COST ESTIMATING MANUAL
CHEVRON RESEARCH AND TECHNOLOGY COMPANY RICHMOND, CA
December 1998
Manual sponsor:
For information or help regarding this manual, contact Daniel E. Moore at (925) 842-2120
Printing History Cost Estimating Manual First Edition Second Edition Third Edition Fourth Edition
April 1995 November 1997 June 1998 December 1998
Restricted Material Technical Memorandum This material is transmitted subject to the Export Control Laws of the United States Department of Commerce for technical data. Furthermore, you hereby assure us that the material transmitted herewith shall not be exported or re-exported by you in violation of these export controls.
The information in this Manual has been jointly developed by Chevron Corporation and its Operating Companies. The Manual has been written to assist Chevron personnel in their work; as such, it may be interpreted and used as seen fit by operating management. Copyright 1989, 1990, 1992, 1995, 1997, 1998 CHEVRON CORPORATION. All rights reserved. This document contains proprietary information for use by Chevron Corporation, its subsidiaries, and affiliates. All other uses require written permission.
Cost Estimating Manual Page-2
December 1998
List of Current Pages Cost Estimating Manual The following list shows publication or revision dates for the contents of this manual. To verify that your manual contains current material, check the sections in question with the list below. If your copy is not current, contact the Technical Standards Team, Chevron Research and Technology Company, Richmond, CA (510) 242-7241.
Section Title Page Front Matter Table of Contents Section 50 (Preface) Section 100 Section 101 Section 102 Section 103 Section 104 Section 105 Section 200 Section 201 Section 202 Section 203 Section 204 Section 205 Section 206 Section 210 Section 211 Section 212 Section 220 Section 221 Section 222 Section 223 Section 224 Section 300 Section 301 Section 302 Section 303 Section 304 Section 305
Date December 1998 December 1998 April 1995 April 1997 April 1995 April 1995 April 1995 April 1995 April 1995 April 1995 April 1995 April 1995 April 1995 April 1995 December 1996 April 1995 April 1995 April 1995 April 1995 April 1995 April 1995 December 1998 April 1995 April 1995 April 1995 April 1995
Cost Estimating Manual December 1998
Page-3
Section Section 310 Section 311 Section 312 Section 313 Section 400 Section 401 Section 402 Section 403 Section 404 Section 405 Section 406 Section 407 Section 408 Section 410 Section 411 Section 420 Section 421 Section 422 Section 423 Section 424 Section 500 Section 501 Section 510 Section 511 Section 512 Section 520 Section 521 Section 522 Section 523 Section 600 Section 601 Section 602 Section 603 Appendices Appendix A Appendix B Appendix C Appendix D Appendix E
Date April 1995 April 1995 April 1995 April 1995 April 1995 December 1995 April 1995 December 1998 April 1995 April 1995 April 1995 April 1995 April 1995 March 1995 (draft) March 1995 (draft) December 1998 April 1995 April 1995 April 1995 April 1995 December 1998 April 1995 April 1995 April 1995 April 1995 April 1995 April 1995 April 1995 April 1995 April 1995
Cost Estimating Manual Page-4
December 1998
Maintaining This Manual Cost Estimating Manual If you have moved or you want to change the distribution of this manual, use the form below. Once you have completed the information, fold, staple, and send by company mail. You can also FAX your change to (510) 242-2157. ❑ Change addressee as shown below. ❑ Replace manual owner with name below. ❑ Remove the name shown below. Previous Owner:
Title: Last
First
M.I.
Current Owner:
Title: Last
First
M.I.
Company:
Dept/Div:
Street:
P.O. Box:
City:
State:
Requesting Signature
Zip:
Date
Send this completed form to: Document Control, Room 50-4328 Chevron Research and Technology Company 100 Chevron Way (P.O. Box 1627) Richmond, CA 94802
CRTC Consultants Card The Chevron Research and Technology Company (CRTC) is a full-service, in-house engineering organization. CRTC periodically publishes a Consultants Card listing primary contacts in the CRTC specialty divisions. To order a Consultants Card, contact Ken Wasilchin of the CRTC Technical Standards Team at (510) 242-7241, or email him at “KWAS.”
Cost Estimating Manual December 1998
Page-5
(This page reserved for future use.)
Reader Response Form Cost Estimating Manual We are very interested in comments and suggestions for improving this manual and keeping it up to date. Please use this form to suggest changes; notify us of errors or inaccuracies; provide information that reflects changing technology; or submit material (drawings, specifications, procedures, etc.) that should be considered for inclusion. Feel free to include photocopies of page(s) you have comments about. All suggestions will be reviewed as part of the update cycle for the next revision of this manual. Send your comments to:
Page or Section Number
Document Control, Room 50-4328 Chevron Research and Technology Company 100 Chevron Way (P.O.Box 1627) Richmond, CA 94802 Comments
Name Address
Phone
Cost Estimating Manual December 1998
Page-7
(This page reserved for future use.)
Cost Estimating Manual Manual Sponsor: Daniel E. Moore / Phone: (510) 842-2120 / E-mail:
[email protected] This document contains extensive hyperlinks to figures and cross-referenced sections. The pointer will change to a pointing finger when positioned over text which contains a link.
List of Current Pages 50
Using this Manual
50-1
100
Introduction to Cost Estimating
100-1
200
Primary Methods—Process Plants
200-1
210
Primary Methods—Offplot Facilities
210-1
220
Primary Methods—Other Facilities
220-1
300
Secondary Methods—Individual Cost Adjustments
300-1
310
Secondary Methods—Bottom-Line Cost Adjustments
310-1
400
Direct Cost Data—Equipment (Major Material)
400-1
410
Direct Cost Data—Bulk Materials (Minor Material)
410-1
420
Direct Cost Data—Construction Labor
420-1
500
Indirect Costs and Special Charges—Indirect Field Costs
500-1
510
Indirect Costs and Special Charges—Technical Services
510-1
520
Indirect Costs and Special Charges—Special Charges
520-1
600
Estimate Presentation and Review
600-1
Appendices Appendix A Appendix B Appendix C Appendix D Appendix E
Chevron Corporation
Estimating Checklists Process Licensors' Sales Factors Code of Accounts (EG-2757) Code of Accoounts for Buildings Projects Glossary
April 1995
Preface he intent of the Cost Estimating Manual is to provide uniform procedures and accompanying data for developing cost estimates for capital projects throughout Chevron. We hope that the material in this manual will contribute to a common understanding and consistent application of the cost-estimating process.
T
Using This Manual The manual is arranged to follow the flow of a typical cost estimate: Chapter 100 provides an overview of cost estimating, estimate classes and estimating methods. Chapter 200 describes the principal methods for making cost estimates—primarily for process plants, but also for offplot and other types of facilities. Method-specific data is also included. Chapter 300 includes factors and data to use with two or more methods described in the previous chapter. Chapter 400 contains instructions and data for estimating individual components of direct costs. The data includes material, labor, and subcontract costs associated with purchasing and erecting the physical facilities. Chapter 500 covers indirect costs and special charges. Indirect costs include construction indirect, engineering, and project management costs. Special charges are costs that may be unique to a project and, therefore, require specific identification and analysis. Chapter 600 contains guidance for reviewing, presenting, and documenting completed cost estimates. The Appendices contain general estimating reference materials, including checklists and a glossary. This manual is sponsored by Project Resource Services, Project Resources. Questions, comments, and suggestions for improvement are welcome and encouraged, and may be addressed to the Manager, Project Resource Services, San Ramon.
Cost Estimating Manual April 1997
Page 1
100
Introduction to Cost Estimating
101
Cost Estimating in General
102
Cost Estimating and the Phases of a Project
103
The Classes of Cost Estimates
104
Methods of Cost Estimating
105
Selecting a Method
Cost Estimating Manual
101 Cost Estimating in General ebster defines an estimate as an approximate computation of probable cost. According to the American Association of Cost Engineers (AACE), cost estimating is the predicting or forecasting ... of the costs required to construct and equip a facility, to manufacture goods, or to furnish a service. The latter definition more closely aligns with the objectives of this manual.
W
Objectives of this Manual While the concept of estimating is familiar to most people, the process may not be familiar. To help you estimate projects for Chevron, the objectives of this manual are to explain the various types of estimates and techniques for making them provide you with estimating data and guidance Although this manual is written primarily for major downstream projects, it can also be applied to upstream projects and smaller downstream projects.
Reasons for Cost Estimating Capital Construction
Generally, you associate estimates with capital construction projects to establish capital budgets evaluate project economics obtain funding approval monitor and control the execution of work
Annual Budgets
Chevron operating companies and staffs base their annual operating expense budgets on estimates.
Other Acitivities
Activities such as these also require estimates: Shutting down refinery plants for maintenance Overhauling tankers Leasing buildings or equipment
Cost Estimating Manual April 1995
Page 101 -1
101
Cost Estimating in General
Providing technical services for studies Writing computer programs Planning business trips The AACE definition points out that you may make a variety of types of estimates. In the next section, you’ll see how estimates fit into the different phases of Chevron project management.
Cost Estimating Manual Page 101 -2
April 1995
102 Cost Estimating and the Phases of a Project ost estimates are important in all phases of project management. In Figure 102-1, note the role of estimating (shown in bold italic) in the Chevron Project Development and Execution Process (CPDEP).
C
Phase
1
2
3
4
5
1
CPDEP Phase
Identify & Assess Opportunities
Select Alternative(s)
Develop Alternative(s)
Execute
Operate & Evaluate
CPMP2 Phase
Concept Development
Feasibility
Front-End Engineering
Execution
Operation & Evaluation
OBJECTIVES
Identify Opportunities Generate Alternatives Fully Define Scope
DELIVERABLES
Develop Detailed Execution Plans
Test for Strategic Fit
Preliminary Development of Alternatives
Preliminary Overall Plan
Develop Preliminary Project Economics
Refine Estimate Develop Final Project Economics
Preliminary Assessment
Identify Preferred Alternative(s)
Submit Request for Funding Approval
Plan for Phase 2
Plan for Phase 3
Plan for Phase 4
Clearly Frame Goal
Business Objectives Preliminary Facility & Final Facility & Project Objectives & Project Framework Project Objectives
Implement Execution Operate Asset Plan Monitor and Evaluate Finalize Operating Performance Plan Business Plan for Phase 5
Identify New Opportunities
Project Review
Operating Facility
Post-Project Assessment
Documentation Block Flow Diagram & Preliminary Capacity
Process Flow Diagrams & Equipment Lists
Preliminary Milestone Schedule
Preliminary Project Schedule
Class 1 Estimate
Class 2 Estimate
Set & Freeze Business Objectives Concept Development FEL Checklist
P&IDs, Plot Plans, One-Line Diagrams
1 2
Lessons Learned & Best Practices Benchmark Performance
Class 3 Estimate
Class 4 (& perhaps 5) Estimates and Final Project Cost
Freeze Capacity, Technology & Site
Freeze Definition Documents
Freeze Design Details
Post-Project Assessment
Feasibility FEL Checklist
Front-End Engineering FEL Checklist
Execute
Review & Share Lessons Learned
Detailed Schedule
TOOLS & PROCESS
Lessons Learned
CPDEP = Chevron Project Development and Execution Process CPMP = Chevron Project Management Process (Downstream Adaptation of CPDEP)
Figure 102-1. Estimating During the Phases of CPDEP and CPMP
Cost Estimating Manual April 1995
Page 102-1
103 The Classes of Cost Estimates hevron has adopted a series of cost estimate classifications as a part of the CPDEP. These classifications establish a common understanding among estimators, project managers, and their clients regarding these factors: Variability in the information required Appropriate estimating methods for each class Resulting estimate quality
C
The Five Classes Figure 103-1 summarizes the five classes. The first three are linked to the three phases of CPDEP Front-End Loading, where their purpose is to provide information to assist decision-makers. Classes 1 & 2
Because the first two project phases may extend over a long time (two to three years for large projects), several Class 1 and Class 2 estimates may be necessary as the project team studies various alternatives.
Class 3
Class 3 is often called an appropriation estimate because it is the basis for preparing an appropriation request. Again, large projects may have more than one Class 3 estimate, especially if the first one exceeds the funds budgeted for the project. In that case, the team must adjust the scope of the project.
Classes 4 & 5
Contractors usually prepare the last two classes of estimates during project execution. Contractors may call the Class 4 a control estimate because it establishes a basis for managing (controlling) the contractor’s work during the construction phase. Class 5 is appropriate only for very large, multiyear projects. It is really a re-forecast of remaining work (and thus the final cost) because much of the cost is fixed by that time.
Cost Estimating Manual April 1995
Page 103-1
103
The Classes of Cost Estimates
Contingency The values shown in the Contingency column of Figure 103-1 indicate relative requirements only and show the benefit of improvement to the project definition as projects progress. For Classes 1 and 2, especially, the typical contingencies shown apply to facilities known at the time of the estimate. Estimates can double or triple as the definition of required facilities evolves. You should not use this table to determine the actual contingency required for any estimate, but determine it from the characteristics of the specific project and estimate (see Section 313).
Cost Estimating Manual Page 103-2
April 1995
Contingency
Class & Project Phase
Engr’g
Contingency
Estimate Methods Used/Cost Basis Information Required Major Equipment
Class 1
1
