ESTIMATE REVIEW & VALIDATION OF ENERGY / PETROCHEM / POWER / OFFSHORE / OIL & GAS FEED STUDY ESTIMATE (AACE - CLASS 3 ESTIMATE):
John G. McConville CCP
Construction Cost Expert & Author of (11) Cost Estimating Books / Databases on US & Global Construction Costs & Labor Productivity:
The assumption of this article is that the review / validation effort will be a 2 - 3 week effort which is typical for a $100 - $850 million CAPEX Project, the number weeks could be less or more depending on the capital cost & sophistication of facility:
Main Tasks:
1. Visit FEED office for at least a week, get up to speed with the goals of the project. Interview key project team member, Project Mangers. Engineers, Estimators / Planners & Procurement staff.
2. Review Project Objectives / Understand Scope of Work (SOW) / Basis of Estimate / ISBL & OSBL interface scopes.
3. Review any Owners Pre-FEED Studies, Conceptual (Class 5 & 4 Estimates) if available.
4. Examine Construction execution approach, Open Shop direct hire, Unionized labor, S/C packages or a significant modularized approach.
5. Evaluate Estimate Plan / Current Major EPC milestones – Project handover date / Validity of Estimate (determine how long Estimate is valid for 3 months or longer? Determine what the impact would be if the project is not approved for 2, 3 months or longer.
6. Investigate current FEED engineering deliverables PFD’s UFD’s, preliminary P&ID’s, Site Plot c/w location of M.E. foundations, Instrument preliminary list & Major Equipment (M.E.) list.
7. Critique pricing of M.E. (multiple vendor quotes c/w bid tabs or in-house estimate), validity of M.E. quotes.
8. Discuss estimating approach & methods utilized with estimating team members (where did the unit prices come from), ask “lots” of estimate / schedule questions, come prepared with estimate checklists (get an understanding if the FEED estimate has captured the full intent of the SOW, project challenges & the site conditions), ask what accuracy they deem the estimate is. Review labor rates, material unit prices, MTO method (spot check major accounts such as concrete, structural steel, piping & instrumentation).
9. Review any module / skids & pre-fabricated piping pricing bids & basis.
10. Discuss labor productivity basis, one overall value or has productivity been modified for different areas of the project, i.e. welding in confined area, general conditions / field in-directs / prelims, site supervision, scaffolding, site establishment, safety equipment, small tools / consumables, construction equipment & heavy lift cranes as a % of TIC.
11. Review allowances, provisional sums, escalation basis, currency data source / date & profit %’s.
12. Critique contingency supporting QRA / Monte Carlo data, risk registrar, freight, vendor assistance, FAT values & spare parts, startup & commission costs.
13. Ask how was initial fill, catalyst & tower rasching ring packings were estimated.
14. Review & evaluate any construction related exclusions, assumptions, missing SOW or estimate errors & the need for temporary camps.
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15. Evaluate EPC Home Office / Detailed Design, Site Construction Management man-hour hourly rates durations & costs / travel & temporary site allowances.
16. Discuss issues related to States & local air / water quality permits / approval. Royalties / technology licensee fees / State location grants, funding payments to locate in State.
17. Review any Owner costs related items such as long lead items, oversight, inspection, Owners contractual T&C’s 45 days or more payments & cash flow issues.
18. Discuss project challenges & risks with Owners senior management (are there any specific issues that could impact the final TIC, such as performance guarantees, LD’s, penalty clauses etc.) Ask their opinion on what % of the DD is completed.
19. Discuss project challenges & risks with EPC senior management, such as skilled worker shortages, per diems for travelers, overtime, shift work, winter work, warranty issues & competing with other major CAPEX projects in general area for available skilled labor. Ask their opinion on what % of the DD is completed.
20. Compile & provide a final Benchmark & Validation Report to Owner with findings / comments & recommendations related to CAPEX estimate. Provide initial findings in a week & detailed report in 3 weeks.
We get involved with a number of Estimate Reviews / Validation studies each year. In the last 5 years we have completed 35 + Estimate Reviews / Validation reports related to Oil & Gas, Petrochemical, LNG. FPSO, Metals & Power projects with excellent results for our clients, saving them both CAPEX funds & optimizing their project schedules.
Contact us if you or your company requires this service.
John McConville CCP - Owner of Compass International
USA Telephone +1 (609) 577 4505
Private Email mcconvil@rcn.com
Senior Cost Manager at AtkinsRéalis | Chartered Quantity Surveyor | licensed Professional Engineer | Certified Risk Professional
2moGreat read! Thanks for sharing
Project Controls Manager.
2moThanks John very useful. Lots of lessons learned on this one! It is important to have the correct execution strategy and the correct contractors/bidders for the selected execution approach.
(Energy Efficiency & Project Controls)
3moGreat Post. Thanks for sharing.
CEO PMSOFT, Project control and cost engineering services in Russia&CIS (Консалтинг в области проектного, стоимостного и системного инжиниринга\Consulting in the field of project, cost and system engineering)
3moDear John, thanks for your articales and notes! As usual, very useful, appreciate very much and always share to our AACERussiaSection 🙌
Specialist, Cost Estimation
3moThanks John G. McConville CCP refresher indeed, sometimes if you to comfortable with what your doing for so many years you neglect basis and fundamentals of developing or validating estimates.