Cost Estimation:

Introduction :

Cost Estimation is a specialized subject and a profession in its own right. The design engineer,
however, needs to be able to make quick, rough, cost estimates to decide between alternative
designs and for project evaluation. Chemical plants are built to make a profit, and an estimate of
the investment required and the cost of production are needed before the profitability of a project
can be assessed. Simple costing methods and some cost data are given, which can be used to
make preliminary estimates of capital and operating costs at the flow-sheet stage. They can also
be used to cost out alternative processing schemes and equipment.

Fixed and Working Capital :

Before an industrial plant can be put into action, a large sum of money must be supplied to
purchase and install the necessary machinery and equipment. Land and service facilities must be
obtained, and the plant must be erected complete with all piping, controls, and services. In
addition, it is necessary to have money available for the payment of expenses involved in the
plant operation.
Fixed capital is the total cost of the plant ready for start-up. It is the cost paid to the contractors.
It includes the cost of:
Design, and other engineering and construction supervision.
All items of equipment and their installation.
All piping, instrumentation and control systems.
Buildings and structures.
Auxiliary facilities, such as utilities, land and civil engineering work.

It is a once-only cost that is not recovered at the end of the project life, other than the scrap
value. Working capital is the additional investment needed, over and above the fixed capital, to
start the plant up and operate it to the point when income is earned. It includes the cost of:
Start-up.
Initial catalyst charges.
Raw materials and intermediates in the process.
Finished product inventories.
Funds to cover outstanding accounts from customers.
Most of the working capital is recovered at the end of the project.

Types of Capital Cost Estimates:

Order-of-magnitude estimate (ratio estimate) based on similar previous cost data; probable
accuracy of estimate over + 30 percent.
Study estimate (factored estimate) based on knowledge of major items of equipment;
probable accuracy of estimate up to 30 percent.
Preliminary estimate (budget authorization estimate; scope estimate) based on sufficient data
to permit the estimate to be budgeted; probable accuracy of estimate within 20 percent.

Classification of cost estimation:

Capital cost estimates can be broadly classified in to 3 types:

1. Preliminary (approximate)
2. Authorization (Budgeting)
3. Detailed (Quotation)
Preliminary estimate has been used.

Classification of rapid capital cost estimation:

Rapid Capital cost estimates can be broadly classified in to 3 types:

1. Historical Cost
2. Step Counting Method
3. Factorial Method
Factorial Method has been used.
Definitive estimate (project control estimate) based on almost complete data but before
completion of drawings and specifications; probable accuracy of estimate within 10 percent.
Detailed estimate (contractor’s estimate) based on complete engineering drawings,
specifications, and site surveys; probable accuracy of estimate within +5 percent.

Distillation Column:-

Material of Construction = Stainless Steel

Height of Column = 11.21 m.

Diameter of column = 2.115 m.

Form Appendix:

Bare cost= 40,000 $

Material factor = C.S = 2

Pressure factor = 1-5 bar = 1

Cost of vessel = 40,000 * 2* 1

Cost of vessel in 2004= Ce = 80,000 $

Plate diameter = 2.115 m

Plate material = Stainless Steel

Plate type = Sieve plate

From Appendix:

Material Factor = 1.7

Cost from Figure = 400 $

Installed Cost = Cost form fig * Material factor

Installed Cost = 400* 1.7

Installed Cost = 680 $

No of Plates = 16

Cost of Plate in 2004 = Installed Cost * No of Plates

= 680 * 16

= 10880 $

Total Cost CE = Cost of Plate in 2004 + Cost of Vessel in 2004

= 10880 + 80,000

= 90880 $

2004 Cost Index = 541.2

2020 Cost Index = 613.5

Equipment Cost in 2020 = Total Cost * 2020 cost index / 2004 cost index

= 90880 * 613.5 / 541.2

= 13020.8427 $