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# Institution of Chemical Engineers
www.catchword.com=titles=02638762.htm Trans IChemE, Vol 80, Part A, September 2002

NEW FACTORS FOR CAPITAL COST ESTIMATION IN

EVOLVING PROCESS DESIGNS
D. J. BRENNAN 1 and K. A. GOLONKA2
1
Department of Chemical Engineering, Monash University, Melbourne, Australia
2
Kvaerner E and C, Melbourne, Australia

C
apital cost assessment is an integral part of an evolving process design. The assessment
should consider installed equipment costs inclusive of plant bulk items and not solely
purchased equipment costs. The ratio of installed equipment cost to purchased
equipment cost varies much more widely for individual equipment items than for entire
plants; the ratio depends on equipment class, design, size and construction materials as well as
plant layout. The factored (IChemE) method outlined in the Institution of Chemical Engineers
‘blue booklet’ is of immediate use and provides a basis for checking detailed estimates. Some
experience in the application of the IChemE method by the authors is reviewed. Recommenda-
tions are made for broadening the inputs for estimating, and some factors are proposed for
estimating installed costs of equipment of different classes. Quantitative data are also presented
for cost breakdown in entire plants arising from project reviews by the authors.

Keywords: capital cost estimation; plant costs; equipment costs; factored estimates; Lang
factor.

INTRODUCTION capital cost estimation, there is need for a structured and

logical set of guidelines and supporting data, and a means of
Capital cost estimation is important in the contexts of a
judging the reliability of an estimate.
contractor bidding for a project, and an operating company
The total Ž xed capital cost of a process plant may be
gaining project approval from the board of directors. In each
estimated as the sum of the fully installed costs for each item
case an accuracy of § 10% is a typical target. Such accuracy
of equipment, requiring an estimate of the purchased equip-
demands detailed design by a number of engineering disci-
ment cost and the additional cost of any associated plant.
plines, and requires a detailed estimate accounting for all
The installed cost deŽ ned in this paper includes that of the
materials and labour items.
equipment item purchase, the installation of the equipment
Capital cost estimation is also important in the context of
item (predominantly labour), the foundations and other
developing a process design where the trading of capital and
civils, steel structures and buildings, piping, instrumenta-
operating costs is common. Frequently it is necessary to
tion, electrics, painting, insulation and Ž reprooŽ ng. In
apply cost estimation to sections of plant in an evolving
addition, engineering overheads for design, procurement,
plant design, for example in:
construction and project management are included.
° exploring various purge and recycle options in a reactor= Plant cost estimates which show the breakdown in cost
separations loop; between individual equipment items and various categories
° comparing direct contact cooling of a gas stream with of plant cost are useful for targeting areas for cost reduction,
indirect cooling; and for comparing alternative designs. The breakdown in
° exploring the effect of re ux ratio in distillation. cost categories is also useful for reviewing achieved costs on
completed projects.
The more interactive the activities of process design and
cost estimation, the greater the likelihood of generating a
THE LANG FACTOR
cost-effective design. However, the time and cost required to
perform detailed engineering and translate this into plant The installed cost of an entire process plant is often
cost estimates are seldom justiŽ able in preliminary process estimated in preliminary project work as a multiplier or
designs. Moreover, the § 10% accuracy necessary for factor of the total purchased cost of all equipment items.
project sanction is not warranted at the evolutionary process This approach is appealing to process engineers, since equip-
design phase. ment speciŽ cation is a key task of process engineering and
A greater range of methods and data than currently exists represents an important interface between process design and
is needed to facilitate the interaction of cost estimation and more detailed plant design. The ratio of the complete plant
process design. Even where computer software exists for cost to the sum of the purchased costs of all equipment has

579
580 BRENNAN and GOLONKA

Table 1. Cost distribution for recent Australian industry projects.

Variability (standard deviation= aver-

Cost category Average relative value Standard deviation age)
Equipment 1 – 0
Equipment installation 0.19 0.06 0.32
Piping 0.60 0.19 0.31
Instrumentation 0.23 0.11 0.46
Electrical 0.14 0.08 0.58
Civils 0.22 0.1 0.47
Structural steel 0.14 0.09 0.61
Buildings 0.048 0.075 1.58
Insulation=Ž reprooŽ ng 0.089 0.066 0.74
Painting 0.014 0.011 0.78
Direct plant cost 2.70 0.52 0.19
Engineering and project management 0.25 0.065 0.26
Total project cost 3.40 0.68 0.20

Note: Values may not sum precisely to totals shown due to rounding.

been termed the ‘Lang’ factor1, which is typically in the range IChemE METHOD
of 3 to 5. This has become a common ‘rule of thumb’ and a
The IChemE Method proceeds in a series of steps, as
useful yardstick for chemical engineers.
follows.
The variability in Lang factor between different plants is
typically less than the variability in the factors for cost (1) the purchased cost (C) of each item of equipment in the
categories making up the total cost of those plants. Further plant is determined;
evidence for this is given in Table 1 which shows the (2) the purchased cost (C) is adjusted to an equivalent cost
breakdown in plant costs for 11 Australian projects span- based on carbon steel construction (Cc). This adjustment
ning the late 1980s to the mid 1990s with total capital values
can be made by dividing the purchased cost by a factor
between $20 million and $120 million ($Australian 2001).
These projects are predominantly from oil and gas indus- fm to account for materials of construction, such that
tries. Cost elements (or categories) are expressed as factors Cc ˆ C=fm;
of purchased equipment cost. Means and standard devia- (3) factors are applied to Cc for equipment installation
tions for each cost category have been calculated for the or erection (fb), piping (fp), instrumentation (f i), elec-
eleven plants. A measure of variability in each cost element trical (fe), civil (fc), structures and buildings (fs), and
is expressed as the ratio of standard deviation to the mean. lagging (fl);
The variability can be seen to be lowest for the overall plant (4) the factored costs are added to the purchased equipment
Lang factor, but considerably higher for many individual cost to give a ‘direct plant cost’ (DPC). Thus,
cost categories. DPC ˆ C ‡ Cc (fb ‡ fp ‡ f i ‡ fe ‡ fc ‡ fs ‡ fl);
Values of Lang factor for plants can re ect the type of (5) overhead costs (M) covering engineering and project
project, the characteristics of the process, and the predomi-
management, as well as a contingency allowance (A),
nant phase processed (solid, liquid or gas). The Lang factor
can also depend on the average cost of the equipment items are added as factors of direct plant cost to provide an
used and, hence, plant capacity. estimate of total installed plant cost (IPC) for the item.
Thus, IPC ˆ DPC (1 ‡ M ‡ A);
(6) the procedure is repeated for all equipment items in the
MODIFIED LANG FACTORS FOR SPECIFIC plant;
EQUIPMENT (7) the installed cost for the plant (or section of plant) is
then determined as the sum of installed costs for
A modiŽ ed Lang factor can be used to represent the ratio equipment items in the plant.
of installed cost to purchased cost for a given equipment
item. Each equipment item may be represented on a piping Worked examples of the IChemE method are given in
and instrumentation diagram to provide a module for cost- references 4 and 5.
ing. Hand2 argued that ratios of installed cost to purchased Values of individual factors reproduced from the Institu-
cost for equipment items are distinct for each equipment tion of Chemical Engineers booklet4 are listed in Table 2.
class. Guthrie3 recommended a detailed breakdown of cost While the factors in Table 2 are strictly only applicable to
categories for deriving installed costs from purchased costs. UK costs, the table is useful in several respects.
In a detailed approach outlined in the Institution of
(i) The table offers guidelines for selecting appropriate
Chemical Engineers publication ‘A Guide to Capital Cost
Estimation’4, factors are applied to each individual equip- factors. For example, piping factors are higher for gas
ment item, considered separately, to estimate the installed processes than liquid processes, re ecting the lower
cost of the item. This approach is subsequently referred to in densities of gases compared to liquids, and hence,
this paper as the ‘IChemE Method’. Worked examples of the larger pipe diameters. The guidelines provided in the
IChemE method are shown in references 4 and 5. table are by no means exhaustive, and can be usefully

Trans IChemE, Vol 80, Part A, September 2002

 FACTORS FOR CAPITAL COST ESTIMATION 581

Table 2. Individual factors of equipment items for estimation of installed equipment cost (IChemE5).

Currency Pounds sterling January 2000

Value of individual equipment item as

purchased standardized to carbon Over 100,000 40,000 to 20,000 to 6000 to 3000 to Under
steel basis 300,000 300,000 100,000 40,000 20,000 6000 3000
Purchased equipment item 1 1 1 1 1 1 1
Delivery to site
Installation of equipment item
Much of site erection included in 0.013 0.03 0.04 0.06 0.075 0.09 0.25
purchased cost
Average erection 0.05 0.08 0.1 0.11 0.13 0.15 0.38
Equipment requires some site 0.08 0.1 0.13 0.15 0.18 0.2 0.48
fabrication (e.g. large pumps
require lining up serpentine
coolers)
Equipment requires much site 0.3 0.38 0.45 0.56 0.67 0.77 1.13
fabrication (e.g. large
distillation columns, furnaces)
Piping including installation
Ducting and chutes 0.03 0.05 0.1 0.18 0.28 0.43 0.59
Small bore piping or service piping 0.06 0.13 0.26 0.43 0.69 1.04 1.4
Average bore piping and service 0.16 0.26 0.4 0.66 0.98 1.4 1.76
piping (e.g. mainly liquid piping)
Large bore piping and service piping 0.2 0.33 0.49 0.78 1.11 1.58 1.94
(e.g. mainly gas)
Average bore piping with complex 0.2 0.33 0.49 0.78 1.11 1.58 1.94
system (e.g. much manifolding,
recirculation)
Large bore piping with complex 0.25 0.41 0.61 0.96 1.38 1.96 2.43
system
Multiplying factor for materials as appropriate for piping material speciŽ ed
Steam tracing 1.3 1.3 1.3 1.3 1.3 1.3 1.3
Instrumentation
Local instruments only 0.03 0.04 0.06 0.13 0.24 0.43 0.75
1 controller and instruments 0.09 0.13 0.22 0.34 0.49 0.65 1
2 controllers and instruments 0.13 0.2 0.33 0.45 0.6 0.79 1.14
3 controllers and instruments 0.18 0.33 0.43 0.6 0.77 0.96 1.38
Electrical
Lighting only 0.03 0.03 0.03 0.06 0.1 0.13 0.19
Lighting and power for ancillary 0.09 0.1 0.14 0.26 0.34 0.41 0.6
drives (e.g. conveyors, stirred
vessels, air coolers)
Lighting and power excluding 0.13 0.18 0.25 0.33 0.43 0.51 0.63
transformers and switchgear for
machine main drives (e.g. pumps,
compressors, crushers)
Lighting and power including 0.19 0.25 0.34 0.46 0.6 0.74 1
transformers and switchgear
for machine main drives
Civil
Average civil work, including plant 0.08 0.1 0.14 0.17 0.22 0.28 0.35
and structure foundations,  oors,
services
Above average civil work, 0.15 0.21 0.31 0.4 0.5 0.6 0.85
complicated machine blocks,
special  oor protection, elevator
pits in  oors, considerable services
Multiplying factor for piling 1.3 1.3 1.3 1.3 1.3 1.3 1.3
Structures and buildings
Negligible structural work and 0.012 0.025 0.025 0.04 0.05 0.06 0.08
buildings
Open air plant at ground level with 0.06 0.08 0.1 0.14 0.17 0.21 0.26
some pipe bridges and minor
buildings
Open air plant within a structure 0.14 0.24 0.31 0.41 0.5 0.59 0.74
Plant in a simple covered building 0.19 0.29 0.39 0.48 0.56 0.69 0.85
Plant in an elaborate building on a 0.35 0.48 0.63 0.76 0.9 1.06 1.38
major structure within a building
Lagging
Lagging for service pipes only 0.012 0.03 0.04 0.06 0.1 0.15 0.23

Trans IChemE, Vol 80, Part A, September 2002

582 BRENNAN and GOLONKA

Table 2. Continued

Currency Pounds sterling January 2000

Value of individual equipment item

as purchased standardised to carbon Over 100,000 40,000 to 20,000 to 6000 to 3000 to Under
steel basis 300,000 300,000 100,000 40,000 20,000 6000 3000
Average amount of hot lagging on 0.03 0.04 0.08 0.14 0.21 0.31 0.38
pipes and vessels
Above average amount of hot lagging 0.04 0.06 0.1 0.17 0.26 0.35 0.4
on pipes and vessels
Cold lagging on pipes and vessels 0.06 0.1 0.15 0.25 0.31 0.41 0.56

Table 3. Other considerations for factored cost estimation.

Check list for IChemE method Other considerations

Installation of equipment item
Much of site erection included in purchase cost Equipment weight, height, complexity, fragility
Average erection Number and complexity of internals (trays, catalyst, etc)
Equipment requires some site fabrication (e.g. large pumps require Ease of access; plant layout
lining up serpentine coolers)
Weather, labour productivity and cost
GreenŽ eld=brownŽ eld site
Equipment requires much site fabrication (e.g. large distillation New plant or modiŽ cation to existing plant; if existing plant, extent of
columns, furnaces) availability for modiŽ cation work
Extent of shop assembly
Extent to which unit is packaged
Piping including installation
Ducting and chutes Weight, material, pressure (and temperature) rating
Small bore piping or service piping Extent of Ž ttings, instrument connections
Average bore piping and service piping (e.g. mainly liquid piping) Packaged unit? Some piping included?
Above ground=underground
Large bore piping and service piping (e.g. mainly gas) Height of equipment item
Average bore piping with complex system (e.g. much manifolding, Stand alone=clustered (i.e. shared pipe rack) or addition to existing
recirculation) rack
Large bore piping with complex system Above ground or underground piping.
Multiplying factor for materials Number of branches on equipment
Steam tracing Spacing between equipment=plant layout
Number of valves; valve design, materials, size, complexity
Instrumentation
Local instruments only Packaged unit? Some instruments included?
1 controller and instruments Extent of alarms, trips, interlocks
2 controllers and instruments Transmission
3 controllers and instruments Cost of measuring instrument –
analyser, temperature, pressure,  owrate, level
Computer hardware and software costs
Some materials factors for on stream instruments
Electrical
Lighting only Ground space, equipment height, security=safety
Lighting and power for ancillary drives (e.g. conveyors, Considerations for lighting
stirred vessels, air coolers)
Number of ancillaries requiring power
Lighting and power excluding transformers and Number of starter stations
Switchgear for machine main drives (e.g. pumps, Size of electric motors
compressors, crushers) Spacing between equipment=plant layout
Lighting and power including transformers and switchgear for Plant electrical class or zone e.g. ‘explosion proof’
machine main drives
Civil
Average civil work, including plant and structure Weight, height of equipment
Foundations,  oors, services Wind loadings
Above average civil work, complicated machine blocks, Load bearing properties of soil
Special  oor protection, elevator pits in  oors, considerable services Large momentum components (large, high speed compressors, centri-
Multiplying factor for piling fuges), reciprocating or vibrating machinery
Structures and buildings
Negligible structural work and buildings Opportunity for shared structures between similar items, e.g. columns,
Open air plant at ground level with some pipe bridges and minor exchangers
buildings Size, height, complexity of equipment
Open air plant within a structure Buildings to house noisy equipment

Trans IChemE, Vol 80, Part A, September 2002

 FACTORS FOR CAPITAL COST ESTIMATION 583

Table 3. Continued

Check list for IChemE method Other considerations

Plant in a simple covered building Explosion proof buildings, control rooms
Plant in an elaborate building on a major structure Special provisions for on-site maintenance
within a building
Lagging
Lagging for service pipes only Insulation for noise
Average amount of hot lagging on pipes and vessels Process temperatures
Above average amount of hot lagging on pipes and vessels
Cold lagging on pipes and vessels
Painting
Corrosion protection (function of plant environment)
Surface area of plant. Function of equipment supply
Miscellaneous considerations of general applicability
Single equipment items or items in parallel
Solid, liquid or gas processing
Safety and environmental standards
Operating cost inputs
Utilities consumptions: utility related investment into piping (steam
and cool, water) electrics (electric power)
Prevailing business environment in engineering industry
Home ofŽ ce costs
Design, engineering, procurement, project management Previous experience; extent to which design is duplicated or modiŽ ed
from previous project or is completely new
Capability, experience of engineering team and its management
Productivity, salary, payroll overheads of personnel
Quality and extent of project deŽ nition, especially at commencement
of project
Extent of client, consultant involvement vs autonomy

supplemented as experience and data from projects (a) To estimate direct plant costs for two completed petro-
allow. For example, more precise piping estimates leum reŽ ning projects (A and B). Very good agreement
would re ect the number of connecting pipes to a (within 3% of the actual achieved plant cost) was
vessel, or the spacing between equipment items. A obtained for Project A which was a brownŽ elds site
list of such considerations proposed by the authors is project. However, when an estimate was made using the
provided in Table 3. IChemE method for Project B, a revamp project, the
(ii) Table 2 accounts for the in uence of equipment size or agreement was poor; reasons for the poor agreement are
cost on the value of the factor employed. For example, discussed later when considering cost of revamps.
instrumentation for a small diameter column implies a (b) To estimate factors for a range of equipment categories.
larger factor than for the same instrumentation on a Table 5 summarizes these estimates which have been
larger diameter column. This is to be expected, since derived from the factors and considerations outlined in
the instrumentation cost is largely independent of Tables 2 and 3. Table 4 shows a more detailed break-
column size. down of the various modiŽ ed Lang factors for the
speciŽ c case of a rotating gas compressor. (The refer-
(iii) The approach accounts for the in uence of materials
ence currency adopted for Tables 4 and 5 were 1991
of construction for an equipment item. This is incor- $Australia, selected to match a particular data set for
porated into step 2 of the IChemE method outlined equipment costs).
above. As an illustration, foundations for a carbon
steel tower would be similar to those of a stainless The estimated factors were then applied on the basis of
the average cost of equipment in particular equipment
steel tower of the same weight and external dimen-
classes for selected projects. The selected projects included:
sions. Hence, the foundations cost are a higher
proportion of equipment cost for a carbon steel ° a gas project, which showed close agreement between the
tower than for the stainless steel tower. In some cost predicted by the IChemE method and that predicted
cases, allowances should be made for the effect of by the conventional detailed estimating approach;
materials on piping and instrumentation. ° two distillation intensive projects where the cost estimated
by the IChemE method was 80% of the achieved cost, due
to differences in piping costs;
° a minerals processing project, where the IChemE method
SOME APPLICATIONS OF THE IChemE METHOD underestimated the achieved cost because of unusually
The IChemE method has been applied by the authors in high civils and structures costs for that project, associated
two ways. with the need for piling.

Trans IChemE, Vol 80, Part A, September 2002

584 BRENNAN and GOLONKA

Table 4. Factors for installed cost of compressors.

$176,000 $70,500 $35,000 $10,600 $5300

Value of individual equipment item as purchased Over to to to to to Under
standardized to carbon steel basis $ 1991 Aust $529,000 $529,000 $176,000 $70,500 $35,000 $10,600 $5300
Purchased equipment item—carbon steel basis 1 1 1 1 1 1 1
Installation
Minimal site fabrication, but alignment, 0.19 0.24 0.29 0.35 0.42 0.48 0.81
tolerances, balancing
important and time consuming
Piping
Large bore piping with moderate 0.25 0.41 0.61 0.96 1.38 1.96 2.43
complex system
Instrumentation
Capacity control, trips, alarms, interlocks, 0.18 0.33 0.43 0.6 0.77 0.96 1.38
often complex for main process gas
compressors (less sophisticated for
ancillary air blowers)
Electrical
Lighting and power for electrical motor 0.13 0.18 0.25 0.33 0.43 0.51 0.63
drive (less for turbine drive but more
for installation, piping)
Civil
Moderate for rotating equipment 0.12 0.15 0.21 0.25 0.33 0.42 0.52
More extensive for reciprocating equipment
Structures and buildings
Simple covered building for maintenance 0.19 0.29 0.39 0.48 0.56 0.69 0.85
Lagging
Assumed negligible
Total direct plant cost (rotating equipment) 2.06 2.6 3.18 3.97 4.89 6.02 7.62
Total installed cost (equipment materials 2.58 3.25 3.98 4.96 6.11 7.53 9.53
factor ˆ 1 and overheads
cost 0.25£ direct plant cost)

Table 5. Overall installed cost factors for different types of equipment.

Value of purchased equipment $176,000 $70,500 $35,000 $10,600 $5300

item standardized to carbon Over to to to to to Under Standard Std
steel basis $ 1991 Aust $529,000 $529,000 $176,000 $70,500 $35,000 $10,600 $5300 Average deviation Dev =Avg
Compressors 2.58 3.25 3.98 4.96 6.11 7.53 9.53 5.42 2.48 0.46
Pumps 2.23 2.66 3.29 4.13 5.13 6.39 7.95 4.54 2.08 0.46
Heat exchangers 2.05 2.43 2.98 3.76 4.7 5.83 7.41 4.17 1.94 0.47
Pressure vessels 2.15 2.56 3.18 4.08 5.06 6.26 8.01 4.47 2.12 0.47
Tray columns 2.96 3.94 4.95 6.55 8.33 10.58 13.49 7.26 3.79 0.52
Packed columns 2.45 3.01 3.73 4.71 5.85 7.25 9.24 5.18 2.44 0.47
Fired heaters 2.74 3.51 4.3 5.60 6.91 8.48 10.90 6.06 2.91 0.48
Size reduction 2.62 3.22 4.03 5.05 6.25 7.65 10.05 5.55 2.64 0.47
Solids conveyor 2.85 3.52 4.37 5.49 5.78 8.26 10.63 5.84 2.75 0.47
Average 2.51 3.12 3.87 4.93 6.01 7.58 9.69
Standard deviation 0.32 0.50 0.64 0.88 1.10 1.44 1.88
Standard deviation=average 0.13 0.16 0.17 0.18 0.18 0.19 0.19
Packaged equipment 1.74 2.07 2.48 3.20 4.02 5.00 6.50 3.57 1.72 0.48

Note: 1. There is potentially more variability in installed cost factor due to equipment value than equipment type.
2. Engineering, project management overheads have been assumed as 25% of direct plant cost.

The last two cases emphasize the potential in uence of depends on the magnitude of purchased equipment cost,
intrinsic features of the site or process technology on the which in turn depends on the size of the equipment item, as
achieved cost. well as the equipment class. For any given process plant,
there is usually a wide distribution of equipment class and
sizes, and a corresponding wide range in the ratios of
OBSERVATIONS
installed to purchased cost for the various equipment
It is evident from Tables 2, 4 and 5, that the ratio of items. This range of ratios is characteristically much wider
installed cost to purchased cost for an equipment item than the range in overall Lang factors for different types and

Trans IChemE, Vol 80, Part A, September 2002

 FACTORS FOR CAPITAL COST ESTIMATION 585

designs of entire process plants where there is an averaging often incur additional component costs and high engineering
effect derived from the range of equipment classes and sizes and construction costs.
present. Many revamp projects incorporate major improvements
In turn, the Lang factor for an overall plant will depend on in process control leading to high instrumentation costs
the average purchased equipment cost, and hence, on the relative to purchased cost of new equipment. ModiŽ cations
plant capacity. This conŽ rms an expected higher Lang factor to plant layout may incur increased piping costs. Since plant
for pilot plants (as high as 10) than for large scale plants (as downtime is often a critical consideration, construction
low as 2.5). This implied dependence of Lang factor (L) on labour may be employed on a continuous basis. Such
average equipment cost (C· ) is consistent with claims of costs may be very high, particularly where downtime
others (for example Montfoort and Meijer6 who reported scheduling is complicated or uncertain.
L / C· ¡0.22). Since the objectives and constraints for revamps are so
Factored estimates can be usefully supplemented in diverse, cost structures are likely to be far more variable than
various components of the estimate where data permits by for new plants, and conventional factors used in factored
costing quantities of materials and labour. For example estimates become far less reliable. Detailed knowledge of
estimates for piping materials ($=m) and piping installation the existing plant and its site are important inputs to cost
(workhours=m and $=workhour) can be used as a cross estimating for revamps.
check for factored piping costs; estimates of cost per control
loop or per alarm or trip system may likewise be useful as a
cross check for instrumentation. SOURCES OF COST DATA
Conversely, factors for individual cost categories such as Guides to sources of published cost data for plant and
piping may be used to selectively check aspects of detailed equipment are provided in Gerrard 4 and Brennan5. A useful
estimates in order to identify irregularities in the estimate. publication on equipment costs with particular emphasis on
The irregularities may re ect unusual aspects of design or Australian equipment is the publication by Breuer and
cost structure, or in some cases may result from errors or Brennan7. Approaches to correlating equipment cost data
oversights. are also critically reviewed by Brennan5 and Breuer and
Care needs to be taken in applying the materials factor fm Brennan7.
to bring the purchased cost back to a carbon steel basis.
Often such factors are quoted as single values. However, the
factor may often differ for small and large items, re ecting CONCLUDING REMARKS
the differing contributions of materials and labour costs. For Chemical engineers require short-cut estimating methods
example the factor for a stainless steel vessel might be 1.2 in order to guide their process design decisions. Powerful
for a 1 tonne vessel, and 2.2 for a 50 tonne vessel of similar cost estimating packages, which may be adjunct to or
design but larger size. interface directly with process simulator packages, are
A caveat lies in the importance of having representative now available to chemical engineers. However, the factored
equipment cost data prior to factor application. A reliable approach to estimating capital costs of plants remains a
cost data base is essential, since a particular quotation may useful technique in its own right, and also provides a means
be skewed by an extreme business environment or may of checking the validity of estimates made by more detailed
result from a genuine error by an equipment supplier. There methods.
are also cases where second hand equipment is used, Chemical engineers need to appreciate the layers of
implying purchased costs well below those for new assumptions built into factored estimating approaches, and
equipment. critically review the assumptions, even where approximate
One further consideration is to allow for equipment approaches are used.
purchased as packaged items. Such items are usually deliv-
ered with instrumentation, connecting piping, and in some
cases structural members. A large proportion of packaged DISCLAIMER
items in a plant could decrease the apparent Lang factor for The views expressed in this paper are those of the authors
the plant. and not necessarily of their respective organizations. The
authors have attempted to rigorously review cost estimating
approaches. However, neither the authors, Kvaerner E and C
COST OF REVAMPS Australia, nor Monash University accept any legal liability
for the use or misuse of methods or data presented in this
A project involving the revamp of an existing plant may paper.
be expected to have a different cost structure than that for a
new plant on either a greenŽ eld or brownŽ eld site. Due to
the imposed constraints of an existing plant and site, the
engineering design, project management and construction REFERENCES
labour costs of a revamp may be much higher as a propor- 1. Lang, H. J., 1948, SimpliŽ ed approach to preliminary cost estimates,
tion of plant costs than for a new plant. While much existing Chemical Engineering, June: 112–113.
equipment may be re-used without modiŽ cation, a number 2. Hand, W. E., 1958, From  owsheet to cost estimate, Petroleum ReŽ ner,
of equipment items typically do require modiŽ cation; 37(9): 331–334.
3. Guthrie, K. M., 1969, Data and techniques for preliminary capital cost
vessels may need new internals, compressors and pumps estimating, Chemical Engineering, March 24: 114–142.
may need to be increased in speed, and so on. Such 4. Gerrard, A. M. (ed), 2000, A Guide to Capital Cost Estimating, 4th
equipment modiŽ cations save on equipment costs, but Edition (IChemE, Rugby, UK).

Trans IChemE, Vol 80, Part A, September 2002

586 BRENNAN and GOLONKA

5. Brennan, D. J., 1998, Process Industry Economics, An International ADDRESS

Perspective (IChemE, Rugby, UK), pp 294.
6. Montfoort, A. G. and Meijer, F. A., 1983, Improved lang factor approach Correspondence concerning this paper should be addressed to
to capital cost estimating, Process Economics International, Vol iv(1): Dr D. J. Brennan, Monash University, Wellington Rd, Clayton, Victoria,
20–21. 3800, Australia.
7. Breuer, P. L. and Brennan, D. J., 1994, Capital Cost Estimation of Process E-mail: [email protected]
Equipment (Institution of Engineers Australia), pp 65.
The manuscript was received 27 July 2001 and accepted for publication
after revision 25 March 2002.
ACKNOWLEDGEMENTS
The authors gratefully acknowledge the permission of Kvaerner E and C
Australia to include data related to previous projects and case studies.

Trans IChemE, Vol 80, Part A, September 2002