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^^^^^^^^^^H ® ^^^^^^^^^^BWÊ^^^ÊM^^ÊÊi^i 1 Product to be made, specifications and storage provicions; plant capacity; operating stream time; provisions for expansion; raw materials, source and storage a Showing number of each item required, capacity, and materials of construction 3 Land values and land developments * Description of laboratory and service facilities required 8 Unusual items of equipment "Showing equipment in plant and elevation 7 Utilities and service facilities, roads, sewers, etc. 8 Sizes, materials of construction 0 Superimposed on equipment and plant layout 10 Cost for preparing estimates contemplates no alternate studies and will not result in any construction drawings or specifications. Does not include cost of preparing the information available or the cost of subsoil investigations to determine soil-bearing values
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Figure 1. Typical chart for handling cost estimating problems
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C H E M I C A L
Poor cost estimates are gener ally a minor factor in l o w r e turns on a n e w operation, a s suming a reasonably accurate estimate has been made on the basis of data available A COMPLETE economic analysis of a pro•**- posed process operation may b e con sidered in three parts : ( 1 ) capital require ment o r total investment, w h i c h is t h e money required to provide process equip ment, buildings, service facilities, a n d working captial; ( 2 ) annual costs of sales, which are t h e sum of variable costs e n tailed i n processing the raw material to finished product (these costs vary with the annual production) plus fixed costs, which are more or less independent of the annual production for a given plant; and ( 3 ) earnings or profit m a d e on t h e operation, which is a function of the sales price o f the product, its market demand, profit taxes, and cost of producing a n d selling the product. Preliminary cost estimations for pro posed plants, therefore, are an important step i n determining t h e economic feasi bility o f a process and require determina tion of ( 1 ) and ( 2 ) above. T h e third part is not within the scope of this article which will consider only cost estimations prior t o actual construction of a commer cial plant where data varying i n degree of completeness are available. There have been a number of articles appearing recently in technical journals on preconstruction cost estimates for proposed plants. In general, they deal either with individual parts of the cost estimate or with summary tabulations where it is presumed that t h e estimator has available the data for the individual items. In some cases, they treat either t h e investment require ment o r t h e annual costs. I will give a brief survey of these articles a n d incor porate them into a procedure t o permit estimation o f both investment and operat ing costs where limited data are available. E a c h individual plant under considera tion will vary i n its cost requirements de pending upon its size, t h e process, and whether or not the plant is an entirely n e w facility or merely an addition to an exist ing plant. T h e general plan followed is to develop certain basic design informaA N D ENGINEERING
NEWS
H . E. SCHWEYER, University of Florida, Gainesville,
Estimation
for
tion from which unknown costs can b e estimated w h e n t h e basic cost data are multiplied by factors. Experience and the literature provide the information which control the factors employed. The investment required to construct the plant is usually based o n the process equipment cost from w h i c h the other individual investment items are factored to obtain the total capital requirement. T h e latter provides a basis for estimating the fixed costs portion of the total annual costs. The variable cost portion of the total annual costs is obtained b y multiplying certain design data by factors. The design data may b e raw materials cost alone, or the sum of the raw materials cost plus direct labor costs (this s u m is sometimes called "prime c o s t " ) . T h e s e estimated costs may b e per unit of product or the total annual charge. At a n y stage of these cost estimations it is prudent to substitute known figures rather than factored values in order to reduce the magnitude of error. Type of Data Required For Cost Estimation A list of basic data required for making a complete cost estimation is given
Process
Operations
in Table I. Numerous items on this list may b e estimates, but an educated guess wih respect to the individual entries is better than a guess for the totals, and reasonable values can usually b e obtained. Nichols ( 6 ) has proposed a less detailed chart of information required for investment cost estimations only, which is reproduced in Figure 1. It also contains information on the reliability of cost estimations as a function of the completeness of the design data employed. T h e numbers in the last vertical column of Chart II of Figure 1 refer to the method of estimating given in the original article. Many of the items in Nichols' chart require the detail surveys listed in Table I for t h e operation. For example, the investment for power facilities cannot b e estimated until an energy and use survey is made t o determine the demands. Total investment The basic data required to estimate total investment are the costs for major process equipment as shown on preliminary or engineering flow sheets. A tabulated list of these items using Table I
Table I.
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as an outline is m a d e up and the costs for the individual equipment items are summarized. These costs should be known accurately either from experience or from manufacturers estimates or quotations. However, if they must b e estimated, the sources in the bibliography may be utilized together with articles appearing in recent issues of technical journals. These sources will provide data for most equipment costs, but care must b e exercised in converting listed costs to a current basis. This may b e done readily by the use of the Marshall and Stevens all industries index, the Engineering News Record Construction Index or any other pertinent cost index that gives current costs relative to those for the year in which the data are available. For convenience, certain abbreviated lists taken from the references are given in Table II where each index has a value of 100 in the base year. More recent values of these indices can b e found in current publications. W h e n equipment costs are known, the remaining capital requirement for the complete plant may be obtained employing the factors in Table III. T w o methods are given, but Method B based on Lang (4)
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NO.
32
AUGUST
10,
1953
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C o s t Indices f o r Various Years Engineering MarshallNews Stevens Record Zimmerman(ConLavine (12) Nelson ( 5 ) (All Industry) struction ) ( Material) ( Labor ) ( Petroleum)
Table II.
Base Year 1930 1935 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 (Jan.) a Listed in Chemical b Discontinued.
1913 1926 203 87 78 196 87 242 93 258 100 276 101 290 102 299 103 308 123 346 151 413 163 461 161 477 16S 509 180 542 180 565 181 587 Engineering.
is recommended since the ranges given by Chilton ( I ) , on which Method A is based, are quite variable. In these methods P t refers to the installed equipment cost (Method A ) whereas P d refers to the delivered cost in Metliod B. The installation in the latter method consists of 0.11 Pa for foundations, 0.08 Pd for supports, and 0.24 Pd for erection; these might vary in a specific plant depending upon the nature of the equipment. " The principal difference in Methods A and B is in the items relating to the engineering—construction drawings, actual construction of the plant, and contractors fee—and site development. Method A considers engineering, construction, and the fee together and in addition considers items 4, 5, and 6 separately, whereas Method B considers only engineering, including the fee separately. Where an engineering-contractor's fee estimate is desired, a figure of 10% of item 10 may be used for small plants ($100,000) which should b e reduced to about 3 % for large plants ( $ 1 0 million). In following the outline, firm figures as obtained b y estimates from contractors for such items as service facilities, laboratories, and buildings, should be employed wherever possible, rather than estimates, since these items may vary considerably with different r^lants. Where firm figures are not available certain references ( 3 , 4, 7, 8) are particularly useful. With respect to engineering, O'Donnell ( 7 ) has given costs in a range of $6.50 to $8.50 per man-hour in 1952 for total engineering, excluding actual direct costs for construction. This author also gives a figure of about 100 man-hours per drawing as an average for design and drafting but emphasizes that this would b e subject to considerable variation for each drawing. The approximate cost to prepare an estimate "of the capital requirements for a plant has-been given by. Nichols in Chart III of Figure 1 as a function of the size of t h e plant.
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1926 1926 97 94 116 124 133 139 144 148 105 166 117 199 147 221 165 229 171 245 174 260 1 8 9b 271 282
1949
123 122 123
1926
109 114 129 141 146 155 167 171 175
1946 70 63 78 80 84 87 88 90 100 117 133 140 146 157 159 168
T h e total physical plant investment developed i n Table III does not represent the total capital involved since ouier expenditures are required. These other items are given in Table IV. Van Noy (10) gives information for estimating certain of these investment costs as does Wessel (11). Both of these references also give data useful for estimating annual costs as well.
TabSe III.
The material in the present article is in substantial agreement with their figures. As a guide for a typical process plant the following may be useful for comparative purposes, considering each item includes its prorated share of engineering and contingency charges. % of Total Plant Investment Process equipment installed with piping Service facilities Buildings, including services Site improvements Othd costs
50 10 10 5 25 100
Annual Cost of Sales
A breakdown of the individual items that make up the annual cost of producing, selling, and getting the product to the customer is given in Table V. The form used here is subject to many variations depending upon the company and industry involved and the accounting system used. The terminology also is not necessarily standard since each author of such tabulations employs different terms to describe the same items. For example, the sum of raw materials and direct labor is sometimes called the prime cost, and the sum of the variable costs plus the indirect plant costs the manufacturing cost of sales. Management expense is sometimes referred to as administration cost and selling ex-
Estimating Plant Investment Costs a Method A ( I ) Method B
1 . Equipment costs— delivered 2 . Installed equipment Pi cost 0.1P, to 0.6P, 3 . Process piping 0.05P, to 0.1P, 4 . Instrumentation 0.2P, to 1.0P, 5 . Process buildings 0.1P, to 1.0P, 6 . Service facilities Total items 2, 3 , 4, 5 , 1.45P, to 3.7P, and 6 7 . Total installed physi— cal costs \ 0.2 to 0.5 times 8 . Engineering >the sum of items 9 . Construction J 2, 3 , 4, 5, and 6 10. Total constructed , cost including en1.74P, to 5.55P,
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