Capital Cost Estimation

NMSU Chemical EngineeringCh 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 (cont’d)• 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 (cont’d)• 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

23

5

4

Accuracy

Cost of Estimate (Time)

Factored Estimates• Total Plant Capital Cost CTM (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.

DefinitionsCo

P,i Purchased cost equipment i (base conditions)Fo

BM,i Bare module $ factor (base conditions).Co

BM,i BM equipment cost (base conditions).FBM,I BM factor corrected for not CS 1atmCBM,I Bare module equipment costFM Materials factor (1 for carbon steel)FP Pressure factor (1 for pressure ~1 atm)CTM Total module cost (addition to existing plant)CGR 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 HandbookIn 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 m2) cost $92,000. What Would Cost be for a Heat Exchanger for Similar Service if Area = 50 m2 and n = 0.44 ?

Example 1 - Solution

$67,300aC

100 m2 Exchanger is not twice as expensive as a 50 m2 exchanger

Economy of Scale

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

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

1950 1960 1970 1980 1990 2000 20100

100

200

300

400

500

600

700

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

371420

775

10100 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?

359551

000,25II

CC1993

now1993now

Example 3 - Accounting for Time and Size• 2 heat exchangers, 1 bought in 1990 and the other in 1995 for the same service

A BArea = 70 m2 130 m2 Time= 1990 1995Cost = 17 K 24 K I = 358 381

Example 3 (cont’d)• What is the Cost of a 80 m2 Heat Exchanger Today ?

• Must First Bring Costs to a Common Time

A = 70

B = 130 26

358551

172010CA

37381551

242010CB

Example 3 (cont’d)

1.288031.2C 57.0

57.0

70log130log26log37log

n

31.270

26AC

K 57.0n

n

n

n

130K37

70K26

KAC

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 (cont’d)• Contingency and Fee

– Contingency– Contractor fee

• Auxiliary Facilities– Site development– Auxiliary buildings– Off-sites and utilities

Equipment Costs

• Purchased cost Cpo is typically estimated by an

equation of form:

– where Ki are a series of constants associated with the type of equipment being costed, and

– A is the capacity (independent variable) of the unit

• Cpo is the base condition cost (i.e., for carbon steel at

atmospheric condition)

21031021op10 AlogKAlogKKClog

Equipment CostsHeat Exchanger K1 K2 K3

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

100 1000 1000010000

100000

1000000

10000000fixed tube sheet

floating head

bayonet

kettle reboiler

exchanger area (sq ft) (capacity, A)

cost

, U.S

. $

K values taken from the CAPCOST® program

Module Costing Technique

• The bare module cost CBM is the sum of the direct and indirect costs associated with equipment purchase and installation.

• The bare module cost CBM can be found from the expression:

CBM = CP° FBM° = CP°(B1 + B2FMFp)– CP° is the purchased cost of the base condition (most common material,

usually carbon steel, operating at ambient pressure)– FBM° 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 (FM) and for actual operating pressures (Fp).

– B1 and B2 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 Fp,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 ¼", and a corrosion allowance of ⅛"

• For pressures below -0.5 barg, Fp,vessel = 1.25

• For all other process equipment,

0063.0

00315.01P6.08502

D1P

F vessel,p

21031021p10 PlogCPlogCCFlog

Module Factor Approach – Pressure Factors

Figure 7.6 Pressure Factors for Carbon Steel Vessels

Module Factor Approach – Pressure Factors

Material Factors

material FM .

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

CDE = CP° + CM + CL

CDE = CP° (1 + M)(1 + L)• Equipment f.o.b. cost CP°

– purchased cost of equipment at manufacturer's site (free on board)

• Materials required for installation CM = M CP° – 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 CL = L (CP° + CM) = CP° L (1 + M)– all labor associated with installing the equipment and materials

Indirect Project Expenses

CIDE = CFIT + CO + CE

CIDE = CP° (1 + M) (FIT + L O + E)

• Freight, insurance, taxes CFIT = FIT (C0 + CM)

– includes all costs for shipping equipment and materials to the plant site

• Construction overhead CO = O CL – 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 CE = E (CP° + CM)– includes salaries and overhead for engineering, drafting, and project

management personnel

Bare Module Cost

• Substitution and collection of like terms:

CBM° = CIDE + CDE

CBM° = CP° (1 + M) (1 + L + FIT + L 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) CCont = aContCBM°

= CP° (1 + aM) (1 + aL + aFIT + aLaO + aE)aCont

• Contractor Fee (typically assumed to be 3%) CFee = aFeeCBM°

= CP° (1 + aM) (1 + aL + aFIT + aLaO + aE)aFee

Total Module Cost

• Total cost for purchase and installation of a process unit, CTM

CTM = CBM° + CCont + CFee

CTM = CP° FBM + CP° aCont + CP° aFee

CTM = CP° (1 + aM)(1 + aL + aFIT + aLaO + aE)(1 +aFee + aCont)

Bare Module Cost for nonbase conditions

• Pressure Factors (FP) – calculated from expression specific to type of vessel (see Appendix A)

• Materials of Construction Factors (FM) – 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)

CBM = CP° FP FM = CP° [FP FM (1+fP&I)+FBM°-1-fP&I]where fP&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.

CGR = CTM + 0.5 CBM,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• Flang = 4.74 Fluid processing plant

= 3.63 Solid-Fluid processing plant = 3.10 Solid processing plant

Lang Factors (cont’d)

n

ipiLangTM CFC

1

Purchased Cost of Major EquipmentFrom Preliminary PFD

(Pumps, Compressors, vessels, etc.)

Total Module Cost