by H. Carl Bauman Manager, Cost Engineering Department Engineering & Construction Division American Cyanamid Co.
I COSTS A
W O R K B O O K
F E A T U R E
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Factoring Costs of Chemical Plant Installations The six-tenths rule of thumb factor will often give good results β \ PREVIOUS article dealt with short cut methods of relatively high ac curacy. Factoring from recent cost experience is another method which, properly applied, yields accuracies in the study range for new cost projections. Good results can be obtained by using the "six-tenths'" factor, i f the new capital project is similar to one recently installed. I n the diversified chemical industry the criteria of similarity of process type, size, and capacity of project are seldom realized. Further, the exponential power relationship has been applied almost exclusively to battery limits process installations. Accuracy of the estimate is seriously affected i f auxiliary facilities vary appreciably from the past design. The application of the 0.6 rule of thumb for most new installations is an oversimplification of a valuable cost concept. Under ideal condi tions of similar process and location, the rule can be expressed simply as C„ = r«-'C
(1)
where C„ is new plant cost, C is original plant cost, and r is ratio of new to original capacity. This simplification assumes that all factors of cost vary as the 0.6 power with capacity; that basic material and equipment costs, labor rates, and efficiency at the new location are similar to those at the original site. Use of this exponent can yield widely differing costs when applied to the same plant capacity as a batterylimits addition to an existing complex vs. installation as a grass roots plant in another area where site and labor conditions are more or less favor able. Results thus obtained are often beyond the 30% accuracy range of the study estimate. I n scaling costs using Equation 1, error can also result from a difference
of engineering and field costs. I f the new process consists of a similar number of process units, there will be little significant difference between engineering of a 50-ton unit and a 300-ton unit. Similarly, field ex penses will not be considerably greater for the larger capacity. A closer approximation therefore for the 0.6 power relationship is C„ = fr»«D + I
(2)
where / is a lumped cost index rela tive to the original installation cost, D is total direct cost, and / is the total indirect cost for the previous installation of similar units. Consider a 50-ton-per-day con tinuous chemical process unit erected in 1955 at a battery limits installed cost of $1,000,000 in the Middle Atlantic area of the U . S. I t is intended to install by late 1958 a similar unit of twice the process capacity but of equal number of process units in a South Atlantic location. Thetable(page70A) shows a cost of $1,516,000 for the new facil
Figure 1. capacity
ity using the simple 0.6 rule of thumb, and $1,310,000 using the modified equation which corrects for labor cost index, fL, labor efficiency, eL, material and equipment cost index, ML, and adjustment in indirect costs. The resulting costs differ by 13.5% based on Equation 1, which appears to yield a pessimistic answer. This is true only in the case selected, where the correction factor, /, for the new location is less than 1. Had the plant locations been re versed, the new plant cost would be $1,870,000 or 24% greater than the cost by the simple relationship. The exponential relationship of costs can be applied more accurately to varied chemical processes by a generalization of the basic equation. The proper value of exponent used in more generalized equations will give closer cost approximations of capital projects. For a mechanical-chemi cal process with exponent assumed at 0.8, the results using Equations 1 and 2 would be, respectively, $1,740,000 and $1,470,000.
Relation of man-hours to haul and set shell tube heat exchangers to
Time for testing, inspection, a n d cleaning, and rental equipment a n d operator time not included
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COSTS
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A Workbook Feature
Plant
A
Β
Capacity, tons/day Location Direct costs Indirect costs Total cost Year installed
50 M i d . Atlantic $760,000 $240,000 $1,000,000 1955
100 So. Atlantic
/ = (IL X ML X et) New plant cost Using Eq. 1 Using Eq. 2
1
(0.9 X 1.15 X 0.9) = 0.93
C„ = 2»·« χ 1,000,000 = 1,516,000 C„ = fr»« + I = 0.93 X 2"· X 760,000 + 240,000 = 1,310,000
Table I. Typical Equipment Cost Factor Exponents Cost vs. C a p a c i t y
Equipment Centrifugal pumps Stainless steel, horizontal Cast iron, horizontal Cast iron, vertical (0 -*• 200 hp.) Positive displacement pumps, carbon steel Tanks Stainless steel Carbon steel Spherical, carbon steel Gas holders (without foundations) Belt conveyors 12-inch width 18-inch w i d t h
0.70 0.67
>70 >40
0.98
>20
0.70
70 >70 >10
0.75
10
0.63 0.60
>10 >10
0.67
>10
0.70 1.00
>50 >50
0.67
/« to 8 inch diameter
>10 >10 >10
0.55
>10
0.94
>10
Table III. Typical Labor Cost Factor Exponents
0.84 0.84 0.66
°·49 0.55 0.62 0.95 0.53 0.98
Cost
_ M Unfired pressure vessels, carbon steel Towers, carbon steel Constant diameter Constant height Tubular heat exchangers Centrifugal pumps Piping, man-hours/joint Brick, 1000/size Lead, sq. ft./thickness Paint, sq. ft./coat
Factor N o . of Exponent C ases 0.20
>75
0.88 1.56 0.00 0.00 0.85 1.00 1.00 1.00
>50 >50 >50 >75 *fmMb + rh3heL(Ebr. + MbL)]fi g r % 7 + . . . + [r"'/ ( £„ + r"JmM„ +
Each term in the equation repre sents a factored cost for a section— such as reaction, distillation, etc.— of the composite plant for which previous cost data exist. I f cost ex ponents of the individual sections are approximately the same, the equation reduces to the simpler preceding forms. Suitable expo nents, indices, and correction factors are taken from compiled data similar to those shown here. I n the ex ample below, the cost of a battery limit three-unit complex is factored from individual costs of similar units of different sizes, built in various recent years in several differ ent areas of the country. Results obtained, using the generalized equa tion, have shown a high correlation with costs obtained with more tradi tional techniques. Properly used, these factoring methods can yield quick fixed capital costs with accuracies sufficient for most economic evaluation purposes. Factoring cannot, however, replace more accurate techniques for close estimation of project final costs. Acknowledgment
Cn = [2 0 · 7 Χ 1.2 Χ 30,000 + 2°-7 Χ 1.15 Χ 25,000 + 2"·' Χ 1.10 Χ 0.95 Χ 100.000 20,000] 0.95 ' 100,000 - 25,000 +
A Workbook
r"3fLeL(EnI. + MnL) ]/; £ % J (6)
where Λ- is a median exponent selected from tables similar to those shown for the class of equipment and material used in the process. For a steam generating plant, χ would be be tween 0.61 and 0.66. For a new similar plant of a new size at a new location but with multiples of the original process units, the following often gives results with somewhat better than study estimate accuracy:
Location Year installed Capacity, tons/day
.
Ι3»·»5 Χ 1.15 Χ 14,000 + 3 0 · 7 Χ 1.12 Χ 12,000 + 3 0 · 7 Χ 1.10 Χ
The writer wishes to acknowledge the assistance of Bayard H . Bonnell and Dextur Kurs in the preparation of this article.
50.000 1 ΛΧ 12,000]J 1 ' ' 50,000 - 12,000 + [40·6» Χ 1.10 Χ 5500 + 4 · · ' Χ 1.10 Χ 3000 + 4°-7 Χ 0.95 Χ 0.95 Χ „„„,„„ 3500 1 0.9 [58,500 + 46,800 + 34,000] 1.36 = 190,000 [32,800 + 29,000 + 28,600] 1.32 = 119,000 [15,500 + 8,700 + 8,350] 1.13 = 37,000 C„ = 346,000
15,000 15,000 - 3,000
Our authors like to hear from readers. If you have questions or comments, or both, send them via The Editor, l/EC, 1155 16th Street N.W., Washington 6, D.C. Letters will be forwarded and answered promptly. VOL. 50, NO. 8
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AUGUST 1958
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