Page 192 - Plant design and economics for chemical engineers

166 PLANT DESIGN AND ECONOMICS FOR CHEMICAL ENGINEERS

Production Economics. This presents cost indexes for plant costs for various
countries in the world including Australia, Belgium, Canada, Denmark, France,
Germany, Italy, Netherlands, Norway, Japan, Sweden, the United Kingdom,
and the United States.?
Unfortunately, all cost indexes are rather artificial; two indexes covering
the same types of projects may give results that differ considerably. The most
that any index can hope to do is to reflect average changes. The latter may at
times have little meaning when applied to a specific case. For example, a
contractor may, during a slack period, accept a construction job with little profit ’
just to keep his construction crew together. On the other hand, if there are
current local labor shortages, a project may cost considerably more than a
similar project in another geographical location.
For use with process-equipment estimates and chemical-plant investment
estimates, the Marshall and Swifr equipment cost indexes and the Chemical
Engineering plant cost indexes are recommended. These two cost indexes give
very similar results, while the Engineeting News-Record construction cost index,
relative with time, has increased much more rapidly than the other two because
it does not include a productivity improvement factor. Similarly, the Nelson-
Farrar refinery construction index has shown a very large increase with time and
should be used with caution and only for refinery construction.

COST FACTORS IN CAPITAL INVESTMENT
Capital investment, as defined earlier, is the total amount of money needed to
supply the necessary plant and manufacturing facilities plus the amount of
money required as working capital for operation of the facilities. Let us now
consider the proportional costs of each major component of fixed-capital
investment as outlined previously in Table 1 of this chapter. The cost factors
presented here are based on a careful study by Bauman and associates plus
additional data and interpretations from other more recent sources$ with input
based on modern industrial experience.

tFor methods used, see Eng. Costs Prod. &on., tilk267 (1982).
SH. C. Bauman, “Fundamentals of Cost Engineering in the Chemical Industry,” Reinhold Publish-
ing Corporation, New York, 1964; K. M. Guthrie, “Process Plant Estimating, Evaluation, and
Control,” Craftsman Book Company of America, Solana Beach, CA, 1974; D. H. Allen and R. C.
Page, Revised Techniques for Predesign Cost Estimating. Chem. Eng., 82(5):142 (Mar. 3, 1975);
W. D. Baasel, “Preliminary Chemical Engineering Plant Design,” American Elsevier Publishing
Company, Inc., New York, 1976; R. H. Perry and D. W. Green, “Chemical Engineers’ Handbook,”
6th ed., McGraw-Hi11 Book Company, Inc., New York, 1984; G. D. Ulrich, “A Guide to Chemical
Engineering Process Design and Economics,” Wiley, New York, 1984; R. K. Sinnott, “An Introduc-
tion to Chemical Engineering Design,” Pergamon Press, Oxford, England, 1983; P. F. Ostwald,
“AM Cost Estimator,” McGraw-Hill Book Company, Inc., New York, 1988.