Page 70 - Chemical process engineering design and economics

Production and Capital Cost Estimation 55

The installation factor consists of direct costs, indirect costs, contingency
cost, and a contractor's fee. The installation factor for a piece-of-equipment is
given by

fi = foe fie fo (2.4)

The direct-cost factor for equipment, fc, contained in Table 2.8, does not include
D
buildings and auxiliary facilities. It includes the labor and materials needed to in-
stall equipment. The buildings and auxiliary costs will be accounted for after we-
calculate the depreciable capital cost for equipment.

EQUIPMENT COST ESTIMATION
Whether a process engineer uses the average factor method or the individual factor
method, the major effort in estimating the depreciable capital cost is estimating the
cost of equipment. After developing the process flow diagram and calculating
mass and energy flow rates, he can then estimate the size of the equipment and the
equipment cost. There are three sources of equipment cost data. These are: current
vendor quotations, past vendor quotations, and literature estimates, in order of
decreasing accuracy. Woods [10] has stated that correlation of equipment costs in
the literature can have large errors - by as much as 100%. A correlation with a
large error is not completely useless, but it will limit the conclusions that one can
draw. Vendor quotations are the most accurate, but the effort required to prepare
detailed specifications and quotations are not usually warranted in the early stages
of a project. Thus, we rely on literature estimates and past quotations for quick
estimates - in spite of their lower accuracy.
Equipment costs reported in the literature are either FOB, delivered, or in-
stalled cost. Usually, these costs are given at some time in the past. When report-
ing equipment costs, the date and shipping point should be specified, but the latter
is frequently not given. Shipping cost (consisting of freight, taxes, and insurance)
will vary from 10 to 25% of the purchased cost [10]. We will use 10%, a value
recommended by Valle-Riestra [20]. Then, the delivered cost is

Csi=1.10C Pi (2.5)
Before adding equipment costs they must all be on the same basis - either FOB,
delivered, or installed. For example, Table 2.6 requires that all equipment costs be
on the delivered basis. If some equipment is reported on the installed basis, then
add this cost after all other equipment costs are on the installed basis.

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