Capital Cost Estimation
Chapter 5
Types of Capital Cost Estimate





1. Order of Magnitude Estimate (Feasibility)
2. Study Estimate / Major Equipment
3. Preliminary Design (Scope) Estimate
4. Definitive (Project Control) Estimate
5. Detailed (Firm or Contractors) Estimate
Capital Cost Estimate Classifications
Estimate Type
Accuracey
Data
Diagrams
Notes
Order of
Magnitude
+ 25%, - 15% Existing plants
BFD
Capacity +
inflation
Study (Major
equipment,
Factored)
+ 30%, - 20% Roughly sized major
equipment
PFD
Generalized
charts cost
Preliminary
Design (scope)
+ 25%, - 15% major equip. + piping
+ instr. + Elec. + util.
PFD
Group project
Definitive
+ 15%, - 7%
Prelim spcs for all
equipment
PFD +
P&ID
Detailed (firm or
contractor
+ 6%, - 4%
Complete engineering
Capital Cost Estimate Classifications
Example 5.1
The estimated capital cost from a chemical plant using the study estimate method
(Class 4) was calculated to be $2 million. If the plant were to be built, over what range
would you expect the actual capital estimate to vary?
For a Class 4 estimate, from Table 5.2, the expected accuracy range is between 3 and
12 times that of a Class 1 estimate. A Class 1 estimate can be expected to vary from
+6% to -4%. We can evaluate the narrowest and broadest expected capital cost
ranges as:
Lowest Expected Cost Range
High value for actual plant cost ($2.0 x 106)[1 + (0.06)(3)] = $2.36 X 106
Low value for actual plant cost ($2.0 x 106)[1 - (0.04)(3)] = $1.76 x 106
Highest Expected Cost Range
High value for actual plant cost ($2.0 x 106)[1 + (0.06 )(12)] = $3.44 x 106
Low value for actual plant cost ($2.0 x 106)[1 - (0.04 )(12)] = $1.04 x 106
The actual expected range would depend on the level of project definition and effort. If
the effort and definition are at the high end, then the expected cost range would be
between $1.76 and $2.36 million. If the effort and definition are at the low end, then
the expected cost range would be between $1.04 and $3.44 million.
Example 5.2
Compare the costs for performing an order-of-magnitude estimate and a detailed
estimate for a plant that cost $5.0 x 106 to build.
Solution :
For the order-of-magnitude estimate, the cost of the estimate is in the range of
0.015% to 0.3% of the final cost of the plant:
Highest Expected Value: ($5.0 x 106)(0.003) = $15,000
Lowest Expected Value: ($5.0 x 106)(0.00015) = $750
For the detailed estimate, the cost of the estimate is in the range of 10 to 100
times that of the order-of-magnitude estimate
For the lowest expected cost range
Highest Expected Value: ($5.0 x 106 )(0.03) = $150,000
Lowest Expected Value: ($5.0 x 106)(0.0015) = $7500
For the highest expected cost range:
Highest Expected Value: ($5.0 x 106)(0.3) = $1,500,000
Lowest Expected Value: ($5.0 x 106)(0.015) = $75,000
Estimating Purchased Equipment Costs



Vendor quote
 Most accurate
- based on specific information
- requires significant engineering
Use previous cost on similar equipment and scale for
time and size
 Reasonably accurate
- beware of large extrapolation
- beware of foreign currency
Use cost estimating charts and scale for time
 Less accurate
 Convenient
Effect of Size (Capacity)
Ca
 Aa 


Cb
 Ab 
(5.1)
Cost Exponent
Equipment Cost
Attribute - Size
Cost
Ca  KAa
where
n
K
n
Cb
Ab n
(5.2)
Effect of Capacity on Purchased Equipment Cost
Ca  K Aan
where
K  Cb Abn
Effect of Size (Capacity) cont.
n = 0.4 – 0.8 Typically
 Often n ~ 0.6 and we refer to Eq.(5.1) as the
(6/10)’s Rule
 Assume all equipment have n = 0.6 in a
process unit and scale-up using this method
for whole processes
 Order-of-Magnitude estimate

Effect of Capacity on Purchased Equipment Cost
Economy of Scale
Example 5.3 :
Use the six-tenths-rule to estimate the % increase in purchased
cost when the capacity of a piece of equipment is doubled.
Using Equation 5.1 with n = 0.6:
Ca./Cb = (2/1)0.6 = 1.52
% increase = (1.52 -1.00)/1.00)(100) = 52%
The larger the equipment, the lower the cost of equipment per
unit of capacity.
Economy of Scale
Example 5.4
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 5.3.
Using Equation 5.1:
Cost ratio using six-tenth-rule (i.e. n = 0.60) = 5.00.6 = 2.63
Cost ratio using (n =0.59) from Table 5.3 = 5.00.59 = 2.58
% Error = (2.63 -2.58)/2.58)(100) = 1.9 %
Effect of Capacity on Purchased Equipment Cost
Rearranging equation 5.2
C  K An
C
 K An 1
A
Equation for Time Effect
 I2 
C2  C1 
 I1 
C = Cost
 I = Value of cost index
 1,2 = Represents points in time at which
costs required or known and index values
known

Effect of Time on Purchased Equipment Cost
Effect of Time on Purchased Equipment Cost
Example 5.6
The purchased cost of a heat exchanger of 500 m2 area in 1990 was $25,000.
a. Estimate the cost of the same heat exchanger in 2001 using the two indices
introduced above.
b. Compare the results.
From Table 5.4:
1990
2001
Marshal and Swift Index
915
1094
Chemical Engineering Plant Cost Index
358
397
a. Marshal and Swift: Cost = ($25,000)(1094/915) = $29,891
Chemical Engineering: Cost = ($25,000)(397/358) = $27,723
b. Average Difference: ($29,891 -27,723)/($29,891 + 27,723)/2)(100) = 7.5%
Marshal & Swift and CEPCI
Table 5.5: The Basis for the Chemical Engineering Plant Cost Index
Components of Index
Weighting of Component (%)
Equipment, Machinery and Supports:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
Fabricated Equipment
Process Machinery
Pipe, Valves, and Fittings
Process Instruments and Controls
Pumps and Compressors
Electrical Equipment and Materials
Structural Supports, Insulation, and
Paint
37
14
20
7
7
5
10
100
Erection and Installation Labor
22
Buildings, Materials, and Labor
7
Engineering and Supervision
10
Total
100
61% of total
Example 5.7
The capital cost of a 30,000 metric ton/year isopropanol plant in
1986 was estimated to be $7 million. Estimate the capital cost of a
new plant with a production rate of 50,000 metric tons/year in 2001.
Cost in 2001 = (Cost in 1986)(Capacity Correction) (Inflation
Correction)
= ($7,000,000)(50,000/30,000)°.6(397/318)
=($7,000,000)(1.359)(1.248) = $11,870,000
Factors affecting Capital Cost
•
•
•
•
Direct project expenses
Indirect project expenses
Contingency and fee
Auxiliary facilities
1. Direct project expenses
Factor
Symbol
Comments
Equipment Cp
f.o.b. cost
Purchased cost of equipment at
manufacturer's site
Materials
CM
Includes all piping, insulation and installation
fireproofing,
foundations
and
structural
supports, instrumentation and electrical, and
painting associated with the equipment
Labor
CL
Includes all labor associated with equipment
and material installing mentioned above
2. Indirect project expenses
Factor
Symbol
Comments
Freight,
insurance,
and taxes
CFIT
transportation costs for shipping equipment
and materials to the plant site, all insurance
on the items shipped, and any purchase
taxes that may be applicable
Construction
overhead
CO
Includes all fringe benefits such as vacation,
sick leave retirement benefits; etc.; labor
burden such as social security and
unemployment insurance, etc.; and salaries
and overhead for supervisory personnel
Contractor
engineering
expenses
CE
salaries and overhead for the engineering,
drafting, and project management personnel
on the project
3. Contingency and fee
Factor
Symbol
Comments
Contingency
CCont
A factor to cover unforeseen circumstances.
These may include loss of time due to storms
and strikes, small changes in the design, and
unpredicted price increases.
Contractor
fee
CFee
fee varies depending on the type of plant and
a variety of other factors
4. Auxiliary facilities
Factor
Symbol
Comments
Site
development
CSite
land; grading and excavation of the site;
installation and hook-up of electrical, water,
and sewer systems; and construction of all
internal roads, walkways, and parking lots
Auxiliary
buildings
CAux
administration offices, maintenance shop and
control rooms, warehouses, and service
buildings
Off-sites and
utilities
COff
raw material and final product storage &
loading & unloading facilities; all equipment
necessary to supply required process utilities;
central environmental control facilities; and
fire protection systems
Capital Cost Modules
1. Total Module Cost (Lang Factor)
2. Bare Module Cost
Lang Factor
n
CTM  FLang  C pi
i 1
Total Module Cost
Purchased Cost of Major Equipment
From Preliminary PFD
(Pumps, Compressors, vessels, etc.)
Chemical Plant Type
Lang Factor Flang
Fluid Processing Plant
4.74
Solid-Fluid Processing Plant
3.63
Solid Processing Plant
3.10
Lang Factor
Example 5.8:
Determine the capital cost for a major expansion to a fluid processing
plant that has a total purchased equipment cost of $6,800,000.
Capital Costs = ($6,800,000)(4.74) = $32,232,000
Lang Factor
•
1.
•
1.
2.
Advantage
Easy to apply.
Drawbacks
Special MOC.
High operating pressure.
Module Factor Approach
•
Table 5.8
• Direct, Indirect, Contingency and Fees are
expressed as functions (multipliers) of purchased
equipment costC op  at base conditions (1 bar and
CS)
•
Each equipment type has different multipliers
•
Details given in Appendix A
Module Factor Approach
o
CBM  C p FBM
Bare Module
Cost
Bare Module Factor
(sum of all multipliers)
Purchased Equipment Cost for CS
and 1 atm pressure - Appendix A
FBM = B1 + B2FpFM
o
FBM
 B1  B2
Fp = pressure factor (= 1 for 1 bar)
FM = material of construction factor (=1 for CS)
C p  C op Fp FM
Bare Module Cost
F  1  M 1   L   FIT   LO   E 
0
BM
Example 5.9
The purchased cost for a carbon steel heat exchanger operating
at ambient pressure is $10,000. For a heat exchanger module
given the following cost information:
Item
% of Purchased Equipment Cost
Equipment
100.0
Materials
71.4
Labor
63.0
Freight
8.0
Overhead
63.4
Engineering
23.3
Using the information given above, determine the equivalent cost
multipliers given in Table 5.8 and the following:
0
a. Bare module cost factor, FBM
0
b. Bare module cost, C BM
Item
% of Purchased Cost Multiplier Value of Multiplier
Equipment Cost
Equipment
100.0
1.0
Materials
71.4
M
0.714
Labor
63.0
L
0.63/(1+0.714)=
0.368
Freight
8.0
 FIT
0.08/(1+0.714)=
0.047
Overhead
63.4
O
0.634/0.368/
(1+0.714)= 1.005
Engineering
23.3
E
0.233/(1+0.714) =
0.136
a. Using Equation 5.8:
0
FBM
= (1 + 0.368 + 0.047 + (1.005)(0.368) + 0.136)(1 + 0.714) = 3.291
b. From Equation 5.6:
0
C BM
= (3.291)($10,000) = $32,910
Module Factor Approach
o
CBM  C p FBM
Bare Module
Cost
Bare Module Factor
(sum of all multipliers)
Purchased Equipment Cost for CS
and 1 atm pressure - Appendix A
FBM = B1 + B2FpFM
o
FBM
 B1  B2
Fp = pressure factor (= 1 for 1 bar)
FM = material of construction factor (=1 for CS)
C p  C op Fp FM
Bare Module Cost Factor
For Heat Exchangers, Process vessels, and pumps
CBM  CP0 FBM  CP0  B1  B2 FM FP 
0
FBM
  B1  B2 
Material Factor, FM, for these equipment are obtained from Figure A.8
along with Table A.3.
Values of B1 and B2 are given in Table A.4
Bare Module Cost Factor
For Heat Exchangers, Process vessels, and pumps
Values of B1 and B2 are given in Table A.4
Module Factor Approach – Pressure Factors
Pressure Factor for vessels
Pressure Factor, FP , for other equipment are given in table A.6
along with Figure A.9
FP ,vessel 
( P  1) D
 0.0315
2 850  0.6( P  1) 
0.0063
If FP is less than 1, then FP= 1.0
For P less than -0.5 barg, FP = 1.25
for tvessel  0.0063m
Pressure Factor for Other
Equipment
Pressure Factor, FP , for other equipment are given in table A.6
along with Figure A.9
log10 FP  C1 C2 log10 P  C3  log10 P 
2
Constants are given in Table A.2
Module Factor Approach – Material
Factors
Bare Module Cost Factor
For equipment not covered in table A.3
Material Factor
Material Factor, FM , for other equipment are given in table A.6
along with Figure A.9
Purchased Equipment Cost
log10 C p0  K1  K 2 log10 ( A)  K 3  log10 ( A) 
2
Where A is the capacity or size parameter for the equipment
K1, K2, and K3 are given in table A.1
These data are also presented in the form of graphs in Figures A.1-A.7
Illustrative Example

Compare Costs for
 1. Shell-and-tube heat exchanger in
2001 with an area = 100 m2
for
 Carbon Steel at 1 bar
 Carbon Steel at 100 bar
 Stainless Steel at 1 bar
 Stainless Steel at 100 bar
Effect of Materials of Construction
and Pressure on Bare Module Cost
C op
Cp
o
C BM
P
MOC
1 bar
CS
25 K
1 bar
SS
25 K
68.3 K 82.3 K 154 K
100 bar
CS
25 K
34.6 K 82.3 K 98.1 K
100 bar
SS
25 K
94.4 K 82.3 K
25 K
CBM
82.3 K 82.3 K
197.4
K
Bare-Module and TotalModule Costs
BM – Previously Covered
 TM – Includes Contingency and Fees at
15% and 3% of BM

CTM  1.18

all equip
CBM
Grass-Roots Costs




GR – grass-roots cost includes costs for
auxiliary facilities
CGR  0.50

o
CBM
 CTM
all equip
Use base BM costs in GR cost (1 atm
and CS) since auxiliary facilities should
not depend on pressure or M.O.C.
Materials of Construction
Very important
 Table 5.9 – rough guide
 Perry’s – good source

Capcost
Calculates costs based on input
 CEPCI – use current value of 401 or
latest from Chemical Engineering
 Program automatically assigns
equipment numbers
