Capital Cost Estimate

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)


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


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


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


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.


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.


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.


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).


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


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


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


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.


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


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.


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


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


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


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.


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.


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)


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.


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


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


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.”


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


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.


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:


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


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.


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


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)


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.


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.


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.


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



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


6.2.11 Analysers

The following are the Analysers activities required to develop the estimate:


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.


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


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


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


10. ESTIMATE PRESENTATION FORMAT

Currently under development


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


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



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



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.


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

Documents

Capital Cost Estimate