Lecture 6: More costs

Question 1

Define class 4 estimates

Answer 1

Vendor estimates and catalogue prices
• Negotiable => large quantities can get discount
• Vendor estimates not binding
• Vendors always estimate high

Should cost modelling
• Carried out by plant customer => rough equipment mechanical design purchased
• Costs estimated from materials and jointing etc i.e. bolts => used to negotiate with vendors

Contractor records
• Role of operator and contractor i.e. BP operate plant but use contractors to design it
• Contractors - lots of experience in designing and building => good contacts with vendors, can negotiate better => better idea at pricing

Vendor quotes
• Legal offer to enter contract
• Vendor must deliver equipment within terms specified in quote => some ‘get-out’ clauses

Factors affecting equipment costs
• Construction materials - differences in cost
• Plant location/equipment manufacture location - transport etc.
Economic conditions - exchange rates

Question 2

Estimating installed cost

Answer 2

• Capital cost of equipment fraction of installed final cost
Level 4/level 3 estimates = factorial method
=> Lang factors - 3 for solid, 4 for liquid/solid, 5 for liquids
=> guthrie - more detailed breakdown

Question 3

Working capital costs

Answer 3

• Extra money is required to start plant
• Costs involved in obtaining initial material stock, operating gear (i.e. PPE)
Money to deal with cash flow limitations

Question 4

Define operating production costs

Answer 4

• Variable costs
- Raw materials, utilities, effluent disposal, packaging and shipping
· Fixed costs
Operating labour, supervision, taxes, maintenance, land rent

Question 5

Extra revenue

Answer 5

• By-products
  
  • Waste heat/electricity
    Using others ‘waste’ as your input