Capital Cost Estimation

Chapter 5
Types of Capital Cost Estimate
1. 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 Classifications
Estimate Type Accuracey Data Diagrams Notes
Order of
Magnitude
+ 25%, - 15% Existing plants BFD Capacity +
inflation
Study (Major
equipment,
Factored)
+ 30%, - 20% Roughly sized major
equipment
PFD Generalized
charts cost
Preliminary
Design (scope)
+ 25%, - 15% major equip. + piping
+ instr. + Elec. + util.
PFD Group project
Definitive + 15%, - 7% Prelim spcs for all
equipment
PFD +
P&ID
Detailed (firm or
contractor
+ 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 10
6
)[1 + (0.06)(3)] = $2.36 X 10
6

Low value for actual plant cost ($2.0 x 10
6
)[1 - (0.04)(3)] = $1.76 x 10
6


Highest Expected Cost Range
High value for actual plant cost ($2.0 x 10
6
)[1 + (0.06 )(12)] = $3.44 x 10
6

Low value for actual plant cost ($2.0 x 10
6
)[1 - (0.04 )(12)] = $1.04 x 10
6


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 10
6
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 10
6
)(0.003) = $15,000
Lowest Expected Value: ($5.0 x 10
6
)(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 10
6
)(0.03) = $150,000
Lowest Expected Value: ($5.0 x 10
6
)(0.0015) = $7500

For the highest expected cost range:
Highest Expected Value: ($5.0 x 10
6
)(0.3) = $1,500,000
Lowest Expected Value: ($5.0 x 10
6
)(0.015) = $75,000
Estimating Purchased Equipment Costs
Vendor 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
Convenient
Effect of Size (Capacity)
n
b
a
b
a
A
A
C
C
|
.
|

\
|
=
Cost
Equipment Cost
Attribute - Size
Cost Exponent
n
a a KA C =
b
n
b
C
K
A
=
(5.1)
where
(5.2)
Effect of Capacity on Purchased Equipment Cost




where
a
b
n
a
n
b
C K A
K C A
=
=
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:

C
a
./C
b
= (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) = 5.0
0.6
= 2.63
Cost ratio using (n =0.59) from Table 5.3 = 5.0
0.59
= 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
C
K A
A

=
=
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
|
|
.
|

\
|
=
1
2
1 2
I
I
C C
Effect of Time on Purchased Equipment Cost




Effect of Time on Purchased Equipment Cost




Example 5.6
The 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
(g) 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 5.7
The 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 C
M
Includes all piping, insulation and installation
fireproofing, foundations and structural
supports, instrumentation and electrical, and
painting associated with the equipment
Labor C
L
Includes all labor associated with equipment
and material installing mentioned above
2. Indirect project expenses
Factor Symbol Comments
Freight,
insurance,
and taxes
C
FIT
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
C
O
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
C
E
salaries and overhead for the engineering,
drafting, and project management personnel
on the project
3. Contingency and fee
Factor Symbol Comments
Contingency C
Cont
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
C
Fee
fee varies depending on the type of plant and
a variety of other factors
4. Auxiliary facilities
Factor Symbol Comments
Site
development
C
Site
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
C
Aux
administration offices, maintenance shop and
control rooms, warehouses, and service
buildings
Off-sites and
utilities
C
Off
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 F
lang

Fluid Processing Plant 4.74
Solid-Fluid Processing Plant

3.63
Solid Processing Plant

3.10

=
=
n
i
pi Lang TM
C F C
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
( )
o
p
C
Module Factor Approach
Bare Module
Cost
Purchased Equipment Cost for CS
and 1 atm pressure - Appendix A
Bare Module Factor
(sum of all multipliers)
F
BM
= B
1
+ B
2
F
p
F
M


F
p
= pressure factor (= 1 for 1 bar)
F
M
= material of construction factor (=1 for CS)
1 2
o
BM
F B B = +
o
p p p M
C C F F =
BM
o
p BM
F C C =
Bare Module Cost
( )( )
0
1 1
BM M L FIT L O E
F o o o o o o = + + + + +
0
BM
F
0
BM
C
Example 5.9
The 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 Cost
Equipment 100.0
Materials 71.4
Labor 63.0
Freight 8.0
Overhead 63.4
Engineering 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) = 3.291
b. 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
o
L
o
FIT
o
O
o
E
o
0
BM
F
0
BM
C
Module Factor Approach
Bare Module
Cost
Purchased Equipment Cost for CS
and 1 atm pressure - Appendix A
Bare Module Factor
(sum of all multipliers)
F
BM
= B
1
+ B
2
F
p
F
M


F
p
= pressure factor (= 1 for 1 bar)
F
M
= material of construction factor (=1 for CS)
1 2
o
BM
F B B = +
o
p p p M
C C F F =
BM
o
p BM
F C C =
Bare Module Cost Factor
For Heat Exchangers, Process vessels, and pumps
( )
( )
0 0
1 2
0
1 2
BM P BM P M P
BM
C C F C B B F F
F B B
= = +
= +
Material Factor, F
M
, for these equipment are obtained from Figure A.8
along with Table A.3.

Values of B
1
and B
2
are given in Table A.4

Bare Module Cost Factor
For Heat Exchangers, Process vessels, and pumps
Values of B
1
and B
2
are given in Table A.4

Module Factor Approach Pressure Factors
Pressure Factor for vessels
Pressure Factor, F
P
, for other equipment are given in table A.6
along with Figure A.9
| |
,
( 1)
0.0315
2 850 0.6( 1)
0.0063
0.0063
P vessel vessel
P D
P
F for t m
+
+
+
= >
If F
P
is less than 1, then F
P
= 1.0

For P less than -0.5 barg, F
P
= 1.25
Pressure Factor for Other
Equipment
Pressure Factor, F
P
, 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 10
log log log
P
F C C P C P = + +
Module Factor Approach Material
Factors
Bare Module Cost Factor
For equipment not covered in table A.3
Material Factor
Material Factor, F
M
, for other equipment are given in table A.6
along with Figure A.9
Purchased Equipment Cost
| |
2
0
10 1 2 10 3 10
log log ( ) log ( )
p
C K K A K A = + +
Where A is the capacity or size parameter for the equipment
K
1
, K
2
, and K
3
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
1. Shell-and-tube heat exchanger in
2001 with an area = 100 m
2
for
Carbon Steel at 1 bar
Carbon Steel at 100 bar
Stainless Steel at 1 bar
Stainless Steel at 100 bar
Effect of Materials of Construction
and Pressure on Bare Module Cost
P MOC C
p


C
BM


1 bar
CS 25 K 25 K 82.3 K 82.3 K
1 bar
SS 25 K 68.3 K 82.3 K 154 K
100 bar
CS 25 K 34.6 K 82.3 K 98.1 K
100 bar
SS 25 K 94.4 K 82.3 K 197.4
K
o
p
C
o
BM
C
Bare-Module and Total-
Module Costs
BM Previously Covered
TM Includes Contingency and Fees at
15% and 3% of BM
all equip
1.18
TM BM
C C =

Grass-Roots Costs
GR 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.

all equip
0.50
o
GR BM TM
C C C = +

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