How to Correctly Assess the Cost of Engineering

Conceptual Engineering

How to Correctly Assess the Cost of Engineering. Conceptual Engineering is the first phase of an engineering project…

In this stage, and once the technical and commercial feasibility of the project is checked according to the objectives set by the client, it is analyzed:

The type of technologies to be used.

The framework of technical standards that will regulate the design.

The economic evaluation and the calculation of the profitability of the project.

Then, with the previous data in hand, the client decides whether to continue with the basic engineering of the project or cancel it because of low profitability.

How to Correctly Assess the Cost of Engineering – Basic Engineering

Basic engineering defines the general guidelines and basic ideas of the project. These ideas and definitions of the project are the pillars on which the detailed engineering will be based on the execution of the construction drawings.

On some occasions, we quote together the basic engineering of a project with its construction. We should note it that the price of this type of engineering is significant regarding the cost of construction, and sometimes may equal or exceed the value of the project’s construction cost.

Basic engineering, for example, has a high value when:

-It is basic engineering with patented technology and specially formulated to execute a transformation process in the petrochemical, mining, etc.

In general, these basic engineering packages include:
-Process flow diagrams.
-Material balances.
-Piping and instrumentation diagrams.
-Datasheets of equipment and instruments.
-Chemical consumption requirements.
-Effluent summaries.

Examples of basic engineering

-Basic engineering to separate and sanitize industrial effluents from an oil refinery by recycling the hydrocarbons they contain.

-The basic engineering to convert kerosene into aviation naphtha.

-Basic engineering to transform iron ore into steel by direct reduction of iron ore, etc.
In other words, the idea, the concept, the technique, the creation ultimately exceed the cost of the action of building.

When the professional or the company selling the basic engineering accepts it, the client first acquires the design or the basic engineering that suits his requirements and then tenders the detailed engineering and the construction of the work separately.
In these cases, the seller establishes the value of the design or basic engineering.

How to Correctly Assess the Cost of Engineering – Detailed Engineering

Detailed engineering includes manufacturing and/or construction drawings, calculation reports, technical specifications, datasheets, as-built drawings, etc., and its cost varies according to the type of project.

To estimate the cost of this engineering, it is not only necessary to consider the hours of the specialists, designers, and draftsmen, etc., but it is also necessary to consider the following topics, among others:

-Knowing what the client’s level of demand is in terms of quality requirements, level of detail, delivery dates, and times for reviewing the documentation that makes up the detailed engineering.

-Concerning the above, it is important to note that the cost of engineering increases when the time stipulated by the client to review each drawing and return it with or without observations is greater than usual.

-In some projects, especially in cases of extensions or repairs, there are interferences with existing facilities, and we must resolve these with a greater expenditure of hours.
In this type of situation, the cost of detailed engineering, in general, is obtained by comparison with similar works.

In tenders where detailed engineering is not complicated, it suffices to consider the hours of specialists, designers, draftsmen, supplies, etc.

Review the following article on how to estimate the direct cost of materials

How to Correctly Assess the Cost of Engineering – Calculate Man Hours

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