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36R-08: Development of Cost Estimate Plans - As Applied in Engineering, Procurement, and Construction for the Process Industries

36R-08: Development of Cost Estimate Plans - As Applied in Engineering, Procurement, and Construction for the Process Industries
AACE International, February 14, 2015

Price: $0 (Member) / $100 (Non-Member)

This recommended practice (RP) of AACE International (AACE) is a guideline for development of cost estimate preparation plans for engineering, procurement and construction (EPC) projects in the process industries.

The purpose of a cost estimate preparation plan (herein referred to as “estimate plan”) is to establish and communicate how the preparation, development, review and approval of the estimate will be completed.

AACE International’s Total Cost Management (TCM) Framework section 7.3.2.1 “Plan for Cost Estimating and Budgeting” highlights the need to develop estimate plans. This RP delineates industry specific practices for development of an estimate plan as they are applied to EPC projects in the process industries.

Cost estimating in the hydrocarbon processing industries (e.g.; chemical, refining, petroleum production facilities, etc.) has evolved to a relatively advanced state over more than four decades of application. These industries have developed many common practices and identified industry-specific best practices through benchmarking and knowledge-sharing. The practices reflected in this document are a result of compiling notes made by industry practitioners, lessons learned and publicly available documents.
With reference to the TCM Framework, this document addresses the steps before and after the “Plan for Estimating and Budgeting” step to the extent necessary for an effective estimate plan.

This document is primarily focused on estimates prepared for project sanction purposes of land-based facilities. Typically, project sanction is based on a Class 3 estimate. Estimate plans for other classes of estimates may be adapted from this document.
The basic principles are applicable to all contracting strategies and asset owner (herein referred to as “owner”) configurations. For example, contracting strategies may be in the form of reimbursable engineering with fixed price procurement and construction and/or EPC alliances, etc. Owner configurations may include self-perform, partnerships with a named “operating company” or consortiums responsible for managing the project/program and so on. Some key principles are:
• Preparation of an estimate plan helps to ensure successful estimate completion in an effective and timely manner.
• Engaging key stakeholders in the estimate planning process prior to the start of the estimate development process, improves the likelihood of meeting estimate objectives.
• The estimate plan defines what information is required from who and when.
• An approved estimate plan provides a duly authorized basis to proceed with the estimating effort, clarifies requirements and responsibilities.

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