1 COST ESTIMATING

2 Time Data Cost Data Performance Data Procurement Data Owner special Data Brainstorming Process Company Needs Market Research. Feasibility Study Change of Objectives New Product Development Proposal Development Conceptual Estimate Paper Design basis Paper Full Proposal Proposal Project Plan Project Control Analysis Corrective Actions Commissioning Project Meeting Project Status Report Progress Measure Procurement Contractual Conditions Contractor Productivity Procurement Deadlines Manpower Loading Claim Request Change Orders Time/Cost Analysis Project Management Systems

3 PROJECT LIFE CYCLE PB DPF.P. CLIENT. APP. COST ESTIMATE PROJ PLAN LLIP PROJ. EXCU. COMMISSIONING PB- Conceptual Paper DP- Design Paper FP- Full Proposal

4 Cost estimating is an essential part of project management. It provides the project information everyone is striving to know from the beginning of a project to its completion. Cost estimates are activities people do most of the time to see if they can afford what they want or if they can continue doing as they are doing. Indexes, factors, methods, equations, rates, productivity profiles, historical data basis, performance measurement procedures and the like are developed and maintained with the sole purpose of producing better cost estimates and improve the probabilities of success.

5 Order of Magnitude Estimates Accuracy: -30% to +30% Basis : Cost capacity curves Cost capacity ratios Cost capacity ratios Use : Investment screening

6 Preliminary Estimates Accuracy: -15% to +30% Basis : Flow sheets Layouts Equipment details Use : Budget proposal Expenditure approval

7 Definitive Estimates Accuracy -5 to +15% Basis: Defined Engineering data Use : Processing Use : Processing Construction Construction

8 Information Required Information Required : Capacity Location Utility requirements Service requirements Building requirements Raw materials and storage requirements Finished products and its storage requirements Order of magnitude

9 Preliminary Information Required Information Required : Site description, surveys and soil studies Preliminary process flow sheet Equipment Engineering specifications Preliminary structural design Preliminary Architectural design Preliminary construction plan Preliminary utility heat balance/flow sheets Rough insulation specifications Motor list and sizes preliminary Substations specifications Preliminary lighting specifications Engineering and drafting man-hours

10 Definitive estimate Information Required: Full site information Process flow sheet Equipment and vessels specifications and Engineering Arrangements Detail Engineering Building and structures drawings Insulation drawings and specifications Electrical installations drawings and specifications Utility installation drawings and specifications Man-hours calculations for Engineering, drafting, labor, and supervision

11 ORDER OF MAGNITUDE ESTIMATING METHODS COST INDEXES NCC ={ Cost in the past } [ I(2) / I(1) ] where, NCC = Needed current cost I (1) = Index value at past time I (2) = Index value at present time

12 Cost Indexes Limitations Indexes do not take local conditions into consideration. Indexes do not take local conditions into consideration. Indexes do not make provision for technological advance. Indexes do not make provision for technological advance. Indexes are recommended within a 10 years range of known past cost only. Indexes are recommended within a 10 years range of known past cost only.

13 KNOWN COST INDEXES ENGINEERING NEWS-RECORD CONSTRUCTION INDEX This index is based on an index value of 100 for the year 1949 and is developed upon a composite cost for 2,500 pounds of structural steel, 1,088 feet board measure of lumber, 6 bbl of cement and 200 hours of common labor.

14 KNOWN COST INDEXES MARSHALL AND SWIFT EQUIPMENT-COST INDEXES The Marshall and Swift indexes are divided in two categories as follows:  The all-industrial equipment index  The process-industry equipment index

15 EQUIPMENT COST BY SCALING Cx = Cy ( Qx/Qy ) 0.6 Cx = Cy ( Qx/Qy ) 0.6 where, Cx = Cost of equipment (x) Cy = Cost of equipment (y) Cy = Cost of equipment (y) Qx = Capacity of equipment (x) Qx = Capacity of equipment (x) Qy = Capacity of equipment (y) Qy = Capacity of equipment (y)