1. Capital Cost Estimating Q&A

2. Note to Reader
This presentation was prepared for the purposes of answering questions from the prior year. This years version may look substantially different.

3. Question 1 “What exactly is a ‘factored equipment estimate’ ?“
What’s a “base cost”, “bare module cost” and what’s included in the latter?
What factors are applied to get a total estimate of the plant?
What do these factors take into account?

4. From Equipment Price to DFC Estimate
Direct Field Cost (DFC)
Direct Field Labour (DFL)
Indirect Field Cost (IFC)
Home Office Engineering
Total Project Cost (ITC)
Allowances
0.25 x DFC
1.0 to 1.6 x DFL
Equipment Purchase
Price
Equipment
Factor
“Off Sites” Cost
DIRECT FIELD COSTS
Equipment Cost
bulk materials & labour to install
off-sites (pipe racks, rail spurs …)
INDIRECT FIELD COSTS
engineering, freight, insurance, overhead
CONTINGENCY AND FEES
first fill of plant, taxes, duties
escalation
Tanks and Vessels
Columns and Trays
Pumps and Compressors
Exchangers
Heaters
TOTAL PROJECT
COST
x Factors
Plus Off Sites, ie Piperacks,Rail Spurs, Tank Farms etc
Direct Field
Cost

5. Estimate Equipment Cost DIRECT FIELD COSTS
bulk materials (piping, valves, instruments) & labour to install
off-sites (pipe racks, rail spurs …)
INDIRECT FIELD COSTS
engineering, freight, insurance, overhead, const supervision
CONTINGENCY AND FEES
first fill of plant, taxes, duties
escalation
TOTAL PROJECT
(CAPITAL)
COST

6. Method 1: Lang Factored Estimate
Total Capital Cost =
Flang * (Sum Of Purchased Cost of Equipment)
Flang = for fluid processing plant

7. Method 2: Equipment Cost Factor
Direct Field Cost (DFC)
Direct Field Labour (DFL)
Allowances
Indirect Field Cost (IFC)
Home Office Engineering
Total Project Cost (ITC)
0.25 x DFC
1.0 to 1.6 x DFL
Equipment Purchase
Price
X Equipment
Factor
“Off Sites” Cost
1.18 x

8. From Equipment Price to “Direct Field Cost”
x Factors
Tanks and Vessels
Columns and Trays
Pumps and Compressors
Exchangers
Heaters
Plus Off Sites, ie Piperacks,Rail Spurs, Tank Farms etc

9. “Off Sites” Inside Battery Limits Rail Car Loading Cooling Tower
Rail Spurs
Office Bldg
Pipe Racks
Cooling Tower
Rail Car Loading
Steam Boilers
Fire Water Sys
Nitrogen Plant
Inside
Battery Limits

10. Equipment Factor
EQUIPMENT
FACTOR
MODULE
COST
PURCHASE COST

11. Equipment Factors Shop Fab. Vessels Compressors Exchangers
Fired Heaters
Pumps
Material Handling Equipment

12. X Equipment Factor Direct Field Cost (DFC) Direct Field Labour (DFL)
Allowances
Indirect Field Cost (IFC)
Home Office Engineering
Total Project Cost (ITC)
0.25 x DFC
1.0 to 1.6 x DFL
Equipment Purchase
Price
X Equipment
Factor
“Off Sites” Cost
1.18 x

13. Method 3: The CAPCOST Approach
Equipment Parameters (Pressure, MOC, Size, Hp …)
“Base Cost” = Purchase Cost of Equipment
- in Carbon Steel and 0 barg
Which One Do We Want?
Bare Module Factor = f (Factorpressure, Factormaterial)
BARE MODULE COST (Directs and Indirects)
- installed equipment in actual materials and actual pressure
Module Factor = 1.18
MODULE COST OF PLANT
- for expansion to an existing Plant -contingency 15%, fees 3%
CHEE
470 Stops
Here
Grass Roots Factor = 1.30
GRASS ROOTS COST OF PLANT
- infrastruction (utilities, off-sites aux. Buildings, product storage, loading and unloading facilities ...)

14. Determine Equipment Cost
Note: Price for Carbon Steel Construction and 0 Bar(g)
Fixed Tube exch with
28 m2 =
$6500
Convert To
Today’s $’s using the CEPCI value

15. Factor to Today’s Cost
$6500 * (1999 CECPI / 1996 CECPI) = today’s cost
$6500 x (390.6 / 381.7) = $6650 in 1999

16. Pressure Factor (Fp)
Pressure Factor
Fp = 1.14

17. Material Factor (Fm)

18. Bare Module Factor FBM Fp Fm 1.14 x 3 = 3.42 Therefore FBM = 7
Bare Module Cost
= Base Cost x FBM
= $6650 x 7
= $46,550
Nowhere is the purchased
cost of the equipment (at
design press and materials)

19. Module Cost Of Plant
Add Contingency and Fees (building permits, environmental permits etc.)
Module Cost = 1.18 S (of Bare Module Cost for all equipment)
Module Cost = 1.18 x $46,550 = $ 54,900

20. Question 2
What is a capital cost?

21. Capital Cost What’s “Capital ?”
Capital is the money required to build a plant or facility
It’s separated from “Expense” money because of the Tax implications imposed by Revenue Canada, IRS, etc.

22. Facility Timeline Facility Creation Facility Operation Conceptual
Engineering
Detailed Engineering
& Construction
Start-up
Capital $
Expense $
Expense $
Expense $
- Operating Expenses
-Depreciation
Capital Cost

23. Capital vs Expense
Once the plant is running ‘Expenses’ are small items or costs which are incurred yearly, or have about a 1 year life.
i.e. Software, Office supplies, wages, advertising, heat, lighting, ...
When Calculating Yearly Income Subtract your Expenses From Your Income

24. Capital vs Expense
‘Capital’ are expensive items or items which have more than a year of life.
i.e. House, lawnmower, TV, computer, chemical plant equip, first fill of chemicals
Revenue Canada etc. only allow you to subtract a % of the Capital every year to account for the wearing out of the facility (depreciation).
This is called the “Capital Cost Allowance”

25. Capital vs Expense Capital Cost Allowance ( CCA )
Works Like a Bank Account
Revenue Canada allow a % of the remaining asset value to be claimed
Remaining
Asset Value
Time (years)

26. CCA Classes

27. Taxable Income Income That’s Taxable (Net Income)
Taxable Income = Income - Expenses CCA
Can’t use CCA if Expenses are greater than Income (can’t use CCA to claim a loss)
CCA can be ‘banked’ for later years where profit is occurring

28. Small Business Tax- Revenue

29. Small Business Tax - Expenses
CCA

30. Capital - The Point
Capital is only allowed to be ‘depreciated’ over years and thus it’s ability to minimize taxable income is limited.
Expenses are claimed in the year they’re paid. They’re better for minimizing your taxes.
The Games People play

31. The Capital Cost Estimate
The tax implications of Capital money requires that you know how much Capital was spent on any asset.
The business financial analysis (NPV etc.) requires that you know the Capital Cost and the Operating Cost well ahead of actually spending any significant amounts of money.

32. Capital Cost Estimate Summary:
The cost to initially build the facility which will be depreciated over time.

33. Question 3 -CAPCOST - arrggh!
“When our tube/shell design pressures are below those which CAPCOST recognizes, do we simply take the minimum CAPCOST pressure and size on that basis?”

34. Off The Shelf Items ASME Code
Piping, Valves, Pumps and most equipment have been standarized in design pressures of the connecting Flange
Standards are called 150, 300, 600, 900, 1500, 2500 “lb” flange ratings.
A 150lb rating  150 psig rating, temperature is important in the ultimate strength of the item
Along with standard flanges are standard pipe wall thickness (Sch 40, Sch 80 etc.)
ASME
Code

35. Flange Rating

36. Heat Exchanger Standards
TEMA - Tubular Exchanger Manufacturers Association
dictates minimum requirements for exchanger mechanical design
Legislation does not require TEMA standards be used.

37. ASME- Pressure Vessel Standards
ASME Code
It started in Chicago after a major explosion in a shoe factory that had a boiler. The boiler explosion caused the government to start regulating pressure vessels (including boilers).
A tool for regulating manufacturers of pressure vessels, heating exchangers, and piping, not pumps, not compressors (no rotating equipment)

38. ASME- Pressure Vessel Standards
Since the explosion in Chicago codes were developed for the guidance in the calculation of pressure vessels, tables of metal strength vs temp
Safety factor of 4 has historically been applied to the mechanical strength of metal, recently (this year) it was reduced to 3.5

39. ASME Code Sections I - Power Boilers
II - Materials (properties i.e. allowable stresses)
III - Nuclear Power Plants
IV - Heating Boilers
V - Non Destructive Examination
VII - Guidelines for the Care and Operation of Heating Boilers
IX - Welding and Brazing Qualifications
X - Fiber-Reinforced Plastic Pressure Vessels
XI - Rules for Inservice Inspection of Nuclear Power Plant Components

40. Minimum Design and CAPCOST
Allowing CAPCOST to choose a minimum makes sense since the manufacturer would do the same.

41. Question 4 - Unknown Equipment
To size the reactor cooling jacket do we send you our data? Is there significant expense in the jacket?
Jacket cost is about $35,000 for the reactor.

42. CAPCOST - User Added Eq. Treat as an additional piece of equipment
Bare Module factor is irrelevant

43. Question 5 - Storage Tanks
How do you do the costing for the cone roof storage tanks?

44. User Added - Storage Tanks
$239,000
Multiply by 2 to get “bare module cost”

45. Adding Storage Tank

46. Question 5 -Agitator
“How can we account for the agitator (shaft, seal + motor) cost in our estimate?”

47. Reactor Diagram

48. Agitator Costs
$65,000
Multiply by 3.0 to get “bare module cost” in CAPCOST

49. The Final Screen