Unit 6 Economic Considerations for Industrial Coating Projects
Economic Considerations for Industrial Coating Projects
Scope and Objectives
Scope
This unit describes methods of selecting coating
systems and maintenance schedules to achieve
minimal life cycle coating costs; factors affecting
painting costs; and methods for estimating costs of
coating projects.
Objectives
After completing this unit, students will be able to:
• Recognize the importance of economics in
protecting structures and equipment with
coatings.
• Explain factors affecting painting costs.
• Practice methods for estimating costs of coating
projects.
• Describe methods of selecting coating systems
and maintenance schedules to achieve minimal
life-cycle coating costs.
• Employ “Present Value” and “Future Value” of
money in planning for future painting work.
Costs of Coating Protection
The owner wishes to minimize the costs of using
coatings to protect facilities. This includes both direct
and indirect costs:
Direct Costs
• Initial coating work (materials, labor, etc.)
• Repair/replacement of damaged components
• Partial or complete repainting
6-1
Indirect Costs
• Cost associated with product leaks
• Production down time
• Administrative and engineering overhead costs
Cost Effectiveness of Coatings
Coating is the most effective method of protection
of structures and equipment only when it is more
economical than alternative methods of protection.
Thus, the owner’s coating manager must conduct an
analysis to determine the most economical method
of obtaining the lowest life cycle cost for protection
of each structure.
Three examples below describe some of the factors
involved in selecting the most economical alternative
system of protection.
Example 1. The gutters and downspouts of several
buildings need replacement. Is it more cost-effective
to use galvanized steel or plastic products? Some
considerations for each alternative include:
• Material cost
• Installation costs
• Projected service life
• Acceptable appearance
• Withstanding abuse
• Life time maintenance requirements and costs
The relative importance of each of these factors may
vary with location and activities being conducted in
the buildings.
C2 Planning and Specifying Industrial Coatings Projects
Unit 6 Economic Considerations for Industrial Coating Projects

Example 2. A dozen new mooring buoys are to be Doing It Right the First Time: Avoiding
placed in San Diego Bay to provide moorings for ships Rework Costs
of the fleet. Is it more cost-effective to install painted
In Unit 1, it was stated that it is more economical for
steel buoys or fiberglass-reinforced plastic buoys?
both the owner and the contractor to have good quality
Special concerns for the buoys are their visibility
control in place to avoid rework. Rework is costly in
and their resistance to impact from small boats. The
itself and may also result in costly work stoppage or
installation costs will be identical. Concerns about
delay until a QC issue can be resolved.
the buoys are somewhat different from those in
Example 1:
Owners are concerned about work stoppages that
• Procurement costs
may extend the expected completion time and delay
• How long will visibility of each alternative remain
the resumption of plant operations. Disputes that are
acceptable?
not readily resolved may go into litigation, and this can
• Expense to restore visibility to an acceptable
be extremely costly and time consuming.
condition
• Impact and abrasion resistance
The contractor’s schedule for the rework may interfere
• How easily and cheaply can repairs be made to
with other work scheduled. The contractor is also
damaged buoys in place?
concerned that work stoppages and delays may be
• Projected service
costly, especially if very little money has been set
aside for contingencies.
Example 3. A 500-foot (152.4 m) galvanized steel
communication tower is to be built in Florida. The FAA
Well-written specifications and pre-construction
(Federal Aviation Administration) requires either bright,
and other periodic conferences with the owner and
alternating bands of orange and white paint or a high
contractor personnel will reduce the chances for
intensity flashing light on its top to alert approaching
misunderstandings and will provide a mechanism for
aircraft. Which alternative is more cost-effective? The
resolving. A positive partnering relationship will also
following factors must be considered:
help resolve issues between parties.
• Cost of procurement of shop-painted towers
compared to unpainted towers Painting Project Estimating Concerns
• How much additional service life will coatings
A cost estimate for a coating project or the coating
provide to the galvanized steel tower?
portion of a larger construction project is the best
• How long will the coatings maintain a visibility
method of developing a realistic cost for specified
acceptable to the FAA?
work. The painting portion of a construction project
• Expected periodic coating maintenance costs
may comprise a significant portion of the total
• Expected life of the flashing light
contract.
• How expensive is it to have a steeplejack replace
the light?
A cost estimate is more than a guess because it is
based on available data for various aspects of the
work and the estimator’s personal experience in

C2 Planning and Specifying Industrial Coatings Projects

6-2
 Unit 6 Economic Considerations for Industrial Coating Projects

preparing similar estimates. However, the available If the funding estimate is too high, necessary
data are subject to change because cost rates vary funds may not be available. Also, the credibility of
with time and location. Estimates that are poorly the estimator may become suspect and estimate
prepared by the owner or the contractor may cause requirements for future years.
serious problems for all.
If the contractor does not have enough money to
Owner Concerns complete the project, the contract may be defaulted,
and a new contract must be prepared to complete the
The owner must estimate the cost of the project well
work. This can be very costly to the owner and is why
in advance of the work, so that the necessary funding
an owner always requires proof of the contractor’s
can be procured. If the funding is requested a few
financial stability.
years in advance, the owner must allow for increased
costs for inflation. The project specification must
The owner may also be concerned about the
include all of the desired work. Later inclusion of
credibility of bids that are unrealistically low (well
overlooked items may require costly change orders.
below estimated costs). In industry, the owner does
not have to select such bids. Public agencies may
If the owner’s estimate is significantly below the bids
have more difficulties in not selecting the lowest bid
received from contractors, the contract work may have
from a qualified contractor. The contractor may be
to be deferred until additional funds can be procured,
asked to check to see if all items have been included in
in order to avoid contract default. Alternatively,
the estimate or given the option of withdrawing the bid.
the contractor’s bids and the specification may be
However, contractors that insist that it is possible to
modified to reduce the project scope to accommodate
complete the work for the bid price and are financially
the level of available funds. Sometimes, the project
stable will probably be awarded the contract.
scope is modified to defer topcoating to a later time
when additional funds become available. Deferring
Contractor Concerns
topcoating can create costly problems:

• The primer may be formulated to be topcoated The contractor would like to bid at a low enough price

within a certain time period to avoid premature to be awarded the contract but at a high enough price

coating failure due to loss of adhesion. to make a fair profit. Contractors must be careful not

• The primer may not be formulated to provide to underbid the actual cost and lose money. Above

protection from corrosion untopcoated for an all, the contractor must have sufficient extra funding

extended period of time. to take care of any unexpected contingencies that

• The primer may not be resistant to weathering. might arise. A contractor who is “hungry” for work is

• The primer may become damaged or contaminated more likely to bid at a low price and be more risky for

so that touch-up or recleaning is required before the owner. Once an estimate is given by a contractor,

topcoating. it is usually “cast in stone” and may be very difficult

to change.

C2 Planning and Specifying Industrial Coatings Projects

6-3
Unit 6 Economic Considerations for Industrial Coating Projects
Beginning with Surface Area
Calculations
Calculating the Surface Areas to be Painted
Before creating the estimate for any coating project,
the dimensions of components must be taken, so that
the total area to be coated can be calculated. These
components may include structures, piping, vessels,
concrete floors, CMU walls, sheeting, and insulation.
Dimensions can be obtained by actually taking
measurements or using takeoffs from drawings.
Takeoffs and Actual Measurements of Areas to
Be Painted
Takeoffs from drawings of a structure and its
components to be painted can be very accurate, if
no structural modifications have been made since
the drawing was prepared. Personnel who are
comfortable reviewing structural plans should take
the measurements from only one view to reduce the
possibility of counting the same items twice.
Field measurements require actually measuring
all the components to be painted. In both cases,
structures should be broken up into easily identified
zones such as building bays, floor levels, pipe rack
sections, etc.
Area Calculations from Takeoffs
Several publications (e.g., SSPC’s Practical Math for
the Coatings Industry, Steel Construction Manual of
the American Institute of Steel Construction, and the
PDCA Estimating Guide Volume II) are available to
show how to estimate the surface areas of different
structural shapes from their dimensions.
C2 Planning and Specifying Industrial Coatings Projects
6-4
For example, the exterior of a cylindrical tank with
diameter of 50 feet (15.24 m) and a height of 100
feet (30.48 m) is to be painted. The areas of the tank
top and its cylindrical side must be determined. To
calculate the area on the side of the tank, multiply the
tank height by its circumference, as determined from
a field measurement to be 157 feet (47.85 m):
U.S. Conversion
100 x 157 = 15,700 square feet
Metric Conversion
30.48 x 47.85 = 1458.47 square meters
If a drawing takeoff was used, the circumference of
the tank top can be calculated by multiplying the tank’s
diameter by 3.14 ( π
; pi):
U.S. Conversion
Circumference of tank = 50 x 3.14 = 157 feet
Metric Conversion
Circumference of tank = 15.24 x 3.14 = 47.85 m
The surface area of the tank top can be calculated by
multiplying the square of its radius (half of its diameter)
byπ
; or using a formula for the area of a circle, where
r is the radius and d is the diameter:
U.S. Conversion
d2 (50ft)2
A = π
r2 or A=π =π = 1963ft 2
4 4
= (3.14)∙(25 ft)2
€ ft2
= 1963
The total surface area to be painted is 15,700 (side)
+ 1,963 (top) = 17, 663 square feet.
 Unit 6 Economic Considerations for Industrial Coating Projects

Metric Conversion costs; those that do (e.g., coatings and solvent used
d2 (15.24m)2
A = �r2 or A=π
4
=π
4
= 182.32m2 to thin them) are called capital costs.

= (3.14)∙(7.62 m)2 Coatings. The cost of coatings for a particular surface

= 182.32
€ m2 area can be calculated with these equations:

The total surface area to be painted is 1458.47 (side) U.S Conversion

+ 182.32 (top) = 1640.79 square meters.
Allowances must be made for any protuberances
such as ladders or stairs, which were ignored in this
example.
Cost Items to Be Considered in
Estimates
The usual cost items to be considered for an industrial
coating project:
Total coating cost in dollars = Price per gallon Volume
in gallons
Volume in gallons =
Area to be painted in square feet
Spreading rate in square feet per gallon
Spreading rate in square feet per gallon =
1604 x Coating % solids by volume
Coating dry film thickness in mils

• Mobilization and demobilization The three above equations can be combined into
• Materials one:
• Equipment 
 A⋅ p⋅D
C=
• Production and QC labor 1604 ⋅ PS

Mobilization and Demobilization
Mobilization involves those costs associated with
bringing equipment, materials, and labor to the
job site. Demobilization is the cost of removing
equipment, excess materials, labor, and generated
waste from the job site. Both costs can be very
significant.
where
C = cost of coating material in dollars
A = area to be painted in square feet
p = price in dollars per gallon
D = dry film thickness in mils
PS = percent solids by volume of the liquid coating
(expressed as a decimal)
1604 = the conversion from mil·ft2 to gallons

Materials Metric Conversion

Total coating cost in dollars = Price per liter x Volume
Material costs include coatings, solvents for thinning
in liters
and clean-up, and abrasives and other surface
preparation materials. Those materials that do not
Volume in liters =
become part of the finished product (e.g., abrasives
Area to be painted in square meters
and solvent used for cleaning) are called expendable
Spreading rate in square meters per 4-liters

C2 Planning and Specifying Industrial Coatings Projects

6-5
€
Unit 6 Economic Considerations for Industrial Coating Projects

Spreading rate in square meters per 4-liters = We then replace the letters in the formula with
149 X Coating % Solids by Volume / Coating DFT the numbers and perform the computation on a
(microns / 25) calculator.

(17,663) ⋅ (40) ⋅ (4)

The three above equations can be combined into C= = $2,202

(1604)⋅ (0.80)
one as above with 149 substituting for 1604 for the
conversion from 25 microns.m2 to 4-liters. Thus, $2202 is the theoretical cost of the epoxy primer
if no material is lost.
A simplified U.S. conversion examines Solids, Mils,
Efficiency, and Square Feet. Coating transfer efficiencies vary widely with the
complexity of the surface. A 75% transfer efficiency
1604 (theoretical coverage a 1 mil, 100% solids per (i.e. 25% loss) is rather typical for paint application by
gallon)
spraying. Thus, to obtain the actual coating cost for
S x 80% Solids by Volume
the primer with a coating transfer efficiency of 75%,
1283.2 (theoretical coverage a 1 mil per the theoretical cost must be divided by 0.75:
gallon)
MIL / 4 Mils DFT 2,202
actual primer cost = = $2,936 

320.8 (theoretical coverage a 4 mils per 0.75
gallon)
E x 83% Efficiency Factor
Coatings, particularly those of the same generic type,
are often compared by computing cost per square foot
266.264 (actual coverage at 4 mils per gallon)
at 1 mil dry film thickness. This takes into account
S 1600 Square Feet (divide by actual
coverage) the relative volumes of solids in liquid paints. Thus,
6.0 Gallons Needed a paint with a lower cost per gallon may be more
expensive than a paint of the same generic type
U.S. Conversion with higher a cost per gallon but a higher percent by
Example: Suppose we wish to find the material cost volume of solids.
for the previously described water tank with an area
of 17,663 ft2, and which is to be painted with 4 mils Metric Conversion
of epoxy primer containing 80% solids and costing Example: Suppose we wish to find the material cost
$40 per gallon. for the previously described water tank with an area
of 1640.95 m2, and which is to be painted with 100
Solution: We first assign a number to each letter in the microns of epoxy primer containing 80% solids and
formula, except C, which is what we are computing. costing $40 per 4-liters.

A = 17,633
p = 40
D=4
PS = 0.80

C2 Planning and Specifying Industrial Coatings Projects

6-6
 Unit 6 Economic Considerations for Industrial Coating Projects

Solution: We first assign a number to each letter in the Abrasives.

formula, except C, which is what we are computing.
U.S. Conversion
A = 1640.95 Abrasives are usually procured by weight. The weight
p = 40 of abrasive for cleaning steel can be calculated by
D = 100 multiplying the weight of abrasive used per square
PS = 0.80 foot by the surface area to be cleaned in square feet.
Thus, if a commercial blast (SSPC-SP 6) requires
We then replace the letters in the formula with 4.0 pounds of abrasive per square foot of area, the
the numbers and perform the computation on a amount of abrasive needed to blast clean the exterior
calculator. surface of the steel tank with a total of 17,663 ft2 of
surface area will be:
Cost = (1640.95) * (40) * (4) / (149) * (0.80) = $2202
4 is calculated by 100 microns / 25 = 4 wt of abrasive = (4.0) ⋅ (17,663) = 70,652 lb

The conversion from pounds to tons is:

Thus, $2202 is the theoretical cost of the epoxy primer
if no material is lost. €
1ton
70,652lb ⋅ = 35.3tons
2000lb
Coating transfer efficiencies vary widely with the
complexity of the surface. A 75% transfer efficiency
Metric Conversion
(i.e. 25% loss) is rather typical for paint application by
€ Abrasives are usually procured by weight. The weight
spraying. Thus, to obtain the actual coating cost for
of abrasive for cleaning steel can be calculated by
the primer with a coating transfer efficiency of 75%,
multiplying the weight of abrasive used per square
the theoretical cost must be divided by 0.75:
meter by the surface area to be cleaned in square
meter. Thus, if a commercial blast (SSPC-SP 6) re-
Actual primer cost = 2202 / 0.75 = $2936
quires 1.8 kilograms of abrasive per square meter of
area, the amount of abrasive needed to blast clean
Coatings, particularly those of the same generic type,
the exterior surface of the steel tank with a total of
are often compared by computing cost per square
1640.94 m2 of surface area will be:
meter at 25 microns dry film thickness. This takes
into account the relative volumes of solids in liquid
wt of abrasive = (1.8) ⋅ (1640.94) = 2953.69 Kg
paints. Thus, a paint with a lower cost per 4-liter may
be more expensive than a paint of the same generic The conversion from kilograms to tons is
type with higher a cost per 4-liter but a higher percent
€ 1ton
by volume of solids. 2953.69Kg ⋅ = 3.26tons
907Kg

The cost of abrasive can then be determined by

multiplying the weight of abrasive per ton by the cost
€
per ton.

C2 Planning and Specifying Industrial Coatings Projects

6-7
Unit 6 Economic Considerations for Industrial Coating Projects
The cost of abrasives can also be calculated by
multiplying the rate of consumption by the number of
abrasive blasting hours. The rate of consumption of
abrasive (e.g., one-quarter to one-half ton per hour)
will vary with the size and shape of the structure, the
surface conditions, and the level of cleaning. The
amount of abrasive used and the cleaning production
rate will be greater when surfaces being cleaned have
existing thick coatings or mill scale that are difficult
to remove.
The abrasive supplier should provide the price of the
abrasive as delivered to the work site. The cost of
transportation can be very significant.
The higher the level of blast cleaning, the more costly
the surface preparation (both the amount of abrasive
and the work hours). The manufacturers of primers
always provide the recommended levels of clean-
ing for their products in different environments. All
primers have a minimum level of steel cleanliness
for good performance, and further cleaning may not
significantly enhance coating performance. A lower
and less costly level of blast cleaning (e.g., com-
mercial blast SSPC-SP 6) usually results in reduced
coating performance, while a higher and more costly
level of blast cleaning (SSPC-SP 5 white metal blast)
will not usually result in a significantly better coating
performance.
Equipment
Equipment required for individual projects varies with
structural substrates, sizes, and configurations and
with the methods of surface preparation and coat-
ing application. The contractor may own part of the
equipment and have to rent the rest. In some cases
(e.g., at remote locations), it may be cheaper for a
C2 Planning and Specifying Industrial Coatings Projects
6-8
contractor to rent equipment than to have owned
equipment shipped to the work site.
The cost of rental equipment is based upon the num-
ber of days each piece of equipment is used (usually
based on a 5-day or 40-hour week) and the rental
rates. The contractor usually provides the fuel and
operator for the equipment. When the contractor
owns the equipment, the estimate includes costs for
recovery of its purchase price.
Some of the more commonly used pieces of equip-
ment for cleaning surfaces and applying coatings
are:
• Abrasive blasting equipment. This includes
an air compressor, typically 350-450 cubic feet
per minute (2,618- 3,366 cubic meters per
minute), along with blast pots, hoses, nozzles,
and helmets.
• Coating application equipment. Airless spray
equipment is typically used for coating application
because of its high production rate. For some
coatings, plural component spray equipment may
be required.
• General equipment. Pickups and larger trucks
used for transportation of materials, equipment,
and workers fit into this category. So do office
trailers, change rooms, storage rooms, and
sanitary facilities.
• Containment and ventilation. This equipment
protects workers and the environment from
hazardous and nuisance materials used or
generated. This includes containment equipment
and dust collectors. Air and soil monitors
and other sampling equipment may also be
necessary to monitor workers and the surrounding
environment.
• Access equipment. Scaffolding, lifts, and
boats.
 Unit 6 Economic Considerations for Industrial Coating Projects
• Safety equipment. Protective clothing, eye and
hearing protection, respirators, traffic control
devices, confined space equipment, and fall
protection equipment. The project safety plan
will itemize all the safety equipment required for
the project.
Production and QC labor
Personnel.
Labor costs should based on the estimated worker
hours (or days) and rates for the operation performed.
Worker hours will vary with the structural sizes,
shapes, and conditions, as well as worker skill. Work-
ers who may be used on large coating projects:
• Riggers . Workers who deploy, place, and
remove equipment (e.g., scaffolding), enabling
workers to gain access to surfaces to be cleaned
and coated.
• Blasters . Workers who perform the actual
abrasive blast cleaning.
• Pot tenders. Workers assisting abrasive blasting
operators by adjusting abrasive flow and providing
other support.
• Spent abrasive handlers. Workers who handle
spent abrasive. They remove abrasive from inside
a vessel or from the immediate work area.
• Coating applicators. Workers who actually
apply the protective coatings to the cleaned
surfaces.
• Helpers. Workers available to assist as needed.
They may mix paint, move and clean equipment,
or assist with the rigging.
• Supervisors. Personnel who oversee the on-
site operations and check that production is
going well. They may not spend full time at the
job site.
6-9
• Competent persons. Workers who have the
ability to recognize hazards and the authority to
take actions to eliminate or minimize them.
• Quality control workers. Contractor workers
who ensure that all project specifications are
being met. They prepare CARs when deviations
from the project specification are detected.
Some of the workers listed above may serve in dif-
ferent capacities at different times.
Labor Costs.
Typically, labor is the costliest portion of a coating
project. The labor cost for each contractor worker
is the estimated work hours charged to the project
multiplied by the cost per work hour. The cost for
each project worker is then totaled to give the total
labor costs for the project.
Labor rates comprise:
• Base wage. An agreed upon figure for each type
of work to be done. Rates vary greatly between
different jobs and at different geographical
locations.
• Overtime. Additional expense is incurred by the
contractor whenever a worker’s time exceeds 8
hours per day or 40 hours per week. This may
be “time and a half” (150% of the base wage)
or double time (twice the base wage, 200%), as
agreed upon in the work contract.
time and a half rate = (1.5) · (base rate)
double time rate = (2) · (base rate)
• Fringe benefits. The contractor is commonly
required to pay into a fund, usually a fixed amount
per worker hour, that provides specific benefits to
workers. Typical fringe benefits include savings
C2 Planning and Specifying Industrial Coatings Projects
Unit 6 Economic Considerations for Industrial Coating Projects

plans, apprentice training programs, and health Table 6-1

and welfare programs.
Calculation of Straight Time Labor for an
• Taxes. Taxes paid to state or federal governments Industrial Painter in the United States
are based upon a percentage of the worker’s
base wage and include Social Security (FICA), Base Wage Rate $37.00

Federal Unemployment Tax (FUET), and State Taxes: FICA (7.65%) 2.83
FUET (0.8%) 0.03
Unemployment Tax (SUET).
SUET (7.2%) 2.66
• Workers’ Compensation Insurance. Contractors
Workers Compensation (17.5%) 6.48
pay insurance companies to cover work-related
General Liability (4%) 1.48
injuries and illnesses of employees. An effective
Fringe Benefits: Health/Welfare 6.66
safety program can reduce these costs through a
Pension 4.07
low EMR (Experience Modification Ratio) rating.
Apprentice training 0.20
Thus, insurance companies offer savings to
Union general fund 0.08
companies whose accidents and losses reported Travel ($12.00 per day) 2.52
to OSHA are consistently below the industry TOTAL: $64.28
average. The EMR is determined by a complex
calculation. • Level of Work Quality. Work done to meet
• General Liability Insurance. The contractor high quality requirements will be more costly than
must pay an insurance carrier for coverage against work done to lesser quality requirements. Thus, a
automobile accidents, pollution, overspray, and near-white blast cleaning (SSPC-SP 10) will cost
other liabilities. more than a commercial blast cleaning (SSPC-SP
• Travel Costs. There may be an agreement 6) of lower quality.
that requires additional pay for work outside of a • Substrate Shapes . Cleaning and painting
specified boundary such as the city limits. production rates are much greater on flat surfaces
than on irregular surfaces. Large diameter pipes
Table 6-1 in the next column is an example of how labor are easier to paint than bundles of small pipes. In
estimates for different trades may be calculated. general, the greater the detail of surfaces being
cleaned and painted, the lower the production
Production Rates rates. Commercial estimating guides provide
guidance for estimating production rates for
The production rate (in square feet per work day or
different shapes and sizes.
square meters per work day) is a measure of pro-
• Location of the Work. Cleaning and painting
ductivity. Coating cleaning and application rates for
production rates are greater when there is ready
unobstructed, readily accessed surfaces in the United
access to the work. Thus, work conducted at
States can be found in the PDCA Estimating Guide
heights or where space is restricted (e.g., confined
Volume II and other commercial estimating guides.
spaces) is much slower and consequently more
These rates vary for several reasons, and additional
expensive.
costs must be taken into account:

C2 Planning and Specifying Industrial Coatings Projects

6-10
 Unit 6 Economic Considerations for Industrial Coating Projects

• Condition of the Substrate. The condition of
the substrate greatly affects surface preparation,
particularly abrasive blasting. The presence of mill
scale reduces the choice of surface preparation
methods, and excessively thick coatings tend to
peel off rather than fracture and disbond.
• Quality of the Workforce. In some geographical
areas, workers do not have the same levels of skill
as do workers in other areas. At remote locations,
contractors may have to hire local labor.
An experienced estimator is able to incorporate the
additional costs due to specifically prevailing fac-
tors.
Methods of Preparing Coating Project Estimates
There are several methods of preparing estimates for
coating work. Some experienced estimators calculate
the costs based upon the previous coating costs for
coating the same or similar structures plus inflation
costs. This may be satisfactory if the previous coating
system that performed well is to be removed and reap-
plied. However, if another system is to be applied, the
estimate may not be as close to actual costs.
Time and Materials Method of Cost Estimating
The time (labor) and materials method of estimating
project costs is the one most commonly used today.
This is basically done in four steps which we have
4. Determine the costs for materials and equipment,
and add them to the labor cost to obtain the total
project cost.
Depending upon how the labor rates were determined,
costs for overhead, profits, and contingencies may
have to be added. Contractors often prefer to include
these costs in other cost elements rather show them
as separate line items.
An example of estimating the cost of a small painting
project is shown in Table 6-2. The number in the
last column is not always the quantity times the unit
cost because an overhead or contingency factor is
sometimes included.
The cost per square foot (0.09 m2) in Table 6.2 was
determined by dividing the grand total, which includes
a profit factor, by the area to be painted. In this case,
$260,209 ÷ 68,436 ft2 (6,358 m2) = $3.80/ft2. (Note:
All data in tables are just illustrative samples.)
Cost Per Square Foot Method of Estimating
The cost per square foot method is one of the simplest
methods of preparing coating estimates. Its accuracy
depends upon the accuracy of the cost values used.
These estimates are based upon available costs per
square foot (0.09 m2) of the different sub-elements
of the project:
• Surface preparation

already discussed: • Coating application

• Coating materials
1. Calculate the surface area to be coated.
2. From labor rate tables, estimate the number
of hours required for each phase (surface
preparation, coating application, etc.) of the
work.
3. Multiply the labor hours by the average labor rate
to obtain the total labor costs.

C2 Planning and Specifying Industrial Coatings Projects

6-11
Unit 6 Economic Considerations for Industrial Coating Projects

Table 6-2. Estimate for coating a reservoir interior

Sheet 1 of 1
Date: June 30, 2008
Man Hour Cost: $ 64.00
Customer: Mountain Water District Area (Interior ): 68,436 ft2 (6,358 m2)
Location: Reservoir #3 Area (Exterior ): Pending

Item Men Days Description Quantity Unit Unit Cost Total

Labor
1 3 2 Move on and off, set-up & tear-down 48 hr $64.00 $3,072.00
2 5 10 Remove floor and 10' of shell coating 400 hr $64.00 $25,600.00
3 4 15 Blast Shell/Roof/Beams to SP-10 480 hr $64.00 $30,720.00
4 4 4 Clean out spent abrasive 128 hr $64.00 $8,192.00
5 4 2 Caulking 64 hr $64.00 $4,096.00
6 4 9 Interior Primer 288 hr $64.00 $18,432.00
7 4 9 Interior Midcoat 288 hr $64.00 $18,432.00
8 4 9 Interior Finish 288 hr $64.00 $18,432.00
9 4 2 Holiday Detection & Report 64 hr $64.00 $4,096.00
10 4 1 Disinfect Interior 32 hr $64.00 $2,048.00
Materials
1 Interior Primer, Midcoat and Finish 885 gal (3,350 liters) $20.00 $19,071.75
2 Chlorine 20 gal (76 liters) $10.00 $215.50
3 Soil Tests 2 tests $100.00 $215.50
4 Abrasive 195 tons (177 tons) $87.00 $18,237.38
5 Diesel Fuel 2000 gal (7571 liters) $2.50 $5,375.00
6 Disposal of spent abrasive 195 Tons (177 tons) $55.00 $11,529.38
Equipment
1 Truck 2 month $450.00 $900.00
2 Dehumidifiers 1 month $0.00 $0.00
3 Dust Collector 1 month $3,600.00 $3,600.00
4 Lifts/Staging 2 month $1,000.00 $2,000.00
5 Container 1 month $258.00 $258.00
6 Portable Restroom 1 month $125.00 $125.00
7 175 Compressor 1 month $1,080.00 $1,080.00
8 825 Compressor 1 month $2,700.00 $2,700.00
9 Generator 1 month $0.00 $0.00
10 Spray Pump 1 month $840.00 $840.00
11 Blast Pot 1 month $894.00 $894.00

Total
Labor Total $133,120
Material Total $54,644.50
Equipment Total $12,397.00
Sub-total $200,161
GRAND TOTAL $260,209 Cost per square foot (0.09 m2)– $3.80

C2 Planning and Specifying Industrial Coatings Projects

6-12Unit 6 Economic Considerations

Planning and Specifying Industrial Coatings Projects:
6- 15
elements of the project:

• Surface preparation
Unit 6 Economic Considerations for Industrial Coating Projects
• Coating application
• Coating materials

Table 6-3 Material Costs per Square Foot (0.09 m2) for Selected Coating Systems

Approximate Cost per Square Foot (0.09 m2) @ Typical DFT*

Coating Min. DFT Spray Brush/Roll
3.0
Acrylic, Waterborne Primer $6.62 $5.15
(75 microns)
2.0
Alkyd Primer $2.91 $2.27
(50 microns)
2.0
Epoxy Primer $2.27 $1.79
(50 microns)
4.0
Epoxy HB Primer $4.58 $3.2
(100 microns)
4.0
Epoxy HB Intermediate/Topcoat $5.02 $4.00
(100 mircons)
5.0
Epoxy HB Surface Tolerant $5.47 $4.25
(125 mircons)
2.0
Urethane, Aliphatic Polyester $6.85 $5.34
(50 microns)
20.0
Vinyl Ester $33.8 NA
(500 microns)
3.0
Zinc-Rich, Inorganic $6.11 NA
(75 microns)
3.0
Zinc-Rich, Organic $6.82 NA
(75 microns)
* Data assumes 30% loss.

Planning and Specifying Industrial Coatings Projects: Unit 6 Economic Considerations

6- 16

C2 Planning and Specifying Industrial Coatings Projects

6-13
Unit 6 Economic Considerations for Industrial Coating Projects

Table 6-4 lists the cost per square foot (0.09 m2) for different surface preparation methods.

Table 6-4
Approximate Surface Preparation Costs by Different Cleaning Methods

METHOD STANDARD SHOP FIELD

Hand Tool Cleaning SSPC-SP 2 $0.47 $0.55
Power Tool Cleaning SSPC-SP 3 $0.32 $0.91
Power Tool Cleaning to Bare SSPC-SP 11 $3.60
Metal
Brush Off Blast SSPC-SP 7 $0.70
Commercial Blast SSPC-SP 6 $0.38 $0.95
Near White Blast SSPC-SP 10 $0.38 $1.37
White Metal Blast (Dry) SSPC-SP 5 $0.46 $1.50
Slurry Blast (White Metal) SSPC-SP 5 $1.38
High Pressure Water Jet SSPC-SP 12/WJ-1 $1.47
Low Pressure Water Wash None $0.40
High Pressure Steam Part of SSPC-SP 1 $0.27

Table 6-5 lists the costs per square foot (0.09 m2) for different methods of coating application.

Table 6-5
Costs per Square Foot (0.09 m2) for Different Application Methods

METHOD MATERIAL SHOP FIELD

Spray One-pack materials $0.33 $0.31
Brush, Roll One-pack materials $0.44
Spray Two-pack epoxies $0.47 $0.33
Spray Two-pack polyurethanes $0.51 $0.37
Spray Zinc-rich $0.44 $0.38
Touch up on ground $0.19

Surface preparation is usually the highest cost ele-
ment, but the costs of all of the elements may vary
from project to project. Typical costs of coating proj-
ects are:
• Surface preparation (40-50%)
• Application (30-45%)
• Coating materials (10-20%)
QC costs should be included in the cost of each ele-
ment.
The data in Tables 6.3, 6.4, and 6.5 are for unob-
structed, readily accessed surfaces. Since each coat-
ing job is unique, these factors must be considered
when making estimates by the cost per square foot
(0.09 m2) method:

C2 Planning and Specifying Industrial Coatings Projects

6-14
 Unit 6 Economic Considerations for Industrial Coating Projects

• Cleaning and coating at a height will be more Calculating Paint Costs

expensive
The cost of each paint used on a project can be cal-
• Type and configuration of the structure will affect
culated by calculating the volume of paint required
accessibility and cost
and multiplying it by the paint cost per gallon or per
• Diameter of piping (Larger diameter piping is less
4-liters:
costly to coat)
• Labor costs for different jobs vary greatly at
U.S. Conversion
different geographical locations
Example: We wish to find the amount of paint needed
and the cost for the paint and we know:
Workshop 6A
• Area to be painted = 8,200 ft2
Using data in Tables 6.3, 6.4, and 6.5, estimate the • Actual spreading rate = 280 ft2/gal
costs per square foot (0.09 m2) of the two coating • Cost per gal = $28
systems described below for a steel tank exterior.

Solution:
System 1:
8,200 ft 2
paint volume required = = 29.3 gal
Surface prep: High-pressure waterjetting in field 280 ft 2 /gal
1st Coat: 5 mils (125 microns) of high-build surface
tolerant epoxy spray applied cost of 30 gal = (30 gal) ⋅ ($28/gal) = $840
2nd Coat: 2 mils (50 microns) DFT of aliphatic poly-
€ So we must order 30 gallons at a total cost of $840.
ester polyurethane spray applied
€
System 2: Metric Conversion
Example: We wish to find the amount of paint needed
Surface Prep: Shop blasting to SSPC-SP 10 (near and the cost for the paint and we know:
white)
• Area to be painted = 762 m2
1st Coat: 3 mils (75 microns) of zinc-rich inorganic
• Actual spreading rate = 26 m2 / 4-liters
coating spray applied
• Cost per gal = $28
Cleaning damages: 20% of total area cleaned to
SSPC-SP 3
Solution:
Field Touchup: 20% sprayed with 3 mils (75 microns)
Paint volume required = 762 m2 / 26 m2 / 4-liters =
of organic zinc-rich coating
29.3 (4)-liters
2nd Coat: 4 mils (100 microns) of high-build epoxy
Cost of 30 (4)-liters = 30 (4)-liters * ($28/gal) = $840
topcoat spray applied
So we must order 30 (4)-liters at a total cost of
3rd Coat: 2 mils (50 microns) of aliphatic polyester
$840
polyurethane coating

C2 Planning and Specifying Industrial Coatings Projects

6-15
Unit 6 Economic Considerations for Industrial Coating Projects

Life Cycle Cost Estimates
Life cycle coating costs are those costs incurred
protecting a structure over its life time. These costs
include the initial coating cost of coating the structure,
periodic inspections and touch-ups, and maintenance
painting. In order to select the most economic coating
system for providing protection throughout its life time,
life cycle cost estimates for each alternative system
must be compared. Before a calculation of life cycle
cost can be made, the service life of the coating must
be estimated. Sources of information on service lives
of coating systems include:
• Your own past experience.
• Experience of others with similar structures in
similar environments.
• Reference 1 at end of unit.
• Journal of Protective Coatings and Linings and
other technical journals.
• Manufacturer’s data.
The simplest way to determine the life cycle cost of
a coating system is to:
• Determine initial coating costs per unit area.
• Determine inspection and maintenance costs per
unit area during life.
Example: Compare the life cycle costs per square foot
(0.09 m2) of coating systems A and B in a moderate
environment. Both systems will be spray applied in
the field.
System A - a 3-coat system consisting of an epoxy
primer (2 mils/50 microns), an epoxy intermediate coat
(4 mils/100 microns), and an aliphatic polyurethane
topcoat (2 mils/50 microns). Surface preparation is
SSPC-SP 6. The estimated service life (from Refer-
ence 1) is 14 years without significant maintenance.
System B – a 3-coat system consisting of an inorganic
zinc-rich primer (3 mils/75 microns), an epoxy inter-
mediate coat (4 mils/100 microns), and an aliphatic
polyurethane topcoat (2 mils/50 microns). Surface
preparation is SSPC-SP 10. The estimated service
life (from Reference 1) is 21 years without significant
maintenance.
Solution:
System A:
Field abrasive blasting to SSPC-SP 6 $0.95
One coat of epoxy primer Material 2.27
(2 mils/50 microns)
Application 0.33

• Estimate expected life of coating system. One intermediate epoxy coat Material 5.02
(4 mils/100 microns)
• Compute total costs of unit area per year.
Application 0.33
One coat of aliphatic polyure- Material 6.85
This procedure can be used to compare life cycle thane (2 mils/50 microns)
costs for alternative coating systems on the basis of Application 0.37
cost per square foot per year. An example is given Total coating costs per square foot $16.12
below for comparing the life cycle costs of two al-
ternative coating systems for protecting a steel tank For an estimated service life of 14 years in a moderate
exterior. Data for the example were taken from Tables environment with no significant maintenance, the cost
6-3, 6-4, 6-5, and 6-6, and the service lives were taken per square foot per year of System A is: $16.12/14
from Reference 1. = $1.15

C2 Planning and Specifying Industrial Coatings Projects

6-16
 Unit 6 Economic Considerations for Industrial Coating Projects

System B: The quantities $0.91 and $0.83 are known as the net
Field abrasive blasting to SSPC-SP 10 $1.37 present value of $1.00 in one and two years, respec-
One coat of inorganic zinc-rich Material 6.11 tively. For example, if a structure were to be painted
primer (3 mils) two years from now at a cost of $100,000, it would
Application 0.38 be necessary to bank only $83,000 of today’s money.
One coat of epoxy intermediate Material 5.02 Because of the time value of money, it is frequently
(4.0mils)
advantageous to minimize the initial investment and
Application 0.33
defer the cost to later years.
One coat of aliphatic polyure- Material 6.85
thane (2 mils)
Using Time Value of Money Approach
Application 0.37
Total coating costs per square foot $20.43 This method of analysis is based on the “time value of
money” or the “cost of money.” Initial application costs
For an estimated service life of 21 years in a moderate are computed, and subsequent yearly maintenance
environment with no significant maintenance, the cost costs are estimated and discounted over the effective
per square foot per year of System B is: $20.43/21 protective life of the coating. As will be shown, the
= $0.97 principle of this method is to determine or estimate the
various expenditures that will occur over the lifetime
Thus, System B would cost more per square foot of the structure or whatever time period is used for
(0.09 m2) initially ($20.43 v. $16.12) but System B calculation. The present value (the value in today’s
would have a lower life cycle cost ($0.97 v. $1.15) money) of each cash expense is calculated, then
per square foot (0.09 m2) per year. System B would totaled to arrive at a present value for each corrosion
save you $0.18 (18.0 cents) per square foot (0.09 control option. In this way, cash flows are discounted
m2) per year compared to System A. For a 100,000 to their present value, so the method is often referred
square foot structure, this savings would be about to as “discounted cash flow.” The most accurate and
$18,000 per year. detailed present value analyses often include adjust-
ments for taxes and depreciation.
Present and Future Values of Money

Time Value of Money – Discounted Flow Method
The cost per unit area per year procedure neglects a
important factor in determining the economics of cor-
rosion protection systems – the time value of money.
Money can earn interest. Because of that, $1.00 today
is more valuable than $1.00 a year from now. At a rate
of return of 10 percent, $1.00 will be worth $1.10 in
one year. Similarly, $0.91 today will be worth $1.00 in
one year, and $0.83 today will be worth $1.00 in two
years. Calculations for inflation can easily be added.
Methods based on discounted cash flow yield more
realistic comparisons because they recognize that
money paid out today is worth more than money paid
out at a subsequent date.
A complete discussion of discounted cash flow analy-
sis techniques is beyond the scope of this course. It
must be noted, however, that the results of any type
of economic analysis are only as good as the input
information. Furthermore, most analytical techniques
use only “dollar” costs and do not consider intangible

C2 Planning and Specifying Industrial Coatings Projects

6-17
Unit 6 Economic Considerations for Industrial Coating Projects

costs such as those related to risks due to environ-
mental or safety hazards/compliance, improved or
changed technologies. Some assign probabilities or
factors to various intangible costs or risks and attempt
to include these in their analysis.
Computers and calculators can provide precise pres-
ent and future values. However, for practical reasons,
Tables 6-6 and 6-7 are presented for calculating pres-
ent and future values, respectively, at three different
interest rates.

The cost estimates discussed so far have not con- Example: The amount of money on hand for the job
sidered how time affects the value of money. Banked is $50,000, but the job will not begin for three years.
money increases in value by earning interest over How much will we have in three years if we invest this
time. Thus, each dollar invested today at a 5 % an- at 5% compounded annually?
nual rate of return will be worth $1.05 after one year.
During the second year, the interest earned during Solution: Before we use the formula we must assign
the first year is itself earning interest. This is called values to the letters.
interest compounding. We will omit the derivation of
the mathematical formula, which can be found in math PV = $50,000
or accounting books. For annual compounding, i.e. r = 0.05 (5% must be converted to a decimal before
interest is added one time per year, the future value being substituted into the formula)
FV of a deposit is given by t=3
FV = the number we are trying to determine
FV = PV (1+ r )t
where Substituting these numbers into the formula we get
FV = the value of the account after t years
FV = PV (1+ r )t = 50,000(1+ 0.05)3 = 50,000(1.1576) = 57,880
€
PV = Present Value, the amount of the deposit, the
value now (t = 0), or the principal
€ Thus, we will have $57,880 on hand for the job when
r = annual percentage rate, commonly called APR, or
it starts in three years.
rate of growth per year (expressed as a decimal)
t = time in years
This is the same calculation we should use if we want
to determine the effect of inflation. Suppose the infla-
If interest is compounded continuously, i.e. every sec-
tion rate is 5% for the next three years. A job that costs
ond instead of once per year, the formula becomes:
$50,000 today will cost $57,880 in three years.
FV = PVe rt

These computations can be done on an Excel spread

Where e represents every second. Future value can
sheet or with a hand held calculator or using the val-
be computed with this formula using the ex button on
€
your calculator. These two formulas will give slightly
ues in Table 6.7. On a calculator, enter the numbers
and functions in the following sequence:
different answers, but for the purpose of estimating,
they are close enough. In this course we will use only
the first formula.

C2 Planning and Specifying Industrial Coatings Projects

6-18
 Unit 6 Economic Considerations for Industrial Coating Projects

50,000 (today’s cost) Thus, $90,703 invested today at 5% will yield

X (multiply) $100,000 in two years. Deferring work to a later date

may reduce the initial investment by the discounted
1.05 (1 plus the rate of inflation)
value of money.
xy (the button on your calculator may be yx)

3 (the number of years)
= (read the answer 57881.25 on the display)
The value for (1.05)3 is rounded to two decimal places
in Table 6.7 and is given as 1.16. A calculator or com-
puter will carry more places and thereby give a more
accurate answer. Rounding is best done after all the
computations have been performed.
Sometimes we want to know how much should be
invested now so that we will have a fixed amount at
some future date; i.e., we know the future value and
we want to determine the present value. Solving the
equation for present value we get
FV
PV =
(1+ r )t
Example: If a structure is to be painted in two years
for a cost of $100,000, how much should banked now
€
at 5% interest.
Solution: Assign numbers to the letters.
FV = 100,000
r = 0.05 (written as a decimal)
t=2
PV = the number we are trying to determine
On the other hand, inflation decreases the value of
money with time. The decrease can also be calcu-
lated in a similar manner to that used for calculating
the effects of interest rates. Thus, with 5% inflation,
a job that costs $90,703 today will cost $100,000 in
two years.
A realistic economic analysis of life cycle coating costs
can best be obtained by using a discounted cash flow
method. The following four steps are taken to include
effects of interest of money and inflation on mainte-
nance painting during the life of the coating system:
1. Estimate the initial cost of installing the coating
system.
2. Estimate the current costs of maintenance paint-
ing that must be made at different specific times
throughout the coating life. This is the cost of
maintenance in today’s dollars.
3. Use the formulas for present value and future
value to reflect interest gains and inflation loses to
determine the value of the maintenance painting
in today’s dollars.
4. Add the values determined in steps 1 and 3.

Substituting into the formula for present value we

get

FV 100,000 100,000
PV = = = = 90,703
(1+ r ) (1+ 0.05)2 1.1025
t

€ C2 Planning and Specifying Industrial Coatings Projects

6-19
 Unit 6 Economic Considerations for Industrial Coating Projects

Table 6-6 Table 6-7

Present Value of $1.00 at Three Interest Rates Future Value

Table 6-7.ofFuture
$1.00 for Three
value of Interest Rates
$1.00 for three interest rates
Table 6-6. Present value of $1.00 at three interest rates

Present Value of $1.00 for 3 Interest Rates Future Value of $1.00 for 3
FV Interest Rates
PV = t
(1+ r) t
FV = PV (1+ r)
t r = 0.15 r = 0.10 r = 0.05
r=
0 $1.00 $1.00 $1.00 t r = 0.15 r = 0.05
0.10
1 $0.87 $0.91 $0.95
0 $1.00 $1.00 $1.00
2 $0.76 $0.83 $0.91
1 $1.15 $1.10 $1.05
3 $0.66 $0.75 $0.86
4 $0.57 $0.68 $0.82 2 $1.32 $1.21 $1.10
5 $0.50 $0.62 $0.78 3 $1.52 $1.33 $1.16
6 $0.43 $0.56 $0.75 4 $1.75 $1.46 $1.22
7 $0.38 $0.51 $0.71 5 $2.01 $1.61 $1.28
8 $0.33 $0.47 $0.68 6 $2.31 $1.77 $1.34
9 $0.28 $0.42 $0.64
7 $2.66 $1.95 $1.41
10 $0.25 $0.39 $0.61
8 $3.06 $2.14 $1.48
11 $0.21 $0.35 $0.58
12 $0.19 $0.32 $0.56 9 $3.52 $2.36 $1.55
15 $0.12 $0.24 $0.48 10 $4.05 $2.59 $1.63
20 $0.06 $0.15 $0.38 11 $4.65 $2.85 $1.71
25 $0.03 $0.09 $0.30 12 $5.35 $3.14 $1.80
30 $0.02 $0.06 $0.23
15 $8.14 $4.18 $2.08
35 $0.01 $0.04 $0.18
20 $16.37 $6.73 $2.65
40 $0.00 $0.02 $0.14
25 $32.92 $10.83 $3.39
! 30 $66.21 $17.45 $4.32
35 $133.1 $28.10 $5.52
40 $267.8 $45.26 $7.04

Cost Comparison of Alternative Options Using Time V

Comparing life cycle costs for two alternative systems is m

present value cost analysis. These calculations can best be

C2 Planning and Specifying Industrial Coatings Projects

6-20 Planning and Specifying Industrial Coatings Projects: Unit 6 Economi

Planning and Specifying Industrial Coatings Projects: Unit 6 Economic Considerations
6- 25
 Unit 6 Economic Considerations for Industrial Coating Projects
Cost Comparison of Alternative Options Using
Time Value of Money
Comparing life cycle costs for two alternative systems
is more accurately done with a present value cost
analysis. These calculations can best be shown with
an example. €
Example: We are trying to decide which of two com-
peting paint systems, both with a 20-year lifetime, will
be the most economical. One is a zinc-rich system
that costs $85,000 now and will need no maintenance
for twenty years. The other is an epoxy system that
costs $60,000 initially but will require maintenance
in 12 years. The cost of the maintenance painting,
if it were done today, would be $35,000. Assume an
inflation rate of 5% and assume a return on invest-
ments of 10%. Ignore hidden costs due to such items
as down time and environmental impact.
Solution: We will compare the systems by computing
the cost based on today’s dollars.
In analyzing the cost of the epoxy system we must
consider the time value of money. First we compute
the cost of the maintenance painting in 12 years. The
present value, PV, is $35,000 and the inflation rate is
5%. Substituting into the formula we get
FV = PV (1+ r )t = 35,000(1.05)12 = 35,000(1.80) = 63,000
So maintenance painting will cost $63,000 in 12
€ years. The value of (1.05)12 = 1.80 can be obtained
from Table 6-7. A more precise answer can be found
using a calculator.
The next step is to compute the present value of
$63,000 assuming a 10% return.
6-21
Substituting these values into the formula for present
value we get
FV 63,000 63,000
PV = = = = 20,063
(1+ r ) (1+ 0.10)
t 12
3.14
or using Table 6-6
PV = 63,000 (0.32) = 20,160
Thus, the maintenance painting in 12 years will cost
about $20,000 in today’s dollars. The difference in
these two values (20,063 and 20,160) is due to round-
ing off of the table entries. Either is close enough for
our purpose.
To get the cost in today’s dollars for the epoxy system
we add the initial cost of painting ($60,000) to the
present value of the maintenance cost ($20,000) and
arrive at $80,000.
Comparing $80,000 for epoxy to $85,000 for the
zinc-rich we see that, over the long haul, the epoxy
system is cheaper.
We could have computed the cost per year for each
system. The cost per year of the zinc-rich system is
$85,000 ÷ 20 = $4250 per year, while the discounted
cost per year for the epoxy system is $80,000 ÷ 20
= $4000 per year. Because these two costs are very
similar, if hidden costs are factored into the decision,
it may be wiser to choose the zinc-rich system.
The computations can be combined into one step if
we subtract the inflation rate from the investment rate
and use the difference as an effective rate. With the
normal range of percentages encountered in this kind
of analysis, the errors introduced by this approxima-
tion are usually tolerable. The effective rate is 10%
on investments minus 5% inflation or 5% effective.
C2 Planning and Specifying Industrial Coatings Projects
 Unit 6 Economic Considerations for Industrial Coating Projects

Using an effective rate of 5% we only have to make

one computation to find the present value of the
maintenance painting.

FV 35,000 35,000
PV = = = = 19,444
(1+ r ) (1+ 0.05)
t 12
1.80

Using this method, the present value of the main-

tenance painting is about $19,000 compared to the
€
more accurate value of $20,000. The greater the
difference between inflation and investment rates
and the longer the time, the less accurate is the
computation using an effective rate. Either method is
extrapolating into the future, which is really a guess.
The further into the future we go, the less likely we
are to be accurate.

C2 Planning and Specifying Industrial Coatings Projects

6-22
 Unit 6 Economic Considerations for Industrial Coating Projects

References
1. Castler, L. Brian, Helsel, Jayson L., MeLampy, Michael F, and Kline, Eric, Comparative Painting Costs,
Chapter 10.2 SSPC Painting Manual Volume 1, Good Painting Practice, SSPC, Pittsburgh, PA, 2002, pp.
95-516.
2. SSPC Technology Update No.9, Estimating Costs for Protective Coating Systems, SSPC, Pittsburgh,
2004.
3. Weaver, Raymond E.F., Practical Math for the Protective Coatings Industry, SSPC, Pittsburgh 2003.
4. AISC Steel Construction Manual, American Institute of Steel Construction, Chicago, latest edition.
5. PDCA Estimating Guide Volume 1: Practices and Procedures, PDCA, 21st edition, Chicago, 2004.
6. PDCA Estimating Guide Volume 2: Rates and Tables, 21st edition, PDCA, Chicago, 2004.

C2 Planning and Specifying Industrial Coatings Projects

6-23
Unit 6 Economic Considerations for Industrial Coating Projects

Terms Used in Unit 6

Capital Expense
Cost of an item that becomes a part of the finished product.

Concrete Masonry Unit (CMU)

Pre-formed element of a concrete structure such as a block or tilt-up wall of portland-cement concrete placed
in position in the structure after its complete curing.

Contingency
Unanticipated event or condition.

Economics
Social science concerned with descriptions and analyses of the production, distribution, and consumption of
goods and services.

EMR
See Experience Modification Ratio.

Expendable Expense
Cost of an item that does not become part of the finished product.

Experience Modification Ratio (EMR)

Mathematical ratio developed by the insurance industry to quantify the relative number of contractor lost time
accidents and reportable losses compared to the industry norm of 1.0; its calculation is quite complex.

Federal Aviation Administration

Federal agency responsible for aviation safety.

Federal Insurance Compensation Act (FICA)

Federal act that established the Social Security Program.

Federal Unemployment Tax (FUET)

Federal tax for program to assist people who lose their employment.

Future Value
The value of money for goods and/or services at a specific future time.

C2 Planning and Specifying Industrial Coatings Projects

6-24
 Unit 6 Economic Considerations for Industrial Coating Projects

Life Cycle Costs (Coating)

Those costs incurred using coatings to protect a structure from deterioration throughout its life (initial plus periodic
maintenance costs).

Mooring
System for securing a ship or other vessel in place.

Pi ( π
)
Ratio of the circumference of a circle to its diameter (3.1416).

Present Value
Discounted value of money for goods and services at a specific time.

Production
Prolificacy in conducting work.

Production Rate
Rate of production per unit time (e.g., square feet per hour) ; see Production.

Reservoir
Tank with a greater diameter than height.

Rigger
Worker who provides or installs special equipment such as scaffolding.

State Unemployment Tax (SUET)

State tax for program to assist those who lose their employment.

SUET
See State Unemployment Tax.

Takeoff
Measurement of dimensions of a structure from drawing dimensions or actual field measurement in order to
determine surface area.

C2 Planning and Specifying Industrial Coatings Projects

6-25
Unit 6 Economic Considerations for Industrial Coating Projects

Workshop 6A

Using data in Tables 6.3, 6.4, and 6.5 in Unit 6, estimate the costs per square foot (0.09 m2) of the two coating
systems described below for a steel tank exterior.

System 1:

Surface prep: High-pressure waterjetting in field

1st Coat: 5 mils (125 microns) of high-build surface tolerant epoxy spray applied

2nd Coat: 2 mils (50 microns) DFT of aliphatic polyester polyurethane spray applied

System 2:

Surface Prep: Shop blasting to SSPC-SP 10 (near white)

1st Coat: 3 mils (75 microns) of zinc-rich inorganic coating spray applied

Cleaning damages: 20% of total area cleaned to SSPC-SP 3

Field Touchup: 20% sprayed with 3 mils (75 microns) of organic zinc-rich coating

2nd Coat: 4 mils (100 microns) of high-build epoxy topcoat spray applied

3rd Coat: 2 mils (50 microns) of aliphatic polyester polyurethane coating

C2 Planning and Specifying Industrial Coatings Projects

6-26
 Unit 6 Economic Considerations for Industrial Coating Projects

Workshop 6B

Using the described procedure for life cycle costs, calculate the total cost per square foot (0.09 m2) per year for
this coating system that has a projected service life of 23 years in a moderate environment:

Field abrasive blasting to SSPC-SP 10

One coat of inorganic zinc-rich primer (3 mils/75 microns)

Two coats of aliphatic polyurethane (2 mils/50 microns each)

C2 Planning and Specifying Industrial Coatings Projects

6-27
Unit 6 Economic Considerations for Industrial Coating Projects

C2 Unit 6 Quiz

Select the best answer for each of the questions below.

1. What is a chief problem with project rework?

a. Work stoppages and delays are costly.

b. The surface preparation may not last.
c. The coating system may need to be changed.
d. The owner may have to switch contractors mid-job.

2. What best describes a takeoff?

a. The actual start of project work.

b. Project cost deductions from engineering.
c. Dimensions of areas to be coated identified in drawings.
d. Applying the intermediate coat in the field and the primer in the shop.

3. What is typically the most expensive part of coating work?

a. Materials
b. Surface preparation
c. Coating application
d. Inspection

4. Which is a good estimate of the theoretical cost of coating materials containing 100% solids and costing
$40.00 per gallon for application to 16,000 ft2 at 5 mils dry film thickness?

a. $1,000
b. $2,000
c. $4,000
d. $8,000

5. What is the best estimate of the practical cost of the coating materials in question 4, if the application transfer
efficiency is 80%?

a. $1,250
b. $2,500
c. $5,000
d. $10,000

C2 Planning and Specifying Industrial Coatings Projects

6-28
 Unit 6 Economic Considerations for Industrial Coating Projects

6. What is the most costly level of abrasive blast cleaning?

a. SSPC-SP 5
b. SSPC-SP 6
c. SSPC-SP 7
d. SSPC-SP 10

7. What affects labor rates?

a. The amount of overtime permitted.

b. The amount of the bid.
c. The number of change orders permitted.
d. The cost of quality control.

8. What is the most commonly used method of estimating project costs?

a. Time and materials

b. Cost per square foot
c. Present value
d. Future value

9. What is included in life cycle costs?

a. Mobilization
b. Periodic inspection costs
c. Equipment costs
d. Production and QC labor

10. What cost items are included in bid estimates?

a. Periodic inspection costs

b. Maintenance costs
c. Present value costs
d. Production and QC labor

11. What is the best description of present value of money?

a. The value of goods and/or services at a specific time.

b. The discounted value of money for goods and services at a specific time.
c. The life cycle costs incurred over the course of a project.
d. Time and materials costs.

C2 Planning and Specifying Industrial Coatings Projects

6-29
Unit 6 Economic Considerations for Industrial Coating Projects

12. What is the best description of future value of money?

a. The value of money for goods and/or services at a specific future time.
b. The discounted value of money for goods and services at a specific time.
c. The life cycle costs incurred over the course of a project.
d. Time and materials costs.

13. What is the best description of life cycle costs?

a. The costs incurred in planning the coating project.

b. The costs incurred in spot repair of a coating project.
c. The costs incurred to protect a structure from future deterioration.
d. The cost of equipment used in maintenance painting.

14. What is an example of direct cost on a coating project?

a. Costs associated with partial or complete repainting.

b. Costs associated with production down time.
c. Costs associated with engineering overhead.
d. Cost associated with product leaks.

15. What is an example of indirect costs on a coating project?

a. Costs associated with partial or complete repainting.

b. Costs associated with plant production down time.
c. Costs associated with repair/replacement of damaged components.
d. Costs associated with materials and labor.

C2 Planning and Specifying Industrial Coatings Projects

6-30
 Unit 6 Economic Considerations for Industrial Coating Projects

Topics
PLANNING AND SPECIFYING
INDUSTRIAL COATINGS PROJECTS
•  Methods of selecting coating systems.
(For Owners and Contractors)
•  Establishing maintenance schedules.
•  Achieving minimal life cycle coating
Unit 6 costs.
Economic Considerations for •  Factors affecting painting costs.
Industrial Coating Projects •  Methods of estimating costs of coating
projects.

Scope Learning Outcomes

•  This unit describes methods of selecting
coating systems and maintenance
schedules to achieve minimal life cycle
coating costs. It also discusses factors
affecting painting costs and methods of
estimating costs of coating projects.
•  After completing this unit, students will be
able to:
−  Recognize the importance of economics in protecting
structures and equipment with coatings.
−  Explain factors affecting painting costs.
−  Practice methods for estimating costs of coating
projects.
−  Describe methods of selecting coating systems and
maintenance schedules to achieve minimal life-cycle
costs.
−  Employ “Present Value” and “Future Value” of money in
planning for future painting work.

Costs of Coating Protection: Costs of Coating Protection:

Direct Costs Indirect Costs
•  Initial coating work (materials, labor, etc.) •  Costs associated with product leaks
•  Repair/replacement of damaged •  Production downtime
components •  Administrative and engineering
•  Partial or complete repainting overhead costs

C2 Planning and Specifying Industrial Coatings Projects

6-31
Unit 6 Economic Considerations for Industrial Coating Projects

Cost Effectiveness of Cost Effectiveness of

Coatings Coatings
•  Book Example 1: •  Book Example 2:
−  Material cost −  Procurement costs
−  Installation cost −  How long will the visibility of each alternative
remain acceptable?
−  Projected service life
−  Expense to restore visibility to an acceptable
−  Acceptable appearance
condition?
−  Withstanding abuse −  Impact and abrasion resistance
−  Life-time maintenance requirements and −  How easily and cheaply can repairs be
costs made?
−  Projected service

Cost Effectiveness of The Cost of

Coatings “Not Doing It Right the First Time”

•  Book Example 3: •  Rework is costly itself

−  Procurement costs: shop vs. unpainted •  It may delay other coating work
−  How much additional service life will coatings
provide?
•  It may interfere with other trades
−  How long will coatings maintain acceptable •  It may delay completion of the project
visibility? and thus delay the start-up of plant
−  What are the expected periodic maintenance operations
costs?
−  How expensive is it to replace the light/what
is the light’s expected life?

Project Cost Estimating: Project Cost Estimating:

Owner Concerns Contractor Concerns
•  Estimating future costs in out years •  Making a fair profit
•  Overestimating may cause •  Sufficient extra funding for unexpected
management to reduce future project contingencies
estimates
•  Underestimating may cause a contract
withdrawal or default
•  Underestimating may reduce the project
scope (e.g., deferral of topcoating)

C2 Planning and Specifying Industrial Coatings Projects

6-32
 Unit 6 Economic Considerations for Industrial Coating Projects
Possible Problems from
Deferring Topcoating of Primer
•  The primer alone may not provide
adequate corrosion protection.
•  The primer may have poor weather
resistance.
•  The primer may become damaged or
contaminated and so require touch-up
or cleaning.
Calculation of Surface
Areas from Takeoffs
•  Uses measurements from drawings.
•  Measurements can be quite accurate if
there have been no structural changes.
•  Calculate areas using standard
formulas.
Cost Items to Be Considered
in Making Cost Estimates
•  Mobilization and demobilization
•  Materials
•  Equipment
•  Production and QC forces
C2 Planning and Specifying Industrial Coatings Projects
6-33
Calculation of Surface
Areas to be Coated
•  Actual measurements
•  Takeoffs
Sources of Equations
for Area Calculations
•  SSPC’s Practical Math for the Coatings
Industry
•  Construction Manual of American
Institute for Steel Construction
•  PDCA Cost Estimating Guide
Cost Estimate:
Mobilization and Demobilization
•  Mobilization: Cost of bringing
equipment, materials, and labor to the
job site
•  Demobilization: Cost of removing
equipment, excess materials, labor, and
generated waste from job site
Unit 6 Economic Considerations for Industrial Coating Projects
Labor Costs:
Base Wages
•  Agreed-upon wage for each type of
work
•  Wages vary greatly with each type of
work
•  Wages also vary at different
geographical locations
Labor Costs:
Fringe Benefits
•  Contractor commonly required to
contribute to worker benefit fund
•  Fund may be for savings, training,
health and welfare, political action, etc.
•  A labor agreement defines the funding
requirements
Labor Costs:
Workers Compensation Insurance
•  It provides coverage for work-related
injuries
•  An effective safety program can reduce
these costs through a low Experience
Modification Ratio (EMR)
C2 Planning and Specifying Industrial Coatings Projects
6-34
Labor Costs:
Overtime
•  Additional pay when worker time
exceeds 8 hours per day or 40 hours
per week
•  May be “time and a half” or “double
time” depending upon labor agreement
Labor Costs:
Taxes (U.S.)
•  Federal and state income tax
•  Social security (FICA)
•  Federal unemployment tax (FUET)
•  State unemployment tax (SUET)
Labor Costs:
General Liability Insurance
•  The contractor must pay an insurance
•  carrier for coverage against automobile
•  accidents, general liability, professional
•  liability, pollution, and overspray.
 Unit 6 Economic Considerations for Industrial Coating Projects

Labor Costs: Example of Straight-Time Pay

Travel for U.S. Industrial Painter (Table 6-1)

•  The local union may have a travel pay Base wage rate $22.00
stipulation in its agreement that requires Taxes: FICA (7.65%) 1.68
extra pay for work outside of a specified FUET (0.8%) 0.18
boundary such as the city limits.
SUET (7.2%) 1.58
Workers Comp. (17.5%) 3.85
General Liability (4%) 0.88

Example of Straight-Time Pay Sources of Information

for U.S. Industrial Painter (cont.) on Wage Rates
•  Local union offices
Fringe Benefits: Health $3.95
Pension 2.50
•  Trade publications
Apprentice 0.12 •  Government sources
Political 0.15 •  Commercial estimating guides
Travel ($12.00 per day) 1.50
Total: $38.29

Sources of Information Items Affecting

on Production Rates Production Rates
•  PDCA Estimating Guide Volume II •  Level of work quality specified (SP 6 vs SP
•  Other commercial guides 10)
•  Complexness of substrate shapes
•  Work location (work slower at heights and
in confined spaces)
•  Condition of substrate (may vary widely)
•  Quality of work force (skills vary, especially
in different geographical locations)

C2 Planning and Specifying Industrial Coatings Projects

6-35
Unit 6 Economic Considerations for Industrial Coating Projects

Two Basic Methods of Steps in Time and Materials

Estimating Project Costs Method of Cost Estimating
•  Time and materials method •  Calculate surface area to be coated
•  Cost per square foot method •  From labor rate tables, estimate the
time required for each work process
•  Multiply the labor hours by the labor
rates
•  Add cost of materials and equipment

Steps in Cost per Typical Costs of Cost

Square Foot Method per Square Foot Elements
•  Estimate the cost of each individual •  Materials (10-20%)
project elements and sum them up: •  Surface preparation (40-50%)
−  Materials •  Coating application (30-40%)
−  Surface preparation
−  Coating application

Project Factors Affecting

Costs of Elements
•  Cleaning and coating at heights is more
costly
•  Structural configurations will affect costs
•  Work on larger diameter piping is less
costly
•  Labor costs vary greatly from
geographical location to location
Workshop 6A Example 1
•  Using the data in Tables 6-3, 6-4, and 6-5,
calculate the cost per square foot for
coating a steel tank exterior:
−  Surface prep: High-pressure waterjetting
−  Coat No. 1: Spray epoxy mastic (5 mils DFT)
−  Coat No. 2: Spray aliphatic polyester
polyurethane (2 mils DFT)

C2 Planning and Specifying Industrial Coatings Projects

6-36
 Unit 6 Economic Considerations for Industrial Coating Projects
Workshop 6A Example 2
•  Using the same data, calculate the cost per
square foot when using this system:
•  Surface prep: Shop blasting to SP 10
−  Coat No.1: Shop spraying IOZ (3 mils DFT)
−  Cleaning 20% of area after field erection
−  Coat No. 2: Spray high-build epoxy (4 mils)
−  Coat No. 3: Spray aliphatic polyester
polyurethane (2 mils)
Calculating Project
Paint Costs
•  Volume required = area/actual
spreading rate = 8,200/280 = 29.3 gal
•  Cost of 30 gal = 30 gal x $28/gal = $840
Sources of Estimates of
Coating Life
•  Your own past experience
•  Experiences of others with similar
environments
•  Economics chapter of SSPC Painting
Manual Vol. 1
•  JPCL and other technical journals
•  Manufacturer data
C2 Planning and Specifying Industrial Coatings Projects
6-37
Example of Project
Paint Costs
•  Area to be painted: 8,200 sq.ft.
•  Actual spreading rate: 280 sq.ft./gal
•  Cost per gal: $28
Steps in Determining
Life Cycle Costs
•  Determine initial coating cost per unit
area
•  Determine inspection and maintenance
costs per unit area during life
•  Estimate expected life in years
•  Compute total costs of unit area per
year
Definition of Present Value
of Money
•  Present value of money is the
discounted value of money for goods
and services at a specific time.
•  It can be used to take into account the
effects of interest and inflation.
Unit 6 Economic Considerations for Industrial Coating Projects

Steps in Estimating Life Cycle Equation for Computing

in Present Value Present Value
•  Estimate initial coating costs
•  Estimate maintenance cost over life
time
•  Discount the costs in Step 2 to reflect PV = FV/(1+i)n
interest and inflation
•  Add the values in Steps 1 and 3

Present/Future Value Example of Calculating

Equation Terms Present Value
•  PV = present value •  For each dollar you need a year from
•  FV = future value today, you need to invest $0.95 at 5%
•  i = rate of return (interest) interest
•  n = number of years
PV = FV/(1+ i)n

PV = $1.00/(1 + 0.05)1 = $0.95

Money Needed Today for Equation for Computing

$100,000 in 10 Years at 15% Int. Future Value

FV = $100,000; n = 10; I = 15% FV = PV x (1=i)n

PV = FV/(1+ i)n Other examples appear on pages 6-18

and 6-19 of the book.
PV = $1,000,000/(1 + 0.15)10 = $24,700

C2 Planning and Specifying Industrial Coatings Projects

6-38
 Unit 6 Economic Considerations for Industrial Coating Projects

Computing Future Values PV Cost Comparison of Tank

of Money Options over 40 Year Life Times

•  Assume: PV = $1.00; i = 15% per year •  FRP Tank (alternative 1)

•  Year 1: FV = $1.00 x 1.15 = $1.15 −  Tank cost: $50,000

•  Year 2: FV = $1.00 x (1.15)2 = $1.32 −  No coating required

•  Carbon steel tank (alternative 2)
−  Tank cost: $20,000
−  Initial lining: $15,000
−  Lining maintenance $15,000 (twice)
−  Initial exterior coating $3,000
−  Exterior coating repair $3,000 (3 times)

Cash Flow for Alternatives

Analogy of Deflation
With No Adjustments for Time
•  When the interest rate is higher than the
inflation rate, the time value of money
reflects a negative inflation (deflation).

Cash Flow with 5% Inflation Cash Flow With 5% Deflation

C2 Planning and Specifying Industrial Coatings Projects

6-39
Unit 6 Economic Considerations for Industrial Coating Projects

Summary Workshop 6A

•  Coating projects must be analyzed in terms of •  Using data in Tables 6-3, 6-4, and 6-5,
direct and indirect costs. estimate the costs per square foot (0.09
•  Estimating properly cuts down on costly m2) of the two coating systems
rework. described for a steel tank exterior. (See
•  Mobilization and demobilization, materials, pages 6-13 through 6-15 of the text.)
equipment, production, and QC forces are
among the factors that must be considered in
estimating.
•  Time and materials and cost per square foot/
meter are methods of estimating costs.

Workshop 6B

•  Using the described procedure for life cycle

costs, calculate the total cost per square foot
(0.09 m2) per year for this coating system that
has a projected service life of 23 years in a
moderate environment:
−  Field abrasive blasting to SSPC-SP 10
−  One coat of inorganic zinc-rich primer (3 mils/75
microns)
−  Two coats of aliphatic polyurethane (2 mils/50
microns each)
•  (See pages 6-16 and 6-17 of the text.)

C2 Planning and Specifying Industrial Coatings Projects

6-40