Estimation of purchased equipment costs

The cost of the purchased equipment is used as the basis of the factorial method of cost estimation and must be determined as accurately as possible. It should preferably be based on recent prices paid for similar equipment. 

The cost of specialised equipment, which cannot be found in the literature, can usually be estimated from the cost of the components that make up the equipment. For example, a reactor design is usually unique for a particular process but the design can be broken down into standard components (vessels, heat-exchange surfaces, spargers, agitators) the cost of which can be found in the literature and used to build up an estimate of the reactor cost. 

Pikulik and Diaz (1977) give a method of costing major equipment items from cost data on the basic components shells, heads, nozzles, and internal fittings. Purohit (1983) gives a detailed procedure for estimating the cost of heat exchangers. 

Almost all the information on costs available in the open literature is in American journals and refers to dollar prices in the US. Some UK equipment prices were published in the journals British Chemical Engineering and Chemical and Process Engineering before they ceased publication. The only comprehensive collection of UK prices available is given in the Institution of Chemical Engineers booklet, IChemE (2000). 

Up to 1970 US and UK prices for equipment could be taken as roughly equivalent, converting from dollars to pounds using the rate of exchange ruling on the date the prices were quoted. Since 1970 the rate of inflation in the US has been significantly lower than in the UK, and rates of exchange have fluctuated since the pound was floated in 1972. 

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The cost for piping covers labor, valves, fittings, pipe, supports, and othc rdtems involved in the complete erection of all piping used directly in the process. This includes raw-material, intermediate-product, finished-product, steam, water, air, sewer, and other process piping. Since process-plant piping can run as high as 80 percent of purchased-equipment cost or 20 percent of tied-capital investment, it is understandable that accuracy of the entire estimate can be seriously affected by the improper application of estimation techniques to this one component. 

Category Eactor Estimates. Various capital categories can be related to total equipment costs by factors, reported as percentages of equipment cost. Both purchased equipment costs, including pumps, tanks (qv), and instmments and deHvered equipment costs, excluding instmments, but including some off-sites, have been used in this approach (1,2). 

The ISBL costs can be roughly estimated by multiplying the sum of the purchased-equipment costs by a certain factor, the so-called Lang factor ... 

Capital cost estimates for chemical process plants are often based on an estimate of the purchase cost of the major equipment items required for the process, the other costs being estimated as factors of the equipment cost. The accuracy of this type of estimate will depend on what stage the design has reached at the time the estimate is made, and on the reliability of the data available on equipment costs. In the later stages of the project design, when detailed equipment specifications are available and firm quotations have been obtained, an accurate estimation of the capital cost of the project can be made. 

The factorial method of cost estimation is often attributed to Lang (1948). The fixed capital cost of the project is given as a function of the total purchase equipment cost by the equation ... 

This is a multiplier , which when applied to the purchase prices of major pieces of chemical process equipment, provides an estimate of the installed cost of the chemical process. b ISBL, inside battery limit. c OSBL, outside battery limit. 

For the alkylation unit, purchased-equipment costs may be estimated using the equipment-specification information of Table 1 and the cost data presented in Chaps. 14 through 16 of this text. Table 2 presents these costs updated to January 1, 1990. The required fixed-capital investment for the nonbiodegradable detergent manufacturing process may be estimated from the total purchased-equipment cost using the equipment-cost ratio method outlined in Table 17 of Chap. 6. The total purchased-equipment cost is, presented in... 

Example 1 Estimation of fixed-capital investment using ranges of process-plant component costs. Make a study estimate of the fixed-capital investment for a process plant if the purchased-equipment cost is 100,000. Use the ranges of process-plant component cost outlined in Table 4 for a process plant handling both solids and fluids with a high degree of automatic controls and essentially outdoor operation. 

The cost of purchased equipment is the basis of several predesign methods for estimating capital investment. Sources of equipment prices, methods of adjusting equipment prices for capacity, and methods of estimating auxiliary process equipment are therefore essential to the estimator in making reliable cost... 

Purchased-equipment costs for vessels, tanks, and process- and materials-handling equipment can often be estimated on the basis of weight. The fact that a wide variety of types of equipment have about the same cost per unit weight is quite useful, particularly when other cost data are not available. Generally, the cost data generated by this method are sufficiently reliable to permit order-of-magnitude estimates. 

Analyses of the total installed costs of equipment in a number of typical chemical plants indicate that the cost of the purchased equipment varies from 65 to 80 percent of the installed cost depending upon the complexity of the equipment and the type of plant in which the equipment is installed. Installation costs for equipment, therefore, are estimated to vary from 25 to 55 percent of the purchased-equipment cost. 

The cost for land and the accompanying surveys and fees depends on the location of the property and may vary by a cost factor per acre as high as thirty to fifty between a rural district and a highly industrialized area. As a rough average, land costs for industrial plants amount to 4 to 8 percent of the purchased-equipment cost or 1 to 2 percent of the total capital investment. Because the value of land usually does not decrease with time, this cost should not be included in the fixed-capital investment when estimating certain annual operating costs, such as depreciation. 

The purchased-equipment cost for a plant which produces pentaerythritol (solid-fuel-processing plant) is 300,000. The plant is to be an addition to an existing formaldehyde plant. The major part of the building cost will be for indoor construction, and the contractor s fee will be 7 percent of the direct plant cost. All other costs are close to the average values found for typical chemical plants. On the basis of this information, estimate the following ... 

Piping is a major item in the cost of chemical process plants. These costs in a fluid-process plant can run as high as 80 percent of the purchased equipment cost or 20 percent of the fixed-capital investment. There are essentially two basic methods for preparing piping-cost estimates-the percentage of installed equipment method and the material and labor take-off method. Several variations of each method have appeared in the literature. 

This method is a valuable tool for the estimator. The system calculates the purchased price for each piece of equipment as well as simulates (based on preprogrammed models) quantity take-offs to generate field material and field labor for installation of each equipment item as well as the entire project. Engineering, overheads, and fees are also calculated. Certain minimum information must be input to the computer for equipment costs. More data given per piece of equipment results in a more accurate cost estimate of the equipment and project as a whole. 

The two major costs associated with evaporators, as with any process equipment, are capital investment and operating costs. The best estimate of the installed cost of evaporation systems is, of course, a firm bid from a vendor. The installed cost, however, can be estimated based on the heat transfer surface area, as in Peters and Timmerhaus. Costs taken from published references must be adjusted for changes subsequent to the time of publication. To do this, one may use an index such as the Marshall and Swift allindustry index. The value of this index is published each month in Chemical Engineering, a McGraw-Hill publication. Further information on the use of this and other cost indices as well as their histories are available, for example, in Peters and Timmerhaus and Ulrich.f Variation of purchased evaporator costs with material of construction and pressure can also be found in Ulrich. ... 

The factorial method of cost estimation is based on purchased equipment costs and therefore requires good estimates for equipment costs. Costs of single pieces of equipment are also often needed for minor revamp and de-bottlenecking projects. 

The cost of purchased equipment is the basis for estimating the capital investment. The various types of equipment can be divided conveniently into ... 

As cited in Chap. 6, basic instrumentation costs range from 3 to 20 per cent of installed equipment costs, depending oh the completeness of automatic control. Detailed instrumentation costs are required for final cost estimates within 10 per cent. Instrumentation as listed by code numbers from the instrumentation flow sheets is set up as separate instrument items on specification sheets and sent to suppliers. Firm quotations are received after mutual agreement on the correct type and application is reached among the purchasing and manufacturing personnel. Table 9-18 lists typical instrument and auxiliary costs which can be used for estimating purposes in lieu of actual quotations. 

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