Let's say we have an old process

plant with a capacity to produce 10,000 gallon per day and

we refer to a particular chemical. The cost today to build the plant
would be around $1 million. The appropriate cost-capacity factor,
which is X for this type of project is 0.6. What would be an estimate for a similar
plant with a capacity
of 30,000 gallon per day? So, we want to find C2 and
we know C1 of 1 million and we know Q2 what's the new production for
that new project of 30,000 gallons. And we know Q1, which is 10,000 as
we can see in this equation here. And the Q2 over Q1 to the power of x,
which is the 0.6, and that will give us around $1.93 million to build similar plant
with a different capacity. So let's take another example. And I'm going to connect,
in this example, what we explained in example number 2 in
the course index or the course indices. So, consider the cost-capacity factor of
around 0.8 for the warehouse that we just solved just a few minutes ago from
the cost, and this is Example 2. If you remember we have warehouse that
was planned to be built in November 2013. And we assume that you have
an estimate for a similar warehouse, that's been done in 1978,
worth of course 4.2 million. So, let's assume that
warehouse that had been built in 1978 has around 120,000
square feet of usable area. The prospective owner for
the new warehouse, wants a structure with a usable
area of 150,000 square feet. So in this case,
why I combine them both because in this kind of equation we want
them to use the cost indices approach to adjust for
the time differences and adjust for the cost from 1978 to let's say 2013. Based on
the cost indices
Example number 2. And we want to adjust on the capacity,
and the change here in this question,
the change in the size of the project. So what we will be doing is C2, the cost
estimated that
we're trying to find or figure out, we highlight the cost index, which is the 5,317
divided 1,674 from 1978. If you remember, these are the numbers we got from
example number 2 from the cost indices. And we multiplied by
the cost capacity factor, which is the 150,000 divided by the old capacity in 1978
was built the 120,000 and you have that by the power
of x which is the 0.8 which is the cost capacity factor for
this type of project. And that will give us
an approximation of $16 million as a cost estimation for such a project with the
different
usable area for that warehouse. Now, I will go with another quick tools methods
just to give
you an introduction to them. First one is the component ratios. Here we have an
example to
a component ratios which would be under the industrial
construction industry. Where major items of components or even equipments are
identified,
such as compressors, pumps, furnaces, refrigeration units, belt conveyors as well
as turbine generators. So usually industrial construction have
very good historical documentation and analytical techniques using
ratios like the following, equipment installation cost ratio and
the planned cost ratio. The equipment installation
cost ratios is the following, you multiply the purchase
cost of the equipment or the component in that project
by an empirically documented factor to estimate the installation
cost of that equipment. These estimates sometimes can be accurate
within 10 to 20% of the final costs. So you have the cost of that equipment and you
have that factor
from the historical data. The multiplication will give
you the installation cost for something similar to that equipment or
component. Another ratio in the component ratios in
addition to the equipment installation cost ratios we have planned cost ratios. And
also, just quickly,
planned cost ratios where it uses equipment vendor price
quotations as a basis for the determining the cost of
the whole constructed facilities. So you just take the vendor prices,
add them up to hook up with the plant
towards the end and the costs. Parameter costs method is also another
method that we want to highlight here and to introduce it and it is commonly
used in building construction. Usually when publications such
as oddest means publishes square foot costs around annually,
as I remembered. And it includes unit costs for a number of building types as well
as for
individual construction tasks. Parameter costs relates all cost of a
project to just a few physical measures or parameters that reflect the size or
the scope of the project. With very good historical records
on comparable structures parameter costing can give reasonable levels of
accuracy for preliminary estimates. To be closer between ten plus minus percent
accuracy. Now moving forward I want to highlight
now the big picture of detailed estimate. That detailed estimates comes when
we are almost finalizing our design and it is after the conceptual and
the preliminary phases. The general steps of the detailed
estimates are the following. One, breaking the project
into cost centers. These cost centers could
be related to earth work, aconcrete, structure seal,
brick and masonry, electrical, mechanical,
pumping, and so on. So after we have these cost centers,
the second step is to estimate the quantities required for each
of these cost centers in step number 1. This could be a physical items, or an un-
physical items for
each of the cost centers. A physical item where we then
perform quantity takeoff. An an unphysical item could be related
to the builder, the builder's risk, insurance, and
amount of the required bonds and so on. When it comes to the third point which is
price out the quantities
from step number 2 here. Using historical data, that's supplier, as well as
supplier catalogs and
other kind of resources that you have in the company as we will see in
the several modules in the course here. Last one is to calculate
the total price for each cost center by multiplying
the required quantities by the unit price. So this is from a big picture
point of view what are the four main processes in order to
find a detailed estimate. And this we will cover in much more
details in the coming modules for sure. But before we move forward I want to
highlight also there is 2 types of detailed estimate. There is the Engineer's
estimate and
the Contractor's estimate. The Engineer's estimate
where the architect or the engineer produce final
Engineer's estimate or for who comes up with total drop
cost minus the mark up. This is used for two things. One to insure the design
is produced within the owner's financial resources to
construct the building or the project. Second, to establish a reference point In
evaluating the bids and the work progress. So, when the bids comes,
we want to compare it, to make sure that it is within what we
are asking for, it makes sense or not. So to evaluate with the bids, as well as to
evaluate the work
progress in our project. The second one is
the contractor's estimate or the bid estimate when the contractors
start bidding for the project. And then what I can say here it has
to be low enough to obtain the work, but yet high enough to make profit. That's for
the contractor's estimate. Again I want to emphasize that
the details of that quantity take off will come in our next modules
in much more detail with several examples to build
on from industry partners. Thank you.