Page 280 - Sustainable On-Site CHP Systems Design, Construction, and Operations

Managing Risks during CHP Plant Construction 253

completion of design have the effect of discouraging investment in CHP plant construc-
tion and result in shifting investment in other more attractive energy conservation
measures (ECM).
A further point to be considered is the interdependence of the elemental categories
used in cost planning. Research has shown that certain elements will be interdepen-
dent, for instance the cost of the electrical installation is likely to be higher in a CHP
project serving buildings with large computer and/or data center operations requiring
extensive HVAC installations served from principally electrically powered centrifugal
versus thermally powered absorption chillers.
Any risk analysis methodology must take account of interdependence related cost
issues in addition to objective correlation coefficients requiring careful examination of
the data which use historical data for construction cost planning. There are numerous
different estimating techniques used at the design stage.
Some risk cannot be confidently estimated at the design stage, such as the effect on
cost that exceptionally inclement weather will have on a project due to the foundation
work commencing on site in early winter. Whereas the majority of risks arise from
matters where there is a lack of information, for example, insufficient design and speci-
fication information at the early stages of design. As more information becomes avail-
able during the design phase, so many of the risks can be resolved until, just prior to a
bid being sought, the estimate of construction cost contains only residual levels of risk.
A straightforward approach to including an allowance for the risk is to identify a list
of risk items and assign each item with the probability of the event occurring and to give
a three-point estimate of the lowest price, the highest price, and the most likely price.
For example, a typical risk item might be the probability of the need for a new gas
main to be installed on site. At the design stage the existing gas main had not yet been
exposed, hence its condition and size remained unknown. The most likely (common
sense) line item cost might include an allowance for some modification to the existing
main, whereas selecting the minimum line item cost assuming no work is required to
the existing main, and the worst case, that substantial work is needed to modify the
main, are equally less attractive. Accordingly probabilities for each event could be
assigned to each event such that there is a 0.50 chance that some modifications are
required, a 0.30 chance that no work is required and a 0.20 chance that substantial work
will be needed. The assessment of probability can rarely be an exact science; therefore,
expert judgment and intuition are required.
Consider next how best to estimate the most likely line item cost needed to adapt
an existing natural gas line needed to supply fuel to a CHP plant prior to obtaining
actual field conditions. There are again three possible scenarios for our CHP con-
tractor’s consideration:

1. Some modifications required to the existing on-site gas main
2. No modifications required to the existing on-site gas main other than inspection
to determine points of connection
3. Substantial modifications required to the existing on-site gas main
As shown in Table 15-1, consideration must next be given to the cost to be allocated by
the contractor for this element of construction cost. For the CHP contractor to include
$4900 which would cover both options (1) and (2) in his line item estimate can only be
informed by looking at the fact that there is only a 0.20 probability that option (3) will be