Capital Cost Estimation

Chapter 5
Types of Capital Cost Estimate

1. Order of Magnitude Estimate (Feasibility)

2. Study Estimate / Major Equipment
3. Preliminary Design (Scope) Estimate
4. Definitive (Project Control) Estimate
5. Detailed (Firm or Contractors) Estimate
 Capital Cost Estimate Classifications
Estimate Type Accuracey Data Diagrams Notes

Order of + 25%, - 15% Existing plants BFD Capacity +

Magnitude inflation
Study (Major + 30%, - 20% Roughly sized major PFD Generalized
equipment, equipment charts cost
Factored)
Preliminary + 25%, - 15% major equip. + piping PFD Group project
Design (scope) + instr. + Elec. + util.
Definitive + 15%, - 7% Prelim spcs for all PFD +
equipment P&ID
Detailed (firm or + 6%, - 4% Complete engineering
contractor
Capital Cost Estimate Classifications
Example 5.1
The estimated capital cost from a chemical plant using the study estimate method
(Class 4) was calculated to be $2 million. If the plant were to be built, over what range
would you expect the actual capital estimate to vary?

For a Class 4 estimate, from Table 5.2, the expected accuracy range is between 3 and
12 times that of a Class 1 estimate. A Class 1 estimate can be expected to vary from
+6% to -4%. We can evaluate the narrowest and broadest expected capital cost
ranges as:
Lowest Expected Cost Range
High value for actual plant cost ($2.0 x 106)[1 + (0.06)(3)] = $2.36 X 106
Low value for actual plant cost ($2.0 x 106)[1 - (0.04)(3)] = $1.76 x 106

Highest Expected Cost Range

High value for actual plant cost ($2.0 x 106)[1 + (0.06 )(12)] = $3.44 x 106
Low value for actual plant cost ($2.0 x 106)[1 - (0.04 )(12)] = $1.04 x 106

The actual expected range would depend on the level of project definition and effort. If
the effort and definition are at the high end, then the expected cost range would be
between $1.76 and $2.36 million. If the effort and definition are at the low end, then
the expected cost range would be between $1.04 and $3.44 million.
Example 5.2
Compare the costs for performing an order-of-magnitude estimate and a detailed
estimate for a plant that cost $5.0 x 106 to build.

Solution :
For the order-of-magnitude estimate, the cost of the estimate is in the range of
0.015% to 0.3% of the final cost of the plant:

Highest Expected Value: ($5.0 x 106)(0.003) = $15,000

Lowest Expected Value: ($5.0 x 106)(0.00015) = $750
For the detailed estimate, the cost of the estimate is in the range of 10 to 100
times that of the order-of-magnitude estimate

For the lowest expected cost range

Highest Expected Value: ($5.0 x 106 )(0.03) = $150,000

Lowest Expected Value: ($5.0 x 106)(0.0015) = $7500

For the highest expected cost range:

Highest Expected Value: ($5.0 x 106)(0.3) = $1,500,000
Lowest Expected Value: ($5.0 x 106)(0.015) = $75,000
Estimating Purchased Equipment Costs

Vendor quote
Most accurate

- based on specific information

- requires significant engineering

Use previous cost on similar equipment and scale for

time and size
Reasonably accurate

- beware of large extrapolation

- beware of foreign currency

Use cost estimating charts and scale for time

Less accurate

Convenient
Effect of Size (Capacity)
n
Ca Aa
(5.1)
Cb Ab Cost Exponent

Cost Equipment Cost

Attribute - Size

Ca KAa n (5.2)

Cb
where K
Ab n
Effect of Capacity on Purchased Equipment Cost
Ca K Aan
where
K Cb Abn
Effect of Size (Capacity) cont.

n = 0.4 0.8 Typically

Often n ~ 0.6 and we refer to Eq.(5.1) as the
(6/10)s Rule
Assume all equipment have n = 0.6 in a
process unit and scale-up using this method
for whole processes
Order-of-Magnitude estimate
Effect of Capacity on Purchased Equipment Cost
 Economy of Scale

Example 5.3 :
Use the six-tenths-rule to estimate the % increase in purchased
cost when the capacity of a piece of equipment is doubled.
Using Equation 5.1 with n = 0.6:

Ca./Cb = (2/1)0.6 = 1.52

% increase = (1.52 -1.00)/1.00)(100) = 52%

The larger the equipment, the lower the cost of equipment per
unit of capacity.
 Economy of Scale

Example 5.4
Compare the error for the scale-up of a heat exchanger by a
factor of 5 using the six-tenth- rule in place of the cost exponent
given in Table 5.3.

Using Equation 5.1:

Cost ratio using six-tenth-rule (i.e. n = 0.60) = 5.00.6 = 2.63
Cost ratio using (n =0.59) from Table 5.3 = 5.00.59 = 2.58
% Error = (2.63 -2.58)/2.58)(100) = 1.9 %
 Effect of Capacity on Purchased Equipment Cost

Rearranging equation 5.2

C K An
C
K An 1
A
Equation for Time Effect

I2
C2 C1
I1
C = Cost
I = Value of cost index
1,2 = Represents points in time at which
costs required or known and index values
known
Effect of Time on Purchased Equipment Cost
 Effect of Time on Purchased Equipment Cost

Example 5.6
The purchased cost of a heat exchanger of 500 m2 area in 1990 was $25,000.
a. Estimate the cost of the same heat exchanger in 2001 using the two indices
introduced above.
b. Compare the results.

From Table 5.4: 1990 2001

Marshal and Swift Index 915 1094
Chemical Engineering Plant Cost Index 358 397
a. Marshal and Swift: Cost = ($25,000)(1094/915) = $29,891
Chemical Engineering: Cost = ($25,000)(397/358) = $27,723
b. Average Difference: ($29,891 -27,723)/($29,891 + 27,723)/2)(100) = 7.5%
Marshal & Swift and CEPCI
 Table 5.5: The Basis for the Chemical Engineering Plant Cost Index

Components of Index Weighting of Component (%)

Equipment, Machinery and Supports:

37
(a) Fabricated Equipment
14
(b) Process Machinery
20
(c) Pipe, Valves, and Fittings
7
(d) Process Instruments and Controls
7
(e) Pumps and Compressors
5
(f) Electrical Equipment and Materials
10
(g) Structural Supports, Insulation, and
100 61% of total
Paint
Erection and Installation Labor 22

Buildings, Materials, and Labor 7

Engineering and Supervision 10

Total 100
Example 5.7
The capital cost of a 30,000 metric ton/year isopropanol plant in
1986 was estimated to be $7 million. Estimate the capital cost of a
new plant with a production rate of 50,000 metric tons/year in 2001.

Cost in 2001 = (Cost in 1986)(Capacity Correction) (Inflation

Correction)
= ($7,000,000)(50,000/30,000).6(397/318)
=($7,000,000)(1.359)(1.248) = $11,870,000
 Factors affecting Capital Cost
Direct project expenses
Indirect project expenses
Contingency and fee
Auxiliary facilities
 1. Direct project expenses
Factor Symbol Comments

Equipment Cp Purchased cost of equipment at

f.o.b. cost manufacturer's site

Materials CM Includes all piping, insulation and installation

fireproofing, foundations and structural
supports, instrumentation and electrical, and
painting associated with the equipment
Labor CL Includes all labor associated with equipment
and material installing mentioned above
 2. Indirect project expenses
Factor Symbol Comments

Freight, CFIT transportation costs for shipping equipment

insurance, and materials to the plant site, all insurance
and taxes on the items shipped, and any purchase
taxes that may be applicable
Construction CO Includes all fringe benefits such as vacation,
overhead sick leave retirement benefits; etc.; labor
burden such as social security and
unemployment insurance, etc.; and salaries
and overhead for supervisory personnel
Contractor CE salaries and overhead for the engineering,
engineering drafting, and project management personnel
expenses on the project
 3. Contingency and fee

Factor Symbol Comments

Contingency CCont A factor to cover unforeseen circumstances.

These may include loss of time due to storms
and strikes, small changes in the design, and
unpredicted price increases.
Contractor CFee fee varies depending on the type of plant and
fee a variety of other factors
 4. Auxiliary facilities
Factor Symbol Comments
Site CSite land; grading and excavation of the site;
development installation and hook-up of electrical, water,
and sewer systems; and construction of all
internal roads, walkways, and parking lots
Auxiliary CAux administration offices, maintenance shop and
buildings control rooms, warehouses, and service
buildings

Off-sites and COff raw material and final product storage &
utilities loading & unloading facilities; all equipment
necessary to supply required process utilities;
central environmental control facilities; and
fire protection systems
 Capital Cost Modules
1. Total Module Cost (Lang Factor)
2. Bare Module Cost
 Lang Factor
n
CTM FLang C pi
i 1

Total Module Cost Purchased Cost of Major Equipment

From Preliminary PFD
(Pumps, Compressors, vessels, etc.)
Chemical Plant Type Lang Factor Flang
Fluid Processing Plant 4.74

Solid-Fluid Processing Plant 3.63

Solid Processing Plant 3.10

 Lang Factor
Example 5.8:

Determine the capital cost for a major expansion to a fluid processing

plant that has a total purchased equipment cost of $6,800,000.

Capital Costs = ($6,800,000)(4.74) = $32,232,000

 Lang Factor
Advantage
1. Easy to apply.
Drawbacks
1. Special MOC.
2. High operating pressure.
Module Factor Approach
Table 5.8
Direct, Indirect, Contingency and Fees are
expressed as functions (multipliers) of purchased

equipment cost C op at base conditions (1 bar and
CS)
Each equipment type has different multipliers
Details given in Appendix A
Module Factor Approach
CBM C p FBM
o Bare Module Factor
(sum of all multipliers)

Bare Module Purchased Equipment Cost for CS

Cost and 1 atm pressure - Appendix A

FBM = B1 + B2FpFM
o
FBM B1 B2

Fp = pressure factor (= 1 for 1 bar)

FM = material of construction factor (=1 for CS)

C p C op Fp FM
 Bare Module Cost

F 1 M 1 L FIT LO E
0
BM
Example 5.9
The purchased cost for a carbon steel heat exchanger operating
at ambient pressure is $10,000. For a heat exchanger module
given the following cost information:
Item % of Purchased Equipment Cost
Equipment 100.0
Materials 71.4
Labor 63.0
Freight 8.0
Overhead 63.4
Engineering 23.3
Using the information given above, determine the equivalent cost
multipliers given in Table 5.8 and the following:
0
a. Bare module cost factor, FBM
b. Bare module cost, C BM0
Item % of Purchased Cost Multiplier Value of Multiplier
Equipment Cost
Equipment 100.0 1.0
Materials 71.4 M 0.714
Labor 63.0 L 0.63/(1+0.714)=
0.368
Freight 8.0 FIT 0.08/(1+0.714)=
0.047
Overhead 63.4 0.634/0.368/
O
(1+0.714)= 1.005
Engineering 23.3 E 0.233/(1+0.714) =
0.136

a. Using Equation 5.8:

0
FBM = (1 + 0.368 + 0.047 + (1.005)(0.368) + 0.136)(1 + 0.714) = 3.291
b. From Equation 5.6:
0
C BM = (3.291)($10,000) = $32,910
Module Factor Approach
CBM C p FBM
o Bare Module Factor
(sum of all multipliers)

Bare Module Purchased Equipment Cost for CS

Cost and 1 atm pressure - Appendix A

FBM = B1 + B2FpFM
o
FBM B1 B2

Fp = pressure factor (= 1 for 1 bar)

FM = material of construction factor (=1 for CS)

C p C op Fp FM
 Bare Module Cost Factor
For Heat Exchangers, Process vessels, and pumps

CBM CP0 FBM CP0 B1 B2 FM FP

0
FBM B1 B2

Material Factor, FM, for these equipment are obtained from Figure A.8
along with Table A.3.

Values of B1 and B2 are given in Table A.4

 Bare Module Cost Factor
For Heat Exchangers, Process vessels, and pumps
Values of B1 and B2 are given in Table A.4
Module Factor Approach Pressure Factors
 Pressure Factor for vessels
Pressure Factor, FP , for other equipment are given in table A.6
along with Figure A.9

( P 1) D
0.0315
2 850 0.6( P 1)
FP ,vessel for tvessel 0.0063m
0.0063
If FP is less than 1, then FP= 1.0

For P less than -0.5 barg, FP = 1.25

 Pressure Factor for Other
Equipment
Pressure Factor, FP , for other equipment are given in table A.6
along with Figure A.9

log10 FP C1 C2 log10 P C3 log10 P

2

Constants are given in Table A.2

Module Factor Approach Material
Factors
Bare Module Cost Factor
For equipment not covered in table A.3
 Material Factor

Material Factor, FM , for other equipment are given in table A.6

along with Figure A.9
 Purchased Equipment Cost

log10 C p0 K1 K 2 log10 ( A) K3 log10 ( A)

2

Where A is the capacity or size parameter for the equipment

K1, K2, and K3 are given in table A.1

These data are also presented in the form of graphs in Figures A.1-A.7
Illustrative Example
Compare Costs for
1. Shell-and-tube heat exchanger in

2001 with an area = 100 m2

for
Carbon Steel at 1 bar

Carbon Steel at 100 bar

Stainless Steel at 1 bar

Stainless Steel at 100 bar

Effect of Materials of Construction
and Pressure on Bare Module Cost
o
P MOC C op Cp C BM CBM

1 bar CS 25 K 25 K 82.3 K 82.3 K

1 bar SS 25 K 68.3 K 82.3 K 154 K

100 bar CS 25 K 34.6 K 82.3 K 98.1 K

100 bar SS 25 K 94.4 K 82.3 K 197.4

K
Bare-Module and Total-
Module Costs
BM Previously Covered
TM Includes Contingency and Fees at
15% and 3% of BM

CTM 1.18 CBM

all equip
Grass-Roots Costs
GR grass-roots cost includes costs for
auxiliary facilities

CGR 0.50 o
CBM CTM
all equip

Use base BM costs in GR cost (1 atm

and CS) since auxiliary facilities should
not depend on pressure or M.O.C.
Materials of Construction
Very important
Table 5.9 rough guide
Perrys good source
Capcost
Calculates costs based on input
CEPCI use current value of 401 or
latest from Chemical Engineering
Program automatically assigns
equipment numbers