Capital Cost Estimation

Chapter 5

1. Order of Magnitude Estimate (Feasibility)

2. Study Estimate / Major Equipment
3. Preliminary Design (Scope) Estimate
4. Definitive (Project Control) Estimate
5. Detailed (Firm or Contractors) Estimate

Capital Cost Estimate Classifications

Estimate Type

Accuracey

Data

Diagrams

Notes

Order of
Magnitude

+ 25%, - 15% Existing plants

BFD

Capacity +
inflation

Study (Major
equipment,
Factored)

+ 30%, - 20% Roughly sized major

equipment

PFD

Generalized
charts cost

Preliminary
Design (scope)

+ 25%, - 15% major equip. + piping

+ instr. + Elec. + util.

PFD

Group project

Definitive

+ 15%, - 7%

Prelim spcs for all

equipment

PFD +
P&ID

Detailed (firm or
contractor

+ 6%, - 4%

Complete engineering

Capital Cost Estimate Classifications

Example 5.1
The estimated capital cost from a chemical plant using the study estimate method
(Class 4) was calculated to be $2 million. If the plant were to be built, over what range
would you expect the actual capital estimate to vary?
For a Class 4 estimate, from Table 5.2, the expected accuracy range is between 3 and
12 times that of a Class 1 estimate. A Class 1 estimate can be expected to vary from
+6% to -4%. We can evaluate the narrowest and broadest expected capital cost
ranges as:
Lowest Expected Cost Range
High value for actual plant cost ($2.0 x 106)[1 + (0.06)(3)] = $2.36 X 106
Low value for actual plant cost ($2.0 x 106)[1 - (0.04)(3)] = $1.76 x 106
Highest Expected Cost Range
High value for actual plant cost ($2.0 x 106)[1 + (0.06 )(12)] = $3.44 x 106
Low value for actual plant cost ($2.0 x 106)[1 - (0.04 )(12)] = $1.04 x 106
The actual expected range would depend on the level of project definition and effort. If
the effort and definition are at the high end, then the expected cost range would be
between $1.76 and $2.36 million. If the effort and definition are at the low end, then
the expected cost range would be between $1.04 and $3.44 million.

Example 5.2
Compare the costs for performing an order-of-magnitude estimate and a detailed
estimate for a plant that cost $5.0 x 106 to build.

Solution :
For the order-of-magnitude estimate, the cost of the estimate is in the range of
0.015% to 0.3% of the final cost of the plant:
Highest Expected Value: ($5.0 x 106)(0.003) = $15,000
Lowest Expected Value: ($5.0 x 106)(0.00015) = $750
For the detailed estimate, the cost of the estimate is in the range of 10 to 100
times that of the order-of-magnitude estimate
For the lowest expected cost range
Highest Expected Value: ($5.0 x 106 )(0.03) = $150,000
Lowest Expected Value: ($5.0 x 106)(0.0015) = $7500
For the highest expected cost range:
Highest Expected Value: ($5.0 x 106)(0.3) = $1,500,000
Lowest Expected Value: ($5.0 x 106)(0.015) = $75,000

Vendor quote
Most accurate
- based on specific information
- requires significant engineering
Use previous cost on similar equipment and scale for
time and size
Reasonably accurate
- beware of large extrapolation
- beware of foreign currency
Use cost estimating charts and scale for time
Less accurate
Convenient

Ca
Aa

Cb
Ab

(5.1)
Cost Exponent

Equipment Cost
Attribute - Size

Cost

Ca KAa
where

Cb
Abn

(5.2)

Effect of Capacity on Purchased Equipment Cost

Ca K Aan
where
K Cb Abn

n = 0.4 0.8 Typically

Often n ~ 0.6 and we refer to Eq.(5.1) as the
(6/10)s Rule
Assume all equipment have n = 0.6 in a
process unit and scale-up using this method
for whole processes
Order-of-Magnitude estimate

Effect of Capacity on Purchased Equipment Cost

Economy of Scale
Example 5.3 :
Use the six-tenths-rule to estimate the % increase in purchased
cost when the capacity of a piece of equipment is doubled.
Using Equation 5.1 with n = 0.6:

Ca./Cb = (2/1)0.6 = 1.52

% increase = (1.52 -1.00)/1.00)(100) = 52%
The larger the equipment, the lower the cost of equipment per
unit of capacity.

Economy of Scale
Example 5.4
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 5.3.
Using Equation 5.1:
Cost ratio using six-tenth-rule (i.e. n = 0.60) = 5.00.6 = 2.63
Cost ratio using (n =0.59) from Table 5.3 = 5.00.59 = 2.58
% Error = (2.63 -2.58)/2.58)(100) = 1.9 %

Effect of Capacity on Purchased Equipment Cost

Rearranging equation 5.2

C K An
C
K An 1
A

 I2
C2 C1
I1
C = Cost
I = Value of cost index
1,2 = Represents points in time at which
costs required or known and index values
known

Effect of Time on Purchased Equipment Cost

Effect of Time on Purchased Equipment Cost

Example 5.6
The purchased cost of a heat exchanger of 500 m2 area in 1990 was $25,000.
a. Estimate the cost of the same heat exchanger in 2001 using the two indices
introduced above.
b. Compare the results.

From Table 5.4:

1990
2001
Marshal and Swift Index
915
1094
Chemical Engineering Plant Cost Index
358
397
a. Marshal and Swift: Cost = ($25,000)(1094/915) = $29,891
Chemical Engineering: Cost = ($25,000)(397/358) = $27,723
b. Average Difference: ($29,891 -27,723)/($29,891 + 27,723)/2)(100) = 7.5%

Marshal & Swift and CEPCI

Table 5.5: The Basis for the Chemical Engineering Plant Cost Index
Components of Index

Weighting of Component (%)

Equipment, Machinery and Supports:

(a)
(b)
(c)
(d)
(e)
(f)
(g)

Fabricated Equipment
Process Machinery
Pipe, Valves, and Fittings
Process Instruments and Controls
Pumps and Compressors
Electrical Equipment and Materials
Structural Supports, Insulation, and
Paint

37
14
20
7
7
5
10
100

Erection and Installation Labor

22

Buildings, Materials, and Labor

Engineering and Supervision

10

Total

100

61% of total

Example 5.7
The capital cost of a 30,000 metric ton/year isopropanol plant in
1986 was estimated to be $7 million. Estimate the capital cost of a
new plant with a production rate of 50,000 metric tons/year in 2001.
Cost in 2001 = (Cost in 1986)(Capacity Correction) (Inflation
Correction)
= ($7,000,000)(50,000/30,000).6(397/318)
=($7,000,000)(1.359)(1.248) = $11,870,000

Factors affecting Capital Cost

Direct project expenses

Indirect project expenses
Contingency and fee
Auxiliary facilities

1. Direct project expenses

Factor

Symbol

Comments

Equipment Cp
f.o.b. cost

Purchased cost of equipment at

manufacturer's site

Materials

CM

Includes all piping, insulation and installation

fireproofing,
foundations
and
structural
supports, instrumentation and electrical, and
painting associated with the equipment

Labor

CL

Includes all labor associated with equipment

and material installing mentioned above

2. Indirect project expenses

Factor

Symbol

Comments

Freight,
insurance,
and taxes

CFIT

transportation costs for shipping equipment

and materials to the plant site, all insurance
on the items shipped, and any purchase
taxes that may be applicable

Construction
overhead

CO

Includes all fringe benefits such as vacation,

sick leave retirement benefits; etc.; labor
burden such as social security and
unemployment insurance, etc.; and salaries
and overhead for supervisory personnel

Contractor
engineering
expenses

CE

salaries and overhead for the engineering,

drafting, and project management personnel
on the project

3. Contingency and fee

Factor

Symbol

Comments

Contingency

CCont

A factor to cover unforeseen circumstances.

These may include loss of time due to storms
and strikes, small changes in the design, and
unpredicted price increases.

Contractor
fee

CFee

fee varies depending on the type of plant and

a variety of other factors

4. Auxiliary facilities
Factor

Symbol

Comments

Site
development

CSite

land; grading and excavation of the site;

installation and hook-up of electrical, water,
and sewer systems; and construction of all
internal roads, walkways, and parking lots

Auxiliary
buildings

CAux

administration offices, maintenance shop and

control rooms, warehouses, and service
buildings

Off-sites and
utilities

COff

raw material and final product storage &

loading & unloading facilities; all equipment
necessary to supply required process utilities;
central environmental control facilities; and
fire protection systems

Capital Cost Modules

1. Total Module Cost (Lang Factor)
2. Bare Module Cost

Lang Factor
n

CTM FLang C pi
i 1

Total Module Cost

Purchased Cost of Major Equipment

From Preliminary PFD
(Pumps, Compressors, vessels, etc.)

Chemical Plant Type

Lang Factor Flang

Fluid Processing Plant

4.74

Solid-Fluid Processing Plant

3.63

Solid Processing Plant

3.10

Lang Factor
Example 5.8:
Determine the capital cost for a major expansion to a fluid processing
plant that has a total purchased equipment cost of $6,800,000.
Capital Costs = ($6,800,000)(4.74) = $32,232,000

Lang Factor

1.

1.
2.

Advantage
Easy to apply.
Drawbacks
Special MOC.
High operating pressure.

Table 5.8

Direct, Indirect, Contingency and Fees are

expressed as functions (multipliers) of purchased
equipment costC op at base conditions (1 bar and
CS)

Each equipment type has different multipliers

Details given in Appendix A

o
CBM C p FBM
Bare Module
Cost

Bare Module Factor

(sum of all multipliers)

Purchased Equipment Cost for CS

and 1 atm pressure - Appendix A

FBM = B1 + B2FpFM

o
FBM
B1 B2

Fp = pressure factor (= 1 for 1 bar)

FM = material of construction factor (=1 for CS)

C p Cop Fp FM

Bare Module Cost

F 1 M 1 L FIT LO E
0
BM

Example 5.9
The purchased cost for a carbon steel heat exchanger operating
at ambient pressure is $10,000. For a heat exchanger module
given the following cost information:
Item
% of Purchased Equipment Cost
Equipment
100.0
Materials
71.4
Labor
63.0
Freight
8.0
Overhead
63.4
Engineering
23.3
Using the information given above, determine the equivalent cost
multipliers given in Table 5.8 and the following:
0
a. Bare module cost factor, FBM
0
b. Bare module cost, C BM

Item

% of Purchased Cost Multiplier Value of Multiplier

Equipment Cost

Equipment

100.0

1.0

Materials

71.4

0.714

Labor

63.0

0.63/(1+0.714)=
0.368

Freight

8.0

FIT

0.08/(1+0.714)=
0.047

Overhead

63.4

Engineering

23.3

0.634/0.368/
(1+0.714)= 1.005

0.233/(1+0.714) =
0.136

a. Using Equation 5.8:

0
FBM
= (1 + 0.368 + 0.047 + (1.005)(0.368) + 0.136)(1 + 0.714) = 3.291
b. From Equation 5.6:
0
C BM
= (3.291)($10,000) = $32,910

o
CBM C p FBM
Bare Module
Cost

Bare Module Factor

(sum of all multipliers)

Purchased Equipment Cost for CS

and 1 atm pressure - Appendix A

FBM = B1 + B2FpFM

o
FBM
B1 B2

Fp = pressure factor (= 1 for 1 bar)

FM = material of construction factor (=1 for CS)

C p Cop Fp FM

Bare Module Cost Factor

For Heat Exchangers, Process vessels, and pumps

CBM CP0 FBM CP0 B1 B2 FM FP

0
FBM
B1 B2

Material Factor, FM, for these equipment are obtained from Figure A.8
along with Table A.3.
Values of B1 and B2 are given in Table A.4

Bare Module Cost Factor

For Heat Exchangers, Process vessels, and pumps
Values of B1 and B2 are given in Table A.4

Pressure Factor for vessels

Pressure Factor, FP , for other equipment are given in table A.6
along with Figure A.9

FP ,vessel

( P 1) D
0.0315
2 850 0.6( P 1)
0.0063

If FP is less than 1, then FP= 1.0

For P less than -0.5 barg, FP = 1.25

for tvessel 0.0063m

Pressure Factor for Other

Equipment
Pressure Factor, FP , for other equipment are given in table A.6
along with Figure A.9

log10 FP C1 C2 log10 P C3 log10 P

Constants are given in Table A.2

Module Factor Approach Material

Factors

Bare Module Cost Factor

For equipment not covered in table A.3

Material Factor
Material Factor, FM , for other equipment are given in table A.6
along with Figure A.9

Purchased Equipment Cost

log10 C p0 K1 K2 log10 ( A) K3 log10 ( A)

Where A is the capacity or size parameter for the equipment

K1, K2, and K3 are given in table A.1
These data are also presented in the form of graphs in Figures A.1-A.7

Illustrative Example

Compare Costs for

1. Shell-and-tube heat exchanger in
2001 with an area = 100 m2
for
Carbon Steel at 1 bar
Carbon Steel at 100 bar
Stainless Steel at 1 bar
Stainless Steel at 100 bar

Effect of Materials of Construction

and Pressure on Bare Module Cost
C op

Cp

o
C BM

MOC

1 bar

CS

25 K

1 bar

SS

25 K

68.3 K 82.3 K 154 K

100 bar

CS

25 K

34.6 K 82.3 K 98.1 K

100 bar

SS

25 K

94.4 K 82.3 K

25 K

CBM

82.3 K 82.3 K

197.4
K

Bare-Module and TotalModule Costs

BM Previously Covered
TM Includes Contingency and Fees at
15% and 3% of BM

CTM 1.18

all equip

CBM

Grass-Roots Costs

GR grass-roots cost includes costs for

auxiliary facilities
CGR 0.50

o
CBM
CTM

all equip

Use base BM costs in GR cost (1 atm

and CS) since auxiliary facilities should
not depend on pressure or M.O.C.

Materials of Construction
Very important
Table 5.9 rough guide
Perrys good source

Capcost
Calculates costs based on input
CEPCI use current value of 401 or
latest from Chemical Engineering
Program automatically assigns
equipment numbers