Factored Cost Estimate

For the factored estimate a list is made of all pieces of equipment, and the delivered cost of each item is obtained. This could be determined by inquiring from manufacturers, from past records, or from published data. The delivered cost of all the equipment is summed and multiplied by an appropriate factor. According to Lang this factor would be 3.10 for a solids process plant, 3.63 for a solid-fluid plant, and 4.74 for a fluid plant. These factors are referred to as Lang factors. This estimate is often used in the preliminary stages of engineering, but is not extremely accurate. 

The factored estimate has one obvious drawback. It is very easy in the early phases of a process engineering study to forget some items. Since this will always 

To use the Lang factors the engineer must define what type of plant is being built. This is important, since the largest factor is 50% greater than the smallest. It is sometimes difficult, however, because there is a continuum of chemical plants between the two extremes. A coal-briquetting plant is obviously a solids processing plant. Methanol and ammonia plants are fluids plants. Plants that extract chemicals from solids fall between. 

Determine the cost of a fluid plant whose equipment costs are given in Table 9-7 for the year 1975. The Lang factors are to be used. From Table 9-7, the total F.O.B. equipment cost is 1,3 10,000. Let us assume a 4% sales tax and an average freight charge of 5%. The total cost of the delivered equipment is 

If a 3% increase in prices per year is expected, the cost of the plant in 1975 is 

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For instance, equipment made of monel generally costs 6.5 times as much as the same item constructed of carbon steel. If 25% of the equipment purchased for a plant were made of monel, this would increase the equipment costs by 237%, and the factor cost estimate would be 2.37 times that for a plant constructed of carbon steel. This is unreasonable, since the cost of buildings, roads, wiring, piping utilities, insulating, and instrumentation are independent of the materials of construction. In fact the only major changes would be in the process piping, which,... 

For this estimate, the prices of all items on the equipment list except those in the 700 and 800 categories were summed to obtain a 1968 F.O.B. cost of 2,203,000. This was increased by the Ohio sales tax of 4% and then by another 5%, to cover freight costs. This results in a delivered equipment cost of 2,400,000. The Lang factor is between that of a fluids plant and a solid-fluids plant. The value selected was 43. This was updated to 1974, and an 8% factor for waste treatment was added The result is a factored cost estimate of 14,400,000. 

Fixed-Capital Investment Summary. In this section, the fixed-capital investment is related to the purchase cost of the equipment items. If desired, the equipment list and the list of equipment purchase costs can be combined. The methods for estimating the fixed capital investment, beginning with the purchase costs, should be clearly stated. If a factored cost estimate is used, the overall factor or individual equipment factors should be noted. 

It should be emphasized that capital cost estimates using installation factors are at best crude and at worst highly misleading. When preparing such an estimate, the designer spends most of the time on the equipment costs, which represent typically 20 to 40 percent of the total installed cost. The bulk costs (civil engineering, labor, etc.) are factored costs which lack definition. At best, this type of estimate can be expected to be accurate to 30 percent. 

Cost estimates can usually be broken into firm items, and items which are more difficult to assess because of associated uncertainties or novelty factor. For example, the construction of a pipeline might be a firm item but its installation may be weather dependent, so an allowance could be included to cover extra lay-barge charges if poor sea conditions are likely. 

A key factor in obtaining binding support for aquaculture is development of a sound business plan. The plan needs to demonstrate that the prospective culturist has identified all costs associated with estabhshment of the faciUty and its day-to-day operation. One or more suitable sites should have been identified and the species to be cultured selected before the business plan is submitted. Cost estimates should be verifiable. Having actual bids for a specific task at a specific location eg, pond constmction, well drilling, building constmction, and vehicle costs helps strengthen the business plan. 

Produced from a.tura.1 Ga.s, Cost assessments of methanol produced from natural gas have been performed (13—18). Projections depend on such factors as the estimated costs of the methanol production faciUty, the value of the feedstock, and operating, maintenance, and shipping costs. Estimates vary for each of these factors. Costs also depend on the value of oil. Oil price not only affects the value of natural gas, it also affects the costs of plant components, labor, and shipping. 

Equipment Costs. Equipment costs include the purchased cost of process and materials handling equipment, storage faciUties, waste treatment equipment, stmctures, and site service faciUties. Installation costs such as insulation, piping, painting and finishing, foundations, process stmctures, instmmentation, and electrical service connections are estimated or factored separately. Actual quoted prices from suppHers are the best data, but these are not usually available when estimates are made. The quick, inexpensive cost estimates are based largely on personal cost files, internal company cost data, or pubUshed cost correlations. 

A popular overall factor refinement, known as the Hand factor approach, uses a different factor to estimate overall costs for each class of equipment to cover all labor field materials, eg, piping, insulation, electrical, foundations, stmctures, and finishes and indirect costs, but not contingencies. Hand factors range from 4 for fractionating towers down to 2.5 for miscellaneous equipment. 

Factor Methods. A more detailed product cost estimation method is to relate manufacturing cost items to a few calculated items, such as raw materials, labor, and utihties by means of simple factors (1,2). Internal accounting groups often develop factors to use with this method. This factor method is very popular. 

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. 

A multiple-factor method for predesign cost estimating has been put forward by D. H. Allen and R. C. Paffe [Chem. Eng., 82, 142-150 (Mar. 3, 1975)] for fluid-type plants (F) that include some vapor processing. The method requires the following input information ... 

For prehminary screening and easibility studies or for rough cost estimates, one may wish to employ a version of the isothermal method which assumes that the liquid temperatures in the tower are everywhere equal to the inlet-liquid temperature. In their analysis of packed-tower designs, von Stockar and Wilke [Ind. Eng. Chem. Fun-dam. 16, 89 (1977)] showed that the isothermal method tended to underestimate the reqmred depth of packing by a factor of as much as 1.5 to 2. Thus, for rough estimates one may wish to employ the assumption that the temperature is equal to the inlet-liquid temperature and then apply a design fac tor to the result. 

Vataviik, W. M., and R. B. Neveril, Factors for Estimating Capital and Operating Costs, Chemical Engineering, November 3, 1980, pp. 157-162. Vogel, G. A. andE. J. Martin, Hazardous Waste Incineration, Chemical Engineering, September 5, 1983, pp. 143-146 (part 1). 

Following development of the study direction, the evaluation describes the efforts of obtaining and validating process information, and then discusses equipment specifications and a cost estimate of the feasibility or budget type i.e., with plant costs factored from major material. Finally, project economics and financing complete the evaluation. 

Since the studies under discussion have cost estimates factored from major material, secondary systems at this stage have relatively smaller impact than later when more definitive cost estimates are done. At this stage, it is well to gain a feel for the completeness of the licensor s design with respect to secondary systems. 

Cooling Water System. A list of cooling duties will be available at this point so the cost estimate for this system can be factored or estimated based on a similar operating system. For a more definitive estimate based on initial or detailed layout, it is probably best to use a contractor or consultant skilled in these designs. If a cooling tower is involved, the groundwork will already have been set. This basis can be passed along on specification sheets provided in the Appendix to a vendor for quotes. 

Not only the buildings themselves, but an allowance for equipment and stocks within the buildings must be included in the cost estimates, such as maintenance shop power equipment, control laboratory analytical equipment and reagents and, largest of all, the thousands of warehouse equipment spares, fittings, and supplies. For feasibility cost estimates, such items are factored from experience. 

Early in the life of a project, information has not been developed to allow definitive cost estimates based on material takeoff and vendor quotes for equipment. Therefore, it is necessary to estimate the cost of a facility using shortcut methods. The first step is to develop or check flow-sheets, major equipment sizes, and specification sheets as described in earlier chapters. From the equipment specification sheets, the cost of each piece of equipment is estimated, using techniques discussed later. Once the major equipment cost has been estimated, the total battery limit plant cost can he quickly estimated using factors developed on a similar project. 

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. 

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