Project Development: The Importance of Cost Estimating
By Larry Dysert, Conquest Consulting Group |
Following a standardized project-development process, in combination with a robust cost-estimate classification system, can help to ensure that projects meet their financial goals
Cost estimating is critical to support decision-making during the project development process for projects in the chemical process industries (CPI). During the early phases of the project development lifecycle, cost estimating supports value-based decisions on project capacity, technology selection, location, execution strategies and many other factors. Eventually, cost estimating is a driver — if not the primary driver — to the final approval and funding authorizations that allow a proposed chemical project to proceed to construction and eventual startup.
Most CPI projects are approved based on the economic analysis of potential returns on the capital project investment cost. The basis for the investment cost is the capital project estimate. Until final sanction of the project (project authorization), it is important to realize that all the engineering and design efforts (expended over perhaps months, if not years) to support project authorization have been completed for a proposed project. Unless the project economic analysis, based on the cost estimate,…