Question

Extended Learning Exercise. You have been asked to prepare a quick estimate of the construction cost for a coal-fired electricity generating plant and facilities. A work breakdown structure (levels one through three) is shown in the table below EE! Click the icon to view the work breakdown structure Click the icon to view the available information What is your estimated 2019 cost for building the coal-fired generating facility? Summarize your calculations in a cost estimating worksheet, and state the assumptions you make Summarize your calculations in a cost estimating worksheet, and state the assumptions you make. (Round the factors for elements 1.2-3, 1.4 to four decimal places and the labor factor to the nearest whole number. Round costs to the nearest ten thousands dollars.) Element Code Units/Factor Price/Unit Subtotal Totals 620 $1,800 $3,100,000 1.2-3 $121,000,000 $5,100,000 1.5.1-3 labor $62 material:s $15,000,000 1.5.4 620 $1,300 3% The total estimated cost

Answer 1

Lets calculate the estimate as per the work breakdown structure:

1.1

site

1.1.1

land improvements

2000

600

1200000

1.1.2

roads, parking, and paved areas

1.1.3

railroads

3000000

3000000

Size of the property = 600 acres

Land improvements, roads, parking, and paved areas cost 2000 $ per acre.

Land improvements, roads, parking, & paved areas cost (for 600 acre property) = 2000x600 = $ 1200000

Railroads will cost $ 3000000

1.2

boiler

110000000

4.472727

492000000

0.535887

263656271.8

1.2.1

furnace

1.2.2

pressure vessel

1.2.3

heat exchange system

1.2.4

generators

1.3

boiler support system

1.3.1

coal transport system

1.3.2

coal pulverizing system

1.3.3

instrumentation and control

1.3.4

ash disposal system

1.3.5

transformers and distribution

In 1993, cost of boiler and boiler support system in a coal fired generating plant twice the size of the one you are estimating was $ 110000000

In 2016, cost of boiler and boiler support system in a coal fired generating plant twice the size of the one you are estimating is = 110000000x(492/110) = 110000000x4.472727 = $ 492000000

where cost index for boilers in 2016 is 492 and cost index for boilers in 1993 was 110. Therefore, cost index is 4.472727

In 2016, cost of boiler and boiler support system in a coal fired generating plant half the size of the 1993 plant is determined by the formula

C2 = C1{Q2/Q1}^a

Where C2 = Cost at desired size

C1=Cost at reference size in today’s date=$492000000

Q2=Capacity at desired size=1

Q1=Capacity at reference size=2

a=Cost Capacity Factor=0.9

Therefore C2=492000000x0.535887=$263656271.8

1.4

coal storage facility

5000000

4.472727

22363636.36

1.4.1

stockpile reclaim system

1.4.2

rail car dump

1.4.3

coal handling equipment

Cost of coal storage facility in 1993 = $ 5000000

Cost of same size coal storage facility in 2016 = 5000000x4.472727 = $ 22363636.36

where cost index in 2016 is 492 and cost index in 1993 was 110. Therefore, cost index is 4.472727

1.5

support facilities and equipment

85500

60

5130000

15000000

20130000

1.5.1

hazardous waste systems

1.5.2

support equipment

1.5.3

utilities and communication systems

1.5.4

security systems

1500

600

900000

Total number of hours required to build support facilities and equipment =95000*90% = 85500 hours

Labor cost per hour to build support facilities and equipment = $ 60 per hour

Total labor cost to build support facilities and equipment = 85500x60= $ 5130000

Cost of material for the construction of support facilities and equipment = 15000000

Total cost for the construction of support facilities and equipment = $ 20130000

Costs of security systems = 1500x600 = $ 900000

1.9

project integration

3%

31693636

950809.0909

1.9.1

project management

1.9.2

environmental management

1.9.3

project safety

1.9.4

quality assurance

1.9.5

test, start-up, and transition management

Project integration cost = 3% of all other construction costs.

Assuming all other construction costs include = construction cost of coal storage facility + construction cost of support facilities and equipment + construction cost of railroads + construction cost of Land improvements, roads, parking, and paved areas.

Therefore all other construction costs = $ 31693636

Project integration costs = 3%(31693636) = $950809.0909

Adding all the costs, we get

Estimated 2016 cost for building the coal fired generating faciliity = 1200000+3000000+263656271.8+22363636.36+20130000+900000+950809.0909 = $ 312200717.2