TOPIC
Capital Cost Estimating
TOPIC OUTCOME
1
Capital Cost
2
Classification of Fixed
Capital Cost Estimates
3
Estimating Purchased
Equipment Costs
Distinguish the classification of
fixed capital cost estimates
Estimate the purchase equipment
costs based on the effect of time
and capacity
Calculate the total capital cost of
a plant
4
Estimating the Total Capital
Cost of a Plant
What is economics?
-The study of how limited
resources is used to satisfy
unlimited human wants
Engineering Economy
- Is a collection of
mathematical techniques
that simplify economic
comparison
1. Problem recognition, formulation, and
evaluation.
2. Development of the feasible alternatives.
3. Development of the cash flows for each
alternative.
4. Selection of a criterion ( or criteria).
5. Analysis and comparison of the
alternatives.
6. Selection of the preferred alternative.
7. Performance monitoring
and post-evaluation
results.

Example
Bad news: You have just wrecked your car!. You
need another car immediately because you have
decided that walking, riding a bike, and taking a
bus are not acceptable. An automobile wholesaler
offers you $2000 for your wrecked car. Also, your
insurance company’s claims adjuster estimates that
there is $2000 in damage for your car. Because you
have collision insurance with a $1000 deductibility
provision, the insurance company mails you a
check for $1000. the odometer reading on your
wrecked car is 58 miles
Assumption:
 A new car worth $10000 with odometer reading 28
miles
 Price of selling a repaired car = $4500
 Sources
of Equipment
 Price Fluctuation
 Company Policies
 Operation Time and Rate of
Production





Used to describe the process by which the
present and future cost consequences of
engineering designs are forecast
Provide information used in setting a selling price
for quoting, bidding, or evaluating contracts
Determine whether a proposed product can be
made and distributed at a profit (EG: price = cost
+ profit)
Evaluate how much capital can be justified for
process changes or other improvements
Establish benchmarks for productivity
improvement programs


Capital cost – Cost associated with
construction of a new plant or modifications
to an existing chemical manufacturing plant
Classification of capital cost estimates:
◦
◦
◦
◦
◦
Order of magnitude estimate
Study estimate
Preliminary estimate
Definitive estimate
Detailed estimate

Order of Magnitude Estimate
◦ relies on cost information for a complete process
taken from previously built plants
◦ Requirement – blok flow diagram
◦ Accuracy: +40% to -20%

Study Estimate
◦ Utilizes a list of major equipment found in the
process (e.g. pumps, compressors and turbines,
columns and vessels, fire heaters and exchangers)
◦ Each of equipment is roughly size and appropriate
cost determined
◦ Based on process flow diagram (PFD)
◦ Accuracy: +30% to -20%

Preliminary Design Estimate
◦ Requires more accurate sizing of equipment than
used in study estimate together with layout of
equipment (piping, instrumentation, electrical
requirements) and also utilities.
◦ Accuracy: +25% to -15%

Definitive Estimate
◦ Requires preliminary specifications for all the
equipment, utilities, instrumentation, electrical and
off-sites
◦ Accuracy: +15% to -7%

Detailed Estimate
◦ Requires complete engineering of the process and
all related off-sites utilities
◦ Obtained vendor quotes for all expensive items
◦ End of detailed estimate: the plant is ready to go to
construction stage
◦ Accuracy: +6% to -4%

Requirement – Process Flow Diagram (PFD)
◦ Material and energy balance
◦ Material of construction
For each major piece
◦ Size/capacity – roughly estimatedof equipment identified

Alternatives of Estimation
◦ Current price quoted from suitable vendor (most
accurate)
◦ Use cost data on previously purchased equipment
(same type)
◦ Utilized summary graphs available for various types
of common equipment (discussed in detailed)

The relationship between the purchased cost and an
attribute of the equipment related to units of
capacity is given by:
C a  Aa 
  
C b  Ab 
n
---------
Equation 1.1
where;
A = Equipment cost attribute
C = Purchased cost
n = Cost exponent
Subscripts – a:- equipment with the required
attribute
b:- equipment with the base attribute

Equation 1.1 can be rearrange to give
Ca  K  Aa 
n
where
K 
---------
Equation 1.2
Cb
 Ab n
Equation 1.2 is a straight line with a slope of n when the
log of C is plotted versus the log of Aa
Values of cost exponent, n used in Equations 1.1 and 1.2
varies depending upon the class of equipment
Replacing n in Equation 1.1 or/and 1.2 by 0.6 provides the
relationship referred to as the six-tenth-rule


Example 1
Use the six-tenth-rule to estimate the %
increase in purchased cost when the
capacity of a piece of equipment is doubled
Example 2
Compare the error for the scale-up of a
heat exchanger by a factor of 5 using the
six-tenth-rule in place of the cost exponent
given in Table 2.3
Equipment type
Range of
correlation
Units of
Capacity
Cost
Exponent n
Reciprocating compressor
with motor drive
220 to 3000
Kw
0.70
Heat exchanger shell and tube
carbon steel
5 to 50
m2
0.44
Vertical tank carbon steel
1 to 40
m3
0.52
Single-stage Blower
0.5 to 4
m3/s
0.64
Jacketed kettle glass lined
3 to 10
m3
0.65
Table 2.3: Typical Values of Cost Exponents for a Selection of
Process Equipment

Example 3
The purchased cost of a recently
acquired heat exchanger with an area of
100 square meters was $10,000.
Determine:
a) the constant K in equation 1.1
b) the cost of a new heat exchanger of
180m2

Indices most generally accepted in chemical
industry
◦ The Marshall and Swift Equipment Cost Index
◦ The Chemical Engineering Plant Cost Index

Determination of Purchased Cost
where;
 I2 
C 2  C1   -------- I1 
Equation 1.3
C= Purchase Cost
I = Cost Index
Subscripts – 1:- refers to the base time when cost is
known
2:- refers to the time when cost is desired

Example 4
The purchased cost of a heat exchanger of
500m2 area in mid-1978 was $25,000
a) Estimate the cost of the same heat exchanger in
mid-1996 using the two indices introduced above
b) Compare the results
Values for Selected Indexes between 1985
to Jun 2009
Year
CE Plant Cost Index
1996
381.8
1997
386.5
1998
389.5
1999
390.6
2000
394.1
2001
394.3
2002
395.6
2003
401.7
2004
444.2
2005
468.2
2006
499.6
2007
525.4
2008
575.4
Jun 2009
597.1

Total capital cost of a chemical plant
includes:
◦ Direct Project Expenses
 Equipment f.o.b. cost, CP
 Material required for installation, CM
 Labor to install equipment and material, CL
◦ Indirect Project Expenses
 Freight, insurance and taxes, CFIT
 Construction overhead, CO
 Contractor engineering expenses, CE
◦ Contingency and Fee
 Contingency, CCont
 Contractor fee, CFee
◦ Auxiliary Facilities
 Site development,CSite
 Auxiliary Buildings, CAux
 Offsites and Utilities, Coff

Estimating capital cost for a process plant
◦ Access to previous similar plant with different
capacity
◦ Apply principles that already introduced:
 The six-tenth rule – may be used to scale up/down
to a new capacity
 The Chemical Engineering Plant Cost Index – should
be used to update the capital costs
 Lang Factor Method – used when no cost information
available

Lang Factor Method
n
CTM  FLang  C p ,i
---------
Equation 1.4
i 1
where;
CTM = the capital cost of the plant
Cp,i
= the purchased cost for the major
equipment units
n
= the total number of individual units
FLang = the Lang Factor
Type of Chemical Plant
Lang Factor,Flang
Fluid Processing Plant
4.74
Solid-Fluid Processing Plant
3.63
Solid Processing Plant
3.10
Capital Cost = (Lang Factor) x (Sum of Purchased Costs of all Major
Equipment)
Table 2.3: Lang Factors for the Estimation of Capital Cost
for Chemical Plants

Example 5
The capital cost of a 30,000 metric ton/year
iso-propanol plant in 1980 was estimated to
be $5,000,000. Estimate the capital cost of a
new plant with a production rate of 50,000
metric tons/year in mid-1996

Example 6
Determine the capital cost for a major
expansion to a fluid processing plant that has
a total purchased equipment cost of
$6,800,000

Bare Module Cost for Equipment at Base
Conditions
◦ Condition specified for base case are: Unit fabricated for most common material, usually
carbon steel (CS)
 Unit operated at near ambient pressure
◦ Bare Module Cost:-
C BM  C P FBM

Bare Module Cost for Equipment at Base
Conditions
◦ Bare Module Factor:-
FBM  1   L   FIT   O L   E 1   M
where
C BM = Bare module equipment cost: direct+ indirect cost
C P = Bare module equipment factor
FBM = Purchased cost for base conditions


Example 7
The purchased cost for a carbon steel heat exchanger
operation at ambient pressure is $10,000. for a heat
exchanger module, Ulrich [4] provides the following
cost multiplying factors
Cost Multiplier
M
L
 FIT
O
E
Value
0.71
0.37
0.08
0.70
0.15
Determine:
a) Bare module cost factor, FBM
b) Bare module Cost, CBM
c) Materials and labor costs to install the exchanger

Example 8
Find the mid-1996 bare module cost of a
floating head shell and tube heat exchanger
with a heat transfer area of 100m2. The
operating pressure of the equipment is
1.0bar with both shell and tube sides
constructed of carbon steel. For this material
and pressure the values of FP and FM are
equal to 1.0
Figure A.1: Purchased equipment cost for shell and tube heat exchangers
Figure A.2: Pressure factors (Fp) for heat exchangers
FM = Material factor to account for
materials of construction
(for carbon steel, FM = 1)
FP = pressure factor to account for
high pressure from Figure 2.5
(for ambient pressure, FP = 1)
Figure A.3: Bare module factors (FoBM) for heat exchangers
Shell Material
Tube Material
Material Factor, FM
Carbon Steel (CS)
Carbon Steel (CS)
1.00
Carbon Steel (CS)
Copper (Cu)
1.25
Copper (Cu)
Copper (Cu)
1.60
Carbon Steel (CS)
Stainless Steel (SS)
1.70
Stainless Steel (SS) Stainless Steel (SS)
3.00
Carbon Steel (CS)
Nickel Alloy (Ni)
2.80
Nickel Alloy (Ni)
Nickel Alloy (Ni)
3.80
Carbon Steel (CS)
Titanium (Ti)
7.20
Titanium (Ti)
Titanium (Ti)
12.00
Table 2.9: Material Factors Floating Head Heat Exchangers

Bare Module Cost for Non-Base
Conditions
◦ Condition specified for Non-Base Case
 Equipment made form other material of
construction
 Operating at non-ambient temperature
 FBM in the base case is replaced with actual bare
module cost factor, F0oBM
o
C BM  C P FBM
◦ Bare Module Cost:-

Example 9
Repeat example 8 except that the exchanger
is made with stainless steel shell and tube

Example 10
Find the bare module cost of a floating-head
shell and tube heat exchanger with a heat
transfer area of 100m2. The operating
pressure of the equipment is 100 bar on both
shell and tube sides and the construction of
the shell and tubes is of stainless steel.

Example 11
Find the bare module cost (in 1996) of a
stainless steel tower 3m in diameter and 30m
tall. The tower has 40 stainless steel sieve
trays and operates at 20 bar.

Grass Roots and Total Module Costs
◦ Grass Roots
 new facility in which we start the construction on
essentially undeveloped land
Total Module Cost, CTM 
◦ Total Module Costs
n
C
i 1
n
o
TM ,i
o
 1.18  C BM
,i
i 1
 Cost of making small-to-moderate expansions or
alterations to an existing facility
Grass Root Cost, C GR  CTM  0.35
n
o
C
 BM ,i
i 1

Example 12
A small expansion to an existing chemical
facility is being investigated and a
preliminary PFD of the process is shown in
Figure E2.14. The expansion involves the
installation of a new distillation column with
a reboiler, condenser, pumps and other
associated equipment. A list of equipment,
sizes, materials of construction, and
operating pressure is given in Table E2.14A.
Using the charts in Appendix A, calculate
the total module cost for this expansion in
1996.