Accuracies of Estimates and Contingencies
For an estimate to be a meaningful basis of a process study, its accuracy needs to be
established and sufficient contingency be added to make the final cost figure as
realistic as possible. Unfortunately, this is easier said than accomplished. Most
companies have however developed analysis programs to meet this requirement,
and many of these are quite sophisticated. Engineering and construction companies
whose daily work depends on good cost estimates for project control are among the
front runners in this exercise. Most of these programs revolve around principles of
Table 15 The equipment factored estimate
Plant
Description
Date
A/C
Estimated cost, MM $
No
Item
M/h
Labor
Subcont
Material
Total
Excavation
Concrete
Structural steel
Buildings
Machinery/equip
17.876
Piping
Electrical
Instruments
Â2.5
Painting/scaffold
Insulation
Direct field cost
44.690
Temp const facil
Constr expense
Craft benefits and burdens
Equip rental
Small tools
Field O/heads
Indirect field costs
Total field costs
Engineering salaries
Purchasing sal
Â1.53
Gen office sal
Office expense
Payroll burdens
Overhead costs
Total office costs
Total field and office costs
Fee (contractor)
Escal/contingency
Total costs
68.377
Petroleum Refinery Planning and Economics
725
For an estimate to be a meaningful basis of a process study, its accuracy needs to be
established and sufficient contingency be added to make the final cost figure as
realistic as possible. Unfortunately, this is easier said than accomplished. Most
companies have however developed analysis programs to meet this requirement,
and many of these are quite sophisticated. Engineering and construction companies
whose daily work depends on good cost estimates for project control are among the
front runners in this exercise. Most of these programs revolve around principles of
Table 15 The equipment factored estimate
Plant
Description
Date
A/C
Estimated cost, MM $
No
Item
M/h
Labor
Subcont
Material
Total
Excavation
Concrete
Structural steel
Buildings
Machinery/equip
17.876
Piping
Electrical
Instruments
Â2.5
Painting/scaffold
Insulation
Direct field cost
44.690
Temp const facil
Constr expense
Craft benefits and burdens
Equip rental
Small tools
Field O/heads
Indirect field costs
Total field costs
Engineering salaries
Purchasing sal
Â1.53
Gen office sal
Office expense
Payroll burdens
Overhead costs
Total office costs
Total field and office costs
Fee (contractor)
Escal/contingency
Total costs
68.377
Petroleum Refinery Planning and Economics
725