Page 178 - Sustainable On-Site CHP Systems Design, Construction, and Operations

CHP Economic Analysis 151

for example, BIM to walk through the step-by-step process of constructing each portion of
the CHP plant that is to be constructed, then the accuracy of the estimate is more likely to
improve; however, this information is not typically available during the planning stage.
Other important components of the budget construction cost estimate to consider in
addition to the “nuts and bolts” material and labor costs are
• Subcontractor markup. Oftentimes, cost estimating publications provide the raw
material and labor costs. The actual “burdened” costs of labor can be much
higher when all of the payroll taxes, benefits, etc. for the worker are considered.
Markups of 10 percent for materials and up to 50 percent for labor have been
used by the author, and are applied only to costs estimated from cost estimating
publications (not to quotes from equipment vendors, for example).
• Location factors. Most cost estimating publications provide location factors to
adjust for the higher or lower costs of materials and labor in the area where the
project is located. In the United States these may be in the range of ±10 percent,
and are added to the subtotal of the costs estimated from the cost estimating
publication (with subcontractor markups).
• Taxes. Sales tax may be applicable to all purchased material depending on the
locale, and is applied to the subtotal including the above markups and location
factors.
• General requirements. General requirements cover the contractors cost of reproduc-
tion, office equipment, constructions trailers, mobilization and demobilization,
project management, etc. Typical values are often around 5 percent, and are
either estimated individually or the 5 percent factor is applied to the subtotal
including the sales tax.
• Contingency. A contingency amount should be added to cover unexpected costs.
Contingencies may range from 5 percent for a very detailed cost estimate based
on final engineering drawings to 25 percent for a rough “order of magnitude”
type cost estimate based on concept level ideas. The contingency is applied to
the subtotal including the general requirements.
• Insurance and bonds. The cost of the contractor’s insurance and bonds is typically
around 3 percent, and is applied to the subtotal including the contingency.
• Contractor’s overhead and profit. This typically ranges from 10 to 15 percent and is
applied to the subtotal including the insurance and bonds.
• Owner’s project costs. In addition to the budget construction costs, additional
project costs should be considered in the LCC analysis, such as the cost of
engineering design, testing, and inspection fees, and the owner’s construction
administration. Project costs are typically about 20 percent of the construction
costs.

Calculating Life-Cycle Costs
Calculating life-cycle costs brings together the project cost, the annual operating and
maintenance costs including energy costs, the cost of obtaining financing, any taxes, the
time value of money, and escalation into one value (the net present value) so that alter-
natives can be compared on a “like for like” basis.