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Estimating capital costs from an equipment list: A case study
Engrnccrrng
Elsevier
Costs and Production
Science
Publishers
Economics.
14 ( 1988)
B.V., Amsterdam-Printed
ESTIMATING
CAPITAL COSTS FROM AN EQUIPMENT LIST: A CASE STUDY VINOD
Process
Development
259
259-266
in The Netherlands
and Operations
Department,
T. SINHA
American
West Main Street,
Cyanamid
Stamford,
Company,
CT 06904-0060
Stamford
Research
Laboratories,
1937
(U.S. A .)
ABSTRACT
This paper presents a new method qf determining the direct cost sf a plant once the eqrlipment list has been prepared. The method has a more rational ba.sis,fi,r obtaining the direct cost /Yom the equipment list than do methods based solel~~on equipment .factors applied to the purchase cost of equipment. Neti! correlations have
been obtained,for the various components ofthe direct cost from actual plant construction data and the procedure outlined is no more involved than that.for any equipment,fhctor method. The method is a significant departure ,from the established,factor methods, yet its simplicity and logic should appeal to most engineers.
1. INTRODUCTION
provided for pricing the equipment. For example, for heat exchangers the chemical engineering design may constitute specifying the heat exchange area (size), whether it is a shell and tube or a double pipe and whether it has a floating head or a fixed head etc. (style), and whether the shell and tube are both stainless steel (SS ) or carbon steel (CS) ( material of construction); for distillation columns it would be necessary to specify the diameter and the height (size), whether it is a sieve plate, bubble cap, or a packed column (style), and whether it is made of SS or CS or some other material (material of construction); and so on. Assuming that a realistic process flowsheet and an equipment list have been drawn up, the equipment list can be used to obtain an estimate of the plant capital cost. The accuracy of this estimate relative to the final actual cost will depend on the extent to which the designed process undergoes changes during process development. Traditionally, the accuracy range
Capital cost estimates based on equipment lists [ l-5 ] are generally considered to be more accurate than pre-flowsheet estimates [ 6-91 developed from process steps or process modules. The increased accuracy, or more often the increased confidence in the estimate, is the result of the effort spent in the study and analysis of the process prior to preparing the equipment list. It is because such analyses are not required for the pre-flowsheet estimates that the quick estimating methods do not engender the same degree of confidence that equipment list methods do. To prepare the equipment list one must start with a process flowsheet based on the chemistry of the proceses. A mass and energy balance is then performed to specify the chemical engineering design of the equipment. Sufficient information, generally including the size, the style. and the material of construction, must be
0167-188X/88/$03.50
0 1988 Elsevier
Science
Publishers
B.V.
260
assigned to the estimate prepared from the first equipment lists has been -t 35% compared to the final cost. In actual practice the deviations have not been symmetrical, and, in fact, the general tendency has been to underestimate the cost because of overly optimistic assumptions about the chemistry (conversions, selectivities) and about the unit operations (ease of separations) required for the process [ lo]. However, if the equipment list is, indeed, accurate, the accuracy of the estimate will really be a function of the accuracy of the cost correlations available for the equipment and of the factors used for translating the equipment cost to the total capital cost. Thus, depending on the accuracy of these items, the overall accuracy could be significantly better than ? 35%. 2. THE EQUIPMENT
FACTOR METHOD
Lang [ 1 ] was one of the tirst authors to propose a method based on the major equipment cost. In his method the total major equipment cost is multiplied by a single factor such as 3.1, 3.63, or 4.74 depending on whether the plant processes solids alone, solids and fluids, or fluids alone. The material of construction is assumed to be carbon steel. For other materials appropriate factors must be used on the overall factor derived for CS. Guthrie [ 3 ] extends Lang’s factor method to different categories of equipment in his “module” concept. Peters and Timmerhaus [ 111 have discussed Lang’s method and other improvements in their book. One of the serious drawbacks of the single factor method is that it does not provide for differences in the types of equipment for cases where the material of construction is different from carbon steel. A welded storage tank, for example, would require approximately the same labor as the corresponding carbon steel tank, and it would be inappropriate to multiply the cost of the labor by the same factor as that for the cost of the material. Following Clerk’s approach [ 121, at Cyanamid in 1973,
we developed a modification of the single factor method in which a series of subfactors are used with the equipment list instead of a single factor based on the total cost of the major equipment as in Lang’s method. A paper showing the superiority of using subfactors was published in 198 1 by Cran [ 5 1. Cran’s subfactors are differently derived from ours, however. Our subfactors depend on the kind of equipment as well as on the material of construction of that equipment, and we were able to simplify the method by limiting the equipment to one of four categories, each of which had a different equipment factor. The material of construction was an additional variable which changed the base equipment factor by the formula shown below. For example, for carbon steel columns or reactors the equipment subfactor would be 4, but if the material of construction is stainless steel, the subfactor would be 3.1 since the total plant cost does not increase in the same proportion as the cost of the equipment when expensive material of construction is used. Assuming that A, is the material cost ratio relative to carbon steel, and X, is the equipment for carbon steel the factor (F, ), for the equipment is given by
where it is further assumed that the cost ratio, A,, applies not only to the major equipment, but also to half of the traditional material and labor which make up the total material and labor for the equipment. In this method the cost estimate is broken down as follows: = (P’E), Process equipment, (PE), Process material and labor, = (PE),(F, ),
(.v+L),, Buildings and utilities, B+U Storage facilities, S Direct costs, DC
=F,(M+L),, =F,(.v+ L),, =(M+L),,+(B+C')+S
=(PE),(F,),lt+E‘,+F,l Indirect costs, IC Contingency, C Total capital cost
=F,(DC) =F,(DC+IC) =DC+IC+C =(PE),(F,),[l+I;2+F,l [I+F,l [l+F,l
261 (PE), in these expressions is the purchase cost of the equipment. Reasonable ranges for the factors can be developed, but note that all the factors are essentially based on the process equipment cost. The method is relatively easy to use once the equipment list has been prepared and the equipment costs have been obtained. However, here too, basing all the cost factors on the cost of the process equipment does not seem reasonable. Of course, an experienced estimator can use his judgement within the established ranges for the factors, but it would be better to eliminate this subjective element, if possible. With this in mind the following method was developed. 3. PREDICTION EQUATIONS CYANAMID PLANT COSTS
BASED ON
The main task in estimating the cost of a plant from an equipment list, after obtaining the equipment costs, is to develop a reasonable estimate of the direct cost. The direct cost, DC, is usually broken down into the following cost elements [ 1 1 1: Process equipment Piping Insulation Site development Substructures Superstructures Process buildings Painting Instrumentation Non-process equipment Process electrical Spare parts In addition to these there are Pollution control Water supply treatment Yard electrical Yard piping Fire protection Demolition and alterations For the new method, it was hypothesized that many of the elements of the direct cost could
be correlated more appropriately with independent variables other than the process equipment cost. For example, piping for a vessel generally runs the width and the height of the vessel; its cost should, therefore, be correlated with the volume of the equipment. The total process piping cost would then depend on the total volume of the equipment and the number of pieces of equipment. Similarly, instrumentation would be proportional to the number of pieces of equipment, since the cost of the control devices, sensors and their installation is not very sensitive to the size and the cost of the equipment. Insulation would depend on the external surface of the vessels and the piping; but since the geometry of the vessels is one of the independent variables for piping, insulation could be correlated with volume and the number of pieces of equipment, or, alternatively with piping. Site development, substructures, and superstructures would also depend on the area and the height occupied by the equipment, and these, too, could be lumped together with insulation. Process and auxiliary buildings and their painting would be site-specific since it is local conditions that dictate whether or not the process equipment needs to be housed in a building. An automated plant in a warmer climate could be predominantly outdoors, while a labor-intensive process in a harsher region would require indoor construction to protect the personnel. Process and auxiliary buildings and painting would, therefore, require considerable judgement on the part of the estimator. As is shown below, their cost correlates well with process piping cost for the Cyanamid plants used in this study. Non-process equipment and electrical cost do not have any discernible logical basis for correlation; for these, therefore, the traditional process equipment cost could be used as the independent variable. Usable data were obtained for Cyanamid’s plants from the files of Cyanamid’s Engineering and Construction Division. The production capacity of these plants varied from 4 M
262 lb/yr to 55 M lb/yr. The kinds of plants varied from predominantly solids handling catalyst substrate manufacturing facilities to plants for complex organic synthesis for agricultural chemicals and animal feed supplement. From the equipment list for each of these plants a list of all “volumetric” equipment was prepared. This category included all storage and surge tanks, columns, reactors and feed hoppers. In essence, it included any vessel the length, breadth, and height of which would be important in determining the length of piping associated with it. It did not include pumps, heat exchangers, condensers, but it did include crystallizers and dryers. For each plant the sum of the volumes of all the volumetric items, in gallons, was calculated, and the number of these volumetric items was also noted. A compilation of factors for various elements of the DC from the actual closed book costs was also available from the files of the Construction Division for the plants. All costs were reduced to March 1972 basis using Chemical Engineering Plant Cost Indices (Index for 3/72 assumed to be 135). Note that in the following, PE represents the process equipment cost and not the purchased cost of the equipment. The PE cost is about 1.25 times the purchased equipment cost (FOB) neglecting escalation. Simple regression analyses yielded the following prediction equations
Process piping in K$ = 14.28 + 5.82 (No. of vol. items) + 1.34 (volume, Kgall) +0.073 1 (PE, KS 1 R’= 98% vs 63% with PE alone, 69% with volume alone, 5 1% with number alone, 97% with volume and number, and 9 1% with volume and PE, where R is the correlation coefficient. (Process piping+ insulation + site development + substruc. + superstruc. + yard piping, K$) = - 146f2.16 (Process piping, KS)
R’=97.4% (Process bldg. + aux. bldg. + painting, = - 18.4+ 1.51 (Process piping, K$)
K$ )
R’= 94.7% vs 48% with PE. (Instrumentation, K$)=28.9+6.75 vol. items) - 0.0446 (PE, K$ ) R2=99.3% vs 44% with PE alone, with number alone.
(No.
of
and 97%
(Non-process eqpmnt. + electrical incl. yard electrical, K$) = 1.163 (PE, K$)‘-” R’=95.5%
in log-log form.
These equations established that the proposed dependent and independent variables were, indeed, correlated. The intercepts in the linear form were, however, without any physical significance. In the “Procedure” section recalculated equations, without intercepts, have been presented. Of the additional items listed earlier, it was possible to include yard piping with the other elements which correlated with process piping and to combine yard electrical with process electrical; but the other items were site-specific and could not be combined in this manner. Pollution-control equipment should probably be designed and costs obtained as for other plant equipment. Water-treatment requirements should be handled similarly. When specific design information is not available, but a need for pollution control and water-supply treatment can be identified, up to 5% of DC should be added for each of them. The estimator should use his judgement in selecting the appropriate percentages. Thus, in the absence following of specific data, the are recommended: Pollution control d 5% of DC Water supply treat. d 5% of DC Fire protection = K$25 (March 1972 $s) Demolition and alterations d 20% of PE
263 Spare parts = 7(/o of PE: 4. PROCEDURE ( 1 ) Prepare a detailed flowsheat of the plant based on the chemistry of the process. Include all major equipment and all storage, surge, and feed tanks. Also include all the pumps and conveyors considered necessary, particularly any special pumps such as a progressive cavity pump or a melt pump for viscous materials. Add more pumps as “miscellaneous” so that the sum of the number of pumps. conveyors, and blowers equals the number of items of “volumetric” equipment without the installed spares. (2 ) Prepare a mass and energy balance. Use of one of the available computer programs for process simulation such as microCHESS, or ASPEN would make this task less time consuming than it would be if done manually. (3) Design the equipment. This will probably be the slow step of this method. After the mass and energy balances are completed. the information should be used with standard texts, manuals, and handbooks to design and size the reactors. columns, dryers. heat exchangers, filters. centrifuges and other equipment. The design need be only approximate, but sufficient information should be provided to determine the cost of the equipment and. in case of “volumetric” items. also the volume of the equipment. Specify the material of construction of each item. (4) Determine costs. With the design. size and material of construction information. the cost of each piece of equipment can be determined. Some sources of cost correlations are: A. Company files. B. SRI’s PEP cost estimating report. C. Peters and Timmerhaus - Text has Jan. 1979 cost curves for equipment. D.COADE cost estimating program. CHEMCOST, has built-in equations for 23 items.
E. ASPEN. Besides the correlations, quotations from vendors should also be considered as a possible source of cost information. (5 ) Determine the process equipment cost (PIT cost), by multiplying the FOB cost by 1.25. This includes the costs of setting-up the equipment. some minor extras, and small design modifications for installation. Field erected equipment costs are to be used without the 1.25 multiplier. (6) Prepare a list of the “volumetric” items. As discussed earlier. this category includes all equipment the length, breadth. and height of which would be important in determining the piping and other installation costs of that equipment. (7) Calculate the volume of the volumetric items in gallons. (8) Use the prediction equations given below for determining the various elements of the DC’ for a Chemical Engineering Plant Cost Index of 330. All costs are in K$. Volume of the volumetric items is in Kgall. piping) = 14.86 ( No. ( Process of vol. items) +3.35 (Volume)+0.076 (PEcost) (Process piping+ insulation + site development + substruc. + superstruc. + yardpiping) = 1.85 (Process piping) (Process bldg. + aux. bldg. + painting) = 1.47 (Process piping) (Instrumentation) = 17.67 (No. of volumetric items) - 0.0302 (PE cost) (Non-process equipment + electrical including yard electrical, K$ ) = 1.37 (PE cost )‘.‘I (9) Sum the results of the last four equations and add to the Pfi cost to obtain the direct cost, DC’. ( 10) Assume indirect cost. /c’=O.3 (DC). Ic’ includes engineering, construction expenses and supervision, and sales taxes. The factor generally ranges from 0.2 to 0.4. ( 1 1) Assume a reasonable value of contingency, c’, between 10% and 25O/oof the sum of DC and ZC’. This should reflect the degree of
264 uncertainty of the process design when the cost estimate is being prepared. ( 12) Add for other miscellaneous items. if relevant, using personal judgement and the guidelines below: Pollution control d 5% of DC Water supply treat. d 5% of DC Fire protection =K$70 (mid 1984) Demolition and alterations < 20% of PE Spare parts =7% of PE ( 13) The sum of DC. IC, C. and item 12 gives the battery limits capital cost of the plant.
Evaporator
bot. receiver
Volume
94 239245 gall
Cost of vessels:
$ 43800 (FOB) +$ 168000 ( Field erected ) Cost of other equipment: $ 399000 (FOB) Therefore, PE = $ 1.25 (43800+399000) + 16800 = $ 1.21x lo6 Number of volumetric items = 19
Section
II
5. EXAMPLE The following example is based on a plant designed for Cyanamid by a design and construction company during 1985. The design company also provided its own estimate for building the plant using its own detailed factors. Volumetric equipment. volumes. and equipment costs from report to Cyanamid: Section
I
Column I Recycle column I Recycle column II Reactor 1 Reactor II Storage silo Feed hopper Dissolver Column I cond. receiver Storage tank Feed tank Storage tank Reactor prod. tank Receiver Flash drum Seal pot Column II cond. receiver Storage tank
167 gall 423 329 4716 2379 128000 4040 1066 106 24612 8060 6133 10152 239 239 94 141 48255
Vaporizer Dehydrogenators Prod. col. Crude col. Recycle col. IPC col. Crude col. Phase sepr. Dehydrogen. steam drum Superheater steam drum Recycle reflux drum Lights surge drum Prod. col. refl. drum Hold tank Crude surge tank Gas desuperheater Crude col. refl. drum IPC col. refl. drum Crude col. refl. drum Storage tank Feed pump tank
450 gall 3200x2 6022 5655 564 6008 9760 2791 317 184 94 94 423 74586 x 2 5901 752 129 423 449 158230x2 3807
Volume
5 15855 gall
Cost of vessels = $135 5000 (FOB) + $2 15000 (Field erected) Cost of other equipment = $739000 (FOB) Therefore. PE cost = $1.25( 1.355+0.739) lo6 +0.215x 10” = $ 2.83x lo6 Number of volumetric items = 24
265 Section
III
Stripper col. Fractionator col. First pass col. Second pass col. Reactors Addition reactors Cracking reactor Sulf. acid st. tk. Neutrlzn. tk. Caustic storage Crude surge tk. Stripper ovhd. drum Fractionator ovhd. drum Recycle st. tk. Caustic calibrn. tk Sulf. acid calibrn. tk. Reactor ovhd. drum Recovered reactant tk. Heavies st. tk. Intermed st. tk. First pass col. refl. dr. Second pass col. refl. dr. Switch cond. recvr. Storage tank Sulf. acid calibrn. tk. Off-spec prod. tk. By-product storage tank Product storage tank Product receiver Flash drum Thin film evpr.
551 gall 1080 6400 2538 376x2 3760x2 1762 6016 595 5518 12690 15 397 6543 18 8 1428 275 129 106 1034 50 648 69950 2 20150 803x2 287865 50 53 141
Volume
435890 gall
Cost of vessels = $ 700000 (FOB) + $ 269000 (Field erected) Cost of other equipment = $762000 (FOB) Therefore, cost of PE = $ 1.25 (0.700 +0.762) lo6 + 0.269 x 1O6 = $2.1x106 Number of volumetric items = 34 Utilities
Section
Steam stripper Condensate recvr. Incinerator feed tk. Hot oil expn. tk. Cold oil st. tk. Tempered water st. tk.
705 gall 2538 29712 2056 611 3032
Volume
58795 gall
Cost of vessels= $ 53000 (FOB) + $ 42000 (Field erected) Cost of other equipment = $ 1565000 (FOB) Therefore, cost of PE = $ 1.25 (0.053 + 1.565) lo6 + 0.042 x 1O6 = $2.07~ lo6 Number of volumetric items = 7 Calculation
of direct
cost
Total volume of volumetric = 1250 Kgall items Total of PE costs = 8209 K$ Total number of volumetric items =84 Using correlations in the text, Process piping =14.86x84+3.35x 1250 + 0.076 x 8209 = 6059 K$ (Proc. and yard piping+ insuln. + site dvlpmnt. + substruct. + superstruc. ) =1.85x6059 =11210K$ Process bldg. + aux. bldg. + painting = 1.47x 6059 = 8907 K$ However the plant is to be built outdoors and the anticipated expenditure for this element is only 500 K$. This lower value has been used by the design and construction company in its estimate and, therefore, also in this example below. Instrumentation = 17.67 x 84-0.0302 x 8209 = 1236 K$ Non-process equipment + electrical = 1.37 x 8209’.*l
266 = 2029 K$ Therefore, DC = 8209 1236 + 2029 = 23000 K$
+
112 10 + 500 +
Calculation of the battery limits cost IC
=0.3x23000 = 6900 K$ DC+ IC = 29900 K$ Contingency, C =0.15x29900 = 4500 K$ Total fixed capital = 29900+ 4500 =35 M$ This estimate includes yard piping and yard electrical but does not include any capital for pollution control and water supply treatment other than that already included in the utilities. Demolition and alterations would be in addition to the calculated capital. Spare parts have been assumed to be included in the equipment list. The design and construction company estimated the capital for the plant by a detailed method developed from its own experience in the design and construction of chemical plants. Its estimate was M$29.3. The estimate of M$ 35, based on the method described in this report, is only 20% above the design company’s estimate, a remarkably good agreement. The correlations presented in this paper have been derived from Cyanamid’s experience and may not necessarily apply to a different company. Each company should derive its own correlations based on in-house data on previous plant construction.
creasing the estimate for any given code based on any additional information he may have, and, in this manner, the benefit of his experience is not lost. But, for a preliminary estimate, the values obtained from the correlations of the kind presented above will give excellent approximations based on the past construction experience of the company. The correlations should be upgraded as more experience develops. ACKNOWLEDGEMENT The modified equipment factor developed at Cyanamid, which has been described in Section 2, was developed by W.P. Colman, a Senior Research Engineer at Cyanamid whose contribution is gratefully acknowledged. REFERENCES
9
6. CONCLUSION The procedure outlined in the “Procedure” section is no more involved than in any conventional Guthrie/Lang type equipment factor method. The use of the correlations, in fact, eliminates some of the subjective element in assigning categories to the equipment. The estimator still has the option of increasing or de-
10
11
12
Lang, H.J., 1948. A simplified approach to preliminary cost estimates. Chem. Eng., June: 112. Hand, W.E., 1958. From flow sheet to cost estimate. Pet. Refiner, September: 33 I. Guthrie, K.M., 1969. Data and techniques for preliminary capital cost estimating. Chem. Eng., March 24: 114. Hirsch, J.H. and Glazier, E.M., 1960. Estimating plant investment costs. Chem. Eng. Prog., December: 37. Cran, J., 198 1, Improved factor method gives better preliminary cost estimates, Chem. Eng., April 6: 65. Zevnik, F.C. and Buchanan, R.L., 1963. Generalized correlation of process investment. Chem. Eng. Progr., February: 70. Allen, D.H. and Page, R.C.. 1975. Revised technique for predesign cost estimating. Chem. Eng., March 3: 142. Taylor, J.M., 1977. The “Process Step Scoring” method for making quick capital estimates. Eng. Proc. Econ., February: 259. Viola, J.L.. Jr.. 1981. Estimate capital costs via a new, shortcut method. Chem. Eng., April 6: 80. Merrow. E.W., Phillips, K.E. and Meyers, C.W., 198 I. Understanding Cost Growth and Performance Shortfalls in Pioneer Process Plants. Rand Corporation Report to the DOE, Report No. R-2569-DOE. Peters, M.S. and Timmerhaus, K.D.. 1980. Plant Design and Economics for Chemical Engineers, 3rd edn. McGraw-Hill, New York. Clerk. J., 1963. Multiplying factors give installed costs of process equipment. Chem. Eng., February 18: 182.
(Received
January
2,
1987;
accepted
April
1987)
Elsevier
Costs and Production
Science
Publishers
Economics.
14 ( 1988)
B.V., Amsterdam-Printed
ESTIMATING
CAPITAL COSTS FROM AN EQUIPMENT LIST: A CASE STUDY VINOD
Process
Development
259
259-266
in The Netherlands
and Operations
Department,
T. SINHA
American
West Main Street,
Cyanamid
Stamford,
Company,
CT 06904-0060
Stamford
Research
Laboratories,
1937
(U.S. A .)
ABSTRACT
This paper presents a new method qf determining the direct cost sf a plant once the eqrlipment list has been prepared. The method has a more rational ba.sis,fi,r obtaining the direct cost /Yom the equipment list than do methods based solel~~on equipment .factors applied to the purchase cost of equipment. Neti! correlations have
been obtained,for the various components ofthe direct cost from actual plant construction data and the procedure outlined is no more involved than that.for any equipment,fhctor method. The method is a significant departure ,from the established,factor methods, yet its simplicity and logic should appeal to most engineers.
1. INTRODUCTION
provided for pricing the equipment. For example, for heat exchangers the chemical engineering design may constitute specifying the heat exchange area (size), whether it is a shell and tube or a double pipe and whether it has a floating head or a fixed head etc. (style), and whether the shell and tube are both stainless steel (SS ) or carbon steel (CS) ( material of construction); for distillation columns it would be necessary to specify the diameter and the height (size), whether it is a sieve plate, bubble cap, or a packed column (style), and whether it is made of SS or CS or some other material (material of construction); and so on. Assuming that a realistic process flowsheet and an equipment list have been drawn up, the equipment list can be used to obtain an estimate of the plant capital cost. The accuracy of this estimate relative to the final actual cost will depend on the extent to which the designed process undergoes changes during process development. Traditionally, the accuracy range
Capital cost estimates based on equipment lists [ l-5 ] are generally considered to be more accurate than pre-flowsheet estimates [ 6-91 developed from process steps or process modules. The increased accuracy, or more often the increased confidence in the estimate, is the result of the effort spent in the study and analysis of the process prior to preparing the equipment list. It is because such analyses are not required for the pre-flowsheet estimates that the quick estimating methods do not engender the same degree of confidence that equipment list methods do. To prepare the equipment list one must start with a process flowsheet based on the chemistry of the proceses. A mass and energy balance is then performed to specify the chemical engineering design of the equipment. Sufficient information, generally including the size, the style. and the material of construction, must be
0167-188X/88/$03.50
0 1988 Elsevier
Science
Publishers
B.V.
260
assigned to the estimate prepared from the first equipment lists has been -t 35% compared to the final cost. In actual practice the deviations have not been symmetrical, and, in fact, the general tendency has been to underestimate the cost because of overly optimistic assumptions about the chemistry (conversions, selectivities) and about the unit operations (ease of separations) required for the process [ lo]. However, if the equipment list is, indeed, accurate, the accuracy of the estimate will really be a function of the accuracy of the cost correlations available for the equipment and of the factors used for translating the equipment cost to the total capital cost. Thus, depending on the accuracy of these items, the overall accuracy could be significantly better than ? 35%. 2. THE EQUIPMENT
FACTOR METHOD
Lang [ 1 ] was one of the tirst authors to propose a method based on the major equipment cost. In his method the total major equipment cost is multiplied by a single factor such as 3.1, 3.63, or 4.74 depending on whether the plant processes solids alone, solids and fluids, or fluids alone. The material of construction is assumed to be carbon steel. For other materials appropriate factors must be used on the overall factor derived for CS. Guthrie [ 3 ] extends Lang’s factor method to different categories of equipment in his “module” concept. Peters and Timmerhaus [ 111 have discussed Lang’s method and other improvements in their book. One of the serious drawbacks of the single factor method is that it does not provide for differences in the types of equipment for cases where the material of construction is different from carbon steel. A welded storage tank, for example, would require approximately the same labor as the corresponding carbon steel tank, and it would be inappropriate to multiply the cost of the labor by the same factor as that for the cost of the material. Following Clerk’s approach [ 121, at Cyanamid in 1973,
we developed a modification of the single factor method in which a series of subfactors are used with the equipment list instead of a single factor based on the total cost of the major equipment as in Lang’s method. A paper showing the superiority of using subfactors was published in 198 1 by Cran [ 5 1. Cran’s subfactors are differently derived from ours, however. Our subfactors depend on the kind of equipment as well as on the material of construction of that equipment, and we were able to simplify the method by limiting the equipment to one of four categories, each of which had a different equipment factor. The material of construction was an additional variable which changed the base equipment factor by the formula shown below. For example, for carbon steel columns or reactors the equipment subfactor would be 4, but if the material of construction is stainless steel, the subfactor would be 3.1 since the total plant cost does not increase in the same proportion as the cost of the equipment when expensive material of construction is used. Assuming that A, is the material cost ratio relative to carbon steel, and X, is the equipment for carbon steel the factor (F, ), for the equipment is given by
where it is further assumed that the cost ratio, A,, applies not only to the major equipment, but also to half of the traditional material and labor which make up the total material and labor for the equipment. In this method the cost estimate is broken down as follows: = (P’E), Process equipment, (PE), Process material and labor, = (PE),(F, ),
(.v+L),, Buildings and utilities, B+U Storage facilities, S Direct costs, DC
=F,(M+L),, =F,(.v+ L),, =(M+L),,+(B+C')+S
=(PE),(F,),lt+E‘,+F,l Indirect costs, IC Contingency, C Total capital cost
=F,(DC) =F,(DC+IC) =DC+IC+C =(PE),(F,),[l+I;2+F,l [I+F,l [l+F,l
261 (PE), in these expressions is the purchase cost of the equipment. Reasonable ranges for the factors can be developed, but note that all the factors are essentially based on the process equipment cost. The method is relatively easy to use once the equipment list has been prepared and the equipment costs have been obtained. However, here too, basing all the cost factors on the cost of the process equipment does not seem reasonable. Of course, an experienced estimator can use his judgement within the established ranges for the factors, but it would be better to eliminate this subjective element, if possible. With this in mind the following method was developed. 3. PREDICTION EQUATIONS CYANAMID PLANT COSTS
BASED ON
The main task in estimating the cost of a plant from an equipment list, after obtaining the equipment costs, is to develop a reasonable estimate of the direct cost. The direct cost, DC, is usually broken down into the following cost elements [ 1 1 1: Process equipment Piping Insulation Site development Substructures Superstructures Process buildings Painting Instrumentation Non-process equipment Process electrical Spare parts In addition to these there are Pollution control Water supply treatment Yard electrical Yard piping Fire protection Demolition and alterations For the new method, it was hypothesized that many of the elements of the direct cost could
be correlated more appropriately with independent variables other than the process equipment cost. For example, piping for a vessel generally runs the width and the height of the vessel; its cost should, therefore, be correlated with the volume of the equipment. The total process piping cost would then depend on the total volume of the equipment and the number of pieces of equipment. Similarly, instrumentation would be proportional to the number of pieces of equipment, since the cost of the control devices, sensors and their installation is not very sensitive to the size and the cost of the equipment. Insulation would depend on the external surface of the vessels and the piping; but since the geometry of the vessels is one of the independent variables for piping, insulation could be correlated with volume and the number of pieces of equipment, or, alternatively with piping. Site development, substructures, and superstructures would also depend on the area and the height occupied by the equipment, and these, too, could be lumped together with insulation. Process and auxiliary buildings and their painting would be site-specific since it is local conditions that dictate whether or not the process equipment needs to be housed in a building. An automated plant in a warmer climate could be predominantly outdoors, while a labor-intensive process in a harsher region would require indoor construction to protect the personnel. Process and auxiliary buildings and painting would, therefore, require considerable judgement on the part of the estimator. As is shown below, their cost correlates well with process piping cost for the Cyanamid plants used in this study. Non-process equipment and electrical cost do not have any discernible logical basis for correlation; for these, therefore, the traditional process equipment cost could be used as the independent variable. Usable data were obtained for Cyanamid’s plants from the files of Cyanamid’s Engineering and Construction Division. The production capacity of these plants varied from 4 M
262 lb/yr to 55 M lb/yr. The kinds of plants varied from predominantly solids handling catalyst substrate manufacturing facilities to plants for complex organic synthesis for agricultural chemicals and animal feed supplement. From the equipment list for each of these plants a list of all “volumetric” equipment was prepared. This category included all storage and surge tanks, columns, reactors and feed hoppers. In essence, it included any vessel the length, breadth, and height of which would be important in determining the length of piping associated with it. It did not include pumps, heat exchangers, condensers, but it did include crystallizers and dryers. For each plant the sum of the volumes of all the volumetric items, in gallons, was calculated, and the number of these volumetric items was also noted. A compilation of factors for various elements of the DC from the actual closed book costs was also available from the files of the Construction Division for the plants. All costs were reduced to March 1972 basis using Chemical Engineering Plant Cost Indices (Index for 3/72 assumed to be 135). Note that in the following, PE represents the process equipment cost and not the purchased cost of the equipment. The PE cost is about 1.25 times the purchased equipment cost (FOB) neglecting escalation. Simple regression analyses yielded the following prediction equations
Process piping in K$ = 14.28 + 5.82 (No. of vol. items) + 1.34 (volume, Kgall) +0.073 1 (PE, KS 1 R’= 98% vs 63% with PE alone, 69% with volume alone, 5 1% with number alone, 97% with volume and number, and 9 1% with volume and PE, where R is the correlation coefficient. (Process piping+ insulation + site development + substruc. + superstruc. + yard piping, K$) = - 146f2.16 (Process piping, KS)
R’=97.4% (Process bldg. + aux. bldg. + painting, = - 18.4+ 1.51 (Process piping, K$)
K$ )
R’= 94.7% vs 48% with PE. (Instrumentation, K$)=28.9+6.75 vol. items) - 0.0446 (PE, K$ ) R2=99.3% vs 44% with PE alone, with number alone.
(No.
of
and 97%
(Non-process eqpmnt. + electrical incl. yard electrical, K$) = 1.163 (PE, K$)‘-” R’=95.5%
in log-log form.
These equations established that the proposed dependent and independent variables were, indeed, correlated. The intercepts in the linear form were, however, without any physical significance. In the “Procedure” section recalculated equations, without intercepts, have been presented. Of the additional items listed earlier, it was possible to include yard piping with the other elements which correlated with process piping and to combine yard electrical with process electrical; but the other items were site-specific and could not be combined in this manner. Pollution-control equipment should probably be designed and costs obtained as for other plant equipment. Water-treatment requirements should be handled similarly. When specific design information is not available, but a need for pollution control and water-supply treatment can be identified, up to 5% of DC should be added for each of them. The estimator should use his judgement in selecting the appropriate percentages. Thus, in the absence following of specific data, the are recommended: Pollution control d 5% of DC Water supply treat. d 5% of DC Fire protection = K$25 (March 1972 $s) Demolition and alterations d 20% of PE
263 Spare parts = 7(/o of PE: 4. PROCEDURE ( 1 ) Prepare a detailed flowsheat of the plant based on the chemistry of the process. Include all major equipment and all storage, surge, and feed tanks. Also include all the pumps and conveyors considered necessary, particularly any special pumps such as a progressive cavity pump or a melt pump for viscous materials. Add more pumps as “miscellaneous” so that the sum of the number of pumps. conveyors, and blowers equals the number of items of “volumetric” equipment without the installed spares. (2 ) Prepare a mass and energy balance. Use of one of the available computer programs for process simulation such as microCHESS, or ASPEN would make this task less time consuming than it would be if done manually. (3) Design the equipment. This will probably be the slow step of this method. After the mass and energy balances are completed. the information should be used with standard texts, manuals, and handbooks to design and size the reactors. columns, dryers. heat exchangers, filters. centrifuges and other equipment. The design need be only approximate, but sufficient information should be provided to determine the cost of the equipment and. in case of “volumetric” items. also the volume of the equipment. Specify the material of construction of each item. (4) Determine costs. With the design. size and material of construction information. the cost of each piece of equipment can be determined. Some sources of cost correlations are: A. Company files. B. SRI’s PEP cost estimating report. C. Peters and Timmerhaus - Text has Jan. 1979 cost curves for equipment. D.COADE cost estimating program. CHEMCOST, has built-in equations for 23 items.
E. ASPEN. Besides the correlations, quotations from vendors should also be considered as a possible source of cost information. (5 ) Determine the process equipment cost (PIT cost), by multiplying the FOB cost by 1.25. This includes the costs of setting-up the equipment. some minor extras, and small design modifications for installation. Field erected equipment costs are to be used without the 1.25 multiplier. (6) Prepare a list of the “volumetric” items. As discussed earlier. this category includes all equipment the length, breadth. and height of which would be important in determining the piping and other installation costs of that equipment. (7) Calculate the volume of the volumetric items in gallons. (8) Use the prediction equations given below for determining the various elements of the DC’ for a Chemical Engineering Plant Cost Index of 330. All costs are in K$. Volume of the volumetric items is in Kgall. piping) = 14.86 ( No. ( Process of vol. items) +3.35 (Volume)+0.076 (PEcost) (Process piping+ insulation + site development + substruc. + superstruc. + yardpiping) = 1.85 (Process piping) (Process bldg. + aux. bldg. + painting) = 1.47 (Process piping) (Instrumentation) = 17.67 (No. of volumetric items) - 0.0302 (PE cost) (Non-process equipment + electrical including yard electrical, K$ ) = 1.37 (PE cost )‘.‘I (9) Sum the results of the last four equations and add to the Pfi cost to obtain the direct cost, DC’. ( 10) Assume indirect cost. /c’=O.3 (DC). Ic’ includes engineering, construction expenses and supervision, and sales taxes. The factor generally ranges from 0.2 to 0.4. ( 1 1) Assume a reasonable value of contingency, c’, between 10% and 25O/oof the sum of DC and ZC’. This should reflect the degree of
264 uncertainty of the process design when the cost estimate is being prepared. ( 12) Add for other miscellaneous items. if relevant, using personal judgement and the guidelines below: Pollution control d 5% of DC Water supply treat. d 5% of DC Fire protection =K$70 (mid 1984) Demolition and alterations < 20% of PE Spare parts =7% of PE ( 13) The sum of DC. IC, C. and item 12 gives the battery limits capital cost of the plant.
Evaporator
bot. receiver
Volume
94 239245 gall
Cost of vessels:
$ 43800 (FOB) +$ 168000 ( Field erected ) Cost of other equipment: $ 399000 (FOB) Therefore, PE = $ 1.25 (43800+399000) + 16800 = $ 1.21x lo6 Number of volumetric items = 19
Section
II
5. EXAMPLE The following example is based on a plant designed for Cyanamid by a design and construction company during 1985. The design company also provided its own estimate for building the plant using its own detailed factors. Volumetric equipment. volumes. and equipment costs from report to Cyanamid: Section
I
Column I Recycle column I Recycle column II Reactor 1 Reactor II Storage silo Feed hopper Dissolver Column I cond. receiver Storage tank Feed tank Storage tank Reactor prod. tank Receiver Flash drum Seal pot Column II cond. receiver Storage tank
167 gall 423 329 4716 2379 128000 4040 1066 106 24612 8060 6133 10152 239 239 94 141 48255
Vaporizer Dehydrogenators Prod. col. Crude col. Recycle col. IPC col. Crude col. Phase sepr. Dehydrogen. steam drum Superheater steam drum Recycle reflux drum Lights surge drum Prod. col. refl. drum Hold tank Crude surge tank Gas desuperheater Crude col. refl. drum IPC col. refl. drum Crude col. refl. drum Storage tank Feed pump tank
450 gall 3200x2 6022 5655 564 6008 9760 2791 317 184 94 94 423 74586 x 2 5901 752 129 423 449 158230x2 3807
Volume
5 15855 gall
Cost of vessels = $135 5000 (FOB) + $2 15000 (Field erected) Cost of other equipment = $739000 (FOB) Therefore. PE cost = $1.25( 1.355+0.739) lo6 +0.215x 10” = $ 2.83x lo6 Number of volumetric items = 24
265 Section
III
Stripper col. Fractionator col. First pass col. Second pass col. Reactors Addition reactors Cracking reactor Sulf. acid st. tk. Neutrlzn. tk. Caustic storage Crude surge tk. Stripper ovhd. drum Fractionator ovhd. drum Recycle st. tk. Caustic calibrn. tk Sulf. acid calibrn. tk. Reactor ovhd. drum Recovered reactant tk. Heavies st. tk. Intermed st. tk. First pass col. refl. dr. Second pass col. refl. dr. Switch cond. recvr. Storage tank Sulf. acid calibrn. tk. Off-spec prod. tk. By-product storage tank Product storage tank Product receiver Flash drum Thin film evpr.
551 gall 1080 6400 2538 376x2 3760x2 1762 6016 595 5518 12690 15 397 6543 18 8 1428 275 129 106 1034 50 648 69950 2 20150 803x2 287865 50 53 141
Volume
435890 gall
Cost of vessels = $ 700000 (FOB) + $ 269000 (Field erected) Cost of other equipment = $762000 (FOB) Therefore, cost of PE = $ 1.25 (0.700 +0.762) lo6 + 0.269 x 1O6 = $2.1x106 Number of volumetric items = 34 Utilities
Section
Steam stripper Condensate recvr. Incinerator feed tk. Hot oil expn. tk. Cold oil st. tk. Tempered water st. tk.
705 gall 2538 29712 2056 611 3032
Volume
58795 gall
Cost of vessels= $ 53000 (FOB) + $ 42000 (Field erected) Cost of other equipment = $ 1565000 (FOB) Therefore, cost of PE = $ 1.25 (0.053 + 1.565) lo6 + 0.042 x 1O6 = $2.07~ lo6 Number of volumetric items = 7 Calculation
of direct
cost
Total volume of volumetric = 1250 Kgall items Total of PE costs = 8209 K$ Total number of volumetric items =84 Using correlations in the text, Process piping =14.86x84+3.35x 1250 + 0.076 x 8209 = 6059 K$ (Proc. and yard piping+ insuln. + site dvlpmnt. + substruct. + superstruc. ) =1.85x6059 =11210K$ Process bldg. + aux. bldg. + painting = 1.47x 6059 = 8907 K$ However the plant is to be built outdoors and the anticipated expenditure for this element is only 500 K$. This lower value has been used by the design and construction company in its estimate and, therefore, also in this example below. Instrumentation = 17.67 x 84-0.0302 x 8209 = 1236 K$ Non-process equipment + electrical = 1.37 x 8209’.*l
266 = 2029 K$ Therefore, DC = 8209 1236 + 2029 = 23000 K$
+
112 10 + 500 +
Calculation of the battery limits cost IC
=0.3x23000 = 6900 K$ DC+ IC = 29900 K$ Contingency, C =0.15x29900 = 4500 K$ Total fixed capital = 29900+ 4500 =35 M$ This estimate includes yard piping and yard electrical but does not include any capital for pollution control and water supply treatment other than that already included in the utilities. Demolition and alterations would be in addition to the calculated capital. Spare parts have been assumed to be included in the equipment list. The design and construction company estimated the capital for the plant by a detailed method developed from its own experience in the design and construction of chemical plants. Its estimate was M$29.3. The estimate of M$ 35, based on the method described in this report, is only 20% above the design company’s estimate, a remarkably good agreement. The correlations presented in this paper have been derived from Cyanamid’s experience and may not necessarily apply to a different company. Each company should derive its own correlations based on in-house data on previous plant construction.
creasing the estimate for any given code based on any additional information he may have, and, in this manner, the benefit of his experience is not lost. But, for a preliminary estimate, the values obtained from the correlations of the kind presented above will give excellent approximations based on the past construction experience of the company. The correlations should be upgraded as more experience develops. ACKNOWLEDGEMENT The modified equipment factor developed at Cyanamid, which has been described in Section 2, was developed by W.P. Colman, a Senior Research Engineer at Cyanamid whose contribution is gratefully acknowledged. REFERENCES
9
6. CONCLUSION The procedure outlined in the “Procedure” section is no more involved than in any conventional Guthrie/Lang type equipment factor method. The use of the correlations, in fact, eliminates some of the subjective element in assigning categories to the equipment. The estimator still has the option of increasing or de-
10
11
12
Lang, H.J., 1948. A simplified approach to preliminary cost estimates. Chem. Eng., June: 112. Hand, W.E., 1958. From flow sheet to cost estimate. Pet. Refiner, September: 33 I. Guthrie, K.M., 1969. Data and techniques for preliminary capital cost estimating. Chem. Eng., March 24: 114. Hirsch, J.H. and Glazier, E.M., 1960. Estimating plant investment costs. Chem. Eng. Prog., December: 37. Cran, J., 198 1, Improved factor method gives better preliminary cost estimates, Chem. Eng., April 6: 65. Zevnik, F.C. and Buchanan, R.L., 1963. Generalized correlation of process investment. Chem. Eng. Progr., February: 70. Allen, D.H. and Page, R.C.. 1975. Revised technique for predesign cost estimating. Chem. Eng., March 3: 142. Taylor, J.M., 1977. The “Process Step Scoring” method for making quick capital estimates. Eng. Proc. Econ., February: 259. Viola, J.L.. Jr.. 1981. Estimate capital costs via a new, shortcut method. Chem. Eng., April 6: 80. Merrow. E.W., Phillips, K.E. and Meyers, C.W., 198 I. Understanding Cost Growth and Performance Shortfalls in Pioneer Process Plants. Rand Corporation Report to the DOE, Report No. R-2569-DOE. Peters, M.S. and Timmerhaus, K.D.. 1980. Plant Design and Economics for Chemical Engineers, 3rd edn. McGraw-Hill, New York. Clerk. J., 1963. Multiplying factors give installed costs of process equipment. Chem. Eng., February 18: 182.
(Received
January
2,
1987;
accepted
April
1987)