The factorial method of cost estimation

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. 

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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 ... 

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 factorial method of cost estimation requires the purchase cost of the major equipment items in the process. Other fixed costs are... 

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 basis of the Factorial Methods is to use quotes or estimates of the delivered costs of the MPls and to multiply these up by so-called installation to obtain a total installed cost [40, 41]. 

The factorial method therefore yields a capital cost estimate of Capital Cost = Fixed Costs + Working Capital = AS1 1 million + As2.45 million = AS1 3.5 million... 

The ratio method provides an estimate of AS1 2.9 million. This can be regarded as reasonably accurate ( 30%) considering the original plant cost data is 7 years old. The factorial method has produced a surprisingly similar result. This is probably due to the fact that the plant is not particularly large, and the possibility of estimation cost inaccuracies is reduced. The estimate of AS1 3.5 million determined by the factorial cost technique should therefore also be regarded as an acceptably accurate value. 

The purchased cost of an item of equipment, free on board (FOB) is quoted by a supplier, and may be multiplied by a factor of 1.1 to give the approximate delivered cost. The factorial methods for estimating the total installed cost of a process plant are based on a combination of materials, labor, and overhead cost components. The fixed capital cost, C(-p, of a plant based on design can be estimated using the Lang Factor method [14] given by the equation... 

The next step is to evaluate the cost of recycles. In a first attempt we consider only the gas recycle. The compressor power is computed with the equation 7.10, taking a pressure ratio in the gas loop of 1.15. The cost of the compressor can be estimated by the factorial method (see Chapter 15). Generally, the cost correlation has the form ... 

The economic evaluation is an important and integral part of the overall feasibility study of the project. First, a capital cost estimate is obtained using two estimation techniques. The ratio method and factorial cost estimation techniques are used to determine separate capital cost estimates for the proposed 280 tonne/day plant. Finally an investigation into the expected return on investment from this project is performed. 

Hereafter we present a simpler method, used in preliminary cost estimations, known as percentage of delivered-equipment cost (Peters Timmerhaus, 1991), or detailed factorial method (Sinnott, 1993). The fundamental element is the cost of basic equipment identified at the conceptual design stage, which includes the main items as reactors, mixers, separators, heat exchangers, intermediate storage vessels, compressors, pumps, filters, centrifuges, furnaces, dryers, etc. 

Factory operations functions inclnde manufacturing cost control and estimation, process planning and control, work methods, and qnality control. With the evolution of computers in manufacturing, techniques used in today s factory operations include computer-aided process planning and computer-aided testing. 

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