Preliminary cost estimation

Lang, H. J., Cost Relationships in Preliminary Cost Estimation, Chem. Engg., 54 117, 1947. 

Guthrie, K. M., Data and Techniques for Preliminary Capital Cost Estimating, Chem. Engg., 76 114, 1969. 

The most common approach to fixed cost estimation iavolves the use of a capital recovery factor to give the annual depreciation and return on capital. This factor typically is between 15 and 20% of the total capital investment. Property taxes are taken as 1—5% of the fixed capital and iasurance is assumed to be 1—2% of the fixed capital. If annual depreciation is estimated separately, it is assumed to be about 10% of the fixed capital investment. The annual iaterest expense is sometimes neglected as an expense ia preliminary studies. Some economists even beHeve that iaterest should be treated as a return on capital and not as part of the manufactufing expense. 

This equipment presents problems in estimating preliminary costs, since there is seldom enough information in-house to make good correlations. Vendors are by far the best source of costs. Guthrie (Reference 23) discusses the complexities of estimating high-pressure equipment and presents some cost data. 

Desai. M. B., Preliminary Cost Estimating of Process Plants, Chemical Engineering, July 27,... 

A key aspect in most cost estimation studies is the evalutUion of the cost of individual pieces of equipment. In addition to quotations from equipment manufacturers, there are several methods for developing cost estimates. For a typical conceptual design, it is normally acceptable to develop an order of magnitude or preliminary estimate whose accuracy is within -h/— 25 to 50%. The following methods may be employed to develop order of magnitude estimates ... 

Prepare rough cost economics, including preliminary sizing and important details of equipment, factor to an order of magnitude capital cost estimate [34] (see also [19]), prepare a production cost estimate, and work with economic evaluation representatives to establish a payout and the financial economics of the proposed process. 

Lang, H. J. (1948) Chem. Eng., NY 55 (June) 112. Simplified approach to preliminary cost estimates. 

The shortcomings of capital cost estimates using installation factors are less serious in preliminary process design if used to compare options on a common basis. If used to compare options, the errors will tend to be less serious as the errors will tend to be consistent across the options. 

This book applies a systems philosophy to the preliminary process design and cost estimation of a plant. In doing so, it tries to keep in perspective all aspects of the design. There is always a tendency on the part of designers to get involved in specific details, and forget that their job is to produce a product of the desired quality and quantity, at the lowest price, in a safe facility. What is not needed is a technological masterpiece that is difficult to operate or costly to build. 

The initial goal of the preliminary process study is to obtain an economic evaluation of the process, with the minimum expenditure of time and money. During this stage, all information necessary to obtain a reasonably accurate cost estimate for building and operating the plant is determined. It is expected that these costs will be within 10% of the actual costs. 

Research laboratories and office buildings are usually not included in the preliminary cost estimate. However, if they are contemplated their location should be indicated on the plot plan. 

Lang, H.J. Simplified Approach to Preliminary Cost Estimates, Chemical Engineering, June,... 

In the detailed design stage, everything must be specified. Each phase of the preliminary design must now be done in much more detail. The flow sheets develop into piping and instrument diagrams. The duty requirements for a piece of equipment become a specification sheet. The layout drawings may be replaced by a scale model, and a construction bid or detailed cost estimate is obtained to verify the previous cost estimate. 

Two advantages of this approach would be the minimized capital and operating costs, along with minimal space requirements. The best process (for iron removal) would probably be chemical precipitation with lime through a rapid mix, flocculation, and DAF step. DAF size requirements would be in the range of a 300- to 350-ft2 unit. Total costs for operation and maintenance of the preliminary treatment facility using an interest rate of 10% over 10 years are estimated at 0.44/1000 gal. A summary of the capital and operating cost estimates is presented in Table 8.2. 

Jashnani, I.L. Lunt, R.R. LaMantia, C.R. "Project Manual for Full-Scale Dual-Alkali Demonstration at Louisville Gas and Electric Co. - Preliminary Design and Cost Estimate," Louisville Gas and Electric Co., Louisville, KY, EPA-600/7-78-010, January 1978. 

The EDS II test program includes testing and design studies needed for a preliminary design of a full-scale pilot plant, a preliminary hazard analysis, development of a full-scale cost estimate, and a schedule for construction and operation of a facility employing the AEA technology. 

Other multiple-factor methods that have been published in the past are those by C. E. Chilton, Cost Estimation in the Process Industries, McGraw-Hill, New York, I960 M. S. Peters, K. D. Timmerhaus, and R. E. West, Plant Design and Economics for Chemical Engineers, 5th ed., McGraw-Hill, New York, 2003 C. A. Miller, Chemical Engineering, Sept. 13,1965, pp. 226-236 and P. A. Holland, P. A. Watson, and V. K. Wilkinson, Chem. Eng., Apr. 1,1974, pp. 71-76. These methods produced preliminary quality estimates. Most companies have developed their own in-house multiple-factor methods for preliminary cost estimation. 

Based on the treatment of 50,000 tons of contaminated material, the preliminary cost estimate for using the STRATEX technology is approximately 125 to 150 per ton of material processed. The preliminary cost estimations include preliminary estimates of the operations and maintenance costs, including labor costs, system transport costs, binder costs, fuel costs, and travel costs (D14167D, p. 6). 

These cost estimates are preliminary approximations for work within the DOE environment and are based on experience gained during the DUS demonstration at the LLNL gasoline spill site. Costs not specified in these estimates include disposal costs for boiler blowdown and equipment costs for off-gas treatment (D114523, pp. 10-12). 

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