Costs of a project

The method of allocating overheads can seriously affect the assigned costs of a project and hence the apparent cash flows for that project . Since these cash flows are used to assess profitability by the net-present-value (NPV) and discounted-cash-flow-rate-of-return (DCFRR) methods, unfair allocation of overhead costs can result in a wrong choice between alternative projec ts. 

Field labor usually runs 25% to 50% of the cost of a project. If one location has 20% lower labor productivity, the cost of the project may increase by 5% to 10%. Contractors have a good feel for the expected productivity in a given area. Such productivity adjustments are usually made with the U.S. Gulf Coast as unity. 

There are many reasons to do careful planning for project costs. To begin with, if you overestimate costs you may lose the job before you begin because you are not competitive. A good plan includes the identification of sources of supplies and materials, and this careful research assures that the costs are realistic. The main function of a good budget is to monitor the costs of a project while it is in progress, and to avoid cost overruns. 

An approximate estimate of the capital cost of a project can be obtained from a knowledge of the cost of earlier projects using the same manufacturing process. This method can be used prior to the preparation of the flow-sheets to get a quick estimate of the investment likely to be required. 

The capital cost of a project is related to capacity by the equation... 

In addition to the direct cost of the purchase and installation of equipment, the capital cost of a project will include the indirect costs listed below. These can be estimated as a function of the direct costs. 

These generalizations can be applied to any job. There are some activities that cannot be speeded up. Others can be done faster, but in most cases this involves spending more money in obtaining special equipment, hiring more labor, paying overtime, working an extra shift, and so on. For all activities there is some minimum finite performance time. No matter what is done, it cannot be completed any faster. This is called the crush time of the activity, and the cost associated with it is the crush cost. The same is true for projects. The crash cost of a project is the price associated with finishing the project in the crash (minimum) time. 

Effective design of a remediation system for dissolved hydrocarbons in groundwater requires consideration of more than only the effectiveness of the technological process involved. At many sites a variety of techniques are capable of completing the cleanup. However, design of a project that is efficient in all aspects — technically, in terms of time, and economically — requires an evaluation of the entire life cycle of the project from inception to closure. Typically, at sites where remediation is expected to continue over a 4-year project life, operation and maintenance account for between 50 and 80% of the total project cost. These percentages increase each year thereafter. The principal components of operation and maintenance are power, labor, and parts. Identification and quantification of these components are critical to the overall cost of a project. 

Other than saving procurement time for long-lead-time items, it is not often cost-effective to purchase used equipment. The fundamental reason is that the major part of the cost of a project is the installation cost. Also, one is never sure about the actual condition of used process equipment. 

Table 8.3 summarizes the actual or estimated prices to build a variety of chemical and refinery process plants. The stated costs do not include associated tankage, utilities, effluent treatment, service roads, general-purpose buildings, spare parts, or all the other components required to complete a major project. These additional offsite facilities are typically considered to add 50% onto the cost of a project. [1, 2]... 

This section mainly addresses the purpose and technical aspects of preclinical studies which are described and recommended in the registration guidelines of the EEC, Japan and the USA. The following brief descriptions of commonly used test procedures cannot replace the detailed study of guidelines by those who conduct these trials. They are intended to give the less experienced an idea about the safety standards, which have to be fulfilled by a medicinal product and about the purpose and conduct of these tests. This enables scientists in research and development to judge essential parts of a project for themselves and to make better and informed decisions. It also assists in planning time and cost of a project. 

Engineers concerned with cost estimations tend to make estimates of the fixed-capital cost of a project, leaving considerations of working capital to the accountants. Although the estimation of fixed-capital cost is more straightforward from an engineering point of view, the estimation of working capital is of vital importance both for an individual project and for the company as a whole. 

A social cost-benefit analysis gives information on the profit of a project and further on the influence of the project on employment, production, consumption, savings, trade balance, redistribution of income etc. Here the Guidelines for project evaluation of the Unido [9] are used. Both the investment and operating costs of a project have to be divided into... 

Two forces have combined to make this estimate obsolete as a separate estimate. One is the modem business need for more precise and up-to-date reporting of the capital cost of a project. The second is the change to lumpsum contracts for most of the construction performed on a project in the biotech/ pharmaceutical arena. 

Development costs often constitute a considerable proportion of the total cost of a project. If the process is completely new, these costs are often around 50% of the investment costs for the industrial plant, and perhaps more if a pilot plant must be built. Therefore, the development costs should be estimated prior to process development according to the following scheme ... 

Estimating- The process of calculating the cost of a project. This can be a formal and exact process or a quick and imprecise process. 

Resource and infrastructure requirements for professional service projects typically fall into any of three categories human resources, facilities and equipment, and information technology (including knowledge bases). Human resource requirements, often the major cost of a project, should be defined... 

From a management viewpoint, the two efforts should be given equal importance. The tendency is always to support operations before construction. Again, if all reasonable measures are taken, bottlenecks should be minimized, but if they occur, the relative costs to the company of selecting a path forward has to be assessed from both viewpoints. The costs of a project failure are simply too high. 

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