Multiplier
Chemical - Liquids 3.75 5.00 6.25
Chemical - Liquids / Solids (Hybrid)
3.25 4.50 5.75
Chemical - Solids 2.50 3.75 5.25
Ethanol Facility (corn / sugar cane)
2.75 3.25 3.75
Pharmaceutical 1.75 2.50 4.50
Power 2.00 3.30 4.00
Steel 1.50 2.00 2.50
Low Range: Typically is an open structure, has a high level of carbon steel piping, an
unsophisticated instrumentation / control system, open shop construction workforce and a normal construction schedule. Solids has a limited amount of piping, the major equipment is usually material handling, crushers and grinders.
Median Range: Typically is a combination of enclosed / open structure, has an assortment of carbon steel and stainless steel piping (60% C.S. and the balance S.S. or better), a reasonably sophisticated instrumentation / control system, open shop or a combination of union construction workforce and a normal construction schedule.
High Range: Characteristically the major equipment is housed in an enclosed structure / building, has an assortment of carbon steel and a high content of stainless steel piping (30% C.S. and the balance 70% S.S. or better), has a state of the art instrumentation / control system – TDC 3000 or equal, open shop or a combination of union construction workforce and a fast track construction schedule, is a hazardous process, is based on new technology.
Other considerations: (refer to other benchmarks on page 28 33)
(D) Front End – Semi-Detailed / Square Foot / Conceptual Estimates (+/- 25% Accuracy) Front end – semi detailed, conceptual, capital cost estimates are usually compiled in the more advanced stage of the front end / conceptual definition / design development effort or early on in the process design stages, i.e. 5% - 15% of the detailed design should have been completed (or a front end design package has been completed). They are typically prepared to formulate the first round of project viability / economics, ROI, that are used to select one chemical / manufacturing process over another or to validate earlier economic evaluations / estimates. The front end / semi-detailed
method can in some situations be of great assistance as quick / cost effective and reasonably defined cost forecast, (accuracy is in the +/- 20-15% range) compared to the lump sum / detailed method described below, the lump sum / detailed method estimating approach takes much more resources / deliverables to compile, the accuracy may be better say +/-15 -10%, however by
perhaps increasing the contingency value by a couple of percentage points this accuracy differential could be mitigated. The front end / semi-detailed estimate provides a reasonable cost evaluation at a much smaller preparation cost and time value, in essence it is based on one premise, the major equipment price list (delivered to site), it is typically predicated upon major equipment listing, i.e., quotes / pricing, hopefully from pre-qualified fabricators / vendors together with preliminary sketches, major quantity take-offs and material unit prices / unit erection hours. This capital cost estimating method / approach is the best “path forward” when a detailed capital cost estimate can not be compiled without the knowledge and advantage of a reasonable amount of completed detailed engineering and the costs associated with this effort, a reasonably accurate front end / semi-detailed estimate, with an accuracy of say -/+ 20% - 15% can be completed with some of the following engineering deliverables.
1. A preliminary / detailed scope of work statement / project execution approach.
2. The location of the new / existing plant.
3. A major equipment list and specifications / materials of construction, with vendor pricing if possible.
4. P.C.A.’s / Phase 1 Environmental Reports (if available).
5. Process Flow Diagram’s P.F.D.’s.
6. Reasonably complete P. & I. D.’s …say 30-70% complete.
7. Some general arrangement drawings, plot plan, some out line / detailed specifications.
8. Preliminary Electric motor list.
9. Electrical classification map.
10. Instrumentation / Control philosophy.
11. Preliminary Instrumentation list.
12. Preliminary equipment arrangements.
13. A milestone “event” schedule (start of engineering, procurement and construction and finish date).
14. Knowledge of off-site requirements.
15. Construction approach union / open shop labor (merit shop).
In general the cost estimate must be a reflection of the (1) Scope of Work, (2) Project Execution Plan (i.e., direct hire, construction packages, GC approach) and (3) The current Milestone
schedule (start and finish date). If the plan of attack is to use multiple construction contractors, the cost estimate basis and backup supporting documentation must include sufficient details so that the final anticipated cost can be established with least amount of effort to mirror potential scope
changes. Additional front end / semi-detailed unit prices and various pricing methods can be found in section D –1.
(E) A.F.E. Funding Estimates / Preliminary Estimates (+/- 20% Accuracy)
These A.F.E. (Approval for Expenditure) “funding” initial control capital cost estimates are produced after the project studies / basic process design package is completed or substantially completed, perhaps 70% complete and the scope of the off-sites has been established or at least initially scoped out. AFE / Preliminary estimates are typically used to assist in the compilation of detailed project execution plan, also to finalize the R.O.I. / EBITDA payback economics. Many time companies use this estimate to get funding from their board of directors, this is the stage in the projects life cycle to obtain it’s full approved funding, typically the detailed engineering effort might
be considered 10% to 20% complete, an appropriate contingency for this type of capital cost estimate would be in the 15% – 20% range.
(F) Validation (Check Estimate) Control / Estimates (+/- 15% Accuracy)
A hybrid of an AFE estimate and a lump sum / definitive estimate, used sometime as a preliminary control estimate, sometimes used to confirm or validate the AFE funding estimate; the engineering typically would be at the 20% - 35% level, when this capital cost estimate is assembled.
(G) Lump Sum (Control)/ Definitive Estimates / GMP / Hard Money / Tender Submission (+/- 5% Accuracy or less)
The lump sum / definitive capital cost estimates are typically compiled / arranged when the project has been comprehensively documented (a good amount of engineering deliverables i.e. drawings and specifications have been completed), i.e., 50% -75% engineering is defined, including plant location, actual location of facility within the plant, detailed scope of work, project approach, specifications, timing, major equipment requirements are known and long lead items may have been ordered and any off-site requirements are known and engineering on the off-sites is well advanced, many times construction could have commenced. This approach the lump sum / hard money / detailed method of capital cost estimating is typically utilized by EPC / engineering firms and / or contractors, some owner type companies still compile this type of “detailed” capital cost estimates. This is vital of course to any firm providing a lump sum bid. This approach is, as its name means, is very much more labor (engineering, design staff, procurement and project
controls), intensive that the previous mentioned front end approaches described previous. B of Q’s, (Bill’s of quantity), Major Equipment lists, Instrument lists, bulk material take-off ‘s are typically made to a large extent from completed drawings and specifications, typically the engineering effort is in the 50% -70% range, possibly even more advanced. Lump Sum Quotes are obtained on the major equipment and specific construction work packages from a reasonable number (2 or 3) of pre-qualified vendors and individual subcontractors. Detailed bulk material lists are compiled and forwarded to vendors, the estimator / cost engineer will also price these items out to ensure / check / verify vendor and sub contractor pricing. The field labor man-hours are evaluated based on quantity take-off measurements / productivity is evaluated. The EPC home office and field support engineering / procurement hours are compiled based on the required project deliverables, typically by each engineering lead engineer. Detailed Engineering and field supervision and field
establishment expenses and other items, such as copies, drawings, telephone expenses, travel expenses, CAD machines, construction rental equipment, freight, import duties and taxes, safety requirements, insurance, contingency, management reserve, insurance, vendor assistance, taxes, permits, testing, freight, import duties / tariffs if required, etc., are all reviewed, estimated, compiled and priced out and incorporated into the estimate summary.
General Benchmarks: To be reviewed and added to the previous cost models if appropriate:
Ref Description Range Cost of
Facility
Cost of Activity
Comments 1 Offsites (OSBL) 5% - 50% of
Inside Battery Limits (ISBL) 2 Fringes (vacations,
holidays, sick days)
22% - 30% of base wage rate 3 Worker Compensation
Insurance
10% - 17.5% of base wage rate
4 Inspections / QA-QC services
1.5% of TIC 5 Front End Studies /
Scoping study / BOD
0.5 – 2.5% of TIC of facility.
$1 - $100 + million 6 Builders all risk insurance
(BAR)
of the project the lower the % typically is.
8 Profit 3.5% - 15% Typically on a $20
million new building / facility a profit margin between 5% - 8.5% can be realized dependent on economic climate and
10 Procurement activities 0.50 – 1.00% of TIC visits, answers to RFI 12 H.O Project Controls 0.50 – 1.50% of
TIC
Estimating, cost
engineering and planning activities
13 Value Engineering Study $5 million
$10 million 16 General Conditions /
Preliminaries
Hand tools / typically valued less than $100 per item Typically $2.50 -
$4.00 per construction
Multiplier of d/d M.E item (cost).
An example of a high multiplier would be Canadian Tar Sands projects
metals 22 Construction Equipment 2 – 7% of Direct
- S/C Labor 23 Protection materials 0.20 – 0.40% of
Direct S/C Labor
Tarpaulins / temporary screens / worker rain gear. Power type construction fees can range from 6% - 10% of TIC
25 Vendor Assistance 0.50 – 1.50% of Major
Equipment
Another approach is to obtain pricing from vendors for this activity
26 Spare Parts 2.5 – 5.50% of cost if o/t is anticipated 29 Validation Services (were
required) / complex EPC projects 31 Owners Staff / Engineers,
Consultant based at EPC office / field location during construction effort range). Airline fare $0.5K - $1.5K
32 Owners Engineers North American Staff /
Consultants based at EPC office / field location during construction effort range. Airline fare $1K -
$2K
Business Class $4K
33 Owners engineers North American Staff /
Consultants based at EPC office / field location during construction effort range. Airline fare $1K -
$3K
Business Class $4K
taxes) 34 Owners Engineers North
American Staff /
Consultants based at EPC office / field location during construction effort range. Airline fare $1.5K -
$4K
Business Class $7K
35 Expense items / Demolition / initial fill Chemicals /
TBD Historically 0.50% - 1.50%
of TIC
Use quoted values were possible:
36 Steel Pipe Mill –
Construction Cost - (Total Facility based on
production capacity)
$300 - $450 Ton Average Cost $375 / Ton 37 Steel Mill – Construction
Cost - (Total Facility based on production capacity)
$550 -$700 Ton Average Cost $625 / Ton 38 LNG – Construction Cost -
(Total Facility based on production capacity)
Construction Cost - (Total Facility based on
40 Bio-Diesel Facility – Construction Cost - (Total Facility based on
production capacity) – Flax, palm oil, sunflower and soybean.
Construction Cost - (Total Facility based on
Construction Cost - (Total Facility based on
50,000 BBL – 250,000 BBL / day
43 Alumina Facility Facility cost per pound / kg 44 Boric Acid Facility Facility cost
per pound / kg 45 Ethyl Acetate Facility Facility cost
per pound / kg
Construction Cost - (Total Facility based on 47 Combined Cycle Power
Plant (Gas) – Construction Cost - (Total Facility based on production capacity) 48 Simple Cycle Power Plant
(Gas)– Construction Cost - (Total Facility based on production capacity) 49 Wind Power Construction
Cost - (Total Facility based on production capacity) 25 MPH for cost effective solutions: Typically these wind farm facilities are in the 10 – 75 MW range (The wind turbine unit typically represent 50% - 75% of the TIC).
Current turbines are sized 1.5 – 3.0 MW
50 Geothermal Power Facility $890 - $1,775 of installed MW of
Based on facility capable of generating 200 – 450 MW
51 Hydro power plant $1,400 - $1,975 of installed MW of capacity 52 Desalination Facility 25 million
gallon per day 53 Construction temporary
services (water, electricity
fittings delivered to site ,
TBD Determine if sales
exemption certificate is in place.
57 Refurbished major Equipment / E&I programming / Tie-in’s / Facility Shut-downs
TBD
58 I/O point new $1,500 – $2,500 59 I/O point modifying
existing system
$800 - $950 60 Operating consumables 0.5 – 1.75% of
annual sales 61 Annual Maintenance Costs
Public Building Manufacturing Facility (Auto Production / Paint / Tire type facility)
Chemical / Fluids Plant**
(Refinery / Amine Clause SRU)
Chemical / Solids Plant (Cement / Toner)
Pharmaceutical Facility***
(Class 10,000 – 100,000)
0.25% – 1.0%
3.5% - 7.5%
1.5% – 5.5%
1.5% - 5.5%
2.5% - 8.5%
Asset first time cost (TIC of installed facility EPC cost) or facilities insurance / book value / replacement cost.
**Could be up to 12.5%
for high pressures / hazardous chemicals / materials that corrode pipe / seals / bushings / impellers:
***Could be up to 15%
for cleaning protocols / chemicals / HEPA Filters / miscellaneous
materials, dismantling and flushing tri-clover type piping systems etc:
62 Utility costs for Refinery / Chemical Plant facilities use 1.5% – 3.75% of M.E. cost 66 Owner Engineering (PM/
Engineering / CM)
68 Rail spurs, roads, footpaths and fences
5% - 10% of M.E. cost.
69 Pre-Commissioning 0.80% - 1.80%
of M.E. plus bulk materials.
70 Project Insurance (Umbrella)
0.65% - 1.30%
of Construction costs
Exclude detailed design, procurement, CM and fees from the
calculation.
71 Third party inspection services
0.75% – 2.25%
of M.E. plus bulk materials
* Current US tax allow for the first $82.5K of earnings to be non taxable (6/26/2006), however working overseas for periods of more than six months will require US expatriates to pay both US and local country income taxes were applicable.
Capital Cost Estimating Summaries. (Cover Sheet)
The capital cost estimate summary on all types of estimates should contain adequate information to permit management to evaluate and consider the compiled / established factors and ratio’s
compared to “normal” company estimating standards. This summary / information should include some of the following:
1. Type of Estimate O.O.M. / Funding / Lump Sum 2. Name and location of plant / facility
3. Basis of estimate / scope work statement 4. Percentage of Engineering Complete
5. Estimating plan / key people involved with capital cost estimate 6. Percentage breakdown between direct and indirect costs 7. Major equipment list (percentage of firm quotes)
8. Significant quantities, total cubic yards of concrete, tons of structural steel, lengths of piping, number of valves, number of motors, number of instrumentation devices, number and footprint area’s of buildings, etc.
9. Estimated engineering and field construction hours 10. Labor rates, union or non union labor
11. Take-off allowances / Resolution factors and allowances / Design growth 12. In-house engineering / Support cost details
13. Estimating assumptions / listing of drawings and specifications estimate is based upon 14. Contracting / construction approach
15. Basis of Inflation / Escalation value
16. Expense items Start-up cost details Vendor Assistance costs
17. Plant tie-ins and shutdown work / Royalties / T & C review / M.E. multiplier 18. Engineering hours per piece of M.E / Shift work or overtime requirements 19. Premiums for M.E. early delivery / Milestone schedule / Accuracy of estimate
20. Project risks, i.e., demolition, hazardous waste, LBP, long lead equipment items / L D’s 21. Percentage of estimate based on formal quotations, percentage based on internal company
estimating systems / Contingency (Technical and General) values / Currency impact etc.
22. Inflation values utilized.
This detailed listing will greatly assist management in their review process. It is important to have this information on file, many times capital cost estimates are delayed, cancelled or deemed to expensive, or the ROI / EBITDA is not considered high enough, many times these estimates are put aside for a period of time only to needed again, two or three years down the road, using the older / previous capital cost estimate and calibrating it to today’s cost can save a lot of time and resources, when the CAPEX estimate is needed again. The basis of the “bid”, i.e., assumptions, clarifications, exclusions from bid or alternates to proposal, need to be documented and made part of the bid submission, the physical effort of a detailed capital cost estimate involves many individuals, to be successful it needs to be a “total team effort”. There must be a substantial / in depth analysis, review and checking procedure by senior management and the estimating / proposal team prior to the estimate / bid being submitted to client / or if the capital cost estimate is to be used as a project control tool. This method is suitable for EPC contractors (some owner / operating companies will produce similar type capital cost estimate) bidding process related work on a lump sum / turnkey / tender submission / GMP basis, it is vital that these activities are completed to minimize any “risk”
items that have been overlooked or estimated incorrectly. Capital cost estimates can be made at all stages of a projects life cycle, these include the capital cost estimates previously described earlier in this section. Owners / Clients and EPC firms have to appreciate that there is no single “best”
method of completing a CAPEX project, there are possibly dozens of methods or ways to execute a project, all methods have plus’s and minus’s associated with them, hopefully some of the
information contained in the following sections will help the reader in understanding these complex issues. Industrial Construction (refineries, chemical plants, pharmaceutical facilities, power facilities etc) need to be looked at differently, they all have distinctive scopes of work that are unique to their market sector. Assembling and calibrating the capital cost estimate for these types of facilities are complicated tasks; the initial sections of this publication should be a good “starting point” data source for individuals tasked with this responsibility. As has been mentioned previously, there is no common denominator when it comes to a standardized estimating methodology - different countries / different companies / different industry sector all use different terms / nomenclature for in
compiling and discussing CAPEX estimates, there is no standard name or classification / approach.
Again a lot of the issues related to the basics of CAPEX estimating, CAPEX estimating fundamentals are discussed in some detail in Section 1, 2 and 3 of this publication.
SECTION A - 4
BASIC BENCHMARKING DATA AND ELEMENTS OF A PROCESS PLANT /