11

COST ESTIMATINGCOST ESTIMATING

22

Time DataCost DataPerformance DataProcurement DataOwner special Data

Brainstorming ProcessCompany NeedsMarket Research.Feasibility StudyChange of ObjectivesNew Product Development

Proposal DevelopmentConceptual Estimate PaperDesign basis PaperFull Proposal

Proposal

Project Plan

Project Control

AnalysisCorrectiveActions

Commissioning

Project MeetingProject Status ReportProgress MeasureProcurementContractual Conditions

Contractor ProductivityProcurement DeadlinesManpower LoadingClaim Request

Change OrdersTime/Cost Analysis

Project Management Systems

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PROJECT LIFE CYCLE

PB DP F.P. CLIENT. APP.

COSTESTIMATE PROJ PLAN

LLIPPROJ.EXCU.

COMMISSIONINGPB- Conceptual PaperDP- Design PaperFP- Full Proposal

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• Cost estimating is an essential part of project management. It provides the project information everyone is striving to know from the beginning of a project to its completion.

• Cost estimates are activities people do most of the time to see if they can afford what they want or if they can continue doing as they are doing.

• Indexes, factors, methods, equations, rates, productivity profiles, historical data basis, performance measurement procedures and the like are developed and maintained with the sole purpose of producing better cost estimates and improve the probabilities of success.

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Order of Magnitude EstimatesOrder of Magnitude Estimates

Accuracy: -30% to +30%Accuracy: -30% to +30%

Basis :Basis : Cost capacity curves Cost capacity curves

Cost capacity ratiosCost capacity ratios

Use : Use : Investment screening Investment screening

66

Preliminary EstimatesPreliminary Estimates

Accuracy: -15% to +30%Basis : Flow sheets

Layouts Equipment details

Use : Budget proposal Expenditure approval

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Definitive EstimatesDefinitive Estimates

Accuracy -5 to +15%Accuracy -5 to +15%

Basis: Defined Engineering dataBasis: Defined Engineering data

Use : Use : Processing Processing

ConstructionConstruction

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Information RequiredInformation Required :

• Capacity• Location• Utility requirements• Service requirements• Building requirements• Raw materials and storage requirements• Finished products and its storage requirements

Order of magnitude

99

PreliminaryInformation RequiredInformation Required :

Site description, surveys and soil studies

Preliminary process flow sheet Equipment Engineering specifications Preliminary structural design Preliminary Architectural design Preliminary construction plan Preliminary utility heat balance/flow

sheets Rough insulation specifications Motor list and sizes preliminary Substations specifications Preliminary lighting specifications Engineering and drafting man-hours

1010

Definitive estimateInformation Required:Information Required:

• Full site information• Process flow sheet• Equipment and vessels specifications

and Engineering• Arrangements• Detail Engineering Building and

structures drawings• Insulation drawings and specifications• Electrical installations drawings and

specifications• Utility installation drawings and

specifications• Man-hours calculations for Engineering,

drafting, labor, and supervision

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ORDER OF MAGNITUDE ESTIMATING METHODSORDER OF MAGNITUDE ESTIMATING METHODS

COST INDEXESCOST INDEXES

NCC ={ Cost in the past } [ I(2) / I(1) ]

where, NCC = Needed current cost I (1) = Index value at past time

I (2) = Index value at present time

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Cost Indexes LimitationsCost Indexes Limitations

Indexes do not take local Indexes do not take local conditions into consideration.conditions into consideration.

Indexes do not make provision Indexes do not make provision for technological advance.for technological advance.

Indexes are recommended Indexes are recommended within a 10 years range of within a 10 years range of

known past cost onlyknown past cost only..

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KNOWN COST INDEXESKNOWN COST INDEXES

ENGINEERING NEWS-RECORD CONSTRUCTION INDEX

This index is based on an index value of 100 for the year 1949 and is developed upon a composite cost for 2,500 pounds of structural steel, 1,088 feet board measure of lumber, 6 bbl of cement and 200 hours of common labor.

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KNOWN COST INDEXESKNOWN COST INDEXES

MARSHALL AND SWIFT EQUIPMENT-COST INDEXES

The Marshall and Swift indexes are divided in two categories as follows:

The all-industrial equipment index

The process-industry equipment index

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EQUIPMENT COST EQUIPMENT COST BY SCALINGBY SCALING

Cx = Cy ( Qx/Qy )Cx = Cy ( Qx/Qy )0.6 0.6

where, Cx = Cost of equipment (x)where, Cx = Cost of equipment (x)

Cy = Cost of equipment (y)Cy = Cost of equipment (y)

Qx = Capacity of equipment (x)Qx = Capacity of equipment (x)

Qy = Capacity of equipment (y)Qy = Capacity of equipment (y)