W6_OAN_Equipment Factored Cost Estimates

  1. Problem Definition

This week, Author went to South Borneo, to conduct survey for New Fuel Terminal. After survey, Management asked Author to estimate cost of this facilities based on the limited time and data availability. This estimation will be used to conduct feasibility study

  1. Development of Feasible Alternatives

Based on AACE RP No. 17R-97, Author should create class 4 estimate to meet Management requirement.

Table 1: Class Estimate

The requirement for class 4 estimate are:

Table 2: Maturity Level of Project Deliverables

  1. Possible Solution

Based on Table 1, the methodology suggested to produce class 4 estimate are:

  • Equipment Factored
  • Parametric Models

In this case, we will use Happel’s Method, which estimated purchase for all pieces of equipment (material), labor needed for installation using factors for each class of equipment, extra material and labor for piping, insulation etc. from ratios relative to sum of material and added installed cost of special equipment, overhead, engineering fees, and contingency.

Table 3: Happel’s Method 1

Table 4: Happel’s Method 2

Table 5: Happel’s Method 3

  1. Selection Criteria

The Estimation result should meet the Management requirement, at expected accuracy at the end of the project actual cost generated .

  1. Analysis and Comparison of the Alternatives

Table 6: Data

From Table 6, we can calculate using Happel’s Method as shown in table 7.

  1. Selection and Preferred Alternatives

As shown at table 1, Class 4 estimation range is from -30% to + 50%.

Table 7: Proposed Solution

Based on the estimation result in Table 7, the Author proposed a class 4 estimate with the total investment cost is $ 59.400.000. The total investment cost includes all of the construction cost plus overhead, engineering fees, and contingency.

  1. Performance Monitoring and the Post Evaluation of Result

The class 4 estimates purpose is only for the study or feasibility. If the management approve the FID (Final Investment Decision), the Estimators then should complete the required project scope so that the level 2 or 3 estimate can be produced for bidding process.



  1. Module 08-4 Creating The Owners Cost Estimate Top Down.
    Retrieved from http://www.planningplanet.com/guild/gpccar/creating-the-owners-cost-estimate
  2. AACE International Recommended Practice No. 17R-97
    Retrieved from http://www.anvari.net/Risk%20Analysis/17r-97.pdf
  3. AACE International Recommended Practice No. 59R-10
    Retrieved from https://fenix.tecnico.ulisboa.pt/downloadFile/1126518382175702/DEVELOPMENT%20OF%20FACTORED%20COST%20ESTIMATES_AACE%2059R-10.pdf
  4. W22_RM_Equipment Factored Cost Estimates (2016)
    Retrieved from https://goldenaace2015.wordpress.com/2016/05/26/w22_rm_equipment-factored-cost-estimates/




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