Fixed-capital-cost estimation engineering

The first stage toward producing an accurate estimate is to use a standard cost code for all construction projects. Table 9-45 shows a suitable numerical cost code, and Table 9-46 shows a typical alphabetical-numerical code. The cost-code system can be used throughout the estimating and construction stages for the collection of cost data by manual or computer methods. There are numerous types of fixed-capital-cost estimates, but in 1958 the American Association of Cost Engineers defined five types as follows ... 

The capital cost estimates are generated by the Engineering function, often based on 50/50 estimates (equal probability of cost overrun and underrun). It is recommended that the operating expenditure is estimated based on the specific activities estimated during the field lifetime (e.g. number of workovers, number of replacement items, cost of forecast manpower requirements). In the absence of this detail it is common, though often inaccurate, to assume that the opex will be composed of two elements fixed opex and variable opex. 

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. 

The OSBL capital cost is estimated as 40% of ISBL cost. The engineering cost and contingency are estimated as 10% and 15% of the sum (ISBL + OSBL) cost, respectively, giving a total fixed capital cost of 361.3 MM. 

A thorough presentation of fundamentals of an economic analysis for process design can be found in the classical book of Peters and Timmerhaus (1991). In addition this book contains detailed information about the cost of chemical equipment. A concise but useful treatment can be found in Coulson Richardson volume 6 (1993). The part on economics in Douglas (1987) is particularly well written from the viewpoint of a designer. The chapter written by Holland Wilkinson for Perry s Handbook 7 edition (1997) contains an extended description of the modem concepts of profitability, a comprehensive estimation of manufacturing and fixed-capital costs, as well as an introduction in the accounting and cost control concepts. The economic evaluation of projects from the perspective of the Institution of Chemical Engineers-UK may be found in Allen (1991). 

In 1992, researchers developed an engineering and costing design for a fixed unit that operated at a rate of 2 tons per hour. Costs were estimated to be 149 (Canadian) per metric ton of soil treated. This estimate was based on the following assumptions the unit used medium naphtha as a solvent operations were 24 hours per day, for 260 days per year utilization factor of the facility was 83% capital costs were 2,548 million (Canadian) and capital amortized over 10 years at 10%, two payments per year. The estimate stipulated that the recovered oil was of suitable quality to be sold to offset process costs. It was estimated that the largest component of process costs would be labor ( 56 per ton of waste treated). Other cost components listed were capitalization costs ( 38 per ton), utilities ( 29 per ton), insurance ( 9 per ton), trucking and maintenance (each 5 per ton), equipment rental and site excavation and restoration (each 3 per ton), and waste disposal was estimated to cost 1 per ton (D17896F, p. 8). 

Another expense which is included under indirect plant cost is the item of construction or field expense and includes temporary construction and operation, construction tools and rentals, home office personnel located at the construction site, construction payroll, travel and living, taxes and insurance, and other construction overhead. This expense item is occasionally included under equipment installation, or more often under engineering, supervision, and construction. If construction or field expenses are to be estimated separately, then Table 15 will be useful in establishing the variation in percent of fixed-capital investment for this indirect cost. For ordinary chemical-process... 

Costs should be included with any rules of thumb because costs are such vital information to engineering practice. Therefore, in this book, cost correlations for the FOB cost and factors for estimation of the complete installation of that equipment into a working process are given for each type of equipment. The cost estimates are ball park ideas + 30 %. Here we discuss the correlations, the L+M factors to convert FOB costs into bare module costs, factors to obtain the fixed capital investment costs and finally the capital cost guidelines for the equipment described in the main text, with title captions that are the same as in the main text. 

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