Cost Estimation

1 Cost Estimation
A capital investment is required for any industrial process and determination of the necessary
investment is an important part of a plant design project.

1.1 Capital Investment

Before industrial plant can put into operation, a large sum of money must be supplied to purchase
and install the necessary machinery and equipment. Land and service facilities must be obtained
and the plant must be erected complete with all piping, controls and service. In addition, it is
necessary to have money available for the payment of expenses involved in the plant operation.
The total capital required for the installation and working of a plant is called total capital
investment.

Total Capital Investment = Fixed Capital + Working Capital

1.1.1 Fixed Capital Investment

The capital needed to supply the necessary manufacturing and plant facilities is called fixed capital
investment. The fixed capital is further subdivided into followings,

i. Manufacturing fixed capital investment

ii. Non-manufacturing fixed capital investment.
The fixed capital investment classified into two sub divisions,

i. Direct Cost
ii. Indirect Cost

1) Direct Cost

The direct cost items arc incurred in the construction of the plant in addition to the cost of
equipment.

i. Purchased equipment cost

ii. Purchased equipment installation
iii. Insulation cost
iv. Instrumentation and control
v. Piping
vi. Electrical installation
 vii. Building including services
viii. Yard improvement
ix. Service facilities
x. Land

2) Indirect Cost

Indirect cost can be estimated by estimating following costs.

i. Engineering and supervision

ii. Construction expenses
iii. Contractor’s fee
iv. Contingencies
v. Startup expenses
1.1.2 Working Capital

The capital required for the operation of the plant is known as working capital. Working capital
includes following things to be considered,

i. Raw materials and supplies carried in stock

ii. Finished product in stock and semi-finished products in the process of being manufactured.
iii. Accounts receivable
iv. Cash kept on hand for monthly payment of operating expenses, such as salaries, wages and
raw material purchases.
v. Accounts payable
vi. Taxes payable
1.2 Capital Cost Estimates

An estimate of the capital investment for a process may vary, pre-design estimated based on little
information except the size of the proposed project to a detailed estimate prepared from complete
drawings and specifications.

Between these two extremes of capital investment estimates there can be numerous, other
estimates which vary in accuracy depending on the stage of development of the project. These
estimates are called by a variety of names, but the following five categories represent the accuracy
range and designation normally used for the design purposes,

i. Order of magnitude estimates

ii. Study estimate (factorial estimate)
iii. Preliminary estimates (budget authorization estimate)
iv. Definitive estimate (project control estimate)
v. Detailed estimate (Contractor’s estimate)
1) Order of magnitude estimates

Ratio-estimated based on similar previous cost date, probable accuracy of estimate over ± 30%

2) Study estimate (factorial estimate)

Based on knowledge of major items of equipment: probable accuracy of equipment estimate

up to ± 30%

3) Preliminary estimates (Budget authorization estimate)

Based on sufficient data to permit the estimate to be gazetted probable accuracy of estimate
within ± 20%

4) Definitive estimate (project control estimate)

It is based on almost complete data but before completion of drawings and specifications,
probable accuracy of estimate within ±10%

5) Detailed estimate (contractor’s estimate)

It is based on complete engineering drawings, specifications and site surveys; probable

accuracy of estimates within ±5%

1.3 Cost Indices

A cost is nearly an index value for a given point in time showing the cost at that time relative to
certain base time. So, present cost is estimated from cost index as follows:

𝑃𝑟𝑒𝑠𝑒𝑛𝑡 𝑐𝑜𝑠𝑡 (𝑂𝑟𝑖𝑔𝑖𝑛𝑎𝑙 𝑐𝑜𝑠𝑡)

=
𝐼𝑛𝑑𝑒𝑥 𝑎𝑡 𝑝𝑟𝑒𝑠𝑒𝑛𝑡 𝑡𝑖𝑚𝑒 𝑖𝑛𝑑𝑒𝑥 𝑣𝑎𝑙𝑢𝑒 𝑎𝑡 𝑡𝑖𝑚𝑒 𝑜𝑓 𝑜𝑟𝑖𝑔𝑖𝑛𝑎𝑙 𝑐𝑜𝑠𝑡

1.3.1 Types of cost indices

Many different types of cost indices are published regularly. Some of these can be used for
estimating equipment cost; others apply specifically to labor, construction, materials or other
specialized fields.

The most common of these indices are

i. Marshal-and-Swift all industry and process industry equipment index

ii. Engineering news record contraction cost index
2 Fluidized Bed Gasifier
Material of construction = Stainless Steel

Length = 9.46 m

Diameter = 1.33 m

Material Factor = 2

Pressure Factor = 1.4

Purchase Cost in 2004 = Bare cost × Material Factor × Pressure Factor

= 10000*2*1.4

= $ 17000 (from fig 2 appendix A)

Cost index in 2004 = 521.7

Cost index in 2018 = 711.17

𝐼𝑛𝑑𝑒𝑥 𝑖𝑛 2018
Cost in 2018 = Cost in 2004 × 𝐼𝑛𝑑𝑒𝑥 𝑖𝑛 2004

= $ 23174.02

3 Cyclone Separator
Flow rate = 303.41 m3/hr

Basket Diameter = 0.088m

Cost in 2002 = Bare cost × material factor

= 2500*1

= $ 2500

Cost index in 2002 = 428

Cost index in 2018 = 711

 𝐼𝑛𝑑𝑒𝑥 𝑖𝑛 2018
Cost in 2018 = Cost in 2002 × 𝐼𝑛𝑑𝑒𝑥 𝑖𝑛 2004

= $ 4153.03

4 Cost of Packed Bed Reactor

Material of construction = Carbon Steel

Length = 34.70 m

Diameter = 1.96 m

Material Factor = 1

Pressure Factor = 2.2

Purchase Cost in 2004 = Bare cost × Material Factor × Pressure Factor

= 10000 × 1 × 2.2

= $ 22000

Cost index in 2004 = 521.7

Cost index in 2018 = 711.17

𝐼𝑛𝑑𝑒𝑥 𝑖𝑛 2018
Cost in 2018 = Cost in 2004 × 𝐼𝑛𝑑𝑒𝑥 𝑖𝑛 2004

= $ 29989.91

5 Cost of Absorber
Diameter of column = 1.042 m

Height of Column = 16.5 m

Height of packing = 5.4 m

Packing: Intalox saddle

Pressure = 30 bar

Material: Stainless Steel

Purchase Cost in 2004 = Bare cost × Material Factor × Pressure Factor

= 12000 × 2 × 1.4

= $ 33600 (from fig 4 appendix A)

2004 index = 541.2

2018 index = 711

𝐼𝑛𝑑𝑒𝑥 𝑖𝑛 2018
Cost in 2018 = Cost in 2004 × 𝐼𝑛𝑑𝑒𝑥 𝑖𝑛 2004

Purchase cost of equipment in 2018 = $ 44141.90

πD2 H
Volume of packing V = 4

V = 0.85 m3

Cost of packing for size of 51 mm = 1400 $/m3

Total cost of packing = $ 1190

Total cost of absorber in 2018 = $ 23260.95

6 Cost of Stripper
Diameter of column = 0.713 m

Height of Column = 15 m

Height of packing = 4.23 m

Packing: Intalox saddle

Pressure= 1.2 bar

Material: Stainless Steel

Purchase Cost in 2004 = Bare cost × Material Factor × Pressure Factor

= 8000 × 2 × 1

= $ 16000
2004 index = 541.2

2018 index = 711

𝐼𝑛𝑑𝑒𝑥 𝑖𝑛 2018
Cost in 2018 = Cost in 2004 × 𝐼𝑛𝑑𝑒𝑥 𝑖𝑛 2004

Purchase cost of equipment in 2018 = $ 21019.95

πD2 H
Volume of packing V = 4

V = 0.43 m3

Cost of packing for size of 25 mm = 1400 $/m3

Total cost of packing = $ 602

Total cost of absorber in 2018 = $ 11111.97

7 Heat Exchanger

7.1 Waste Heat Boiler E-101

Figure 1: Bare Cost of Shell & Tube Heat Exchanger

Type: Shell and tube heat exchanger
Material: Carbon steel
Pressure Factor = 1.25 (30 bar)
Type factor U tube = 0.85
Heat transfer surface area = 552.9 ft2
Heat transfer surface area = 51.36 m2
From Figure F.1 = 25*1000 $
Bare cost from figure = 25000 $
Purchased Equipment Cost in 2004 = Bare cost × Type factor × Pressure factor
Purchased Equipment Cost in 2004 = 26565 $
2004 Cost Index = 541.2
2018 Cost Index = 621.53
2018 Cost Index 621.53
Equipment Cost in 2018 = Ce = 25000$ ∗ ( 541.2 )
2004 Cost Index

Purchase cost of E-101 in 2018 = 28710.7 $

As there are two Exchangers of same specifications (E-101 & E-102) so,

Purchase Cost of Heat Exchanger E-102 in 2018 = 28710.7 $

7.2 Heat Exchanger E-201

Type: Shell and tube heat exchanger

Material: Carbon steel
Pressure Factor = 1.25 (30 bar)
Type factor U tube = 0.85
Heat transfer surface area = 1151 ft2
Heat transfer surface area = 106 m2
From Figure F.1 = 36*1000 $
Bare cost from figure = 36000 $
Purchased Equipment Cost in 2004 = Bare cost × Type factor × Pressure factor
Purchased Equipment Cost in 2004 = 38250 $
2004 Cost Index = 541.2
2018 Cost Index = 621.53
2018 Cost Index 621.53
Equipment Cost in 2018 = Ce = 38250$ ∗ ( 541.2 )
2004 Cost Index

Purchase cost of E-201 in 2018 = 43927 $

7.3 Heat Exchanger E-104 A

Figure 2: Cost of Double Pipe Heat Exchangers

Type: Double Pipe Heat Exchanger

Material: Carbon steel

Heat transfer surface area = 17 ft2 = 1.64 m2
Heat transfer surface area =1.64 * 10 = 16.4 m2
From Figure 2, Equipment Cost in 2004 = 2600 $
2004 Cost Index = 541.2
2018 Cost Index = 621.53
2018 Cost Index 621.53
Equipment Cost in 2018 = Ce = 2600$ ∗ ( 541.2 )
2004 Cost Index
Purchase cost of E-104 A in 2018 = 2986 $

7.4 Heat Exchanger E-104 B

Type: Double Pipe Heat Exchanger

Material: Carbon steel

Heat transfer surface area = 10.8 ft2 = 1.00 m2
Heat transfer surface area =1.00 * 10 = 10 m2
From Figure 2, Equipment Cost in 2004 = 2400 $
2004 Cost Index = 541.2
2018 Cost Index = 621.53
2018 Cost Index 621.53
Equipment Cost in 2018 = Ce = 2400$ ∗ ( 541.2 )
2004 Cost Index

Purchase cost of E-104 B in 2018 = 2750 $

7.5 Heat Exchanger E-104 C

Type: Double Pipe Heat Exchanger

Material: Carbon steel

Heat transfer surface area = 7 ft2 = 0.65 m2
Heat transfer surface area =0.65 * 10 = 6.5 m2
From Figure 2, Equipment Cost in 2004 = 2100 $
2004 Cost Index = 541.2
2018 Cost Index = 621.53
2018 Cost Index 621.53
Equipment Cost in 2018 = Ce = 2100$ ∗ ( )
2004 Cost Index 541.2

Purchase cost of E-104 C in 2018 = 2412 $

8 Cost of Furnace F-001

Figure 3: Cost of Furnace

Furnace Heat Duty = Q = 2015880 Btu/hr

From Figure 3, Cost of Furnace in 2004 = 140,000 $

2018 Cost Index 621.53

Cost of Furnace in 2018 = Ce = 140,000$ ∗ ( 541.2 )
2004 Cost Index

Cost of Furnace in 2018 = 160,780 $