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Comment PDF Business & Economics

Cost Engineering: Equipment Purchase Costs

By Thane Brown |

A methodology and examples for estimating equipment costs are presented

Engineers have the responsibility to create projects having attractive returns on investment and to create economically sound designs — designs that produce high-quality, competitively priced products. This requires the technical and economic1 study of many different options. When doing studies, the design is usually not well defined, so one will often use factor methods for capital estimating. With these methods, one first determines the purchase cost of the equipment and multiplies that by a factor to determine the capital cost of a process or plant.2

The accuracy of factored estimates is usually good enough to produce high-quality decisions.

Purchase cost data.This article presents up-to-date equipment purchase cost data for nine different types of process equipment.

  • Agitators
  • Air compressors
  • Boilers
  • Cooling towers
  • Fans
  • Heat exchangers
  • Pressure vessels
  • Pumps, centrifugal
  • Tanks, storage

The cost data are presented for each of these types of equipment in Figures 1–9 on p. 52. Each begins with a general specification. For example in Figure 2 (air compressors) the specification is: Centrifugal, rotary screw and reciprocating compressors that produce 100–150 psig oil-free air. The price also includes intercoolers and aftercoolers, a lubrication system and a totally enclosed, fan-cooled (TEFC) motor.

Each figure contains a log-log graph plotting purchase cost versus capacity, an equation for cost as a function of capacity, and a size exponent for capacity ratioing. Most also contain factors that permit adjusting costs for different materials of construction, operating pressure or equipment type (such as API versus ANSI pumps).

All costs are quoted at a Chemical Engineering Price Cost Index (CEPCI) of 570, which corresponds to August 2017. The graphs were developed from actual purchase cost or vendor quotation data. Of special note is that BSI Engineering (Cincinnati, Ohio; www. bsiengr.com) allowed me to use their cost database as one of the key information sources.

Ratioing for different capacities and size exponents. When the cost of equipment, processes, or plants having the same design features is plotted versus capacity on log-log paper, the plot usually is a straight line. Thus, one can write the following equation, where n is the size exponent.

(1)

 

For equipment, the average size exponent is 0.6, for plants 0.67.

To illustrate, if you know the price of a 500 ft2 plate-and-frame exchanger is $10,500, you can estimate the price of an 800 ft2 exchanger using Equation (1). Referring to Figure 6, note that the size exponent for plate-and-frame exchangers is 0.71. Rearranging Equation (1), the cost is:

Cost 800 ft2 = $10,500 × (800 ft2 / 500 ft2)0.71 = $14,700.

Adjusting for inflation using the CEPCI. To keep track of the effects of inflation, several organizations publish cost indices. For chemical plant construction, I feel the CEPCI is the preferred index. Chemical Engineering publishes the index each month. One can use it to escalate costs. The relationship between costs and indices is given by Equation (2):

(2)

 

For example, if you know the price of a 10,000-gal. storage tank in August 2017 (CEPCI = 570) was $33,000, you can estimate the price in mid-2019 (CEPCI ~ 590) using Equation (2). Rearranging (2):

$CEPCI, 590 = $33,000 (590/570) = $34,200.

Using the graph factors. Six of the graphs include factors that permit adjusting costs for different materials of construction, different operating pressures or different equipment variations. Their use is simple. To adjust a price, simply multiply the price by the appropriate factor.

To illustrate, the small boiler prices in Figure 3 are for units generating 150 psig steam. If you wish to price a 100-hp unit that produces 15 psig steam, you would multiply the cost from the graph, $82,000, by the 15 psig factor, which is 0.85. Hence,

$15 psig = $82,000 (0.85) = $69,700.

A few examples will illustrate the use of the figures.

Example 1. Determine the purchase price, at a CEPCI of 570, of a top-entering turbine agitator. The agitator will have a mechanical seal, carbon steel shaft with two turbine blades, a gear reducer, and a 25-hp motor.

Using the graph in Figure 1, enter it at 25 hp and go up to the top-entering curve. You then find the base price of the unit is $60,000. This price will have to be adjusted for the mechanical seal (Fseal = 1.3), for carbon steel metallurgy (FCS = 0.8), and two turbine blades (F2-blades = 1.1). Thus the purchase price for the specified unit is:

$ = $60,000 (Fseal) (FCS) (F2-blades) = $60,000 × 1.3 × 0.8 × 1.1 = $68,600.

Example 2. Estimate the purchase price, at a CEPCI of 570, of a stainless-steel API centrifugal pump rated at 260 gallons per minute (gpm) with a total developed head of 310 ft.

Use Figure 8. First calculate (gpm*ft)/1,000 to find the value of the x-axis:

gpm*ft/1,000 = (260 × 310)/1,000 = 80.6.

From Figure 8, you find the cost of a carbon-steel ANSI pump to be $10,500. Next, you adjust this price for materials and for an API pump as opposed to an ANSI pump.

$SS,API = $10,500 × (FSS) × (FAPI) = $10,500 × 1.9 × [6.18 × (80.6)–0.25 ]= $41.100

Example 3. Estimate the price of a 10,000-gal, specially designed reactor at a CEPCI of 600. Your reactor is to be made of carbon steel and will have a pressure rating of 350 psig. In 2013 (CEPCI = 567), your company bought a similar reactor for $33,900. That reactor has a capacity of 7,500 gal, is made of stainless steel, and has a pressure rating of 150 psig.

Since the reactors are both pressure vessels, you decide to use the factors in Figure 7 to adjust the 2013 price. You adjust for reactor size using Equation (1), for inflation using Equation (2), and for titanium construction and the higher pressure rating using the factors in Figure 7.

$new =$old (Capacitynew /Capacityold)0.70 × (CS factor/SS factor) × (Pressure factornew /Pressure factorold) × (CEPCI 600 /CEPCI 2013)

= $33,900 (10,000/7,500).70 (1/1.4) {[0.0023(350) + 0.66]/1.0} (600/567) = $46,000.

Summary. One can use the information in this article for the following:

  • Preliminary estimating of equipment purchase costs
  • Adjusting price data for equipment size, materials of construction, design pressure, and equipment type
  • Creating mathematical models used in economic option analyses

In turn, the purchase cost data can be used to create order-of-magnitude and study grade estimates. While vendor quotations can be more accurate than the data in the graphs, the data here are generally accurate enough for use developing costs early in a project and when doing economic option analysis.


1. For an economic comparison, one usually has to estimate the capital and production cost for each option and use that information to calculate the net present value (NPV) or annualized cost (AC) of each. The NPV or AC is then used to find the economic option.
2. Brown’s book [1] explains economic comparison methodology, Lang and Hand factors, plus production cost estimating in depth.

References

1.Brown, T.R., “Engineering Economics and Economic Design for Process Engineers,” CRC Press, Boca Raton, Fla., 2006.

Author

Thane Brown (Email: trbnjb@earthlink.net) worked for more than 36 years for Procter & Gamble in a variety of engineering and manufacturing roles, primarily in the food-and-beverage business and in health, safety and environmental engineering. In his last position there, Brown was director of North American engineering. After retiring, he taught engineering economics at the University of Cincinnati, and plant design at the University of Dayton. Brown is presently a member of the Chemical Engineering Advisory Committees at the University of Dayton, at Miami University (Oxford, Ohio), at the University of Louisville and at the University of Cincinnati. He also works as a SCORE counselor, providing free assistance to small businesses in the Cincinnati area. Brown authored the book “Engineering Economics and Economic Design for Process Engineers” [1], as well as a number of articles on engineering economics, batch pressure filtration and heat transfer. He is a registered professional engineer in Ohio (inactive), and holds a B.S.Ch.E. from Oregon State University.


Figures 1–9 depict up-to-date equipment purchase cost data for nine different types of process equipment: agitators (Figure 1); air compressors (Figure 2); boilers (Figure 3); cooling towers (Figure 4); fans (Figure 5); heat exchangers (Figure 6); pressure vessels (Figure 7); centrifugal pumps (Figure 8); and storage tanks (Figure 9)

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