Chemical Engineering July 2021 - 24

FIGURE 3. During the FEL 2 phase, many documents will be prepared,
including equipment lists, plot plans, instrumentation philosophy and
equipment layout diagrams
Fairmont, W. Va.; web.aacei.org), a
professional organization supporting
the cost estimating and cost engineering
community [2]. The defined
estimate classes identify the maturity
level of the engineering and technical
deliverables that are expected to be
generated during each stage of the
project development process.
The following briefly describes the
project development stages FEL 0
through FEL 3, which is typically the
stage culminating in project authorization,
and the corresponding cost
estimates that are prepared to support
the gate decision at the end of
each stage.
FEL 0: Identify opportunity
This stage is typically performed by a
business unit within an owner organization,
usually without support of a
project team. This stage involves the
long-range identification of potential
opportunities to create a new facility
or asset, or modify an existing facility
or asset. The business unit may prepare
a cost study or unclassified estimate
to support a Gate 0 decision
to include the potential opportunity
in the long-range capital planning
budget of the owner organization (as
identified in Figure 2).
Typically,
little
formal
participation
from engineering is involved
in defining the overall scope of the
proposed project during FEL 0,
and the technical definition of the
project does not meet the expectations
of a formal classified estimate.
Generally, the unclassified estimate
for FEL 0 may be prepared using
analogy estimating techniques,
often without the involvement of a
trained estimator.
24
FEL 1: Business case
If the owner organization
decides to further investigate
a potential project,
it will authorize funds to
create a small core project
team to begin the FEL
1 stage. The goal of this
stage is to progress the
maturity of engineering
and project deliverables
to support preparation of
a Class 5 estimate. During
this stage, various
alternative schemes and
designs may be considered, and a
Class 5 estimate may be prepared for
each alternative.
The scope and characteristics of
the project (or each potential alternative)
are developed to provide overall
project definition, looking at considerations
like capacity, technology or
location. Technical deliverables, such
as block-flow diagrams and selection
of the proposed primary technologies
to produce the eventual
end products, are defined, as well as
potential locations for the facility.
A Class 5 estimate will be developed
to support preparation of a
business case and the Gate 1 decision
on whether the project should
proceed to the next stage (FEL 2) or
not. The technical definition remains
at a very high level at FEL 1, and the
Class 5 estimates are generally prepared
using conceptual estimating
techniques, such as analogy, capacity
factoring or parametric estimating.
Class 5 estimates will be associated
with a high level of uncertainty
(corresponding with a relatively wide
range of expected accuracy). However,
the Class 5 estimate is not used
to sanction the project. The goal for
1. Find and review known analogous (similar) projects.
2. Remove costs for scope items in the analogous project(s) that are not in the scope of
the project to be estimated.
3. Normalize the costs on the analogous project for the location and timing of the project to
be estimated.
4. Adjust the normalized costs for differences in scope between the analogous project(s) and
the project to be estimated.
5. Incorporate costs into the estimate for scope items in the new project but did not exist in
the analogous project(s).
CHEMICAL ENGINEERING WWW.CHEMENGONLINE.COM JULY 2021
the Class 5 estimate is that it is sufficiently
accurate to support the FEL
1 gate decision on whether to incrementally
authorize only the required
additional funds to move to the next
phase of project definition.
FEL 2: Select
During the FEL 2 (Select) phase, the
project team is expanded, and engineering
is progressed to provide a
much clearer picture of the specific
scope for the proposed project. The
preliminary equipment list with key
design parameters should be developed,
along with approved process
and utility flow diagrams and corresponding
heat and material balances.
Preliminary plot plans and
general equipment layouts should
be prepared (Figure 3). All associated
utilities, offsite requirements,
infrastructure and site conditions
should be defined. Identification of
preliminary design specifications to
understand the metallurgies required
by the facility is important. A general
description of the overall instrument
and control philosophy should
be prepared.
In addition to the technical deliverables,
preliminary integrated project
plans to identify anticipated contracting,
procurement, fabrication
and contracting strategies should be
developed, as well as a preliminary
master schedule for the project.
The Class 4 cost estimate to be
prepared during FEL 2 is based on
the more specific and mature level of
scope defined by the FEL 2 technical
and project deliverables. Typically,
a Class 4 estimate will use an
equipment-factored (or equipmentmodeling)
approach, and some portions
of the estimate may use more
TABLE 1. DEVELOPING ANALOGY-BASED ESTIMATES

http://web.aacei.org http://WWW.CHEMENGONLINE.COM

Chemical Engineering July 2021

Table of Contents for the Digital Edition of Chemical Engineering July 2021