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(EST-2215) Accuracy of FEL 2 Estimates in Process Plants

Primary Author: Melissa C. Matthews
Audience Focus: Intermediate
Application Type: Research
Venue: 2016 AACE International Annual Meeting, Toronto, ON, Canada

Abstract: Estimators use a variety of practices to determine the cost of capital projects at the end of the select stage when only a small portion of engineering is complete. The expected accuracy of these conceptual estimates is usually quoted at plus or minus 30 percent. However, many projects finish with costs outside that range. AACE® International recommends that projects have a class 4 estimate when upwards of 15 percent of engineering is complete, which is approximately the end of the select phase. Data from actual projects in the process industries show that conceptual estimates labeled as class 4 are not as predictable as expected. In fact, most class 4 estimates resemble the predictability of class 5 estimates. Given this, the question that follows is: What drives variance in performance measured from the FEL 2 estimates? Using Independent Project Analysis’s (IPA’s) extensive database, the author looked at project estimates and practices to identify approaches that improve the accuracy of FEL 2 estimates.