Capital Cost Estimate Class 3 -Onshore Guideline

Document No: PDP-0310 2-Oct-06

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CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE

SYNOPSIS
This document outlines the guideline for preparing a Class 3 cost estimate during the Define Phase.

PROJECT PDP-0310 - CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
REV DESCRIPTION ORIG REVIEW KEIPL APPROVAL DATE CUSTOMER APPROVAL DATE

0

Issued for use A Drulle M Reilly M Reilly

2-Oct-06

N/A

002-000-PMW-185 (015277) PDP-0310 Rev 1 (31-Oct-06)

Corporate Base

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CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE

CONTENTS
Appendices.............................................................................................................3 1. Introduction...........................................................................................................4 2. Class 3 Estimates.................................................................................................5 3. Pre-Estimate Activities.........................................................................................6 4. Estimating Methodology.....................................................................................13 5. Customer Estimate Input....................................................................................29 6. Engineering Estimate Input................................................................................30 7. Procurement Estimate Input...............................................................................37 8. Construction Estimate Input...............................................................................38 9. Historical Data....................................................................................................39 10. Estimate Presentation Format..........................................................................40 11. Documentation Basis for Estimating................................................................41 12. Responsibility Table.........................................................................................42 Appendices Appendix 1 – Cost Estimate Classification Guideline PDP-0017 Appendix 2 – Manual Labour Rate Development Guideline PDP-0029 Appendix 3 – Engineering Transmittal for Cost Estimate Input PDF-1006

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE 1. INTRODUCTION

The Class 3 estimate is the most important estimate, as it acts as the stepping stone to project approval and economic evaluation. The hours and time to prepare this type of estimate should by now means be underestimated. It is an integrated effort, and incorporates engineering, procurement, construction and estimating as a team to deliver a successful estimate. The Class 3 estimate is normally based on a firm scope and a preliminary design definition. At this phase of the project, design engineering is usually between 5 – 10 percent complete. The general accuracy range for a feasibility or control estimate is <+/-15%. Cost estimates increase in accuracy at every phase during the development of a project. Therefore, this type of estimate could be updating from a Class 2 estimate by incorporating scope refinements, design developments, and pricing provided by potential suppliers. Class 3 estimates normally provide one or more of the following: • • • • • • A mechanism for a customer to present to the board for project sanction, with sufficient confidence in seeking project financing Establish a project budget A yardstick to control costs at the execution phase Basis for evaluating future changes in scope A basis for negotiating a contract For inclusion in a Bankable Document.

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE 2. 2.1 CLASS 3 ESTIMATES Purpose

This guideline addresses the appropriate activities to support the estimate and to establish the methods to be used for developing a Class 3 estimate. The Class 3 estimate guideline addresses the following issues. • • • • • • • • • • • • Pre-estimate activities Estimate methodology and cost estimating principles applicable to the estimate preparation Estimate Structure - Code of Accounts (Facility and Commodity codes) Estimating System Engineering deliverables required to support a Class 3 estimate Procurement deliverables required to support a Class 3 estimate Construction deliverables required to support a Class 3 estimate Indirect Costs Contingency and accuracy of the estimate Estimate Reporting Estimate Reviews Utilization of Historical and Benchmarking Data.

This guideline sets out the roles and responsibilities, deliverables and steps that need to be undertaken to produce a Class 3 +/-15%.

2.2

Responsibilities

Every individual project manager is responsible to ensure that the Class 3 guideline is observed and followed when preparing, presenting and reviewing a feasibility or control estimate. The development of a Class 3 estimate is a team effort, and needs input from many other groups. An experienced estimator is required to facilitate this process and will need input and support from project management, engineering, procurement and construction to achieve the level of accuracy required at this phase of the project. The Senior or Lead Estimator has the responsibility for determining that the scope available is sufficient to complete the desired classification of estimate requested, and that the estimating can realistically be accomplished based on the overall schedule and staffing availability . The estimator has the primary role to facilitate the estimating process, and deliver, present and review a capital cost estimate that meets the accuracy desired for this Class of estimate.

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE 3. PRE-ESTIMATE ACTIVITIES

There are a number of activities that need to occur before a Class 3 estimate commences. The main activities are: • • • • • • • Project Kick-off Meeting Estimate Plan\Kick-off Meeting Site Visits Estimating System Estimate Schedule Establishing Estimate Structure and Project Code of Accounts Requests for Historical data and other estimates

These main activities will be discussed in detail in the following sections.

3.1

Project Kick-off Meeting

The project kick-off meeting is arranged by the Project Manager and is attended by the project team, which includes Engineering, Procurement, Construction, Estimators and Project controls. The initial kick-off meeting is to convey to the project team the broad scope of the project and outline the major aspects of the assignment. Other areas for discussion are commercial aspects, customer objectives and staffing issues.

3.2
3. 2.1

Estimate Plan\Kick-off Meeting
Esti mat e Ki ck- off Meeti ng

The Estimate kick-off meeting is only held, once the estimate plan is developed. The Lead Estimator will produce the estimate plan and present this document to the key players of the project team. The attendees of this meeting will be the Project Manager, Lead Discipline Engineers, Estimating, Procurement and Construction. The purpose of this meeting is to highlight the estimate requirements and establish responsibilities and communication links between the department heads. It brings all the project team to sing on the same piece of music, in order to not have any misunderstandings on what roles each department needs to play in delivering the estimate. The estimate plan should be written as standalone document, in order to convey the estimate to anyone outside the project team and to be utilised for future inductions for new personnel joining the project. Normally the customer is invited to participate in this meeting, in order to have the customers buy-in on the approach.

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
3. 2.2 Esti mat e Pl an

To produce the estimate plan is the responsibility of the Lead estimator. The Lead Estimator may have to source information from various departments in order to finalise the document. The document sets the estimate ground rules and establishes uniformity across the project team. (For further detailed information in producing an estimate plan, refer to Estimate Plan guideline and Estimate Plan sample template.) The estimate plan addresses the following issues. • • • • • • Brief Scope Description Customer Strategies and Objectives Estimate Deliverables Key Personnel Contact List Estimating System Estimate Methodology 1. Quantity development 2. Material Pricing (Equipment and Bulk Materials) 3. Manual Labour Rate and Man-hours 4. Sub-Contractor Costs 5. Freight 6. Vendor Representatives • • • • Code of Accounts (Facility and Commodity codes) Engineering deliverables required to support this type of estimate Contracting Strategy Procurement Strategy - the determination of which items of equipment should be issued for firm quotation (major equipment items) and which items will be costed on the basis of budget quotations, historical/database information or by other techniques (minor equipment items). Construction Input Material Take-off formats Indirect Costs (Common Distributables and EPCM Services) Escalation Contingency and accuracy the determination of which items of equipment should be issued for firm quotation (major equipment items) and which items will be costed on the basis of budget quotations, historical/database information or by other techniques (minor equipment items). Qualifications and Exclusions

• • • • • •

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
• • • Roles and Responsibilities Matrix Estimate Reviews Final Report

3.3

Site Visits

Site Visits may be required to establish better Engineering, Procurement, Construction and cost information in order to assist in the project design and planning to support the estimate. The site visits are decided by the Project Manager based on consideration of the commercial contract, budget and the need for the data to be collected. The Site Visit team normally consists of the Project Engineer, Estimator and a representative from Construction. If an Estimator does not participate in a site visit, he will request those making the trip to collect cost data on his behalf, based on a detailed list provided by the Lead Estimator. (For further information on Site Visits, refer to Cost Estimate Site Visit Guideline PDP-0030).

3.4
3. 4.1

Estimating System
Syst em Overvi ew

The Lead Estimator will determine the estimating system to be used in producing the Class 3 estimating. The Estimating System currently adopted in KEIPL is called “Quest”. This is the mandatory estimating system to be used for all Class 2, 3 and 4 estimates. The system is available on the WOW under System Group. New estimators will have to request permission from the KEIPL Estimating Manager. All support, training and initial set up will be provided by the Corporate Estimating Group, which resides out of Melbourne (Australia). There are times, when a preferred customer system may have to be used, due to their unique reporting and integration to other internal customer systems. This is acceptable as long as it does not break the estimating work processes presented in this document. It is preferred to work in Quest and any integration issues should be referred to the Business Systems Group. Quest can be tailored to customer needs, and those have to be clearly identified up front in order to structure Quest appropriately.

3. 4.2

Quest Overvi ew

Quest is a multi-user and multi-currency system, which can be operated across WOW in a virtual office environment. Quest is a flexible tool that allows changes to quantities, unit pricing, unit job hours and the like, at any time during the preparation of the estimate. The system provides for the development and storage of “tables” of standard estimating information. The tables comprise a set of files which store the following information: • Facility and Commodity Descriptions • Standard Material Unit Prices • Standard Installation Unit Job hours • Freight Bulking Factors

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
• Hourly Rates and Productivity Rates for each Labour Craft • Labour Crews and Labour Craft Composition • Construction Equipment Details and Rates • Currency Codes, Descriptions and Exchange Rates • Port of Export Details and Freight Rates The system can be operated in single user or shared multi-user environment on a range of computer hardware platforms and operating systems. On completion of the estimate, the estimating system interfaces directly with KEIPL. In Control cost control system and provides for transfer of estimates, which can become control budgets at a consolidated level of detail. (For further details of Quest, please refer to the Quest Overview Document, or the training manual loaded on WOW under system group, Quest Estimating System). The KEIPL overall estimating process is illustrated in below.

3.5

Estimate Schedule

The key dates and milestones (i.e. engineering cut-offs, reviews etc.) of the estimate schedule are normally established early and presented in the estimate plan at the estimate kick-off meeting. It is important the Lead Estimator has a thorough review of the steps required to complete the estimate and in doing so, prepare a bar chart showing the estimate input required and their dates and durations. The development of the schedule normally requires coordination with the Project Manager, Lead Engineers, Procurement and Construction. Typical information should include: • Engineering input to the estimate broken down by discipline.

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
• • • • Pricing data from Procurement Data to develop direct costs from Procurement, Industrial Relations and Engineering personnel. Estimate preparation breaking down, direct costs, indirect costs, reviews and final estimate preparation and presentation. Estimate Reviews

3.6
3. 6.1

Establishing Estimate Structure and Project Code of Accounts
General

The Lead Estimator in conjunction with the KEIPL Estimating Manager will be responsible to develop the project code of accounts as one of the pre-estimate activities. This consists of developing the direct cost facility codes, indirect codes and respective commodity codes. Normally the direct cost facility codes are tailored for the plant and are driven by the customer. The commodity codes are a standard set of codes specified by the KEIPL Corporate Estimating Group. It is mandatory to use these codes, as it brings uniformity across other estimates, and helps streamline a common approach and enables to share data and compare to historical information. Copies of the commodity codes are available from the KEIPL Corporate Estimating group.

3. 6.2

Code of Account s

The “code of accounts” is the framework representing and applied to the project WBS, used to facilitate the systematic control of scope, cost and schedule. The project costs are segregated into facilities (numeric) and commodities (alpha –numeric) for ready identification and logical grouping of cost items. The code is used for sorting information to permit visualizing the project scope and for translating engineering concepts into quantities and costs. It provides the framework for preparing estimates, project budgets, cost monitoring, forecasting, benchmarking and controlling costs during construction. (For further detail please refer to Standard Estimating Code of Accounts guideline for further guidance.) A brief definition of Facility and Commodity codes are described below. Facility Code Portion of the Code of Accounts that identifies the geographical area or system component of the project. (Refer to Standard Estimating Code of Accounts Guideline PDP-0014 for further detail). Commodity Code A portion of a cost code to provide a segregation of cost. Generic product (or activity) type, the production of which may involve a number of trades. For example, the commodity “concrete” requires the services of carpenters, steel fixers and concrete trades for its production. (Refer to Standard Estimating Code of Accounts Guideline PDP-0014 for more detail.)

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
3. 6.3 Esti mat e Component s
The components of an estimate are broken down into two major categories, direct and indirect costs. 3. 6.3. 1 Di rect Costs

Direct costs are the permanent facilities and services required for their installation. Further subdivisions of these costs are broken into facility and commodity codes as described above. The direct costs include plant equipment, bulk materials, manual labour, sub-contractor costs, freight and vendor representatives. Plant Equipment includes the mechanical, electrical and instrumentation components of a plant, which are either shop assembled, modularised or pre-assembled on site. Bulk Materials are those materials, such as rebar, pipe, wire and cable, concrete, light steel etc, which are purchased based on quantity. Installation refers to the manual labour and sub-contractors costs to install or erect the direct materials both plant equipment and bulk materials. 3. 6.3. 2 Indi rect Costs

Indirect Costs are the costs associated to support the purchase and installation of the direct costs. This group includes the materials and services required for field construction, but not incorporated into or accounted for as part of the permanent facilities (Direct Costs). A standard set of indirect codes with detailed descriptions on what is included in each account are found in the Standard Estimating Code of Accounts Guideline PDP-0014). The main type of costs includes: • Temporary Construction Facilities, covers temporary buildings and infrastructure, work areas and bays, temporary roads, walkways and parking areas, temporary buildings, temporary utilities, transportation facilities, weather protection, general purpose scaffolding, cribbing and dunnage and minor temporary construction. Construction Plants, includes aggregate crushing plants, concrete batch plants and fabrication facilities. Construction Support covers general and final site cleanup, material handling and warehousing, manual labour training and testing, security, medical, soil testing, survey, operation and maintenance of facilities. Construction Equipment and Consumables, covers construction equipment (customer furnished), small tools, maintenance of equipment and tools, fuels and lubricants, consumable supplies and medical and safety supplies. Pre-Operational and Commissioning Assistance, covers pre-operational testing, startup, plant modifications,

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
• Manual Labour Allowances covers inductions, manual labour transportation, nonproductive labour costs, R&R travel costs, manual labour living allowances and project bonuses. Material Transportation and Storage Costs include air freight, ocean freight, shipping agents expenses and fees, marshalling and demurrage. Project Accommodation covers camp construction and camp operation and maintenance costs. EPCM Services covers engineering, procurement, construction and project management, 3rd party consultants and all costs associated for the Home and field office, overheads, fee etc. Escalation is an allowance to anticipate future changes from the costs used in the estimate details. The estimate details are included for present day costs. Contingency is an allowance to cover costs which is based on past experience and expected to be encountered, but which is not possible to identify at the time an estimate is prepared. Owners Costs

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE 4. 4.1 ESTIMATING METHODOLOGY Pricing General

All costs to complete will be in the base date of the estimate and in the currency of the country, with appropriate escalation applied to project completion. The exchange rates for the main study should be nominated by KEIPL, and approved by the customer. Any exchange variations that may occur from the base date of the estimate and onwards will need to be addressed by the customer in their economic modelling or procurement strategy. The estimate will be prepared based on native currencies which will be expressed in the country of origin, based on the following exchange rates: Australian Dollar A$1.00 = Other Currency TBA TBA TBA TBA US Dollars UK Pounds European Euro Japanese Yen

4.2

Contracting Strategy

The Capital Cost Estimate can be based on an Engineering, Procurement and Construction Management (EPCM) or EPC strategy. Therefore, appropriate allowance should be made in the Capital Cost Estimate to allow for EPC or EPCM contractor profit and returns.

4.3

Quantities

Quantity developed is the key step in successfully completing a Class 3 estimate. A basic guideline of deliverables needed for a Class 3 estimate is outlined in the Estimate Classification Guideline. It is important the quantities for a Class 3 estimate are determined accurately and in the line with KEIPL commodity code structure. The quantities set the foundations for determining material pricing, installation hours and scope for subcontractors, fabrication shops and turnkey packages to determine a good fixed or budget quotation. In Section 5.0, Engineering Deliverables will be explained in more detail by discipline.

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
All quantities will be taken off as neat quantities, without allowances buried in the details. Certain allowances will be picked up in the actual rates that are applied to the quantities received from engineering, and other allowances such as design allowances will be included as part of the engineering review process. Only allowances that are not shown on a drawing, but is known to be normally included for complete design should be included. Standard material take-off sheets can be obtained for most bulk material commodity accounts from the KEIPL Corporate estimating group. In most cases, these material take-off sheets should be attached to the estimate plan for engineering to use. Estimating and Engineering will establish the level of detail of quantity development required for the estimate, for each facility and commodity code. The level of detail should be consistent to the estimate classification and intended use. Enough detail must be provided to suit the estimator’s needs without burdening insignificant details. The estimator will assess the information provided and summarize the material take-offs into meaningful estimate entries by facility and commodity. Quantities by commodity code shall be developed by engineering from scope documents provided by the customer, using drawings, sketches, P&ID’S. All bulk material quantities shall be given to the estimating team by facility and commodity. These quantities may be compared with quantity information available from previous material requisitions, purchase orders, contracts and actual historical costs where appropriate. The estimator will verify the completeness and accuracy of the data received, before entering it into the estimating system.

4.4

Equipment and Material Pricing

In preference, and where appropriate, pricing rates for plant, equipment and bulk materials shall be based on budget or bids received from suppliers. For a Class 3 estimate, these will be obtained through the Procurement group. Engineering will prepare the datasheets and technical information and pass it to Procurement in order to send out enquiries to appropriate vendors. As the vendor quotations are returned back to KEIPL it will be reviewed in conjunction with Engineering and Procurement in order to ensure we are buying it for the right price and it complies technically. Where information is not available, pricing information will be obtained from KEIPL’s in-house database and escalated appropriately. Rates and pricing for equipment and materials shall reflect ex works delivery and local freight FAS at port of export, included within the vendor’s scope. Plant equipment pricing as a minimum, should include the equipment price (by currency) and quantity by equipment tag number, exchange rate, freight costs, duties and taxes and vendor representative day rates. For Australia only, equipment shall be referenced via tag number where available, and shall exclude Goods and Services Tax (GST).

4.5

Freight

Estimated costs for ocean freight and inland freight to site can be developed for each relevant estimate item separately from material supply pricing. Freight revenue (or bulk) tonnes can be developed and stored in the estimating system. Where applicable, freight tonnes may be

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
developed by estimating system as the product of the estimated quantity and a bulking factor for the given commodity. Alternately freight tonnes may be developed and entered directly for each appropriate estimate item. Another alternative is to have a procurement traffic and logistics expert, work out the total freight costs for the project. This needs to be organised and agreed at the estimate planning phase to ensure the total freight components are picked up. For domestic projects, the cost of freight should be included in the pricing of mechanical equipment, but identified separately for parametric purposes. Other costs such as duties, taxes etc would be expressed as a percentage from mechanical equipment and bulk materials, based on the regulations of the country the project is being built. Where equipment pricing is not available, generally for domestic projects, 3 – 5% is applied on total material cost. For International, remote projects with a more extensive freight scope, a procurement traffic and logistics person should be appointed in order to calculate the total freight cost. This will be suitable checked at the end of the estimate against similar projects and historical data. The scope of freight would normally include the following: • • • • • • Location Scope and Execution of the project Source of Materials and Equipment Traffic and Logistics plan Warehousing Special Handling

To the points listed above, a consideration of market conditions should be evaluated and incorporated to the total freight cost. That is, in a depressed economy, with a low, competitive pricing structure. Freight will be a higher percentage of material cost than under other economic conditions. The freight factor will be generally in the range of 5 to 15 percent of material cost. For domestic projects the range is 3 – 5%, and for remote sites is between 5 – 15% of material costs. For further detail please refer to the Freight Costs Guideline PDP-0026. Special note needs to be made of the items that are to be pre-assembled off-site, so that freight pricing can be estimated to include this.

4.6
4. 6.1

Contract Labour Pricing
Manual Labour Productivity

To develop manual labour man-hours for a Class 3 estimate, it is important to understand productivity. Project productivity is evaluated by comparing to a set of standard unit man-hours. These standards will have to be developed for each country, in order to obtain a consistent yardstick. In Australia we are already utilizing a base line, based on history, estimators experience and developing rates from first principles. To formalize this approach a unit manhour book will be developed in the future, which will align to KEIPL’s standard commodity codes. This productivity is applied as a factor (ie 1.5 of standard rate) to our standard set of unit man-hours.

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
Productivity is influenced by a number of factors which may include the following: • • • • • • • • • • • • • • • • • • • • • • Labour skills Availability of labour Remote sites Market availability Weather (normal) Supervision Non-productive time, permits, safety, inductions and waiting time for materials Selection of contractor Construction methods Brownfield work Greenfield work Modularization and pre-assembly methods Work week Site access Height or depth Design complexity Shutdowns Tie-ins Crew mix Language and culture Demolition work Contract type ie performance incentives, direct hire, lump sum etc.

Labour productivity and crew mixes for onsite and offsite works will be based on historical data from recent projects. The data necessary to evaluate productivity could be sourced from the following: • • • • • • Actual return data from projects and construction Historical and current projects in the region or under similar conditions Site visit report Information from Industrial Relations Richardson’s and other reference material or publications Trade publications

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
4. 6.2 Inst all ation Man-hours

The unit man-hours are the quantity measurement unit for installation labour. In a typical estimate, only onsite hours are shown. Even for a turnkey package, hours should be shown with the corresponding labour cost. It is important to show these hours, as they impact the following: • • • • • • • • • • • • • • • • • Project Schedule Camp size Camp Operations and Maintenance Peak manning Contracting strategies Temporary facilities on-site Common distributables Construction costs Future labour cost monitoring ie quantity against hours installed Future Claims or Variances to scope Safety gear and equipment Medical supplies Tools and consumables for Construction Project accommodation ie housing and hotel requirements Manual labour transport, ie bussing, airfares etc Rest and relocation costs Construction support required, ie security, janitorial, etc

All fabrication and offsite hours are included in the all up rates by commodity code or total cost, or shown in the estimate description field. Unit man-hours for installation of equipment and materials are developed by the estimator for each commodity with support from Construction and previous projects or actual return data. Where possible, first principle estimating techniques will be used to crew up the level of work required to install equipment or bulk material items. The installation hours should include the efforts for all crafts or trades involved, which includes handling the item from storage, assembly, positioning, aligning etc, right through to complete installation. Caution should be exercised in the build up man-hours to ensure it is compatible to the degree of field fabrication required. These hours should be discussed and agreed with Construction to assure the estimate reflects the execution plan and intended construction methods. Depending on the project location, complexity, or whether it is a Brownfield or a Greenfield site, adequate productivity will need to add to the standard unit man-hours to reflect the work to complete. For further detail and explanation on productivity, refer to the previous section 4.6.1 under manual labour productivity.

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
4. 6.3 Manual Labour Rat es

The weighted composite contract labour pricing per hour should be based on existing site agreements, enterprise bargain agreements or utilizing in-house historical data. This will be compared with similar projects for each type of craft and construction as a check for reasonableness. The labour pricing will reflect the project work week and other site conditions, within the country the work will be performed. Projects in North America and Australia perform work using unions. The labour rates are generally governed by site agreements or controlled by a labour or Enterprise Agreement. In countries such as Asia, manual labour rates are much cheaper, however hours should be visible in the estimate, as it does impact certain construction costs on a project that may be dependent on number of men, ie camps, bussing etc. A sample manual labour rate calculation sheet is attached in Appendix 2. For a Class 3 estimate in Australia, it is advisable the trade or craft rates be checked through the Chamber of Commerce or an Industrial Relations consultant. Manual Labour rates are sometimes market driven, so a consultant within the country, with local knowledge of current projects in the area is highly recommended to achieve the correct accuracy of the estimate.

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
Composite labour rates will be developed for each type of construction ie earthworks, concrete work, steel erection, etc. These composite rates will be based on pay rates and crew mixes in the estimate data base. Where a mix of nationalities occur on one project site the Expat or local mix, will have to be broken down by nationality and currency in order to obtain the correct crew mix. A labour rate calculation is mandatory for all Class 3 estimates, particularly in North America and Australia. It does vary between EPC (Direct Hire) and EPCM projects. A typical manual labour rate by craft or trade for an EPCM project would include the following: • • • • • • • • • • • • • • • • • • • • Base Wage (base work week needs to specified) Allowances, which may include industry allowances, special allowances, tool allowances, license allowances, leading hand allowance. Adjusted site work week, overtime, Rostered Days Off, shift premiums etc. Location Allowance Site Allowances Living Subsidies Grievance Allowance Statutory Holidays Sick Leave Annual Leave Rest and Recreation allowances Incentive or Bonus Payments Redundancy\Severance pay Long Service Leave Superannuation Income Protection Insurance Payroll Tax Workers Compensation Meal Allowance Travel Allowance

Please note that the above categories may change according to the country or state within North America and Australia that the work will be executed. A typical manual labour rate by craft or trade for an EPC project (mainly for North America) would include the following: • • Base Wage Rate (base work week needs to be specified) Overtime and Shift Premiums

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
• • • • • • • • • • • • • • Travel Time Non-Productive Time (Safety meetings, inductions etc) Work Operation Premiums (Height, dust etc) Health and Welfare Pension Annual Leave Statutory Holidays Sick Leave Bonuses Union or association funds Travel and Subsistence Insurances Taxes Sometimes profit

Camp and catering costs, small tools and consumables, overhead costs and profit should generally be estimated and monitored separately not be included in the manual labour rate.

4. 6. 4

Sub-Contract ors Costs

Contractors’ deliverables can be developed as a percentage of contract manual labour costs by major commodities with the support of historical data. These rates cover construction equipment and other support required to support and deploy installation labour. Cost components covered by these rates include: • Temporary facilities including Mobilisation and Demobilisation • Maintenance of temporary facilities and equipment • Ownership and operation of construction equipment • Tools and consumables • Site office operation • Staff and Supervision • Home Office & corporate overheads • Profit Ideally, the other method to obtain sub-contractor costs is to produce a detailed definition provided by Construction in order to obtain a price based on the categories above. The other is to utilize past project information and adjust it accordingly to suite the execution plan of the project.

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE 4.7
4. 7.1

Allowances
Desi gn Allowances

In preparing a capital cost estimate, it is rare occasion when everything is known, specified and measurable. Design allowances are applied at the direct cost level, to compensate the degree of engineering complete and quotations used at this level of estimate. Past experience by the project team will be applied, to provide some measure to fill the gap at the direct cost level. In a Class 3 estimate, design allowances can range between 3 -5% of total direct cost, depending on the information provided by the customer and the quality of historical data used. Design allowances are considered a known and definite requirement when preparing the direct costs, as they are historically based and lift the material take-offs and material pricing to more accurately reflect what the final design will require. Design allowances are addressed, when engineering have reviewed the scope and quantities of the estimate. The Lead Estimator facilitates the process by using a design allowance format. Refer to Appendix 1. This is a matrix by area and major commodity level. The Estimator utilizes this sheet to seek input from the Lead engineers and procurement. For further detail please refer to the Design allowances guideline.

4. 7.2

Ot her Allowances

Costs associated with wastage, over pours, loss and damage will be included in unit rates as allowances; not in measured quantities supplied by Engineering. Percentage allowance will be used to estimate costs of pipe supports, pipe testing and inspection, mechanical bulks and the like. Allowances for NDT testing and stress relieving etc will be covered by estimating as a percentage of total pipe quantity and cost. Allowances for cost growth for minor scope changes, scope and estimating omissions, quality of bids and budget pricing, market forces and the like are to be included in contingency, not in direct costs.

4.8

Common Distributable

Common distributable costs are materials, equipment services and utilities provide to the project which are not specific to any one subcontractor. Where similar items and services are attributable to one contractor, these costs are to be charge to contractor distributable costs. Common distributable costs also cover scope provided to the project by the EPCM contractor in support of the project. Material and labour costs which cannot easily be identified with specific direct work operations in the construction of a plant and are either supporting services by nature or apply in such a way to several direct operations that a convenient allocation to each separate operation cannot be readily be made. Examples are temporary roads, camp operation and maintenance etc. This is commonly addressed as part of the indirect cost account. A detailed coding structure with full definitions can be found in the Standard Estimating Code of Accounts Guideline.

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
For a Class 3 level estimate, this would normally be scoped out and quantified by Engineering and Construction. This will normally reflect the execution plan adopted by the project, particularly field construction. After the estimate is complete this will be compared to similar projects and parametrically checked against historical data.

4.9

Engineering, Management

Procurement

and

Construction

Estimates for the EPC or EPCM services will be established by discipline engineers, procurement, project management, construction and project controls using InControl to generate the relevant CTRs. These CTRs should encompass the scope of work and detail resources, rates and deliverables required to complete the works. Separate estimates will be prepared for office communications, reproductions and supplies, office furniture and equipment, computer hardware and software, vehicles, outside services and the like to match the above organisation. These will be spilt between the project and field office. After completion of the estimate the total EPCM services will be checked against similar projects and current historical data. The costs for the Project Managers’ Engineering, Procurement and Construction Management services include for: Production Engineering • Detailed Design engineering • Secondary consultants Project Management Services • Project management and non-technical support • Project Controls • Procurement and Contracts • Inspection and Expediting • Finance and Accounting • Safety and Employment Relations • Human Resources • Document Control Construction Services • Construction management • Field Engineers • Field Project Controls • Field Procurement • Field Safety • Field (IR)

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
Other Costs • Overheads • Fee • Business Travel , Accommodation and En-route expenses • Office expenses, photocopiers, faxes etc • Rental, Office fit-out and furniture • Stationary, printing and photocopying etc • Communications (telephone, fax, couriers, postage) • Information Technology setup, hardware and software • Other Employee costs, such as, mobilisation / demobilisation, R&R, • Fringe Benefit Tax, Foreign Taxes and Payroll Tax • Statutory On Costs (Annual Leave, Public Holiday etc) • Workers Compensation and Insurance This information will be incorporated into the final estimate as single line items and split between project and field office.

4.10

Escalation

Escalation may or not be included in the estimate. This needs to be qualified by the customer as part of the initial project and estimate kick-off meetings. The three main elements needed to prepare escalation for Class 3 estimates are: • • • Capital Cost estimate, which is broken down by labour, bulk materials, plant equipment and sub-contractor costs. Project Schedule Yearly escalation rates to apply to all categories of the estimate

4.11

Contingency

In preparing a capital cost estimate, it is a rare occasion when everything is known, specified and measurable. To complete a capital cost estimate for a project, one must provide for that which is not fully known, specified or measurable as well as that not foreseen in order to attain a complete cost figure. The contingency to be added to the base estimate is defined as: “An allowance for goods and services which at the current state of project definition cannot be accurately quantified, but which history and experience show will be necessary to achieve the given project scope.” The assessment of potential cost and schedule overrun and the estimation of appropriate contingency levels is an important element of capital cost estimates as it typically addresses some of the major risks to a project.

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
These risks relate to items such as: • • • • • • • • • • Level of detail of Scope The level of Engineering completed at the time of the study Technical Risks for untried or “out of ordinary” process items Geotechnical Issues Weather (normal) Quantity Take-off Detail Pricing details for bulk materials and equipment Labour cost and Labour Productivity Market Conditions Construction Schedule Issues

Contingency will be developed for the range of risks assessed during the preparation of the estimate. The risk analysis-contingency program (@Risk) will be used as the tool to assess the accuracy of the estimate and to calculate the contingency necessary to provide the required probability of achieving the estimated costs. The estimator will facilitate the risk process, with input from engineering, construction, customer, and any other estimate related personnel. (Please refer to Cost Estimate Classification Guideline PDP-0018 and Cost Risk Analysis Procedure PDP-0011 for more detail.)

4.12

Owners Costs

These costs are specifically to cater for the Owner, which has not been included elsewhere in the estimate. Normally this estimate is generated by the customer for the Owner to use in support to the EPCM or EPC contractor. These costs generally include: • • • • • • • • • • Owners Team costs, including salaries, travel, accommodation, office costs etc. Land lease or purchase Royalties and Fees Legal Costs Taxes and Insurances (public and professional liability) Owners Staff Commissioning costs Scope Variances Study Costs Owners Risk Hedging

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
• • • Marketing and Sales Research and Development Costs 3rd Party Consultants

4.13

Estimate Reviews

4. 13.1 General
To ensure the estimate meets the deliverables and accuracy required, a progressive checking process needs to occur during the estimate preparation phase. An estimate review is an examination and analysis by a group of people to ensure the completeness, methodology, qualifications and exclusions applied to the estimate. When developing an estimate, it is not uncommon to have an optimistic view about uncertainties concerning scope and process issues. The role for the checking team is to find the right balance, be examining the project data carefully and presenting their findings and amendments, in order to achieve a complete and accurate estimate. There are six typical stages in reviewing a Class 3 estimate. The estimate reviews consist of the following: • • • • • • Engineering Quantity / Scope Review Project Team Review Corporate Estimating Management Review Business Unit Review Senior Management Review Customer Presentation and Review

The flow chart below sets out the sequence and the intended purpose of the estimate reviews.

Estimate Review Flow Chart

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
Detailed Estimate Package
Preliminary or Definitive Estimate

Business Unit Review
Presentation for Acceptance and Approval /Set Contingency

Issue to Engineering for Review
Issue in Detail Level •Major Equipment •Bulk Quantities

Quantity/ Scope Review
Scope Review in Detail: •Estimate Basis •Quantities

Issue to Engineering for Review
Issue in Detail Level: •Major Equipment •Bulks •Pricing •Jobhours •Quantities

Project Team Review
Scope Review in Detail •Estimate Basis •Scope Used •Quantities •Pricing •Jobhours •Directs •Distribs •Home Office •Contingency

Corporate Estimating Review
Scope Review in Detail •Quantities •Pricing •Jobhours •Percentages •Contingency •Comparisons •Home Office •Distribs •Presentation Packages •Gross Margin

Senior Management Review
Presentation for Final Approval

Client Review
Presentation for Client Acceptance and Approval

4. 13. 2 Engi neeri ng -Quantit y/ Scope Revi ew
This is an evaluation that the estimate accurately represents the project scope defined and the quantities are what Engineering delivered to estimating for input into the estimating system. The engineering review is a mandatory requirement and is an integral part in achieving a Class 3 estimate. The quantity/ Scope review will evaluate the following: • • • • • • • Ensure estimate detail has been completely and correctly quantified for direct accounts according to the scope document Project team review of scope and quantity details for each account Engineering\Design Costs Review Major Equipment pricing Determine non-take off quantities to be incorporated in the estimate (i.e..; small bore pipe, lighting wire lengths, misc steel) Determine appropriate design allowances to be applied over and above the material take-offs received to cover for known unknowns. Input to Contingency Analysis

4. 13. 3 Proj ect Team Revi ew
The project team review is a mandatory requirement. The main purpose for the project team review is to cover the following: • • Assure project team agreement with the estimate basis, format, scope, and overall completeness of the package. Key review elements include:

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE – – – – – – – – –
• • • • Material Pricing Manual Labour Unit Rates Sub-Contractor Distributables Common Distributables Design Allowances EPCM Home and Field Office Costs Escalation Contingency Owners Costs

Construction methods and man-hour rates Procurement to check equipment and bulk material pricing Estimate validation against internal and external benchmarks Includes engineering, procurement, and construction project team members

4. 13. 4 Corporat e Esti mati ng Management Revi ews
This consists of the following: • • • • • • Ensure the estimate methodology is sound and complete and all normal steps and precautions are taken. Internal department review of overall estimate package as an independent check of the scope, quantities, unit man-hours, pricing, and overall presentation Review the content and format of the Estimating package. Rehearse presentation Align historical and benchmarking information were applicable. Attendees include Project Manager, Corporate Estimating Manager, and the Lead /Senior Estimator’s.

4. 13. 5 Busi ness Unit Revi ew
This consists of the following: • • • • • Review of the final version of the estimate presentation package, at a total summary level. Provide each manager a complete overview of the project in relation to their commitments and performance expectations to support the project Concur on the project execution plan Review and fix contingency, fee and policy matters Approval to proceed with the strategies and recommendations

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
4. 13. 6 Seni or Management Revi ew
• Presentation of the estimate package to the operating company’s president and other senior managers, by the project manager, using the estimate package approved by business management. Meeting results in final approval of the estimate submittal

4. 13.7

Cust omer Revi ew

This meeting is chaired by the KEIPL Project Manager, with the customer’s representative and the lead estimator as participants. The estimate package is presented to the Customer representative, using the estimate presentation package as approved by business unit/ senior management. The amount of information released to the customer will be decided at the Business Unit and Senior Management reviews in order to not have any commercial or schedule implications downstream.

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE 5. CUSTOMER ESTIMATE INPUT

5.1. 1 Cust omer Input
Basic information needs to be provided by the customer which may include the following: • • • • Type of Plant Plant Capacity and basic process Geographic location Required Start Date Preliminary engineering work conducted by KEIPL or the Customer is sometimes made available to provide additional information and improve the quality of the estimate. The preliminary work may include the following: • • • • • • Preliminary process flow sheets Preliminary equipment list (Major Items) General arrangement drawings and sketches Broad assumptions on site conditions and Utilities Actual return cost data from similar plants An outline of the Project Schedule

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE 6.
6.1.1

ENGINEERING ESTIMATE INPUT
General Requir ement s

The detail of the estimate will include all major equipment as well as bulk materials in the format specified in the estimate kick-off plan, as delivered by the Lead Estimator. A template Engineering Transmittal for Cost Estimate Input PDF-1006 for the formal transmittal of information from engineering to the Lead Estimator is provided in Appendix 3.

6.1. 2

Plant Equi pment

Engineering input for the estimate will include major equipment lists for all permanent facilities, including mechanical, electrical and control equipment, mobile equipment and spares. The equipment lists will include the following data, for items: • Facility Code • Commodity Code • Work pack number • Equipment Tag Number • Quantity and Unit of Measure • Equipment Description • Size, Rating or specifications • Weight • Manufacturer • Motor No/Motor Size (kW) where applicable Also in order to evaluate freight costs on the equipment it is necessary to include the following where possible: • Overall dimensions • Mass • Probable country of source • Any pre-assembly (including size of skid and any bulk materials required)

6.1. 3

Bul k Mat erial s

Engineering will provide bulk material quantities by: • Facility Number

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
• Commodity Number • Work pack number The supporting documentation for the Material Take-Off sheets will be provided and include: • Layout Drawings • Sketches • P&IDs (ELDs – Engineering Line Diagrams) • Piping Line Tables • Process Flow Diagrams • Mechanical Data Sheets • Instrument list and data sheets • Electrical Single line diagrams • Any pre-assembly (including size of skid and any bulk materials required) The supporting documentation, stating size, and weight of skid, source of skid.

6.2

Engineering Execution Plan

The following activities and outputs are required from Engineering so as to prepare the Class 3 Cost Estimate. This is by no means an exhaustive list and may need to be added or deleted as appropriate.

6.2.1 Process
The following are the process activities required to develop the estimate: • • • • • Prepare brief process scope and description document to serve as support for the estimate Process Flow Diagrams Prepare Piping and Instrumentation Diagrams (ELDS – Engineering Line Diagrams) Prepare line lists Provide process information for new equipment datasheets.

6.2. 2 Pi ping\ Fittings
• Prepare Piping and Fitting Material Take Off - MTO sheets. Where pipes are on a line list the transmittal must be in Excel format showing facility code, line size, spec, neat quantity in linear metres measured through centreline of all fittings, short description, fitting count by type. The line description should indicate whether the line is normal in plant or rack pipe, or part of a skid preassembly.

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
• Where a line passes through more than one facility it will be coded to the facility where the flow starts. Where a line passes through a skid a separate line number will be given to the skid portion. Where pipe and fittings are to be installed offsite as part of a skid or preassembly, this must be noted by a designated alpha built into the line list. The Estimator will then assign special codes and rates for this type of work. Fitting costs will be calculated as a composite weighted rate for each size and spec by the Estimator, based on the fitting count by type from the engineer. Prepare Piping speciality Material Take-off Sheets showing facility code, size, type, spec quantity. Prepare Pipe tie in list by type based on a pre agreed diagram of various component complexities. The diagram must indicate hot tie ins. The tie in list must show facility code, size, spec, type. Pipe supports below 100kg in wt will be allowed for by the estimator. Structural pipe supports greater than 100kg in weight should be in the structural steel commodity codes. Pipe sizes greater than DN50 will be assumed to be spooled offsite (shop fabricated) unless noted otherwise. This will be applicable to Carbon Steel Pipe, whereas Stainless Pipe will include sizes DN 50 (also) and above. The estimator will identify separately the quantity of pipe and fittings to be spooled based on the pipe line lists and Material Take-offs, no input from engineering is required. Pipe Insulation line lists or Material Take-offs are required showing nominal pipe size, type of insulation and cladding, thickness of insulation, length in linear meters through centreline of all pipe, fittings, valves and pipe specials. The Estimator will factor in the extra cost of insulating fittings in the pipe insulation rate.

• • •

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
• NDT work costs for the spooled portion of pipes will be allowed for by the Estimator based on the applicable pipe spec, and the costs included in the spooling rates. NDT for all site pipe work will be allowed for and identified separately by the Estimator as a lump sum in each facility based on the final quantity of pipe in each facility, also taking into account the pipe in skids.

6.2. 3 Valves
• • Prepare manual Valve MTO sheets, showing facility code, engineering valve code, size Note Control Valves will be coded to the instrument commodity codes.

6. 2. 4

Pi peline

The following are the process activities required to develop the estimate: • • Undertake route selection and prepare pipeline alignment sheets Coordinate any geographical, hydrological or other studies required to provide an acceptable level of definition of the pipeline route, in particular areas of rock

• Prepare Material Take-offs

6.2. 5 Mechani cal
The following are the mechanical activities required to develop the estimate: • Prepare brief mechanical scope of work document to serve as support for the estimate. • Coordinate and prepare major mechanical equipment list by tag number. • Prepare equipment list in an excel file format, suitable for importing into the “Quest” estimating system. The equipment list will be accompanied by a hard copy, with a signed transmittal advice, revision stamped and listing any attachments. • Prepare transmittal templates from engineering which will identify any unusual problems or special construction techniques that are envisaged which will affect the use of standard installation hours. For example, height, complexity, restricted access, long reach or heavy lift cranage etc. The transmittal format can be obtained from the Corporate Estimating Group. Refer to Appendix 3. • Prepare equipment data sheets for major items of equipment for delivery to vendors for budgetary price inquiry. Identification and contact of vendors should be coordinated through procurement personnel. • Obtain and compile pricing information from past projects, request budget costs or prepare bid evaluations from Vendors (with the support from Procurement). This information will be used as supporting documentation for the estimate.

6.2. 6 Ci vil/Struct ural
The following are the civil/structural activities required to develop the estimate: • Prepare brief civil/structural scope of work document to serve as support for the estimate

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
• Prepare MTO for site works (if required) • Prepare MTO for earth works (for foundations and trenching) • Prepare MTO for concrete (foundations) and piling • Prepare MTO for structural steel • Prepare MTO for buildings • Obtain and compile pricing information from recent orders or request budget costs from Vendors (with the support from Procurement). This information will be used as supporting documentation for the estimate.

6.2.7 El ect ri cal
The following are the electrical activities required to develop the estimate: • Prepare brief electrical scope of work document to serve as support for the estimate • Prepare major electrical equipment list with load ratings • Prepare Material Take-off (MTO) for cable and terminations • Prepare Junction Box location and Electrical item location plans • Prepare MTO for cable ladder • Prepare MTO for lighting • Prepare MTO for communications cable • Prepare MTO for earthing • Prepare electrical data sheets for major items of equipment for delivery to vendors for budgetary or bid evaluation price inquiry. Identification and contact of vendors should be coordinated through procurement personnel. • Obtain and compile pricing information from recent orders or request budget costs from Vendors (with the support from Procurement). This information will be used as supporting documentation for the estimate.

6.2. 8 Inst rument ati on and Control
The following are the instrumentation and control activities required to develop the estimate: • Prepare brief instrumentation and control scope of work document to serve as support for the estimate • Prepare Instrument Index. • Prepare DCS/SIS equipment architecture upgrade plans.

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
• Prepare MTO of instrument types and budget pricing coordinated through Procurement Group • Prepare MTO of bulk materials to be installed. • Prepare Control Valve and PSV MTO sheets showing facility code, valve description, size and rating.

6. 2. 9

DCS Appli cati ons

The following are the DCS Applications activities required to develop the estimate: • Prepare DCS Applications vendor specification for hardware and software configuration for budgetary price inquiry. Inquiry documents and pricing to be co-ordinated through procurement. • Prepare brief DCS Applications construction scope of works specification to serve as support for the estimate.

6. 2.10 Communi cations and SCADA
The following are the communications and SCADA activities required to develop the estimate: • • • Prepare brief communications and SCADA scope of work document to serve as support for the estimate. Prepare SCADA equipment listing and schematic Prepare communications and SCADA data sheets for major items of equipment for delivery to vendors for budgetary price inquiry. Identification and contact of vendors should be coordinated through procurement personnel. Obtain and compile pricing information from recent orders or request budget costs from Vendors (with support from procurement). This information will be used as supporting documentation for the estimate.

6. 2.11 Anal yser s
The following are the Analysers activities required to develop the estimate: • Prepare Analysers vendor specification for hardware and software configuration for budgetary price inquiry. Inquiry documents and pricing to be coordinated through procurement. Prepare brief Analysers construction scope of works specification to serve as support for the estimate.

6. 2.12 Ski ds
Engineering will provide clear identification of all bulk materials and equipment contained within a skid which is assembled offsite. The quantities will be by: • Facility Number

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
• Skid identifying number or alpha • Commodity Number (assigned by estimator) • The supporting documentation, stating size, and weight of skid, source of skid.

6. 2.13 Pai nting\Surface Tr eat ment
Engineering will provide clear identification of all materials and equipment which will require painting or galvanising. The quantities in square metres will be calculated by the Estimator based on the quantities of steel, pipe etc submitted by the engineers for each commodity. The Estimator in consultation with the engineer\contracts may choose to include the painting as part of the normal commodity code or as line items in a discrete painting code. For example, the galvanising of steel would remain as part of the steel commodity account, whereas the painting of a site built tank may be coded under the painting account as the painting contract may be separate from the tank contract. A method statement will be prepared by the engineer outlining how painting costs will be captured for each applicable commodity.

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE 7.

PROCUREMENT ESTIMATE INPUT
Vendor Quotes\Bid Analysis -Major Plant Equipment\Subcontracts -Selected Bulk Materials • Vendor Quotes -Plant Equipment -Bulk Materials • • • • • • Vendor Representative Rates and Expenses Freight Rates Taxes, Duties and Insurances Procurement Manning Charts Market Pricing and Escalation Analysis Lead Times on Major Equipment

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE 8.
• • • • • • • • • • • •

CONSTRUCTION ESTIMATE INPUT
Construction Plan Manual Labour Rates and Work Weeks Manual Labour Productivity Temporary Facilities Construction Support and Equipment Special Rigging Requirements Pre-Commissioning and Startup Definition and Manning Safety Program Labour Relations Agreement Constructability Plan Construction Non-Manual Manning Charts Input to Construction Schedule

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE 9.
9.1.1

HISTORICAL DATA
Usi ng Benchmarki ng and Hi st ori cal Dat a

In the future, a KEIPL benchmarking tool will be developed and made available to assist in reviewing a Class 3 estimate at the define phase. Published information is available, and can be used, however its accuracy is not always known. In house databases are preferred, as the basis of cost is qualified and understood to make appropriate adjustments. Comparing capital cost estimates requires costs of similar past projects and requires adjustments for the new location, time period and infrastructure, which usually requires judgement or well defined adjustment factors.

9.1.2 Pro-rati on Esti mat es
Pro-ration estimates are a quick way to determine the cost of a specific facility or commodity to check for reasonableness, as long as it meets the following requirements: • • • • • • Need Historical data or recent costs on a similar plant and process Must be near duplicate Should be reasonably close in size Adjust for off-sites and utilities Adjust for project execution differences Adjust for escalation and for location

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE 10. ESTIMATE PRESENTATION FORMAT

Currently under development

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE 11. DOCUMENTATION BASIS FOR ESTIMATING

It is very important that the defined scope and the various inputs for the estimate preparation are captured and included in a reference document. This assists in controlling the scope for the next phase and identifying where and why changes to the project cost have occurred. The lead personnel identified are responsible for ensuring the scope assumptions and qualifications, and design deliverables are forwarded to the Lead Estimator to enable compilation of the Estimate Basis. This would include the following: • • • • • • • • Scope document Material Take-offs Copies Equipment and Bulk Material Pricing Labour Rates Build up and Crew Mixes Sub-Contractor Costs Common Distributables Costs EPCM or EPC Services backup Contingency or Risk Assessment

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE 12. RESPONSIBILITY TABLE

Detailed below is a responsibility matrix for the estimates. It lists the data required for the successful completion of the estimates and the responsible department/person for supplying that data. The data will be transferred to the estimators and will generally include: • Scope descriptions • Material Take Offs (MTOs) for bulk materials • Bid summaries for equipment • List of reference drawings and sketches • Correspondence • Equipment lists • Budget pricing (where applicable) Scope 1. Scope Definition, Documentation and Execution Strategy 2. Quantity and Pricing Development Major Equipment Equipment list of all process, utility, and specific site support plant identifying necessary information and design data, design allowance percentage for quoted items and spare parts. Prepare existing data sheets to issue to Procurement for reconfirmation of equipment pricing. Prices quoted by vendors, current market pricing information, inland and ocean freight rates and related data for shipment of equipment, import duties if required, vendor representative rates and expenses Construction and installation methods and schedules, labour availability and productivity information. Labour rate information. Sales and other taxes, foreign currency issues and import duties. Major equipment estimate, including review of scope, material Engineering Responsibility Team Manager

Procurement

Construction

Estimating Procurement\Estimating

Estimating

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
Scope and labour pricing. Bulk Quantity Development Development of the various levels of scope including takeoffs. Methods used to develop quantities Contracts Contracting Plan 3. Field Manual and Labour Pricing Establishing and updating field installation labour hour standards. Manual labour productivity, wage rates and craft mixes evaluation. Establishing composite wage rates and the application of standard labour hours and productivity. Estimating Construction\Contracts Engineering Responsibility

Estimating

Estimating/Construction

Estimating

4. Contractors and Common Distributable Preparation of Distributables Estimate. Definition of temporary field facilities, utilities, construction support services, construction equipment, tools and consumables, field non-manual staffing requirements, manual labour rates and productivity. 5. Services Estimate Engineering job hours, other direct costs. Department Estimate of hours and other direct costs. Total cost of EPC. 6. Escalation Analysis Escalation rates Instructions and information to the estimating team concerning Estimating Estimating Estimating Construction\Engineering

All Engineering Department Managers Team/Estimating

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
Scope operations policy on escalation rates, indexes and projections. 7. Contingency Analysis Development of estimate and the best measure of potential variance in project costs. Final estimate figure. 8. Estimate Reviews Engineering Review (Quantity/Scope) The Quantity Review meeting is held to ensure the estimate detail has been completely and correctly quantified for all direct account categories according to the scope document. This meeting is a team review of scope and quantity details for each account, and it is a key review of the direct account quantities where agreement on the total package must be reached among all attendees. The estimate detail sheets that are to be reviewed must be issued to engineering at least two working days before the meeting, to provide sufficient time for independent reviews. Customer Review This meeting is chaired by the KEIPL Project Manager, with the customer’s representative and the lead estimator as participants. The estimate package is presented to the customer representative, using the estimate presentation package as the approved by functional management. Team Responsibility

Management

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE

Appendix 1 – Cost Estimate Classification Guideline PDP-0017

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE

Appendix 2 – Manual Labour Rate Development Guideline PDP-0029

CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE

Appendix 3 – Engineering Transmittal for Cost Estimate Input PDF-1006

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