Page 188 - Plant design and economics for chemical engineers

162 PLANT DESIGN AND ECONOMICS FOR CHEMICAL ENGINEERS

TABLE 2
Typical average costs for making estimates (199O)t

Less than $2,ooo,ooo to $10,ooo,ooo to
Cost of project $2,ooo,ooo $10,ooo,000 $loO,OOO,ooO
Order-of-magnitude estimate $ 3,000 $ 6,000 $ 13,ooo
Study estimate 20,000 40,000 60,000
Preliminary estimate 50,000 80,000 130,000
Definitive estimate 80,000 160,000 320,000
Detailed estimate 200,000 520,000 1,000,000
t Adapted from A. Pikulik and H. E. Diaz, Cost Estimating for Major Process Equipment, Chem.
Eng., 84(21):106 (Oct. 10, 1977).

4. Definitive estimate (project control estimate) based on almost complete data
but before completion of drawings and specifications; probable accuracy of
estimate within f 10 percent.
5. Detailed estimate (contractor’s estimate) based on complete engineering
drawings, specifications, and site surveys; probable accuracy of estimate
within +5 percent.

Figure 6-4 shows the relationship between probable accuracy and quantity
and quality of information available for the preparation of these five levels of
estimates.? The approximate limits of error in this listing are plotted and show
an envelope of variability. There is arge probability that the actual cost will be
iyI/
more than the estimated cost where information is incomplete or in time of
rising-cost trends. For such estimates, the positive spread is likely to be wider
than the negative, e.g., +40 and - 20 percent for a study estimate. Table 2
illustrates the wide variation that can occur in the cost of making a capital-
investment estimate depending on the type of estimate.
Predesign cost estimates (defined here as order-of-magnitude, study, and
preliminary estimates) require much less detail than firm estimates such as the
definitive or detailed estimate. However, the predesign estimates are extremely
important for determining if a proposed project should be given further consid-
eration and to compare alternative designs. For this reason, most of the
information presented in this chapter is devoted to predesign estimates, al-
though it should be understood that the distinction between predesign and firm
estimates gradually disappears as more and more detail is included.
It should be noted that the predesign estimates may be used to provide a
basis for requesting and obtaining a capital appropriation from company man-
agement. Later estimates, made during the progress of the job, may indicate
that the project will cost more or less than the amount appropriated. Manage-
ment is then asked to approve a variance which may be positive or negative.

tAdapted from a method presented by W. T. Nichols, Znd. Eng. Chem., 43(10):2295 (1951).