Estimate your projects' costs by looking into your history

As the Irish philosopher and politician Edmund Burke once said: “Those who don’t know history are destined to repeat it”. And that’s just one of numerous quotes from just as many philosophers, historians and politicians about the lessons to be learned from the past.

In one of our previous blogs it was already mentioned that experience is a very valuable asset of a cost estimator. Part of that experience can be made tangible by creating accurate cost reports from executed projects. By using the same approach to every such report, you can ensure they are comparable.

Capacity factor estimating

High-level factor estimating is used in the first phases of a project, when the scope is not yet finalized and no detailed design is available yet. Therefore, historical data of similar projects is used to have at least an indication of the expected costs of that particular project.

This could be based on one or multiple parameters; with practically no design available, you’ll probably use the total capacity of the plant, for example 900MW for a nuclear power plant, or 120.000 barrels per day for a refinery. If you have executed similar projects in the past, the costs can be expected to be roughly the same order of magnitude.

Equipment factor estimating

Once more information is known about a project, for example when a process flow diagram (PFD) has been developed, you can add more detail and therefore more accuracy to the estimate. To do so, historic information is once again essential. By analyzing previous quotations you have received from vendors for several kinds of equipment, you can develop a cost model based on a certain set of parameters. For instance, the costs of a heat exchanger can be approximated based on, amongst others: capacity, operating temperature, surface area and material.

Benchmarking

Another example of the value of historic data, is its use for benchmarking purposes. A properly documented database of historic projects provides the reference needed to benchmark estimates and project performance. The former helps to increase the quality of future estimates and validate existing cost models. The latter might provide insight into the reasons of cost overruns and can be a reason to investigate certain elements further, for example the performance of a certain vendor.

These are just 3 reasons why it is important to capture, store, analyze and reuse historic data. To streamline data analysis and improve cost accuracy, consider using cost estimating software. Want to know more about the value of data? Contact us to discuss your data needs.