Cost Estimated Techniques at Plant Conceptual Design Phase

In "Design to Cost" authored by Jack V. Michaels and William P. Wood, according to the view held by the Department of Defense on the time phasing of decisions affecting life-cycle cost, 70 percent of weapon system life-cycle cost is ordained by end of the concept phase, at which time an approved system is in hand. Conceptual cost estimate of which accuracy can be allowed between ±20% and ±30% is the one of the most important functions for plant owners to prepare for feasible studies, selection from alternative design and approval of budget within limited time. Design generally may be 5% to 20%completed depending on different situations. This paper focuses on some conceptual cost estimate techniques such as factored/ratio estimates and compound unit cost estimates and how to proceed the estimate with some examples based on the my experience engaged in over 20 years as a cost engineer of a plant equipment. In addition to the above cost estimate techniques, I recommend how to estimate a contingency related the accuracy and finally price index is more recommendable to adjust the historical costs to present costs instead of cost index.