67% 28,67% 26,00% 10,67% 0,67% 0,33% 9,67% 2,67% 8,33%

Different factors for different cost groups and even different cost items required (up to 165 per country in order to cover different project structures) Equipment, civil, electrical & instrumentation, piping etc. Carbon steel / stainless steel Domestic / imported Execution strategy EPC, complete owners engineering etc.

. . . Equipment
Wasserpumpe, CS, P<15kW Wasserpumpe, SS, P<15kW Chemie-Normpumpe, CS, einfache Ausfhrung Chemie-Normpumpe, SS, einfache Ausfhrung Chemie-Normpumpe, CS, >250m/h, >200m Chemie-Normpumpe, SS, >250m/h, >200m Spaltrohrmotorpumpe, CS Spaltrohrmotorpumpe, SS Magnetgekuppelt, CS, P<7,5 kW Magnetgekuppelt, SS, P<7,5 kW Dosierpumpe, CS Dosierpumpe, SS Ventilator, CS Ventilator, SS Vakuumpumpe, low power, dp<600mbar Klteanlage N2-Verdichter Proze-Verdichter, Schraubenverdichter l-freie Verd. p<100bar, Wasserstoff-Verd. Hebeeinrichtungen Frdereinrichtungen 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 1,21 1,21 1,21 1,21 1,21 1,21 0,88 0,88 0,88 0,88 1,05 1,05 1,02 1,02 1,10 1,01 1,10 1,10 1,10 1,13 1,13 1,13 1,13 1,13 1,13 1,13 1,13 1,13 1,13 1,13 1,13 1,13 1,13 1,13 1,13 1,13 1,13 1,13 1,13 1,13 1,13 1,13 0,06% 0,30% 0,26% 1,23% 0,06% 0,30% 0,28% 1,47% 0,38% 1,68% 0,06% 0,26% 0,30% 1,45% 1,25% 7,27% 0,12% 0,52% 0,12% 3,03% 3,33%

. . .

Determination of Foreign Country Factors

Basic Methods for Factor Generation

Factor calculation from executed Projects and / or external sources

Analogy Method

Mathematical Method

Application depends on availability of Sources

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Determination of Foreign Country Factors

Sources for Factor Generation

Internal Sources: Executed Projects Frame Contracts for Material & Services Hourly Rates & Productivity Evaluation

External Sources: Public or Purchased Data e.g. EC Harrison, Eurostat, IPA-Reports etc. Contractor Data Regional experienced contractors

Determination of Foreign Country Factors

Generation of Factors General Calculation Scheme
MADE IN GERMANY MADE IN USA

DIN
100.000 status

ASME
Kostenbasis Lu

Mat. of Construction: Heat Exch. Area: Tubeside pressure: Shellside pressure:

1.4541 93 m 40 bar 10 bar

Mat. of Construction: 304 L

10.000

p = 6 / 6 1.000 1 10 100 Wrmeaustauschflche [m] 1000

Heat. Exch. Area: 1000 sq. ft Tubeside pressure: 580 psi Shellside pressure: 145 psi

(= 1.4541) (= 93 m) (= 40 bar) (= 10 bar)

Estimated costs LU: 31.500 EUR Factor 0,9 EUR-USA 28.500 EUR

K s n [D ] o te M

Actual purchasing cost: 37.000 USD Exchange rate 1,30 USD/EUR

LU Conditions

Foreign Conditions

Factor includes code & standard conversion and labor & productivity adjustment
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Determination of Foreign Country Factors

Analysis of Executed Projects

Analysis of executed projects serves as a main source for foreign country factors Re-estimating as built quantities with most current tools & cost data Calculating foreign country factors for each Cost Item Evaluating factors by printing graphs and applying a smoothing function

Determination of Foreign Country Factors

Goods Basket

s pecification

Material

Flow (m/h)

Head

Seal

Unit

LU Price (Euro)

Local Price (Local Currency)

faktor

SS

10

30

Single

4900

SS Centrifugal Pump without Motor Cas t Iron

30

30

Single Cos t per Unit

5300

30

30

Single

4600

SS

30

30

Canned

7900

Goods basket with Key Quantities for all disciplines available Contractor or local engineering unit should be able to fill out Due to complexity of key quantities and specific costs explanation required

s pecification

Power (kW)

Voltage (V)

Other

Unit

LU Price (Euro)

Local Price (Local Currency)

Explos ion proof type

500 Cos t per Unit

G u D , Eu m t ro p -G q ip en

Motor

400 ...

s pecification

Material

Area [m)

Pres s ure Shell (bar)

Unit

LU Price (Euro)

Local Price (Local Currency)

CS Tube Heat Exchanger SS 10 5 Cos t per Unit

6000

9000

CS Plate Heat Exchanger SS 10 5 Cos t per Unit

3000

s pecification

Material

Capacity [m)

Pres s ure Shell (bar)

Unit

LU Price (Euro)

Local Price (Local Currency)

Proces s Ves s el without agitator

SS

20

15 / (-1)

Cos t per unit

80000

CS

29000

Vetical Storage Tank

SS

100

pres s ureles s Cos t per Unit

49000

FRP

35000

CS Vertical Ves s el SS 10 4

13000

19000

Factor evaluation on estimating basis

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Determination of Foreign Country Factors

Fantage Planning Package

Planning Package for fictitious plant available Civil description, P&IDs, equipment list, pipeline list, instrument list Utilized for factor evaluation with contractors and inhouse engineering units

Factor evaluation on estimating basis

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Determination of Foreign Country Factors

Analogy Model

X-Country

Singapur

1 DM = 0,87 SGD Anteil LU Gewichtung %

0

1 EUR = x.x YYY

Dez 99

Date

Domestic-Faktoren
Umfang Quelle 1 Quelle 2
1

Gruppe

Singapur X-Country min 0,95 0,95 0,95 0,90 0,90 0,92 0,89 0,93 1,00 0,93 0,92 0,99 0,99 0,98 0,98 1,07 1,04 1,06 1,05 1,03 1,03 1,03 1,04 durch. 0,90 0,90 0,90 0,87 0,87 0,88 0,87 0,89 0,93 0,89 0,88 0,93 0,93 0,93 0,93 1,07 1,03 1,06 1,05 1,02 1,02 1,02 1,03 max 0,85 0,85 0,85 0,84 0,84 0,85 0,84 0,85 0,86 0,85 0,85 0,88 0,87 0,89 0,88 1,07 1,02 1,06 1,04 1,00 1,00 1,00 1,02

Spalte

GesamtFaktor gewhlt

bisher Faktoren Blatt stand 12.99

Vergleichen mit
Y-Country China China

Well known country of the same region used as a reference Labor costs & efficiencies needs to be similar Raw material availability (eg. steel mills etc.) needs to be comparable Serves as Check & Balance during factor evaluation process

D-G

1,8 2,7 1,8 2,7 4 30 26,2 9,1 10,1 11,6 100 49,5 11,7 38,8 100 30 40 30 100 25 10 13 52

Erschlieung Straen Kanle Rohrbrcken Pfhlung Beton Stahlbau Ausbau Techn. Bearb. Bauhilfsarb. Durchschnitt Gr. A Isolierung Anstrich HKL Durchschnitt Gr. B Fahrzeuge, Werkz. Laborg., Mbel EDV Durchschnitt Gr. C Serienmasch. Sondermaschinen Apparate CS Apparate SS

0,66 0,66 0,66 0,66 0,83 1,02 1,02 1,02 1,02 0,83 0,96 1,18 0,83 1,00 1,07 1,22 0,61 1,00 0,91 0,93 1,22 0,93 1,22

Factor evaluation on estimating basis

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Determination of Foreign Country Factors

Mathematical Model (Plausibility)

< = D ie s e r A n te il ndern

Land: Mexiko X-Country Stand: Dez 99 bei Wechselkurs:

Status: Date

1DM = 5,07 LW Rate:

2 Verteilung Material-Anteil = Rohr CS 2 (LW=Landeswhrung) x % Dom."Offshore"-Anteil + (1-x) % Dom."Onshore"-Anteil Rohr SS 2 x = 0,95 Platte Fertigungs-Anteil MaschMaterial-Anteil Gruppe Gre GesamtMat.- Domestic Domestic Offshore - Onshore - Fert.- Faktor Arbeits- Arbeits- Anteil Faktor anteil "Offshore" - "Onshore" - Faktor Faktor Anteil anteil Faktor Masch-Faktor Anteil Anteil
Exchange

Wurde mit den von Mixed Currency korrigiert Faktoren gerechnet

Proposer valeur du A une

For equipment for instance material, fabrication & labor and onshore & offshore portion is calculated separately Respective factors for the different portions above are applied and a composite factor is calculated The factor from other methods will be compared with the composite factor as a plausibility check

Rohrbndel type Equipment CS X

m2 10 50 100 250 500 m2 10 50 100 250 500 m2 10 50 100 250 500

Durchschnitt Gr. A Rohrbndel SS Equipment type Y

30% 33% 36% 50% 70% 44% 40% 50% 60% 65% 70% 57% 55% 58% 60% 60% 60% 59%

29% 31% 34% 48% 67% 42% 38% 48% 57% 62% 67% 54% 52% 55% 57% 57% 57% 56%

2% 2% 2% 3% 4% 2% 2% 3% 3% 3% 4% 3% 3% 3% 3% 3% 3% 3%

1,00 1,00 1,00 1,00 1,00

1,27 1,27 1,27 1,27 1,27

70% 67% 64% 50% 30% 56% 60% 50% 40% 35% 30% 43% 45% 42% 40% 40% 40% 41%

0,68 0,68 0,68 0,68 0,68

70% 67% 64% 50% 30% 56% 60% 50% 40% 35% 30% 43% 45% 42% 40% 40% 40% 41%

0,68 0,68 0,68 0,68 0,68

0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

1,00 1,00 1,00 1,00 1,00

0,78 0,79 0,80 0,85 0,91 0,83 0,81 0,85 0,88 0,90 0,91 0,87 0,86 0,87 0,88 0,88 0,88 0,88

1,00 1,00 1,00 1,00 1,00

1,27 1,27 1,27 1,27 1,27

0,68 0,68 0,68 0,68 0,68

0,68 0,68 0,68 0,68 0,68

1,00 1,00 1,00 1,00 1,00

Durchschnitt Gr. A Platten-WT Equipment type Z

1,00 1,00 1,00 1,00 1,00

1,27 1,27 1,27 1,27 1,27

0,68 0,68 0,68 0,68 0,68

0,68 0,68 0,68 0,68 0,68

1,00 1,00 1,00 1,00 1,00

Durchschnitt Gr. A

Factor evaluation based on analytical model

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Determination of Foreign Country Factors

Maintaining Factor Basis

Factornew = Factorold X Foreign Price Index LU Price Index

e.g.:
220,0 210,0 200,0 190,0 180,0 170,0 INDEX 160,0 150,0 140,0 130,0 120,0 110,0 100,0 90,0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 YEAR

Factors were influenced by inflation rates from home base country and foreign country Update to current conditions necessary for estimating purpose
USGC Lu

Factor = 0,9
old (1990)

1 EUR = 1,3 USD

Factor = 1,4
MoE (2009)

Historical

Forecast

Ration of inflation rates can be used for update Reevaluation necessary after certain period of time

Factor update by means of inflation ratios

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Determination of Foreign Country Factors

Estimating with foreign country factors

Factor

DOMESTIC Foreign
Specific Costs

Project Scope

Country

Costs

IMPORTED

Exchange Rate

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Determination of Foreign Country Factors

Estimating with foreign country factors

M ADE ING ANY ERM

MADEINUSA

Factors will be updated with ratio of inflation rates

ASM E

DIN
s ta tu s 1 00 .0 0 0

Kostenb asis Lu

Mat. of Construction: Heat Exch. Area: Tubeside pressure: Shellsidepressure:

1.4541 93 m 40 bar 10 bar

M of Construction: 304L at.

10 .0 0 0

p =6 / 6

1 .0 0 0 1 10 100 W rme a u st a u sc h fl ch e [m ] 10 0 0

(=1.4541) Heat. Exch. Area: 1000sq. ft (=93m) Tubesidepressure: 580 psi (=40bar) S hellside pressure: 145psi (=10bar)

Estimating of cost items with home database per today (overnight) Application of factors & related exchange rate (reverse calculation from factor evaluation) Application of foreign country inflation rate to midpoint of expenditure

Estim costs LU 31.500 EU ated : R Factor 0,9 EU -U R SA 28.500 EU R

K o s te n

[D

A ctual purchasing co 37.000 USD st: Exchange rate 1,30 U /EU SD R

LUConditions

Foreign C onditions

Results in foreign country conditions & currency

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Determination of Foreign Country Factors

Influences on Foreign Country Estimates Project-Specific Influences:
Project cost structure Standard practices (eg. Steel vs. concrete) Material of construction

Site Influences:

Economic Influences:
Currency parities

Climatic conditions Legal requirements, codes, standards Salary level Existing infrastructure and logistics

Duties/Taxes

Inflation Possible special local-market influences

Import/Domestic Split

Execution Strategy

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Determination of Foreign Country Factors

Most common traps w/ comparing foreign investment figures

Scope is not comparable e.g. Verbund site vs. stand alone site Factors from former projects applied with different exchange rate High inflation ratio compared to former project (e.g. situation at Gulf Coast region after hurricane Katrina) Different execution strategies apply

Cost Engineering can support Apples to Apples- Comparison

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Determination of Foreign Country Factors

Cost Engineering can support Apples to Apples- Comparison

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