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Capital Cost Estimation

NMSU Chemical Engineering


Ch E 452
Outline
Types of estimates
Adjusting costs for changes in capacity
Adjusting costs for changes in time
Total plant cost estimates
Direct, indirect, etc.
Lang Factors
Module cost approach
Effect of temperature and pressure
Capcost program

Capital Cost Estimate Types
1. Order of Magnitude Estimate (Feasibility)
+ 40%, - 20%
BFD , Process Modification
2. Study Estimate / Major Equipment
+ 30%, - 20%
PFD , Cost Chart
Capital Cost Estimates Types (contd)
3. Preliminary Design (Scope) Estimate
+ 25%, - 15%
PFD , vessel sketches , equip. diagrams
4. Definitive (Project Control) Estimate
+ 15%, - 7%
PFD , P&ID, all vessel sketches, equip. diagrams,
preliminary isometrics
Capital Cost Estimates Types (contd)
5. Detailed (Firm or Contractors) Estimate
+ 6%, - 4%
Everything included ready to go to construction phase

Estimate low so actual cost will be high (+)
Estimate high so actual cost will be low (-)
Why is + # > - #.?

Cost of Estimate See Also Table 7.2
1
2
3
5
4
Accuracy
Cost of Estimate (Time)
Factored Estimates
Total Plant Capital Cost C
TM
(Fixed Capital
Investment, FCI) can be estimated by a factored
estimate.
In a factored estimate, one first estimates the cost of
individual pieces of equipment, then estimates the
total installed cost by multiplying by factors.
Definitions
C
o
P,i
Purchased cost equipment i (base conditions)
F
o
BM,i
Bare module $ factor (base conditions).
C
o
BM,i
BM equipment cost (base conditions).
F
BM,I
BM factor corrected for not CS 1atm
C
BM,I
Bare module equipment cost
F
M
Materials factor (1 for carbon steel)
F
P
Pressure factor (1 for pressure ~1 atm)
C
TM
Total module cost (addition to existing plant)
C
GR
Grass roots cost (new plant, new site)
Estimating Purchased Equipment Cost
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 capacity on cost
A equipment cost attribute
C purchased cost
n cost exponent
typically 0.4-0.8
Often use n = 0.6, then refer to eqn as the 6/10ths rule
6/10ths rule can be used to scale up an entire process
a unit with required attribute
b unit with base attribute
Exponents tabulated in numerous sources, such as Perry's
Chemical Engineer's Handbook
In general, the larger the equipment, the lower the cost of
equipment per unit of capacity
n
b
a
b
a
A
A
C
C
|
|
.
|

\
|
=
Example 1
A New Plant Ordered a Set of Floating Head Heat
Exchangers (Area = 100 m
2
) cost $92,000. What
Would Cost be for a Heat Exchanger for Similar
Service if Area = 50 m
2
and n = 0.44 ?
Example 1 - Solution


Ca
Cb
=
Aa
Ab






n


Ca =Cb
Aa
Ab






n
$67, 300
a
C =
100 m
2
Exchanger is not twice as expensive as a 50 m
2
exchanger
Economy of Scale


92,000
50
100






0.44
Effect of Time
Time increases cost increases (inflation)
Inflation is measured by cost indexes - Figure 7.3
Chemical Engineering Plant Cost Index (CEPCI)
Marshall and Swift Process Industry Index
Numbers based on basket of goods typical for
construction of chemical plants - Table 7.5

Effect of time on cost
I cost index
C purchased cost
1 base time when cost is known
2 time when cost is desired


C
2
C
1
=
I
2
I
1
Cost Indicies
Marshall & Swift Equipment Cost Indexes
all-industry equipment index - arithmetic average of indexes for 47
different types of industrial, commercial, and housing equipment
based on an index value of 100 for the year 1926
account for cost of machinery and major equipment plus costs for
installation, fixtures, tools, office, and minor equipment
Engineering News-Record Construction Cost Index
indicates variance in labor rates and materials costs for industrial
construction
one of three basis used: 100 for 1913, 1949 or 1967
Nelson-Farrar Refinery Construction Cost Index
petroleum industry construction costs
basis - 100 for 1946
Marshall & Swift Equipment Cost
Index
Marshall & Swift Equipment Cost
Index
Chem. Engr. Plant Cost Index (CEPCI)
construction costs for chemical plants
equipment, machinery and supports, 61%; erection and
installation labor, 22%; buildings, materials, and labor, 7%;
engineering and supervision, 10%
major components subdivided as: fabricated equipment, 37%;
process machinery, 14%; pipe, valves, and fittings, 20%;
process instruments and controls, 7%; pumps and
compressors, 7%; electrical equipment and materials, 5%;
structural supports, insulation and paint, 10%
basis - 100 for 1957-1959
0
100
200
300
400
500
600
700
1950 1960 1970 1980 1990 2000 2010
Chemical Engineering Plant Cost Index from 1950 to 2010
Table 7.5: 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, 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 2
Cost of vessel in 1993 was 25,000, what is estimated
cost today?
|
.
|

\
|
=
|
|
.
|

\
|
=
359
551
000 , 25
I
I
C C
1993
now
1993 now
Example 3 - Accounting for Time and Size
2 heat exchangers, 1 bought in 1990 and the other in
1995 for the same service
A B
Area = 70 m
2
130 m
2

Time= 1990 1995
Cost = 17 K 24 K
I = 358 381


Example 3 (contd)
What is the Cost of a 80 m
2
Heat Exchanger Today ?

Must First Bring Costs to a Common Time


A = 70

B = 130
( ) 26
358
551
17 2010 C
A
=
|
.
|

\
|
=
( ) 37
381
551
24 2010 C
B
=
|
.
|

\
|
=
Example 3 (contd)
( ) 1 . 28 80 31 . 2 C
57 . 0
= =
( ) ( )
( ) ( )
57 . 0
70 log 130 log
26 log 37 log
n =

=
31 . 2
70
26
A
C
K
57 . 0 n
= = =
( )
( )
n
n
n
130 K 37
70 K 26
KA C
=
=
=
Total Cost of Plant
Purchased cost equipment f.o.b.
f.o.b. freight (free) on board
commonly used when shipping goods to indicate who pays loading
and transportation costs, and/or the point at which the
responsibility of the goods transfers from shipper to buyer
Installed cost Often 3 to 8 times larger than
purchased cost
Installed Equipment Cost (Table 7.6)
1. Direct Project Expenses
Equipment
Material for installation
Labor for installation

2. Indirect Project Expenses
Freight, insurance, and taxes
Construction overhead
Contractor engineering expenses

Installed Equipment Cost (contd)
Contingency and Fee
Contingency
Contractor fee

Auxiliary Facilities
Site development
Auxiliary buildings
Off-sites and utilities
Equipment Costs
Purchased cost C
p
o
is typically estimated by an
equation of form:


where K
i
are a series of constants associated with the type
of equipment being costed, and
A is the capacity (independent variable) of the unit

C
p
o
is the base condition cost (i.e., for carbon steel at
atmospheric condition)
( ) ( ) | |
2
10 3 10 2 1
o
p 10
A log K A log K K C log + + =
Equipment Costs
Heat Exchanger K
1
K
2
K
3
Fixed tube, sheet, or U tube 4.3247 -0.303 0.1634
Floating Head 4.8306 -0.8509 0.3187
Bayonet 4.2768 -0.0495 0.1431
Kettle Reboiler 4.4646 -0.5277 0.3955
10000
100000
1000000
10000000
100 1000 10000
c
o
s
t
,

U
.
S
.

$

exchanger area (sq ft) (capacity, A)
fixed tube sheet
floating head
bayonet
kettle reboiler
K values taken from the
CAPCOST program
Module Costing Technique
The bare module cost C
BM
is the sum of the direct and indirect costs
associated with equipment purchase and installation.
The bare module cost C
BM
can be found from the expression:
C
BM
= C
P
F
BM
= C
P
(B
1
+ B
2
F
M
F
p
)
C
P
is the purchased cost of the base condition (most common material,
usually carbon steel, operating at ambient pressure)
F
BM
is a multiplicative factor called the bare module cost factor that adjusts
for all of the previously discussed costs, as well as for specific materials of
construction (F
M
) and for actual operating pressures (F
p
).
B
1
and B
2
are factors that are dependent on equipment-type.
The superscript is used to denote base condition factor (i.e, carbon steel and
ambient pressure operation).
Pressure Factors
A pressure factor F
p,vessel
for a vessel of diameter D and
operating at pressure P (in units of bar) is based the
ASME code for pressure vessels.
Assuming a maximum allowable carbon steel stress of
944 bar, a 90% weld efficiency, a minimum allowable
vessel thickness of ", and a corrosion allowance of "



For pressures below -0.5 barg, F
p,vessel
= 1.25
For all other process
equipment,

( )
( ) | |
0063 . 0
00315 . 0
1 P 6 . 0 850 2
D 1 P
F
vessel , p
+
+
+
=
( ) ( ) | |
2
10 3 10 2 1 p 10
P log C P log C C F log + + =
Module Factor Approach Pressure
Factors
Figure 7.6 Pressure Factors for Carbon Steel Vessels
Module Factor Approach Pressure
Factors
Material Factors
material F
M .

carbon steel 1.0
stainless steel clad 1.7
stainless steel 3.1
nickel clad 3.6
nickel 7.1
titanium clad 4.7
titanium 9.4
Direct Project Expenses
C
DE
= C
P
+ C
M
+ C
L

C
DE
= C
P
(1 + o
M
)(1 + o
L
)
Equipment f.o.b. cost C
P

purchased cost of equipment at manufacturer's site (free on board)
Materials required for installation C
M
= o
M
C
P

includes all piping, insulation and fire proofing, foundations and structural
supports, instrumentation and electrical, and painting associated with the
equipment.
labor to install equipment & mat'l C
L
= o
L
(C
P
+ C
M
) = C
P
o
L
(1 + o
M
)
all labor associated with installing the equipment and materials
Indirect Project Expenses
C
IDE
= C
FIT
+ C
O
+ C
E

C
IDE
= C
P
(1 + o
M
) (o
FIT
+ o
L
o
O
+ o
E
)
Freight, insurance, taxes C
FIT
= o
FIT
(C
0
+ C
M
)
includes all costs for shipping equipment and materials to the plant site
Construction overhead C
O
= o
O
C
L

includes fringe benefits, sick leave, vacation; labor burden such as social
security and unemployment insurance, etc.; and salaries and overhead for
supervisory personnel
Contractor engineering expense C
E
= o
E
(C
P
+ C
M
)
includes salaries and overhead for engineering, drafting, and project
management personnel
Bare Module Cost
Substitution and collection of like terms:
C
BM
= C
IDE
+ C
DE

C
BM
= C
P
(1 + o
M
) (1 + o
L
+ o
FIT
+ o
L
o
O
+ o
E
)

Sum of Direct and Indirect costs for a process unit
Contingency and Fee
A contingency factor covers unforeseen
circumstances (15% for well understood systems)
C
Cont
= o
Cont
C
BM

= C
P
(1 + o
M
) (1 + o
L
+ o
FIT
+ o
L
o
O
+ o
E
)o
Cont


Contractor Fee (typically assumed to be 3%)
C
Fee
= o
Fee
C
BM

= C
P
(1 + o
M
) (1 + o
L
+ o
FIT
+ o
L
o
O
+ o
E
)o
Fee
Total Module Cost
Total cost for purchase and installation of a process
unit, C
TM
C
TM
= C
BM
+ C
Cont
+ C
Fee

C
TM
= C
P
F
BM
+ C
P
o
Cont
+ C
P
o
Fee


C
TM
= C
P
(1 + o
M
)(1 + o
L
+ o
FIT
+ o
L
o
O
+ o
E
)(1 +o
Fee
+ o
Cont
)
Bare Module Cost for
nonbase conditions
Pressure Factors (F
P
) calculated from expression specific to type of
vessel (see Appendix A)
Materials of Construction Factors (F
M
) simple mutiplicative factor based
on relative cost of material to base case material
Carbon steel (base case)
Low-alloy steel (low/moderate)
Stainless steel, Aluminium and Copper and their alloys (moderate)
Titanium and Nickel and their alloys (high)
C
BM
= C
P
F
P
F
M
= C
P
[F
P
F
M
(1+f
P&I
)+F
BM
-1-f
P&I
]
where f
P&I
represents fraction of installation associated with piping and instrumentation
Grass Roots Cost (new site)
Includes costs for site development, auxiliary
buildings, and off-sites and utilities. Such facilities
depend typically on materials of construction and/or
operating pressure, and can range from 20 to 100%
of the base module cost. A value of 50% is a good
starting point to assume.
C
GR
= C
TM
+ 0.5 EC
BM,i

summation is performed over all n process units in the design
CAPCOST
CAPCOST is a Microsoft Excel program for
estimating bare module, total module, and grass
roots costs of complex chemical plants.

Lang Factors
Table 7.7
Use multiplier depending on type of plant to escalate
equipment costs to installed costs
F
lang
= 4.74 Fluid processing plant
= 3.63 Solid-Fluid processing plant
= 3.10 Solid processing plant
Lang Factors (contd)

=
=
n
i
pi Lang TM
C F C
1
Purchased Cost of Major Equipment
From Preliminary PFD
(Pumps, Compressors, vessels, etc.)
Total Module Cost