TOPIC

Capital Cost Estimating

TOPIC OUTCOME

Capital Cost

Classification of Fixed
Capital Cost Estimates

Estimating Purchased
Equipment Costs

Distinguish the classification of

fixed capital cost estimates
Estimate the purchase equipment
costs based on the effect of time
and capacity
Calculate the total capital cost of
a plant

Estimating the Total Capital

Cost of a Plant

What is economics?
-The study of how limited
resources is used to satisfy
unlimited human wants
Engineering Economy
- Is a collection of
mathematical techniques
that simplify economic
comparison

1. Problem recognition, formulation, and

evaluation.
2. Development of the feasible alternatives.
3. Development of the cash flows for each
alternative.
4. Selection of a criterion ( or criteria).
5. Analysis and comparison of the
alternatives.
6. Selection of the preferred alternative.
7. Performance monitoring
and post-evaluation
results.

Example
Bad news: You have just wrecked your car!. You
need another car immediately because you have
decided that walking, riding a bike, and taking a
bus are not acceptable. An automobile wholesaler
offers you $2000 for your wrecked car. Also, your
insurance companys claims adjuster estimates that
there is $2000 in damage for your car. Because you
have collision insurance with a $1000 deductibility
provision, the insurance company mails you a
check for $1000. the odometer reading on your
wrecked car is 58 miles
Assumption:
A new car worth $10000 with odometer reading 28
miles
Price of selling a repaired car = $4500

 Sources

of Equipment
Price Fluctuation
Company Policies
Operation Time and Rate of
Production

Used to describe the process by which the

present and future cost consequences of
engineering designs are forecast
Provide information used in setting a selling price
for quoting, bidding, or evaluating contracts
Determine whether a proposed product can be
made and distributed at a profit (EG: price = cost
+ profit)
Evaluate how much capital can be justified for
process changes or other improvements
Establish benchmarks for productivity
improvement programs

Capital cost Cost associated with

construction of a new plant or modifications
to an existing chemical manufacturing plant
Classification of capital cost estimates:

Order of magnitude estimate

Study estimate
Preliminary estimate
Definitive estimate
Detailed estimate

Order of Magnitude Estimate

relies on cost information for a complete process
taken from previously built plants
Requirement blok flow diagram
Accuracy: +40% to -20%

Study Estimate
Utilizes a list of major equipment found in the
process (e.g. pumps, compressors and turbines,
columns and vessels, fire heaters and exchangers)
Each of equipment is roughly size and appropriate
cost determined
Based on process flow diagram (PFD)
Accuracy: +30% to -20%

Preliminary Design Estimate

Requires more accurate sizing of equipment than
used in study estimate together with layout of
equipment (piping, instrumentation, electrical
requirements) and also utilities.
Accuracy: +25% to -15%

Definitive Estimate
Requires preliminary specifications for all the
equipment, utilities, instrumentation, electrical and
off-sites
Accuracy: +15% to -7%

Detailed Estimate
Requires complete engineering of the process and
all related off-sites utilities
Obtained vendor quotes for all expensive items
End of detailed estimate: the plant is ready to go to
construction stage
Accuracy: +6% to -4%

Requirement Process Flow Diagram (PFD)

Material and energy balance
Material of construction
For each major piece
Size/capacity roughly estimatedof equipment identified

Alternatives of Estimation

Current price quoted from suitable vendor (most

accurate)
Use cost data on previously purchased equipment
(same type)
Utilized summary graphs available for various types
of common equipment (discussed in detailed)

The relationship between the purchased cost and an

attribute of the equipment related to units of
capacity is given by:

C a Aa

C b Ab

---------

Equation 1.1

where;
A = Equipment cost attribute
C = Purchased cost
n = Cost exponent
Subscripts a:- equipment with the required
attribute
b:- equipment with the base attribute

Equation 1.1 can be rearrange to give

Ca K Aa

where

---------

Equation 1.2

Cb

Ab n

Equation 1.2 is a straight line with a slope of n when the

log of C is plotted versus the log of Aa

Values of cost exponent, n used in Equations 1.1 and 1.2

varies depending upon the class of equipment
Replacing n in Equation 1.1 or/and 1.2 by 0.6 provides the
relationship referred to as the six-tenth-rule

Example 1
Use the six-tenth-rule to estimate the %
increase in purchased cost when the
capacity of a piece of equipment is doubled
Example 2
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 2.3

Equipment type

Range of
correlation

Units of
Capacity

Cost
Exponent n

Reciprocating compressor
with motor drive

220 to 3000

Kw

0.70

Heat exchanger shell and tube

carbon steel

5 to 50

m2

0.44

Vertical tank carbon steel

1 to 40

m3

0.52

Single-stage Blower

0.5 to 4

m3/s

0.64

Jacketed kettle glass lined

3 to 10

m3

0.65

Table 2.3: Typical Values of Cost Exponents for a Selection of

Process Equipment

Example 3
The purchased cost of a recently
acquired heat exchanger with an area of
100 square meters was $10,000.
Determine:
a) the constant K in equation 1.1
b) the cost of a new heat exchanger of
180m2

Indices most generally accepted in chemical

industry
The Marshall and Swift Equipment Cost Index
The Chemical Engineering Plant Cost Index

Determination of Purchased Cost

where;

I2
C 2 C1 -------- I1

Equation 1.3

C= Purchase Cost
I = Cost Index
Subscripts 1:- refers to the base time when cost is
known
2:- refers to the time when cost is desired

Example 4
The purchased cost of a heat exchanger of
500m2 area in mid-1978 was $25,000
a) Estimate the cost of the same heat exchanger in
mid-1996 using the two indices introduced above
b) Compare the results

Values for Selected Indexes between 1985

to Jun 2009
Year

CE Plant Cost Index

1996

381.8

1997

386.5

1998

389.5

1999

390.6

2000

394.1

2001

394.3

2002

395.6

2003

401.7

2004

444.2

2005

468.2

2006

499.6

2007

525.4

2008

575.4

Jun 2009

597.1

Total capital cost of a chemical plant

includes:
Direct Project Expenses
Equipment f.o.b. cost, CP
Material required for installation, CM
Labor to install equipment and material, CL

Indirect Project Expenses

Freight, insurance and taxes, CFIT
Construction overhead, CO
Contractor engineering expenses, CE

 Contingency and Fee

Contingency, CCont
Contractor fee, CFee

Auxiliary Facilities
Site development,CSite
Auxiliary Buildings, CAux
Offsites and Utilities, Coff

Estimating capital cost for a process plant

Access to previous similar plant with different
capacity
Apply principles that already introduced:
The six-tenth rule may be used to scale up/down
to a new capacity
The Chemical Engineering Plant Cost Index should
be used to update the capital costs
Lang Factor Method used when no cost information
available

Lang Factor Method

n

CTM FLang C p ,i

---------

Equation 1.4

i 1
where;
CTM = the capital cost of the plant
Cp,i
= the purchased cost for the major
equipment units
n
= the total number of individual units
FLang = the Lang Factor

Type of Chemical Plant

Lang Factor,Flang

Fluid Processing Plant

4.74

Solid-Fluid Processing Plant

3.63

Solid Processing Plant

3.10

Capital Cost = (Lang Factor) x (Sum of Purchased Costs of all Major

Equipment)
Table 2.3: Lang Factors for the Estimation of Capital Cost
for Chemical Plants

Example 5
The capital cost of a 30,000 metric ton/year
iso-propanol plant in 1980 was estimated to
be $5,000,000. Estimate the capital cost of a
new plant with a production rate of 50,000
metric tons/year in mid-1996

Example 6
Determine the capital cost for a major
expansion to a fluid processing plant that has
a total purchased equipment cost of
$6,800,000

Bare Module Cost for Equipment at Base

Conditions
Condition specified for base case are: Unit fabricated for most common material, usually
carbon steel (CS)
Unit operated at near ambient pressure

Bare Module Cost:-

C BM C P FBM

Bare Module Cost for Equipment at Base

Conditions
Bare Module Factor:-

FBM 1 L FIT O L E 1 M
where
C BM = Bare module equipment cost: direct+ indirect cost
C P = Bare module equipment factor

FBM = Purchased cost for base conditions

Example 7
The purchased cost for a carbon steel heat exchanger
operation at ambient pressure is $10,000. for a heat
exchanger module, Ulrich [4] provides the following
cost multiplying factors
Cost Multiplier

M
L
FIT
O
E

Value
0.71
0.37
0.08
0.70
0.15

Determine:
a) Bare module cost factor, FBM
b) Bare module Cost, CBM
c) Materials and labor costs to install the exchanger

Example 8
Find the mid-1996 bare module cost of a
floating head shell and tube heat exchanger
with a heat transfer area of 100m2. The
operating pressure of the equipment is
1.0bar with both shell and tube sides
constructed of carbon steel. For this material
and pressure the values of FP and FM are
equal to 1.0

Figure A.1: Purchased equipment cost for shell and tube heat exchangers

Figure A.2: Pressure factors (Fp) for heat exchangers

FM = Material factor to account for

materials of construction
(for carbon steel, FM = 1)
FP = pressure factor to account for
high pressure from Figure 2.5
(for ambient pressure, FP = 1)

Figure A.3: Bare module factors (FoBM) for heat exchangers

Shell Material

Tube Material

Material Factor, FM

Carbon Steel (CS)

Carbon Steel (CS)

1.00

Carbon Steel (CS)

Copper (Cu)

1.25

Copper (Cu)

Copper (Cu)

1.60

Carbon Steel (CS)

Stainless Steel (SS)

1.70

Stainless Steel (SS) Stainless Steel (SS)

3.00

Carbon Steel (CS)

Nickel Alloy (Ni)

2.80

Nickel Alloy (Ni)

Nickel Alloy (Ni)

3.80

Carbon Steel (CS)

Titanium (Ti)

7.20

Titanium (Ti)

Titanium (Ti)

12.00

Table 2.9: Material Factors Floating Head Heat Exchangers

Bare Module Cost for Non-Base

Conditions
Condition specified for Non-Base Case
Equipment made form other material of
construction
Operating at non-ambient temperature
FBM in the base case is replaced with actual bare
module cost factor, F0oBM
o

C BM C P FBM

Bare Module Cost:-

Example 9
Repeat example 8 except that the exchanger
is made with stainless steel shell and tube

Example 10
Find the bare module cost of a floating-head
shell and tube heat exchanger with a heat
transfer area of 100m2. The operating
pressure of the equipment is 100 bar on both
shell and tube sides and the construction of
the shell and tubes is of stainless steel.

Example 11
Find the bare module cost (in 1996) of a
stainless steel tower 3m in diameter and 30m
tall. The tower has 40 stainless steel sieve
trays and operates at 20 bar.

Grass Roots and Total Module Costs

Grass Roots

new facility in which we start the construction on

essentially undeveloped land
Total Module Cost, CTM

Total Module Costs

C
i 1

o
TM ,i

o
1.18 C BM
,i
i 1

Cost of making small-to-moderate expansions or

alterations to an existing facility

Grass Root Cost, C GR CTM 0.35

o
C
BM ,i
i 1

Example 12
A small expansion to an existing chemical
facility is being investigated and a
preliminary PFD of the process is shown in
Figure E2.14. The expansion involves the
installation of a new distillation column with
a reboiler, condenser, pumps and other
associated equipment. A list of equipment,
sizes, materials of construction, and
operating pressure is given in Table E2.14A.
Using the charts in Appendix A, calculate
the total module cost for this expansion in
1996.