Chemical Engineering July 2021 - 29

portunity to cancel the project if it is
not justified or potentially to remain
in FEL 2 to further develop project
and technical deliverables before
making a " go " or " no-go " decision.
Engineering and estimating continue
to work together to provide meaningful
information to management to
support the decision on whether to
move the project forward. If project
economics cannot achieve management
targets, it is better to cancel
the project early than to continue to
invest in an economically sub-optimal
project.
Class 3 estimates
Class 3 estimates are typically used
in support of the full project-funding
decision by project owners. Engineering
and design will not be complete
at the end of FEL 3 (supporting
the Class 3 estimate). However, the
maturity of the project and technical
deliverables has progressed to
allow a sufficiently accurate estimate
to be prepared in support of
project authorization. If the economic
analysis supported by the
Class 3 estimate meets the financial
goals of the project owner and project
authorization is approved, then
the proposed project may proceed
to become a finished project and
transition to a producing asset of
the organization.
The FEL 3 stage is used to complete
the required technical definition
to support detailed design (with the
goal of no changes to the key defining
deliverables). P&IDs, equipment
lists, plot plans, arrangement drawings,
electrical
one-line drawings,
instrument and control philosophy,
specifications and so on should
achieve " issued-for-design " status.
In addition to the technical deliverables,
other project deliverables,
including the integrated project plan
and project schedule should have
progressed to meet the maturity expectations
for the Gate 3 review.
The Class 3 estimate is usually a
deterministic estimate based upon
detailed quantification of as much
of the project scope as possible. If
the engineering and design information
has been incorporated into an
engineering model, then the model
may be able to support a detailed
quantification of the project scope
(equipment and bulk materials). Any
gaps in the model may be supplemented
by a supplemental quantity
takeoff from the available design
drawings, whether by engineering or
by estimating [5].
The
detailed
quantification
is
priced by the estimators for purchase,
fabrication and installation
costs as required. As design is not
complete, there will still be the need
for some costs to be accounted for
by estimate allowances, and certain
categories of costs will continue to
be factored. Engineering supports
estimating by ensuring that the
Class 3 estimate accounts for all elements
of project scope.
As the decision points to support
full-funding authorization of a project,
Gate 3 in the project development
process is critical. It decides
whether the months or years of project
and design development will be
realized by a constructed facility. Estimators
should always be included
in gate reviews to provide perspective
on the estimate in relation to
the gate decision, and especially for
Gate 3 reviews.
The estimator must objectively
describe the level of project definition
that supported estimate
preparation. Project organizations
are often under pressure to complete
activities and meet scheduled
gate reviews. Thus, there will be
expectations that a specific class
of estimate be prepared at each
stage of project development. The
estimator should be unbiased in
identifying the actual class of estimate
achieved based on the project
and technical deliverables that
were provided to prepare the estimate.
The estimator should identify
any exceptions to deliverables that
did not meet the intended level of
maturity and quantify the resulting
impact to uncertainty so that
decision-makers have the best information
on which to base their
funding decision.
A standardized project development
process, in combination with
an estimate classification system,
is key to providing the right maturity
of design development to support
the various estimates prepared durCHEMICAL
ENGINEERING WWW.CHEMENGONLINE.COM JULY 2021
ing the project lifecycle. Engineering
supports effective cost estimating
by ensuring that the maturity of the
design deliverables meet the expectations
required by each project development
stage and the estimating
methodologies used for each stage.
Effective estimating requires close
coordination between estimators
and engineers. In the early stages of
project development, it ensures that
the right alternative or project is selected
to proceed to later stages of
development. By Gate 3, it ensures
that the project has the correct budget
to be executed effectively and
meet all project goals and objectives.
All estimates support decision-making
that eventually turn proposed
projects into producing assets of
an organization.
n
Edited by Mary Page Bailey
References
1. AACE International, Recommended Practice 10S-90: Cost Engineering
Terminology, March 2021.
2. Dysert, L. R., Supporting Estimates with Effective Scope of Work
Definition, 2020 AACE International Transactions, Morgantown,
W. Va., 2020.
3. AACE International, RP 18R-97: Cost Estimate Classification System
- As Applied in Engineering, Procurement, and Construction
for the Process Industries, August 2020.
4. Dysert, L. R., Early Conceptual Estimating Methodologies, 2020
AACE International Transactions, Morgantown, W. Va., 2020.
5.
Dysert,
L.
R., Sharpen Your Estimating
June 2003.
6. Remer, D. and Chai, L., Estimate Costs of Scaled-Up Process
Plants, Chem. Eng., April 1990.
7. Dysert, L. R., So You Think You're An Estimator, 2005 AACE International
Transactions, Morgantown, W. Va., 2005.
8. International Society of Parametric Analysts, " Parametric Estimating
Handbook, " Fourth Edition, Vienna, Va., 2008.
9. Hand, W.E., Estimating Costs from Process Flow Sheets, AACE
Professional Practice Guide to Parametric and Conceptual Estimating,
3rd Edition, 2012.
Author
Larry Dysert is the managing
partner of Conquest Consulting
Group (CCG; Email: ldysert@ccgestimating.com;
Phone:
1-971221-2101).
He has been actively
involved in many of CCG's consulting
areas, including providing
cold-eyes estimate reviews, estimate
preparation, cost engineering
organizational development,
project controls, risk management, training and claims/
dispute resolution support. Dysert has over 40 years of
project estimating, management, consulting, and training
experience in the chemical, petroleum, oil sands,
high technology, utility generation, manufacturing and
construction industries, and has been responsible for
the preparation of conceptual and detailed estimates for
capital projects, domestic and international, ranging to
over $25 billion in size. He is a frequent presenter and
author on estimating and cost engineering topics. Dysert
holds several professional certifications related to
cost estimating and decision and risk management. He
is also an Award of Merit recipient, Honorary Lifetime
Member and Fellow of AACE International and previously
served as the vice president of the Technical
Board for AACE International.
29
Skills, Chem. Eng.,
http://www.estimating.com http://WWW.CHEMENGONLINE.COM
Chemical Engineering July 2021

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