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) major equip. + piping + instr. + Elec. + util. 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 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 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) (5.1) Cost Exponent Equipment Cost Attribute - Size Cost (5.2) where

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

Economy of Scale 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 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

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 5.6 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 Structural Supports, Insulation, and Paint 37 14 20 7 5 10 100 61 % of total Erection and Installation Labor 22 Buildings, Materials, and Labor Engineering and Supervision 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 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 Total Module Cost (Lang Factor) Bare Module Cost

Lang Factor Total Module Cost Purchased Cost of Major Equipment From Preliminary PFD (Pumps, Compressors, vessels, etc.) Chemical Plant Type Lang Factor Flang Fluid Processing Plant 4.74 Solid-Fluid Processing Plant 3.63 Solid Processing Plant 3.10

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 Easy to apply. Drawbacks Special MOC. 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

Module Factor Approach Bare Module Factor (sum of all multipliers) Bare Module Cost Purchased Equipment Cost for CS and 1 atm pressure - Appendix A FBM = B1 + B2FpFM Fp = pressure factor (= 1 for 1 bar) FM = material of construction factor (=1 for CS)

Bare Module Cost

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,

% of Purchased Equipment Cost Cost Multiplier Value of Multiplier 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 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

Module Factor Approach Bare Module Factor (sum of all multipliers) Bare Module Cost Purchased Equipment Cost for CS and 1 atm pressure - Appendix A FBM = B1 + B2FpFM Fp = pressure factor (= 1 for 1 bar) FM = material of construction factor (=1 for CS)

Bare Module Cost Factor For 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.4

Bare Module Cost Factor For 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 vessels Pressure 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 = 1.25

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

Module Factor Approach – Material Factors

Bare Module Cost Factor For 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 Where A is the capacity or size parameter for the equipment K1, 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 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 bar

Effect of Materials of Construction and Pressure on Bare Module Cost MOC Cp CBM 1 bar CS 25 K 82.3 K SS 68.3 K 154 K 100 bar 34.6 K 98.1 K 94.4 K 197.4 K

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

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.

Materials of Construction Very important Table 5.9 – rough guide Perry’s – good source

Capcost Calculates costs based on input CEPCI – use current value of 401 or latest from Chemical Engineering Program automatically assigns equipment numbers