Cost estimation procedures

It is important to be able to estimate vessel weights, since most cost estimating procedures start with the weight of the vessel. The vessel weight, both empty and full with water, may be necessary to adequately design a foundation or to assure that the vessel can be lifted or erected once it gets to the construction site. 

The reader can refer to Ulrich (1984) for more detailed descriptions of these topics, especially pages 279-280 containing a review of the capital cost estimation procedure. A more detailed (although still necessarily brief) discussion is included here in Sections 6.2 to 6.4, the references quoted provide an excellent in-depth coverage of this subject. 

As this chapter is primarily concerned with cost-estimation procedures, there will be no attempt to go into the theory of economics, but equations are presented for the economic evaluation calculations. A certain amount of basic information is needed to undertake the calculations for an economic evaluation of a project. 

All Office of Saline Water research and development are carried out in the expectation that results will lower conversion costs. There have been many saline water conversion costs published and quoted however, almost all are estimates and have not been proved. The existence of the demonstration plant program attests to this lack of reliable cost information. It is generally agreed that the conversion of sea water to fresh by distillation processes in use 15 to 20 years ago produced fresh water in small quantities at costs of 4 to 5 per thousand gallons. Based upon the Office of Saline Water cost estimating procedure, it is estimated that the first two sea water conversion demonstration plants will produce water at about 1.25 per thousand gallons in the million-gallon-per-day size. Further research and development will lead to lower costs. 

Cost-estimating procedures must be performed quickly and accurately because of tough customer demands and global competition. Listed below are several types of cost estimates that oiganizations routinely make. 

The following example of the cost-estimate procedure made in the year 2005, for example, illustrates the method of a preliminary cost evaluation for a drying process. 

Today, with increasing price of petrochemical feedstocks and new processes being developed, alternative production routes using biomass feedstocks are gaining more attention. Therefore, this chapter presents a simplified cost-estimation procedure for looking at biomass-based production processes, to be compared to present petrochemical production routes. The procedure is based on specific investment and product yield figures. 

This final cost estimation procedure can be repeated enough times, with different streams of n = 1,..., N, so as to generate a desirable sta-... 

Review Scheduling A review scheduhng procedure should be estabhshed that documents who is responsible for initiating the review and when the review(s) should occur during the project. The scheduling needs to balance availability of process information, review technique used, and the impact of potential review action items on project costs (i.e., early enough to minimize the cost of any potential changes to the process). The aclual amount of time needed for the review should also be stated in the procedure. On the basis of the number of project reviews required and the estimated time needed for each review, the project cost estimate should include the cost for project reviews as part of the total cost for the project. 

Process economics is an essential element of a good design procedure. The objective of this appendix is to provide an overview of basic concepts in cost estimation and economics of chemical processes. For more details, the reacker is referred to Humphreys and Wellman (1996), Peters and Timmerhaus (1991), Garrett (1989) and Ulrich (1984). 

Finding 10. Prudent management requires early decisions, accurate assumptions, and full consideration of all cost components, regardless of the entity incurring them, and cost estimates that approach the actual final costs. Project cost control procedures and contract incentives were not established as part of the JACADS contract. 

The use of these indices is subject to errors inherent in any generalized estimating procedure, but some such factor must obviously be incorporated in projecting costs from a previous time basis to a current period. 

The solution procedure requires the designer to select a feasible set of decision variables y for the first iteration. Once this initial set of five decision variables has been chosen, the entire design (for that iteration) is fixed and the set of state variables x, and cost estimates are determined. With values assigned to all the state and decision variables, the set of shadow prices SP(i), is evaluated, and in turn, the set of marginal prices, PM(i), is determined. These marginal prices are then used to direct the iteration as described by Equation 16. 

None of the procedures listed in the first two methods is entirely satisfactory because of cost. Estimates can run up to several hundred dollars for a 500-page book, depending upon the procedure used. When... 

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