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Capital Cost Estimate Class 3 -OnshoreGuideline
Document No: PDP-0310
2-Oct-06
Level 12, 141 Walker Street, North Sydney NSW 2060, Australia+61 2 8923 6866+61 2 8923 6877
WorleyParsons LimitedABN 61 001 279 812
© Copyright 2010 Kazstroy Engineering India Pvt. Ltd
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
SYNOPSIS
This document outlines the guideline for preparing a Class 3 cost estimate during the Define Phase.
PROJECT PDP-0310 - CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
REV DESCRIPTION ORIG REVIEW KEIPLAPPROVAL
DATE CUSTOMERAPPROVAL
DATE
0 Issued for useA Drulle M Reilly M Reilly
2-Oct-06 N/A
002-000-PMW-185 (015277) PDP-0310 Corporate Base Page 2Rev 1 (31-Oct-06)
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
CONTENTS
1. Introduction................................................................................................6
2. Class 3 Estimates......................................................................................7
2.1 Purpose........................................................................................................................ 7
2.2 Responsibilities............................................................................................................7
3. Pre-Estimate Activities...............................................................................9
3.1 Project Kick-off Meeting................................................................................................9
3.2 Estimate Plan\Kick-off Meeting.....................................................................................9
3.2.1 Estimate Kick-off Meeting........................................................................................9
3.2.2 Estimate Plan........................................................................................................10
3.3 Site Visits.................................................................................................................... 11
3.4 Estimating System......................................................................................................11
3.4.1 System Overview..................................................................................................11
3.4.2 Quest Overview.....................................................................................................12
3.5 Estimate Schedule.....................................................................................................13
3.6 Establishing Estimate Structure and Project Code of Accounts.................................14
3.6.1 General.................................................................................................................14
3.6.2 Code of Accounts..................................................................................................14
3.6.3 Estimate Components...........................................................................................14
4. Estimating Methodology...........................................................................17
4.1 Pricing General...........................................................................................................17
4.2 Contracting Strategy...................................................................................................17
4.3 Quantities................................................................................................................... 17
4.4 Equipment and Material Pricing..................................................................................18
4.5 Freight........................................................................................................................ 19
4.6 Contract Labour Pricing..............................................................................................20
4.6.1 Manual Labour Productivity...................................................................................20
4.6.2 Installation Man-hours...........................................................................................21
4.6.3 Manual Labour Rates............................................................................................22
4.6.4 Sub-Contractors Costs..........................................................................................24
4.7 Allowances................................................................................................................. 25
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
4.7.1 Design Allowances................................................................................................25
4.7.2 Other Allowances..................................................................................................25
4.8 Common Distributables..............................................................................................26
4.9 Engineering, Procurement and Construction Management........................................26
4.10 Escalation...................................................................................................................28
4.11 Contingency...............................................................................................................28
4.12 Owners Costs.............................................................................................................29
4.13 Estimate Reviews.......................................................................................................29
4.13.1 General.................................................................................................................29
4.13.2 Engineering -Quantity/ Scope Review...................................................................31
4.13.3 Project Team Review............................................................................................31
4.13.4 Corporate Estimating Management Reviews........................................................32
4.13.5 Business Unit Review............................................................................................32
4.13.6 Senior Management Review.................................................................................32
4.13.7 Customer Review..................................................................................................33
5. Customer Estimate Input..........................................................................34
5.1.1 Customer Input......................................................................................................34
6. Engineering Estimate Input......................................................................35
6.1.1 General Requirements..........................................................................................35
6.1.2 Plant Equipment....................................................................................................35
6.1.3 Bulk Materials........................................................................................................36
6.2 Engineering Execution Plan.......................................................................................36
6.2.1 Process................................................................................................................. 36
6.2.2 Piping\Fittings........................................................................................................37
6.2.3 Valves................................................................................................................... 38
6.2.4 Pipeline................................................................................................................. 38
6.2.5 Mechanical............................................................................................................38
6.2.6 Civil/Structural.......................................................................................................39
6.2.7 Electrical................................................................................................................39
6.2.8 Instrumentation and Control..................................................................................40
6.2.9 DCS Applications..................................................................................................40
6.2.10 Communications and SCADA...............................................................................40
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
6.2.11 Analysers..............................................................................................................41
6.2.12 Skids.....................................................................................................................41
6.2.13 Painting\Surface Treatment...................................................................................41
7. Procurement Estimate Input.....................................................................42
8. Construction Estimate Input.....................................................................43
9. Historical Data..........................................................................................44
9.1.1 Using Benchmarking and Historical Data..............................................................44
9.1.2 Proration Estimates...............................................................................................44
10. Estimate Presentation Format..................................................................45
11. Documentation Basis for Estimating........................................................46
12. Responsibility Table.................................................................................47
Appendices
Appendix 1. – Cost Estimate Classification Guideline PDP-0017
Appendix 2. – Manual Labour Rate Development Guideline PDP-0029
Appendix 3. – Engineering Transmittal for Cost Estimate Input PDF-1006
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
1. INTRODUCTION
The Class 3 estimate is the most important estimate, as it acts as the stepping stone to
project approval and economic evaluation. The hours and time to prepare this type of
estimate should by now means be underestimated. It is an integrated effort, and incorporates
engineering, procurement, construction and estimating as a team to deliver a successful
estimate.
The Class 3 estimate is normally based on a firm scope and a preliminary design definition.
At this phase of the project, design engineering is usually between 5 – 10 percent complete.
The general accuracy range for a feasibility or control estimate is <+/-15%. Cost estimates
increase in accuracy at every phase during the development of a project. Therefore, this type
of estimate could be updating from a Class 2 estimate by incorporating scope refinements,
design developments, and pricing provided by potential suppliers. Class 3 estimates normally
provide one or more of the following:
A mechanism for a customer to present to the board for project sanction, with
sufficient confidence in seeking project financing
Establish a project budget
A yardstick to control costs at the execution phase
Basis for evaluating future changes in scope
A basis for negotiating a contract
For inclusion in a Bankable Document.
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
2. CLASS 3 ESTIMATES
2.1 Purpose
This guideline addresses the appropriate activities to support the estimate and to establish
the methods to be used for developing a Class 3 estimate.
The Class 3 estimate guideline addresses the following issues.
Pre-estimate activities
Estimate methodology and cost estimating principles applicable to the estimate
preparation
Estimate Structure - Code of Accounts (Facility and Commodity codes)
Estimating System
Engineering deliverables required to support a Class 3 estimate
Procurement deliverables required to support a Class 3 estimate
Construction deliverables required to support a Class 3 estimate
Indirect Costs
Contingency and accuracy of the estimate
Estimate Reporting
Estimate Reviews
Utilization of Historical and Benchmarking Data.
This guideline sets out the roles and responsibilities, deliverables and steps that need to be
undertaken to produce a Class 3 +/-15%.
2.2 Responsibilities
Every individual project manager is responsible to ensure that the Class 3 guideline is
observed and followed when preparing, presenting and reviewing a feasibility or control
estimate.
The development of a Class 3 estimate is a team effort, and needs input from many other
groups. An experienced estimator is required to facilitate this process and will need input and
support from project management, engineering, procurement and construction to achieve the
level of accuracy required at this phase of the project.
The Senior or Lead Estimator has the responsibility for determining that the scope available is
sufficient to complete the desired classification of estimate requested, and that the estimating
can realistically be accomplished based on the overall schedule and staffing availability . The
estimator has the primary role to facilitate the estimating process, and deliver, present and
review a capital cost estimate that meets the accuracy desired for this Class of estimate.
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
3. PRE-ESTIMATE ACTIVITIES
There are a number of activities that need to occur before a Class 3 estimate commences.
The main activities are:
Project Kick-off Meeting
Estimate Plan\Kick-off Meeting
Site Visits
Estimating System
Estimate Schedule
Establishing Estimate Structure and Project Code of Accounts
Requests for Historical data and other estimates
These main activities will be discussed in detail in the following sections.
3.1 Project Kick-off Meeting
The project kick-off meeting is arranged by the Project Manager and is attended by the
project team, which includes Engineering, Procurement, Construction, Estimators and Project
controls. The initial kick-off meeting is to convey to the project team the broad scope of the
project and outline the major aspects of the assignment. Other areas for discussion are
commercial aspects, customer objectives and staffing issues.
3.2 Estimate Plan\Kick-off Meeting
3.2.1 Estimate Kick-off Meeting
The Estimate kick-off meeting is only held, once the estimate plan is developed. The Lead
Estimator will produce the estimate plan and present this document to the key players of the
project team. The attendees of this meeting will be the Project Manager, Lead Discipline
Engineers, Estimating, Procurement and Construction.
The purpose of this meeting is to highlight the estimate requirements and establish
responsibilities and communication links between the department heads. It brings all the
project team to sing on the same piece of music, in order to not have any misunderstandings
on what roles each department needs to play in delivering the estimate. The estimate plan
should be written as standalone document, in order to convey the estimate to anyone outside
the project team and to be utilised for future inductions for new personnel joining the project.
Normally the customer is invited to participate in this meeting, in order to have the customers
buy-in on the approach.
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
3.2.2 Estimate Plan
To produce the estimate plan is the responsibility of the Lead estimator. The Lead Estimator
may have to source information from various departments in order to finalise the document.
The document sets the estimate ground rules and establishes uniformity across the project
team. (For further detailed information in producing an estimate plan, refer to Estimate Plan
guideline and Estimate Plan sample template.)
The estimate plan addresses the following issues.
Brief Scope Description
Customer Strategies and Objectives
Estimate Deliverables
Key Personnel Contact List
Estimating System
Estimate Methodology
1. Quantity development
2. Material Pricing (Equipment and Bulk Materials)
3. Manual Labour Rate and Man-hours
4. Sub-Contractor Costs
5. Freight
6. Vendor Representatives
Code of Accounts (Facility and Commodity codes)
Engineering deliverables required to support this type of estimate
Contracting Strategy
Procurement Strategy - the determination of which items of equipment should be
issued for firm quotation (major equipment items) and which items will be costed on
the basis of budget quotations, historical/database information or by other techniques
(minor equipment items).
Construction Input
Material Take-off formats
Indirect Costs (Common Distributables and EPCM Services)
Escalation
Contingency and accuracy
the determination of which items of equipment should be issued for firm quotation
(major equipment items) and which items will be costed on the basis of budget
quotations, historical/database information or by other techniques (minor equipment
items).
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
Qualifications and Exclusions
Roles and Responsibilities Matrix
Estimate Reviews
Final Report
3.3 Site Visits
Site Visits may be required to establish better Engineering, Procurement, Construction and
cost information in order to assist in the project design and planning to support the estimate.
The site visits are decided by the Project Manager based on consideration of the commercial
contract, budget and the need for the data to be collected. The Site Visit team normally
consists of the Project Engineer, Estimator and a representative from Construction. If an
Estimator does not participate in a site visit, he will request those making the trip to collect
cost data on his behalf, based on a detailed list provided by the Lead Estimator. (For further
information on Site Visits, refer to Cost Estimate Site Visit Guideline PDP-0030).
3.4 Estimating System
3.4.1 System Overview
The Lead Estimator will determine the estimating system to be used in producing the Class 3
estimating. The Estimating System currently adopted in KEIPL is called “Quest”. This is the
mandatory estimating system to be used for all Class 2, 3 and 4 estimates. The system is
available on the WOW under System Group. New estimators will have to request permission
from the KEIPL Estimating Manager. All support, training and initial set up will be provided by
the Corporate Estimating Group, which resides out of Melbourne (Australia).
There are times, when a preferred customer system may have to be used, due to their unique
reporting and integration to other internal customer systems. This is acceptable as long as it
does not break the estimating work processes presented in this document. It is preferred to
work in Quest and any integration issues should be referred to the Business Systems Group.
Quest can be tailored to customer needs, and those have to be clearly identified up front in
order to structure Quest appropriately.
3.4.2 Quest Overview
Quest is a multi-user and multi-currency system, which can be operated across WOW in a
virtual office environment.
Quest is a flexible tool that allows changes to quantities, unit pricing, unit job hours and the
like, at any time during the preparation of the estimate. The system provides for the
development and storage of “tables” of standard estimating information. The tables comprise
a set of files which store the following information:
Facility and Commodity Descriptions
Standard Material Unit Prices
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
Standard Installation Unit Job hours
Freight Bulking Factors
Hourly Rates and Productivity Rates for each Labour Craft
Labour Crews and Labour Craft Composition
Construction Equipment Details and Rates
Currency Codes, Descriptions and Exchange Rates
Port of Export Details and Freight Rates
The system can be operated in single user or shared multi-user environment on a range of
computer hardware platforms and operating systems. On completion of the estimate, the
estimating system interfaces directly with KEIPL. In Control cost control system and provides
for transfer of estimates, which can become control budgets at a consolidated level of detail.
(For further details of Quest, please refer to the Quest Overview Document, or the training
manual loaded on WOW under system group, Quest Estimating System).
The KEIPL overall estimating process is illustrated in below.
3.5 Estimate Schedule
The key dates and milestones (i.e. engineering cut-offs, reviews etc.) of the estimate
schedule are normally established early and presented in the estimate plan at the estimate
kick-off meeting. It is important the Lead Estimator has a thorough review of the steps
required to complete the estimate and in doing so, prepare a bar chart showing the estimate
input required and their dates and durations. The development of the schedule normally
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
requires coordination with the Project Manager, Lead Engineers, Procurement and
Construction.
Typical information should include:
Engineering input to the estimate broken down by discipline.
Pricing data from Procurement
Data to develop direct costs from Procurement, Industrial Relations and Engineering
personnel.
Estimate preparation breaking down, direct costs, indirect costs, reviews and final
estimate preparation and presentation.
Estimate Reviews
3.6 Establishing Estimate Structure and Project Code of Accounts
3.6.1 General
The Lead Estimator in conjunction with the KEIPL Estimating Manager will be responsible to
develop the project code of accounts as one of the pre-estimate activities. This consists of
developing the direct cost facility codes, indirect codes and respective commodity codes.
Normally the direct cost facility codes are tailored for the plant and are driven by the
customer. The commodity codes are a standard set of codes specified by the KEIPL
Corporate Estimating Group. It is mandatory to use these codes, as it brings uniformity
across other estimates, and helps streamline a common approach and enables to share data
and compare to historical information. Copies of the commodity codes are available from the
KEIPL Corporate Estimating group.
3.6.2 Code of Accounts
The “code of accounts” is the framework representing and applied to the project WBS, used
to facilitate the systematic control of scope, cost and schedule. The project costs are
segregated into facilities (numeric) and commodities (alpha –numeric) for ready identification
and logical grouping of cost items. The code is used for sorting information to permit
visualizing the project scope and for translating engineering concepts into quantities and
costs. It provides the framework for preparing estimates, project budgets, cost monitoring,
forecasting, benchmarking and controlling costs during construction. (For further detail
please refer to Standard Estimating Code of Accounts guideline for further guidance.)
A brief definition of Facility and Commodity codes are described below.
Facility Code
Portion of the Code of Accounts that identifies the geographical area or system component of
the project. (Refer to Standard Estimating Code of Accounts Guideline PDP-0014 for further
detail).
Commodity Code
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
A portion of a cost code to provide a segregation of cost. Generic product (or activity) type,
the production of which may involve a number of trades. For example, the commodity
“concrete” requires the services of carpenters, steel fixers and concrete trades for its
production. (Refer to Standard Estimating Code of Accounts Guideline PDP-0014 for more
detail.)
3.6.3 Estimate Components
The components of an estimate are broken down into two major categories, direct and
indirect costs.
3.6.3.1 Direct Costs
Direct costs are the permanent facilities and services required for their installation. Further
subdivisions of these costs are broken into facility and commodity codes as described above.
The direct costs include plant equipment, bulk materials, manual labour, sub-contractor costs,
freight and vendor representatives.
Plant Equipment includes the mechanical, electrical and instrumentation components of a
plant, which are either shop assembled, modularised or pre-assembled on site.
Bulk Materials are those materials, such as rebar, pipe, wire and cable, concrete, light steel
etc, which are purchased based on quantity.
Installation refers to the manual labour and sub-contractors costs to install or erect the direct
materials both plant equipment and bulk materials.
3.6.3.2 Indirect Costs
Indirect Costs are the costs associated to support the purchase and installation of the direct
costs. This group includes the materials and services required for field construction, but not
incorporated into or accounted for as part of the permanent facilities (Direct Costs). A
standard set of indirect codes with detailed descriptions on what is included in each account
are found in the Standard Estimating Code of Accounts Guideline PDP-0014).
The main type of costs includes:
Temporary Construction Facilities, covers temporary buildings and infrastructure,
work areas and bays, temporary roads, walkways and parking areas, temporary
buildings, temporary utilities, transportation facilities, weather protection, general
purpose scaffolding, cribbing and dunnage and minor temporary construction.
Construction Plants, includes aggregate crushing plants, concrete batch plants and
fabrication facilities.
Construction Support covers general and final site cleanup, material handling and
warehousing, manual labour training and testing, security, medical, soil testing,
survey, operation and maintenance of facilities.
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
Construction Equipment and Consumables, covers construction equipment (customer
furnished), small tools, maintenance of equipment and tools, fuels and lubricants,
consumable supplies and medical and safety supplies.
Pre-Operational and Commissioning Assistance, covers pre-operational testing, start-
up, plant modifications,
Manual Labour Allowances covers inductions, manual labour transportation, non-
productive labour costs, R&R travel costs, manual labour living allowances and
project bonuses.
Material Transportation and Storage Costs include air freight, ocean freight, shipping
agents expenses and fees, marshalling and demurrage.
Project Accommodation covers camp construction and camp operation and
maintenance costs.
EPCM Services covers engineering, procurement, construction and project
management, 3rd party consultants and all costs associated for the Home and field
office, overheads, fee etc.
Escalation is an allowance to anticipate future changes from the costs used in the
estimate details. The estimate details are included for present day costs.
Contingency is an allowance to cover costs which is based on past experience and
expected to be encountered, but which is not possible to identify at the time an
estimate is prepared.
Owners Costs
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
4. ESTIMATING METHODOLOGY
4.1 Pricing General
All costs to complete will be in the base date of the estimate and in the currency of the
country, with appropriate escalation applied to project completion.
The exchange rates for the main study should be nominated by KEIPL, and approved by the
customer. Any exchange variations that may occur from the base date of the estimate and
onwards will need to be addressed by the customer in their economic modelling or
procurement strategy.
The estimate will be prepared based on native currencies which will be expressed in the
country of origin, based on the following exchange rates:
Australian Dollar Other Currency
A$1.00 = TBA US Dollars
TBA UK Pounds
TBA European Euro
TBA Japanese Yen
4.2 Contracting Strategy
The Capital Cost Estimate can be based on an Engineering, Procurement and Construction
Management (EPCM) or EPC strategy. Therefore, appropriate allowance should be made in
the Capital Cost Estimate to allow for EPC or EPCM contractor profit and returns.
4.3 Quantities
Quantity developed is the key step in successfully completing a Class 3 estimate. A basic
guideline of deliverables needed for a Class 3 estimate is outlined in the Estimate
Classification Guideline. It is important the quantities for a Class 3 estimate are determined
accurately and in the line with KEIPL commodity code structure. The quantities set the
foundations for determining material pricing, installation hours and scope for subcontractors,
fabrication shops and turnkey packages to determine a good fixed or budget quotation. In
Section 5.0, Engineering Deliverables will be explained in more detail by discipline.
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
All quantities will be taken off as neat quantities, without allowances buried in the details.
Certain allowances will be picked up in the actual rates that are applied to the quantities
received from engineering, and other allowances such as design allowances will be included
as part of the engineering review process. Only allowances that are not shown on a drawing,
but is known to be normally included for complete design should be included.
Standard material take-off sheets can be obtained for most bulk material commodity accounts
from the KEIPL Corporate estimating group. In most cases, these material take-off sheets
should be attached to the estimate plan for engineering to use.
Estimating and Engineering will establish the level of detail of quantity development required
for the estimate, for each facility and commodity code. The level of detail should be
consistent to the estimate classification and intended use. Enough detail must be provided to
suit the estimator’s needs without burdening insignificant details. The estimator will assess
the information provided and summarize the material take-offs into meaningful estimate
entries by facility and commodity.
Quantities by commodity code shall be developed by engineering from scope documents
provided by the customer, using drawings, sketches, P&ID’S. All bulk material quantities shall
be given to the estimating team by facility and commodity. These quantities may be
compared with quantity information available from previous material requisitions, purchase
orders, contracts and actual historical costs where appropriate.
The estimator will verify the completeness and accuracy of the data received, before entering
it into the estimating system.
4.4 Equipment and Material Pricing
In preference, and where appropriate, pricing rates for plant, equipment and bulk materials
shall be based on budget or bids received from suppliers. For a Class 3 estimate, these will
be obtained through the Procurement group. Engineering will prepare the datasheets and
technical information and pass it to Procurement in order to send out enquiries to appropriate
vendors. As the vendor quotations are returned back to KEIPL it will be reviewed in
conjunction with Engineering and Procurement in order to ensure we are buying it for the right
price and it complies technically. Where information is not available, pricing information will
be obtained from KEIPL’s in-house database and escalated appropriately.
Rates and pricing for equipment and materials shall reflect ex works delivery and local freight
FAS at port of export, included within the vendor’s scope.
Plant equipment pricing as a minimum, should include the equipment price (by currency) and
quantity by equipment tag number, exchange rate, freight costs, duties and taxes and vendor
representative day rates.
For Australia only, equipment shall be referenced via tag number where available, and shall
exclude Goods and Services Tax (GST).
4.5 Freight
Estimated costs for ocean freight and inland freight to site can be developed for each relevant
estimate item separately from material supply pricing. Freight revenue (or bulk) tonnes can
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
be developed and stored in the estimating system. Where applicable, freight tonnes may be
developed by estimating system as the product of the estimated quantity and a bulking factor
for the given commodity. Alternately freight tonnes may be developed and entered directly for
each appropriate estimate item.
Another alternative is to have a procurement traffic and logistics expert, work out the total
freight costs for the project. This needs to be organised and agreed at the estimate planning
phase to ensure the total freight components are picked up.
For domestic projects, the cost of freight should be included in the pricing of mechanical
equipment, but identified separately for parametric purposes. Other costs such as duties,
taxes etc would be expressed as a percentage from mechanical equipment and bulk
materials, based on the regulations of the country the project is being built. Where equipment
pricing is not available, generally for domestic projects, 3 – 5% is applied on total material
cost.
For International, remote projects with a more extensive freight scope, a procurement traffic
and logistics person should be appointed in order to calculate the total freight cost. This will
be suitable checked at the end of the estimate against similar projects and historical data.
The scope of freight would normally include the following:
Location
Scope and Execution of the project
Source of Materials and Equipment
Traffic and Logistics plan
Warehousing
Special Handling
To the points listed above, a consideration of market conditions should be evaluated and
incorporated to the total freight cost. That is, in a depressed economy, with a low, competitive
pricing structure. Freight will be a higher percentage of material cost than under other
economic conditions. The freight factor will be generally in the range of 5 to 15 percent of
material cost. For domestic projects the range is 3 – 5%, and for remote sites is between 5 –
15% of material costs.
For further detail please refer to the Freight Costs Guideline PDP-0026.
Special note needs to be made of the items that are to be pre-assembled off-site, so that
freight pricing can be estimated to include this.
4.6 Contract Labour Pricing
4.6.1 Manual Labour Productivity
To develop manual labour man-hours for a Class 3 estimate, it is important to understand
productivity. Project productivity is evaluated by comparing to a set of standard unit man-
hours. These standards will have to be developed for each country, in order to obtain a
consistent yardstick. In Australia we are already utilizing a base line, based on history,
estimators experience and developing rates from first principles. To formalize this approach a
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
unit man-hour book will be developed in the future, which will align to KEIPL’s standard
commodity codes. This productivity is applied as a factor (ie 1.5 of standard rate) to our
standard set of unit man-hours.
Productivity is influenced by a number of factors which may include the following:
Labour skills
Availability of labour
Remote sites
Market availability
Weather (normal)
Supervision
Non-productive time, permits, safety, inductions and waiting time for materials
Selection of contractor
Construction methods
Brownfield work
Greenfield work
Modularization and pre-assembly methods
Work week
Site access
Height or depth
Design complexity
Shutdowns
Tie-ins
Crew mix
Language and culture
Demolition work
Contract type ie performance incentives, direct hire, lump sum etc.
Labour productivity and crew mixes for onsite and offsite works will be based on historical
data from recent projects.
The data necessary to evaluate productivity could be sourced from the following:
Actual return data from projects and construction
Historical and current projects in the region or under similar conditions
Site visit report
Information from Industrial Relations
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
Richardson’s and other reference material or publications
Trade publications
4.6.2 Installation Man-hours
The unit man-hours are the quantity measurement unit for installation labour. In a typical
estimate, only onsite hours are shown. Even for a turnkey package, hours should be shown
with the corresponding labour cost. It is important to show these hours, as they impact the
following:
Project Schedule
Camp size
Camp Operations and Maintenance
Peak manning
Contracting strategies
Temporary facilities on-site
Common distributables
Construction costs
Future labour cost monitoring ie quantity against hours installed
Future Claims or Variances to scope
Safety gear and equipment
Medical supplies
Tools and consumables for Construction
Project accommodation ie housing and hotel requirements
Manual labour transport, ie bussing, airfares etc
Rest and relocation costs
Construction support required, ie security, janitorial, etc
All fabrication and offsite hours are included in the all up rates by commodity code or total
cost, or shown in the estimate description field.
Unit man-hours for installation of equipment and materials are developed by the estimator for
each commodity with support from Construction and previous projects or actual return data.
Where possible, first principle estimating techniques will be used to crew up the level of work
required to install equipment or bulk material items. The installation hours should include the
efforts for all crafts or trades involved, which includes handling the item from storage,
assembly, positioning, aligning etc, right through to complete installation. Caution should be
exercised in the build up man-hours to ensure it is compatible to the degree of field fabrication
required. These hours should be discussed and agreed with Construction to assure the
estimate reflects the execution plan and intended construction methods.
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
Depending on the project location, complexity, or whether it is a Brownfield or a Greenfield
site, adequate productivity will need to add to the standard unit man-hours to reflect the work
to complete. For further detail and explanation on productivity, refer to the previous section
4.6.1 under manual labour productivity.
4.6.3 Manual Labour Rates
The weighted composite contract labour pricing per hour should be based on existing site
agreements, enterprise bargain agreements or utilizing in-house historical data. This will be
compared with similar projects for each type of craft and construction as a check for
reasonableness. The labour pricing will reflect the project work week and other site
conditions, within the country the work will be performed.
Projects in North America and Australia perform work using unions. The labour rates are
generally governed by site agreements or controlled by a labour or Enterprise Agreement. In
countries such as Asia, manual labour rates are much cheaper, however hours should be
visible in the estimate, as it does impact certain construction costs on a project that may be
dependent on number of men, ie camps, bussing etc.
A sample manual labour rate calculation sheet is attached in Appendix 2. For a Class 3
estimate in Australia, it is advisable the trade or craft rates be checked through the Chamber
of Commerce or an Industrial Relations consultant. Manual Labour rates are sometimes
market driven, so a consultant within the country, with local knowledge of current projects in
the area is highly recommended to achieve the correct accuracy of the estimate.
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
Composite labour rates will be developed for each type of construction ie earthworks,
concrete work, steel erection, etc. These composite rates will be based on pay rates and
crew mixes in the estimate data base. Where a mix of nationalities occur on one project site
the Expat or local mix, will have to be broken down by nationality and currency in order to
obtain the correct crew mix.
A labour rate calculation is mandatory for all Class 3 estimates, particularly in North America
and Australia. It does vary between EPC (Direct Hire) and EPCM projects.
A typical manual labour rate by craft or trade for an EPCM project would include the following:
Base Wage (base work week needs to specified)
Allowances, which may include industry allowances, special allowances, tool
allowances, license allowances, leading hand allowance.
Adjusted site work week, overtime, Rostered Days Off, shift premiums etc.
Location Allowance
Site Allowances
Living Subsidies
Grievance Allowance
Statutory Holidays
Sick Leave
Annual Leave
Rest and Recreation allowances
Incentive or Bonus Payments
Redundancy\Severance pay
Long Service Leave
Superannuation
Income Protection Insurance
Payroll Tax
Workers Compensation
Meal Allowance
Travel Allowance
Please note that the above categories may change according to the country or state within
North America and Australia that the work will be executed.
A typical manual labour rate by craft or trade for an EPC project (mainly for North America)
would include the following:
Base Wage Rate (base work week needs to be specified)
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
Overtime and Shift Premiums
Travel Time
Non-Productive Time (Safety meetings, inductions etc)
Work Operation Premiums (Height, dust etc)
Health and Welfare
Pension
Annual Leave
Statutory Holidays
Sick Leave
Bonuses
Union or association funds
Travel and Subsistence
Insurances
Taxes
Sometimes profit
Camp and catering costs, small tools and consumables, overhead costs and profit should
generally be estimated and monitored separately not be included in the manual labour rate.
4.6.4 Sub-Contractors Costs
Contractors’ deliverables can be developed as a percentage of contract manual labour costs
by major commodities with the support of historical data. These rates cover construction
equipment and other support required to support and deploy installation labour. Cost
components covered by these rates include:
Temporary facilities including Mobilisation and Demobilisation
Maintenance of temporary facilities and equipment
Ownership and operation of construction equipment
Tools and consumables
Site office operation
Staff and Supervision
Home Office & corporate overheads
Profit
Ideally, the other method to obtain sub-contractor costs is to produce a detailed definition
provided by Construction in order to obtain a price based on the categories above. The
other is to utilize past project information and adjust it accordingly to suite the execution
plan of the project.
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
4.7 Allowances
4.7.1 Design Allowances
In preparing a capital cost estimate, it is rare occasion when everything is known, specified
and measurable. Design allowances are applied at the direct cost level, to compensate the
degree of engineering complete and quotations used at this level of estimate.
Past experience by the project team will be applied, to provide some measure to fill the gap at
the direct cost level. In a Class 3 estimate, design allowances can range between 3 -5% of
total direct cost, depending on the information provided by the customer and the quality of
historical data used.
Design allowances are considered a known and definite requirement when preparing the
direct costs, as they are historically based and lift the material take-offs and material pricing to
more accurately reflect what the final design will require.
Design allowances are addressed, when engineering have reviewed the scope and quantities
of the estimate. The Lead Estimator facilitates the process by using a design allowance
format. Refer to Appendix 1. This is a matrix by area and major commodity level. The
Estimator utilizes this sheet to seek input from the Lead engineers and procurement.
For further detail please refer to the Design allowances guideline.
4.7.2 Other Allowances
Costs associated with wastage, over pours, loss and damage will be included in unit rates as
allowances; not in measured quantities supplied by Engineering.
Percentage allowance will be used to estimate costs of pipe supports, pipe testing and
inspection, mechanical bulks and the like.
Allowances for NDT testing and stress relieving etc will be covered by estimating as a
percentage of total pipe quantity and cost.
Allowances for cost growth for minor scope changes, scope and estimating omissions, quality
of bids and budget pricing, market forces and the like are to be included in contingency, not in
direct costs.
4.8 Common Distributable
Common distributable costs are materials, equipment services and utilities provide to the
project which are not specific to any one subcontractor. Where similar items and services are
attributable to one contractor, these costs are to be charge to contractor distributable costs.
Common distributable costs also cover scope provided to the project by the EPCM contractor
in support of the project.
Material and labour costs which cannot easily be identified with specific direct work operations
in the construction of a plant and are either supporting services by nature or apply in such a
way to several direct operations that a convenient allocation to each separate operation
cannot be readily be made. Examples are temporary roads, camp operation and maintenance
etc. This is commonly addressed as part of the indirect cost account. A detailed coding
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
structure with full definitions can be found in the Standard Estimating Code of Accounts
Guideline.
For a Class 3 level estimate, this would normally be scoped out and quantified by Engineering
and Construction. This will normally reflect the execution plan adopted by the project,
particularly field construction. After the estimate is complete this will be compared to similar
projects and parametrically checked against historical data.
4.9 Engineering, Procurement and Construction Management
Estimates for the EPC or EPCM services will be established by discipline engineers,
procurement, project management, construction and project controls using InControl to
generate the relevant CTRs. These CTRs should encompass the scope of work and detail
resources, rates and deliverables required to complete the works.
Separate estimates will be prepared for office communications, reproductions and supplies,
office furniture and equipment, computer hardware and software, vehicles, outside services
and the like to match the above organisation. These will be spilt between the project and field
office. After completion of the estimate the total EPCM services will be checked against
similar projects and current historical data.
The costs for the Project Managers’ Engineering, Procurement and Construction
Management services include for:
Production Engineering
Detailed Design engineering
Secondary consultants
Project Management Services
Project management and non-technical support
Project Controls
Procurement and Contracts
Inspection and Expediting
Finance and Accounting
Safety and Employment Relations
Human Resources
Document Control
Construction Services
Construction management
Field Engineers
Field Project Controls
Field Procurement
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
Field Safety
Field (IR)
Other Costs
Overheads
Fee
Business Travel , Accommodation and En-route expenses
Office expenses, photocopiers, faxes etc
Rental, Office fit-out and furniture
Stationary, printing and photocopying etc
Communications (telephone, fax, couriers, postage)
Information Technology setup, hardware and software
Other Employee costs, such as, mobilisation / demobilisation, R&R,
Fringe Benefit Tax, Foreign Taxes and Payroll Tax
Statutory On Costs (Annual Leave, Public Holiday etc)
Workers Compensation and Insurance
This information will be incorporated into the final estimate as single line items and split
between project and field office.
4.10 Escalation
Escalation may or not be included in the estimate. This needs to be qualified by the customer
as part of the initial project and estimate kick-off meetings.
The three main elements needed to prepare escalation for Class 3 estimates are:
Capital Cost estimate, which is broken down by labour, bulk materials, plant
equipment and sub-contractor costs.
Project Schedule
Yearly escalation rates to apply to all categories of the estimate
4.11 Contingency
In preparing a capital cost estimate, it is a rare occasion when everything is known, specified
and measurable. To complete a capital cost estimate for a project, one must provide for that
which is not fully known, specified or measurable as well as that not foreseen in order to
attain a complete cost figure.
The contingency to be added to the base estimate is defined as:
“An allowance for goods and services which at the current state of project definition cannot be
accurately quantified, but which history and experience show will be necessary to achieve the
given project scope.”
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
The assessment of potential cost and schedule overrun and the estimation of appropriate
contingency levels is an important element of capital cost estimates as it typically addresses
some of the major risks to a project.
These risks relate to items such as:
Level of detail of Scope
The level of Engineering completed at the time of the study
Technical Risks for untried or “out of ordinary” process items
Geotechnical Issues
Weather (normal)
Quantity Take-off Detail
Pricing details for bulk materials and equipment
Labour cost and Labour Productivity
Market Conditions
Construction Schedule Issues
Contingency will be developed for the range of risks assessed during the preparation of the
estimate. The risk analysis-contingency program (@Risk) will be used as the tool to assess
the accuracy of the estimate and to calculate the contingency necessary to provide the
required probability of achieving the estimated costs.
The estimator will facilitate the risk process, with input from engineering, construction,
customer, and any other estimate related personnel.
(Please refer to Cost Estimate Classification Guideline PDP-0018 and Cost Risk Analysis
Procedure PDP-0011 for more detail.)
4.12 Owners Costs
These costs are specifically to cater for the Owner, which has not been included elsewhere in
the estimate. Normally this estimate is generated by the customer for the Owner to use in
support to the EPCM or EPC contractor.
These costs generally include:
Owners Team costs, including salaries, travel, accommodation, office costs etc.
Land lease or purchase
Royalties and Fees
Legal Costs
Taxes and Insurances (public and professional liability)
Owners Staff Commissioning costs
Scope Variances
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
Study Costs
Owners Risk
Hedging
Marketing and Sales
Research and Development Costs
3rd Party Consultants
4.13 Estimate Reviews
4.13.1 General
To ensure the estimate meets the deliverables and accuracy required, a progressive checking
process needs to occur during the estimate preparation phase. An estimate review is an
examination and analysis by a group of people to ensure the completeness, methodology,
qualifications and exclusions applied to the estimate. When developing an estimate, it is not
uncommon to have an optimistic view about uncertainties concerning scope and process
issues. The role for the checking team is to find the right balance, be examining the project
data carefully and presenting their findings and amendments, in order to achieve a complete
and accurate estimate.
There are six typical stages in reviewing a Class 3 estimate. The estimate reviews consist of
the following:
Engineering Quantity / Scope Review
Project Team Review
Corporate Estimating Management Review
Business Unit Review
Senior Management Review
Customer Presentation and Review
The flow chart below sets out the sequence and the intended purpose of the estimate
reviews.
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
Estimate Review Flow Chart
DetailedEstimatePackage
Issue toEngineeringfor Review
Quantity/ScopeReview
Issue toEngineering for Review
Project Team
Review
CorporateEstimating
Review
Business Unit
Review
SeniorManagement
Review
ClientReview
Preliminary orDefinitive Estimate
Issue in Detail Level•Major Equipment•Bulk Quantities
Scope Review in Detail:•Estimate Basis•Quantities
Issue in Detail Level:•Major Equipment•Bulks•Pricing•Jobhours•Quantities
Scope Review in Detail•Estimate Basis•Scope Used•Quantities•Pricing•Jobhours•Directs•Distribs•Home Office•Contingency
Scope Review in Detail•Quantities•Pricing•Jobhours•Percentages•Contingency•Comparisons•Home Office•Distribs•Presentation
Packages•Gross Margin
Presentation forAcceptance and
Approval /SetContingency
Presentation forFinal Approval
Presentation forClient Acceptance
and Approval
DetailedEstimatePackage
Issue toEngineeringfor Review
Quantity/ScopeReview
Issue toEngineering for Review
Project Team
Review
CorporateEstimating
Review
Business Unit
Review
SeniorManagement
Review
ClientReview
Preliminary orDefinitive Estimate
Issue in Detail Level•Major Equipment•Bulk Quantities
Scope Review in Detail:•Estimate Basis•Quantities
Issue in Detail Level:•Major Equipment•Bulks•Pricing•Jobhours•Quantities
Scope Review in Detail•Estimate Basis•Scope Used•Quantities•Pricing•Jobhours•Directs•Distribs•Home Office•Contingency
Scope Review in Detail•Quantities•Pricing•Jobhours•Percentages•Contingency•Comparisons•Home Office•Distribs•Presentation
Packages•Gross Margin
Presentation forAcceptance and
Approval /SetContingency
Presentation forFinal Approval
Presentation forClient Acceptance
and Approval
4.13.2 Engineering -Quantity/ Scope Review
This is an evaluation that the estimate accurately represents the project scope defined and
the quantities are what Engineering delivered to estimating for input into the estimating
system. The engineering review is a mandatory requirement and is an integral part in
achieving a Class 3 estimate.
The quantity/ Scope review will evaluate the following:
Ensure estimate detail has been completely and correctly quantified for direct
accounts according to the scope document
Project team review of scope and quantity details for each account
Engineering\Design Costs
Review Major Equipment pricing
Determine non-take off quantities to be incorporated in the estimate (i.e..; small bore
pipe, lighting wire lengths, misc steel)
Determine appropriate design allowances to be applied over and above the material
take-offs received to cover for known unknowns.
Input to Contingency Analysis
4.13.3 Project Team Review
The project team review is a mandatory requirement.
The main purpose for the project team review is to cover the following:
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
Assure project team agreement with the estimate basis, format, scope, and overall
completeness of the package.
Key review elements include:
– Material Pricing
– Manual Labour Unit Rates
– Sub-Contractor Distributables
– Common Distributables
– Design Allowances
– EPCM Home and Field Office Costs
– Escalation
– Contingency
– Owners Costs
Construction methods and man-hour rates
Procurement to check equipment and bulk material pricing
Estimate validation against internal and external benchmarks
Includes engineering, procurement, and construction project team members
4.13.4 Corporate Estimating Management Reviews
This consists of the following:
Ensure the estimate methodology is sound and complete and all normal steps and
precautions are taken.
Internal department review of overall estimate package as an independent check of the
scope, quantities, unit man-hours, pricing, and overall presentation
Review the content and format of the Estimating package.
Rehearse presentation
Align historical and benchmarking information were applicable.
Attendees include Project Manager, Corporate Estimating Manager, and the Lead /Senior
Estimator’s.
4.13.5 Business Unit Review
This consists of the following:
Review of the final version of the estimate presentation package, at a total summary level.
Provide each manager a complete overview of the project in relation to their commitments
and performance expectations to support the project
Concur on the project execution plan
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
Review and fix contingency, fee and policy matters
Approval to proceed with the strategies and recommendations
4.13.6 Senior Management Review
Presentation of the estimate package to the operating company’s president and other
senior managers, by the project manager, using the estimate package approved by
business management.
Meeting results in final approval of the estimate submittal
4.13.7 Customer Review
This meeting is chaired by the KEIPL Project Manager, with the customer’s representative
and the lead estimator as participants. The estimate package is presented to the Customer
representative, using the estimate presentation package as approved by business unit/ senior
management.
The amount of information released to the customer will be decided at the Business Unit and
Senior Management reviews in order to not have any commercial or schedule implications
downstream.
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
5. CUSTOMER ESTIMATE INPUT
5.1.1 Customer Input
Basic information needs to be provided by the customer which may include the following:
Type of Plant
Plant Capacity and basic process
Geographic location
Required Start Date
Preliminary engineering work conducted by KEIPL or the Customer is sometimes made
available to provide additional information and improve the quality of the estimate. The
preliminary work may include the following:
Preliminary process flow sheets
Preliminary equipment list (Major Items)
General arrangement drawings and sketches
Broad assumptions on site conditions and Utilities
Actual return cost data from similar plants
An outline of the Project Schedule
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6. ENGINEERING ESTIMATE INPUT
6.1.1 General Requirements
The detail of the estimate will include all major equipment as well as bulk materials in the
format specified in the estimate kick-off plan, as delivered by the Lead Estimator.
A template Engineering Transmittal for Cost Estimate Input PDF-1006 for the formal
transmittal of information from engineering to the Lead Estimator is provided in Appendix 3.
6.1.2 Plant Equipment
Engineering input for the estimate will include major equipment lists for all permanent
facilities, including mechanical, electrical and control equipment, mobile equipment and
spares.
The equipment lists will include the following data, for items:
Facility Code
Commodity Code
Work pack number
Equipment Tag Number
Quantity and Unit of Measure
Equipment Description
Size, Rating or specifications
Weight
Manufacturer
Motor No/Motor Size (kW) where applicable
Also in order to evaluate freight costs on the equipment it is necessary to include the following
where possible:
Overall dimensions
Mass
Probable country of source
Any pre-assembly (including size of skid and any bulk materials required)
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
6.1.3 Bulk Materials
Engineering will provide bulk material quantities by:
Facility Number
Commodity Number
Work pack number
The supporting documentation for the Material Take-Off sheets will be provided and include:
Layout Drawings
Sketches
P&IDs (ELDs – Engineering Line Diagrams)
Piping Line Tables
Process Flow Diagrams
Mechanical Data Sheets
Instrument list and data sheets
Electrical Single line diagrams
Any pre-assembly (including size of skid and any bulk materials required)
The supporting documentation, stating size, and weight of skid, source of skid.
6.2 Engineering Execution Plan
The following activities and outputs are required from Engineering so as to prepare the Class
3 Cost Estimate. This is by no means an exhaustive list and may need to be added or deleted
as appropriate.
6.2.1 Process
The following are the process activities required to develop the estimate:
Prepare brief process scope and description document to serve as support for the
estimate
Process Flow Diagrams
Prepare Piping and Instrumentation Diagrams (ELDS – Engineering Line Diagrams)
Prepare line lists
Provide process information for new equipment datasheets.
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
6.2.2 Piping\Fittings
Prepare Piping and Fitting Material Take Off - MTO sheets. Where pipes are on a
line list the transmittal must be in Excel format showing facility code, line size, spec,
neat quantity in linear metres measured through centreline of all fittings, short
description, fitting count by type. The line description should indicate whether the line
is normal in plant or rack pipe, or part of a skid preassembly.
Where a line passes through more than one facility it will be coded to the facility
where the flow starts. Where a line passes through a skid a separate line number will
be given to the skid portion.
Where pipe and fittings are to be installed offsite as part of a skid or preassembly, this
must be noted by a designated alpha built into the line list. The Estimator will then
assign special codes and rates for this type of work.
Fitting costs will be calculated as a composite weighted rate for each size and spec
by the Estimator, based on the fitting count by type from the engineer.
Prepare Piping speciality Material Take-off Sheets showing facility code, size, type,
spec quantity.
Prepare Pipe tie in list by type based on a pre agreed diagram of various component
complexities. The diagram must indicate hot tie ins. The tie in list must show facility
code, size, spec, type.
Pipe supports below 100kg in wt will be allowed for by the estimator. Structural pipe
supports greater than 100kg in weight should be in the structural steel commodity
codes.
Pipe sizes greater than DN50 will be assumed to be spooled offsite (shop fabricated)
unless noted otherwise. This will be applicable to Carbon Steel Pipe, whereas
Stainless Pipe will include sizes DN 50 (also) and above. The estimator will identify
separately the quantity of pipe and fittings to be spooled based on the pipe line lists
and Material Take-offs, no input from engineering is required.
Pipe Insulation line lists or Material Take-offs are required showing nominal pipe size,
type of insulation and cladding, thickness of insulation, length in linear meters through
centreline of all pipe, fittings, valves and pipe specials. The Estimator will factor in the
extra cost of insulating fittings in the pipe insulation rate.
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
NDT work costs for the spooled portion of pipes will be allowed for by the Estimator
based on the applicable pipe spec, and the costs included in the spooling rates. NDT
for all site pipe work will be allowed for and identified separately by the Estimator as a
lump sum in each facility based on the final quantity of pipe in each facility, also
taking into account the pipe in skids.
6.2.3 Valves
Prepare manual Valve MTO sheets, showing facility code, engineering valve code,
size
Note Control Valves will be coded to the instrument commodity codes.
6.2.4 Pipeline
The following are the process activities required to develop the estimate:
Undertake route selection and prepare pipeline alignment sheets
Coordinate any geographical, hydrological or other studies required to provide an
acceptable level of definition of the pipeline route, in particular areas of rock
Prepare Material Take-offs
6.2.5 Mechanical
The following are the mechanical activities required to develop the estimate:
Prepare brief mechanical scope of work document to serve as support for the estimate.
Coordinate and prepare major mechanical equipment list by tag number.
Prepare equipment list in an excel file format, suitable for importing into the “Quest”
estimating system. The equipment list will be accompanied by a hard copy, with a
signed transmittal advice, revision stamped and listing any attachments.
Prepare transmittal templates from engineering which will identify any unusual
problems or special construction techniques that are envisaged which will affect the
use of standard installation hours. For example, height, complexity, restricted access,
long reach or heavy lift cranage etc. The transmittal format can be obtained from the
Corporate Estimating Group. Refer to Appendix 3.
Prepare equipment data sheets for major items of equipment for delivery to vendors for
budgetary price inquiry. Identification and contact of vendors should be coordinated
through procurement personnel.
Obtain and compile pricing information from past projects, request budget costs or
prepare bid evaluations from Vendors (with the support from Procurement). This
information will be used as supporting documentation for the estimate.
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
6.2.6 Civil/Structural
The following are the civil/structural activities required to develop the estimate:
Prepare brief civil/structural scope of work document to serve as support for the
estimate
Prepare MTO for site works (if required)
Prepare MTO for earth works (for foundations and trenching)
Prepare MTO for concrete (foundations) and piling
Prepare MTO for structural steel
Prepare MTO for buildings
Obtain and compile pricing information from recent orders or request budget costs from
Vendors (with the support from Procurement). This information will be used as
supporting documentation for the estimate.
6.2.7 Electrical
The following are the electrical activities required to develop the estimate:
Prepare brief electrical scope of work document to serve as support for the estimate
Prepare major electrical equipment list with load ratings
Prepare Material Take-off (MTO) for cable and terminations
Prepare Junction Box location and Electrical item location plans
Prepare MTO for cable ladder
Prepare MTO for lighting
Prepare MTO for communications cable
Prepare MTO for earthing
Prepare electrical data sheets for major items of equipment for delivery to vendors for
budgetary or bid evaluation price inquiry. Identification and contact of vendors should
be coordinated through procurement personnel.
Obtain and compile pricing information from recent orders or request budget costs from
Vendors (with the support from Procurement). This information will be used as
supporting documentation for the estimate.
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
6.2.8 Instrumentation and Control
The following are the instrumentation and control activities required to develop the estimate:
Prepare brief instrumentation and control scope of work document to serve as support
for the estimate
Prepare Instrument Index.
Prepare DCS/SIS equipment architecture upgrade plans.
Prepare MTO of instrument types and budget pricing coordinated through Procurement
Group
Prepare MTO of bulk materials to be installed.
Prepare Control Valve and PSV MTO sheets showing facility code, valve description,
size and rating.
6.2.9 DCS Applications
The following are the DCS Applications activities required to develop the estimate:
Prepare DCS Applications vendor specification for hardware and software configuration
for budgetary price inquiry. Inquiry documents and pricing to be co-ordinated through
procurement.
Prepare brief DCS Applications construction scope of works specification to serve as
support for the estimate.
6.2.10 Communications and SCADA
The following are the communications and SCADA activities required to develop the estimate:
Prepare brief communications and SCADA scope of work document to serve as
support for the estimate.
Prepare SCADA equipment listing and schematic
Prepare communications and SCADA data sheets for major items of equipment for
delivery to vendors for budgetary price inquiry. Identification and contact of vendors
should be coordinated through procurement personnel.
Obtain and compile pricing information from recent orders or request budget costs
from Vendors (with support from procurement). This information will be used as
supporting documentation for the estimate.
6.2.11 Analysers
The following are the Analysers activities required to develop the estimate:
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
Prepare Analysers vendor specification for hardware and software configuration for
budgetary price inquiry. Inquiry documents and pricing to be coordinated through
procurement.
Prepare brief Analysers construction scope of works specification to serve as support
for the estimate.
6.2.12 Skids
Engineering will provide clear identification of all bulk materials and equipment contained
within a skid which is assembled offsite. The quantities will be by:
Facility Number
Skid identifying number or alpha
Commodity Number (assigned by estimator)
The supporting documentation, stating size, and weight of skid, source of skid.
6.2.13 Painting\Surface Treatment
Engineering will provide clear identification of all materials and equipment which will require
painting or galvanising. The quantities in square metres will be calculated by the Estimator
based on the quantities of steel, pipe etc submitted by the engineers for each commodity. The
Estimator in consultation with the engineer\contracts may choose to include the painting as
part of the normal commodity code or as line items in a discrete painting code. For example,
the galvanising of steel would remain as part of the steel commodity account, whereas the
painting of a site built tank may be coded under the painting account as the painting contract
may be separate from the tank contract.
A method statement will be prepared by the engineer outlining how painting costs will be
captured for each applicable commodity.
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
7. PROCUREMENT ESTIMATE INPUT
Vendor Quotes\Bid Analysis
-Major Plant Equipment\Subcontracts
-Selected Bulk Materials
Vendor Quotes
-Plant Equipment
-Bulk Materials
Vendor Representative Rates and Expenses
Freight Rates
Taxes, Duties and Insurances
Procurement Manning Charts
Market Pricing and Escalation Analysis
Lead Times on Major Equipment
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
8. CONSTRUCTION ESTIMATE INPUT
Construction Plan
Manual Labour Rates and Work Weeks
Manual Labour Productivity
Temporary Facilities
Construction Support and Equipment
Special Rigging Requirements
Pre-Commissioning and Startup Definition and Manning
Safety Program
Labour Relations Agreement
Constructability Plan
Construction Non-Manual Manning Charts
Input to Construction Schedule
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
9. HISTORICAL DATA
9.1.1 Using Benchmarking and Historical Data
In the future, a KEIPL benchmarking tool will be developed and made available to assist in
reviewing a Class 3 estimate at the define phase. Published information is available, and can
be used, however its accuracy is not always known. In house databases are preferred, as the
basis of cost is qualified and understood to make appropriate adjustments. Comparing capital
cost estimates requires costs of similar past projects and requires adjustments for the new
location, time period and infrastructure, which usually requires judgement or well defined
adjustment factors.
9.1.2 Pro-ration Estimates
Pro-ration estimates are a quick way to determine the cost of a specific facility or commodity
to check for reasonableness, as long as it meets the following requirements:
Need Historical data or recent costs on a similar plant and process
Must be near duplicate
Should be reasonably close in size
Adjust for off-sites and utilities
Adjust for project execution differences
Adjust for escalation and for location
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
10. ESTIMATE PRESENTATION FORMAT
Currently under development
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
11. DOCUMENTATION BASIS FOR ESTIMATING
It is very important that the defined scope and the various inputs for the estimate preparation
are captured and included in a reference document. This assists in controlling the scope for
the next phase and identifying where and why changes to the project cost have occurred. The
lead personnel identified are responsible for ensuring the scope assumptions and
qualifications, and design deliverables are forwarded to the Lead Estimator to enable
compilation of the Estimate Basis.
This would include the following:
Scope document
Material Take-offs
Copies Equipment and Bulk Material Pricing
Labour Rates Build up and Crew Mixes
Sub-Contractor Costs
Common Distributables Costs
EPCM or EPC Services backup
Contingency or Risk Assessment
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
12. RESPONSIBILITY TABLE
Detailed below is a responsibility matrix for the estimates. It lists the data required for the
successful completion of the estimates and the responsible department/person for supplying
that data.
The data will be transferred to the estimators and will generally include:
Scope descriptions
Material Take Offs (MTOs) for bulk materials
Bid summaries for equipment
List of reference drawings and sketches
Correspondence
Equipment lists
Budget pricing (where applicable)
Scope Responsibility
1. Scope Definition, Documentation and Execution Strategy Team Manager
2. Quantity and Pricing Development
Major Equipment
Equipment list of all process, utility, and specific site support
plant identifying necessary information and design data,
design allowance percentage for quoted items and spare
parts. Prepare existing data sheets to issue to Procurement
for reconfirmation of equipment pricing.
Engineering
Prices quoted by vendors, current market pricing information,
inland and ocean freight rates and related data for shipment
of equipment, import duties if required, vendor representative
rates and expenses
Procurement
Construction and installation methods and schedules, labour
availability and productivity information.
Construction
Labour rate information. Estimating
Sales and other taxes, foreign currency issues and import
duties.
Procurement\Estimating
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
Scope Responsibility
Major equipment estimate, including review of scope,
material and labour pricing.
Estimating
Bulk Quantity Development
Development of the various levels of scope including take-
offs.
Engineering
Methods used to develop quantities Estimating
Contracts
Contracting Plan Construction\Contracts
3. Field Manual and Labour Pricing
Establishing and updating field installation labour hour
standards.
Estimating
Manual labour productivity, wage rates and craft mixes
evaluation.
Estimating/Construction
Establishing composite wage rates and the application of
standard labour hours and productivity.
Estimating
4. Contractors and Common Distributable
Preparation of Distributables Estimate. Estimating
Definition of temporary field facilities, utilities, construction
support services, construction equipment, tools and
consumables, field non-manual staffing requirements,
manual labour rates and productivity.
Construction\Engineering
5. Services Estimate All
Engineering job hours, other direct costs. Engineering
Department Estimate of hours and other direct costs. Department Managers
Total cost of EPC. Team/Estimating
6. Escalation Analysis
Escalation rates Estimating
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
Scope Responsibility
Instructions and information to the estimating team
concerning operations policy on escalation rates, indexes
and projections.
Estimating
7. Contingency Analysis
Development of estimate and the best measure of potential
variance in project costs.
Team
Final estimate figure. Management
8. Estimate Reviews
Engineering Review (Quantity/Scope)
The Quantity Review meeting is held to ensure the estimate detail has been completely and
correctly quantified for all direct account categories according to the scope document. This meeting
is a team review of scope and quantity details for each account, and it is a key review of the direct
account quantities where agreement on the total package must be reached among all attendees.
The estimate detail sheets that are to be reviewed must be issued to engineering at least two
working days before the meeting, to provide sufficient time for independent reviews.
Customer Review
This meeting is chaired by the KEIPL Project Manager, with the customer’s representative and the
lead estimator as participants. The estimate package is presented to the customer representative,
using the estimate presentation package as the approved by functional management.
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
Appendix 1 – Cost Estimate Classification Guideline
PDP-0017
CAPITAL COST ESTIMATE CLASS 3 -ONSHORE GUIDELINE
Appendix 2 – Manual Labour Rate Development Guideline PDP-0029