1. Capital Cost Estimation
Chapter 5

2. 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

3. 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

4. Capital Cost Estimate Classifications

5. 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.

6. 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)( ) = $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

7. 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

8. Effect of Size (Capacity)
(5.1)
Cost Exponent
Equipment Cost
Attribute - Size
Cost
(5.2)
where

9. Effect of Capacity on Purchased Equipment Cost

10. 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

11. Effect of Capacity on Purchased Equipment Cost

12. 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 = ( )/1.00)(100) = 52%
The larger the equipment, the lower the cost of equipment per unit of capacity.

13. 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) = = 2.63
Cost ratio using (n =0.59) from Table 5.3 = = 2.58
% Error = ( )/2.58)(100) = 1.9 %

14. Effect of Capacity on Purchased Equipment Cost
Rearranging equation 5.2

15. 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

16. Effect of Time on Purchased Equipment Cost

17. 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:
Marshal and Swift Index
Chemical Engineering Plant Cost Index
a. Marshal and Swift: Cost = ($25,000)(1094/915) = $29,891
Chemical Engineering: Cost = ($25,000)(397/358) = $27,723
b. Average Difference: ($29, ,723)/($29, ,723)/2)(100) = 7.5%

18. Marshal & Swift and CEPCI

19. 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
% of total
Erection and Installation Labor 22
Buildings, Materials, and Labor
Engineering and Supervision
Total
100

20. 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

21. Factors affecting Capital Cost
Direct project expenses
Indirect project expenses
Contingency and fee
Auxiliary facilities

22. 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

23. 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

24. 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

25. 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

26. Capital Cost Modules
Total Module Cost (Lang Factor)
Bare Module Cost

27. 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

28. 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

29. Lang Factor Advantage Easy to apply. Drawbacks Special MOC.
High operating pressure.

30. 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

31. 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)

33. Bare Module Cost

34. 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
Materials
Labor
Freight
Overhead
Engineering
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,

35. % 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/( )= 0.368
Freight
8.0
0.08/( )= 0.047
Overhead
63.4
0.634/0.368/
( )= 1.005
Engineering
23.3
0.233/( ) = 0.136
a. Using Equation 5.8:
= ( (1.005)(0.368) )( ) = 3.291
b. From Equation 5.6:
= (3.291)($10,000) = $32,910

36. 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)

37. 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

38. Bare Module Cost Factor
For Heat Exchangers, Process vessels, and pumps
Values of B1 and B2 are given in Table A.4

39. Module Factor Approach – Pressure Factors

40. 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

41. 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

42. Module Factor Approach – Material Factors

43. Bare Module Cost Factor
For equipment not covered in table A.3

44. Material Factor
Material Factor, FM , for other equipment are given in table A.6 along with Figure A.9

45. 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

49. Illustrative Example Compare Costs for
1. Shell-and-tube heat exchanger in 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

50. 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

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

52. 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.

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

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