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HomeMy WebLinkAboutAkutan geothermal report Appendix B 2014 Appendix B Phase III Scoping Meeting 28-29 October 2013 • Agenda • Additional Background for Scoping Meeting • Akutan Geothermal Development Project Power Point Presentation • AACE International Cost Estimate Classification System Akutan Geothermal Development Project Phase III Scoping Meeting Date/Time: 28-29 October 2013 Location: Homewood Suites Las Vegas Airport, Nevada Attendees: RMA Consulting Group Geothermal Resource Group Ray Mann Alan Bailey Bob Kirkman Bill Rickard Mary Ohren URS Geothermal Design Associates Bill Hoskins Larry Green Mead & Hunt Jim Botz AGENDA Day 1: 28 October 2013 I. Meeting Overview A. Background, Agenda B. Objectives C. Deliverables II. Project Updates A. 2011 Preliminary Business and Operations Plan, AEA Project Review, Mannvit/Technip (Trident) Report B. 2012 Field Operations, Findings and Recommendations C. Grant Re-scoping, 2013 Field Operations III. Current Tasking A. Overview, Task Descriptions B. RMA Consulting Group, Mead & Hunt 1. Road and Water Supply Design 2. Environmental Review, Permitting 3. Economic Assessment, Revised Business Case 4. Partnerships, Funding C. Geothermal Resource Group, GDA, URS 1. Engineering and Cost Estimates 2. Screening Study 3. Support for Permitting Package, Economic Assessment and Revised Business Case IV. Development of Design Criteria A. Access and Logistics B. Drilling Program C. Gathering System and Power Plant D. Transmission and Interconnection Day 2: 29 October 2013 I. Review Day 1 Results and Remaining Issues II. Prepare Team Integration Plan and Tasking Chart III. Develop Schedule for Remaining Tasks IV. Discuss Financing Considerations and Options V. Resolve Remaining Issues and Identify Action Items 1 AKUTAN GEOTHERMAL DEVELOPMENT PROJECT ADDITIONAL BACKGROUND FOR LAS VEGAS SCOPING MEETING 28-29 OCTOBER 2013 General As a result of 2010 field exploratory work in Hot Springs Bay Valley of Akutan and subsequent data evaluation and modeling, the City of Akutan and Alaska Energy Authority (AEA) authorized the continuation of the feasibility phase of the project. RMA Consulting Group, acting as Program Managers of the project, assembled a technical team consisting of RMA, Mead & Hunt Engineers, and Geothermal Resource Group (GRG). Geothermal Development Associates and URS Corporation were engaged as subcontractors to GRG. Utilizing technical and economic data provided by various team members, a conceptual level evaluation of costs and economics (“Akutan Screening Study”) was completed in May 2011. Among other things, the screening study identified a preferred alternative, consisting of “…two 5MW non-condensing steam plants, four (4) production/injection wells and the road construction/transmission line route from Akutan Bay over the saddle into the southwest end of Hot Springs Bay Valley.” Estimated cost of construction was $60 million in 2011 dollars. With input from the screen study and other economic and operational information, RMA prepared a Draft Operational and Business Plan, dated 23 September 2011. The plan elaborates on the findings and recommendations of the screening study and defines next steps for the project as: • Execute a (Round IV) grant agreement with AEA for expenditure of $3.1 million for final design and permitting. • Meet and confer with Trident Seafoods Corporation on results of their independent study, and adjust planning and design accordingly.* • Implement Phase III Final Design and Permitting for the project as described in the Feasibility Report and this business plan. • Develop final cost estimates for construction, commissioning, operations and maintenance. • Continue to seek $15 million of grants, appropriations and subsidies for project development, as projected in the financial analysis section of this business plan. 2 • Conclude negotiation with Akutan and Aleut Corporations for property control and resource utilization. • Prepare final operational and business plan for construction and commissioning. *Trident Seafoods engaged the team of Mannvit/Technip to prepare a “viability study” for the Akutan geothermal development project. The report has been placed on the GRG FTP site for review prior to the scoping meeting. Resource Confirmation – 2012 Field Work Alaska Energy Authority and Alaska Division of Geological and Geophysical Surveys (DGGS) reviewed the Phase II Feasibility Report, the Screen Study and the Draft Operational and Business Plan. There were two primary comments: 1. AEA and DGGS did not believe the 2011 Feasibility Report provided enough evidence to confirm the location and characteristics of the geothermal resource. 2. Both agencies identified the $13.8 million estimated cost of production/injection drilling as too low, in view of the significant risk of drilling in extremely remote locations, and in view of the need for further efforts to confirm the resource. As a consequence, AEA was unwilling to release funding for Phase III of the project (Design and Cost Estimates) without additional field-based efforts toward resource confirmation. In summer 2012, the City contracted with the team of RMA, Mead & Hunt, GRG, and GRG subcontractors Zonge International, and Hinz/Dering Structural Geologists (University of Nevada). The GRG team performed MT and gravity surveys, geologic mapping, data processing and interpretation, and modeling. Mead & Hunt provided a feasibility analysis of the proposed Akutan geothermal access road. These efforts resulted in a variety of published reports, which have been made available to team members on a GRG FTP site, and which will be reviewed at the Las Vegas scoping meeting. Project Continuation: Phase III, Design and Cost Estimating After thorough review of the data findings and recommendations of the 2012 fieldwork, AEA agreed to authorize continuation of Phase III, Design and Cost Estimates, to include the following tasks: • Design and construction estimates for drilling, steam field and plant, access road and supporting infrastructure • Environmental assessment and permitting • Power sales agreements and investment strategies 3 • Updated economic and financial analysis • Final business and operations plan Funding was also provided for the abandonment of TG wells 2 and 4, which were drilled as part of the 2010 field exploration of Hot Springs Bay Valley. Phase III work commenced in September 2013 with additional fieldwork to support access road and pad design, water system design, identification of rock material for construction, environmental review, including biological, hydrology, historical/archeological, and other permit related field investigations. The results of these work efforts are currently being compiled and will be discussed in detail at the Las Vegas scoping meeting With the completion of 2013 fieldwork, it is important that all team members be briefed on progress to date, and that an integration plan be developed to clearly establish team member and individual tasks and the integration of workflow. Consequently, a Phase III scoping meeting has been scheduled for 28-29 October 2013 in Las Vegas, Nevada. Purposes of Scoping Meeting Meeting participants need to develop a shared view of project status and the work/deliverables to be completed for Phase III. Probably most important, is the development of design criteria that will drive team member and collective work efforts through the remainder of Phase III. Using the 2011 screening study and business plan as points of departure, the team will need to revisit previously established assumptions and criteria such as: 1. Number, size and location of production and re-injection wells 2. Size, configuration and location of gathering system and power plant 3. Routing for access road and transmission lines 4. Logistics for production drilling and system construction 5. Economic factors such as price of fuel, rates of return and investor requirements In addition, the team must consider recently acquired data and information, such as the Mannvit/Technip study, environmental and permitting evaluations, water supply, and investment strategies. We must also decide the cost estimate classification to be used for the completion of Phase III tasking. (See attached matrix.) Finally, there are a variety of remaining issues and questions that need to be addressed at the scoping meeting. We should do our best to reduce these to a minimum by the time the meeting adjourns. 4 Objectives of the Scoping Meeting There are several key objectives for the scoping meeting. Some are listed below. The remainder will be identified during the opening session of the meeting. Team members should come to the meeting with their own lists of issues, questions and objectives, to ensure that all of our goals and objectives can be accomplished within the time allotted. Minimum objectives include: • Develop a common, shared understanding of project status and the work effort needed to complete Phase III. • Provide a clear understanding of Phase III tasking and prepare a task and workflow integration plan or matrix. • Develop a comprehensive list of necessary design criteria, and confirm criteria to be used going forward, i.e., reduce the number of issues or questions that are unresolved. • Prepare a timeline and schedule for the overall project and for impacts and deliverables needed to keep the project moving. • Identify critical path items and risk factors for the timely completion of the project, to include cost containment. • Explore and define financing options for construction, using team member experience, lessons learned, and strategy development skills. 5 Copyright © AACE® International AACE® International Recommended Practices AACE International Recommended Practice No. 18R-97 COST ESTIMATE CLASSIFICATION SYSTEM – AS APPLIED IN ENGINEERING, PROCUREMENT, AND CONSTRUCTION FOR THE PROCESS INDUSTRIES TCM Framework: 7.3 – Cost Estimating and Budgeting Rev. November 29, 2011 Note: As AACE International Recommended Practices evolve over time, please refer to www.aacei.org for the latest revisions. Contributors: Peter Christensen, CCE (Author) Larry R. Dysert, CCC CEP (Author) Jennifer Bates, CCE Jeffery J. Borowicz, CCE CEP PSP Peter R. Bredehoeft, Jr. CEP Robert B. Brown, PE Dorothy J. Burton Robert C. Creese, PE CCE John K. Hollmann, PE CCE CEP Kenneth K. Humphreys, PE CCE Donald F. McDonald, Jr. PE CCE PSP C. Arthur Miller Todd W. Pickett, CCC CEP Bernard A. Pietlock, CCC CEP Wesley R. Querns, CCE Don L. Short, II CEP H. Lance Stephenson, CCC James D. Whiteside, II PE AACE® International Recommended Practice No. 18R-97 COST ESTIMATE CLASSIFICATION SYSTEM –AS APPLIED IN ENGINEERING, PROCUREMENT, AND CONSTRUCTION FOR THE PROCESS INDUSTRIES TCM Framework: 7.3 – Cost Estimating and Budgeting November 29, 2011 Copyright © AACE® International AACE® International Recommended Practices PURPOSE As a recommended practice of AACE International, the Cost Estimate Classification System provides guidelines for applying the general principles of estimate classification to project cost estimates (i.e., cost estimates that are used to evaluate, approve, and/or fund projects). The Cost Estimate Classification System maps the phases and stages of project cost estimating together with a generic project scope definition maturity and quality matrix, which can be applied across a wide variety of process industries. This addendum to the generic recommended practice (17R-97) provides guidelines for applying the principles of estimate classification specifically to project estimates for engineering, procurement, and construction (EPC) work for the process industries. This addendum supplements the generic recommended practice by providing: • a section that further defines classification concepts as they apply to the process industries; and • a chart that maps the extent and maturity of estimate input information (project definition deliverables) against the class of estimate. As with the generic recommended practice, an intent of this addendum is to improve communications among all of the stakeholders involved with preparing, evaluating, and using project cost estimates specifically for the process industries. The overall purpose of this recommended practice is to provide the process industry definition deliverable maturity matrix which is not provided in 17R-97. It also provides an approximate representation of the relationship of specific design input data and design deliverable maturity to the estimate accuracy and methodology used to produce the cost estimate. The estimate accuracy range is driven by many other variables and risks, so the maturity and quality of the scope definition available at the time of the estimate is not the sole determinate of accuracy; risk analysis is required for that purpose. This document is intended to provide a guideline, not a standard. It is understood that each enterprise may have its own project and estimating processes and terminology, and may classify estimates in particular ways. This guideline provides a generic and generally acceptable classification system for process industries that can be used as a basis to compare against. This addendum should allow each user to better assess, define, and communicate their own processes and standards in the light of generally-accepted cost engineering practice. INTRODUCTION For the purposes of this addendum, the term process industries is assumed to include firms involved with the manufacturing and production of chemicals, petrochemicals, and hydrocarbon processing. The common thread among these industries (for the purpose of estimate classification) is their reliance on process flow diagrams (PFDs) and piping and instrument diagrams (P&IDs) as primary scope defining documents. These documents are key deliverables in determining the degree of project definition, and thus the extent and maturity of estimate input information. Estimates for process facilities center on mechanical and chemical process equipment, and they have significant amounts of piping, instrumentation, and process controls involved. As such, this addendum may apply to portions 18R-97: Cost Estimate Classification System –As Applied in Engineering, Procurement, and Construction for the Process Industries 2of 10 November 29, 2011 Copyright © AACE® International AACE® International Recommended Practices of other industries, such as pharmaceutical, utility, metallurgical, converting, and similar industries. Specific addendums addressing these industries may be developed over time. This addendum specifically does not address cost estimate classification in non-process industries such as commercial building construction, environmental remediation, transportation infrastructure, hydropower, “dry” processes such as assembly and manufacturing, “soft asset” production such as software development, and similar industries. It also does not specifically address estimates for the exploration, production, or transportation of mining or hydrocarbon materials, although it may apply to some of the intermediate processing steps in these systems. The cost estimates covered by this addendum are for engineering, procurement, and construction (EPC) work only. It does not cover estimates for the products manufactured by the process facilities, or for research and development work in support of the process industries. This guideline does not cover the significant building construction that may be a part of process plants. This guideline reflects generally-accepted cost engineering practices. This addendum was based upon the practices of a wide range of companies in the process industries from around the world, as well as published references and standards. Company and public standards were solicited and reviewed, and the practices were found to have significant commonalities. These classifications are also supported by empirical process industry research of systemic risks and their correlation with cost growth and schedule slip[8]. COST ESTIMATE CLASSIFICATION MATRIX FOR THE PROCESS INDUSTRIES Primary Characteristic Secondary Characteristic ESTIMATE CLASS MATURITY LEVEL OF PROJECT DEFINITION DELIVERABLES Expressed as % of complete definition END USAGE Typical purpose of estimate METHODOLOGY Typical estimating method EXPECTED ACCURACY RANGE Typical variation in low and high ranges [a] Class 5 0% to 2% Concept screening Capacity factored, parametric models, judgment, or analogy L: -20% to -50% H: +30% to +100% Class 4 1% to 15% Study or feasibility Equipment factored or parametric models L: -15% to -30% H: +20% to +50% Class 3 10% to 40% Budget authorization or control Semi-detailed unit costs with assembly level line items L: -10% to -20% H: +10% to +30% Class 2 30% to 75% Control or bid/tender Detailed unit cost with forced detailed take-off L: -5% to -15% H: +5% to +20% Class 1 65% to 100% Check estimate or bid/tender Detailed unit cost with detailed take-off L: -3% to -10% H: +3% to +15% Notes: [a] The state of process technology, availability of applicable reference cost data, and many other risks affect the range markedly. The +/- value represents typical percentage variation of actual costs from the cost estimate after application of contingency (typically at a 50% level of confidence) for given scope. Table 1 – Cost Estimate Classification Matrix for Process Industries Table 1 provides a summary of the characteristics of the five estimate classes. The maturity level of definition is the sole determining (i.e., primary) characteristic of Class. In Table 1, the maturity is roughly indicated by a % of 18R-97: Cost Estimate Classification System –As Applied in Engineering, Procurement, and Construction for the Process Industries 3of 10 November 29, 2011 Copyright © AACE® International AACE® International Recommended Practices complete definition; however, it is the maturity of the defining deliverables that is the determinant, not the percent. The specific deliverables, and their maturity, or status, are provided in Table 3. The other characteristics are secondary and are generally correlated with the maturity level of project definition deliverables, as discussed in the generic RP[1]. The characteristics are typical for the process industries but may vary from application to application. This matrix and guideline outline an estimate classification system that is specific to the process industries. Refer to the generic estimate classification RP[1] for a general matrix that is non-industry specific, or to other addendums for guidelines that will provide more detailed information for application in other specific industries. These will provide additional information, particularly the project definition deliverable maturity matrix which determines the class in those particular industries. Table 1 illustrates typical ranges of accuracy ranges that are associated with the process industries. Depending on the technical and project deliverables (and other variables) and risks associated with each estimate, the accuracy range for any particular estimate is expected to fall into the ranges identified (although extreme risks can lead to wider ranges). In addition to the degree of project definition, estimate accuracy is also driven by other systemic risks such as: • Level of non-familiar technology in the project. • Complexity of the project. • Quality of reference cost estimating data. • Quality of assumptions used in preparing the estimate. • Experience and skill level of the estimator. • Estimating techniques employed. • Time and level of effort budgeted to prepare the estimate. Systemic risks such as these are often the primary driver of accuracy; however, project-specific risks (e.g. risk events) also drive the accuracy range[3]. Another way to look at the variability associated with estimate accuracy ranges is shown in Figure 1. Depending upon the technical complexity of the project, the availability of appropriate cost reference information, the degree of project definition, and the inclusion of appropriate contingency determination, a typical Class 5 estimate for a process industry project may have an accuracy range as broad as -50% to +100%, or as narrow as -20% to +30%. Figure 1 also illustrates that the estimating accuracy ranges overlap the estimate classes. There are cases where a Class 5 estimate for a particular project may be as accurate as a Class 3 estimate for a different project. For example, similar accuracy ranges may occur for the Class 5 estimate of one project that is based on a repeat project with good cost history and data and the Class 3 estimate for another project involving new technology. It is for this reason that Table 1 provides ranges of accuracy range values. The accuracy range is determined through risk analysis of the specific project. 18R-97: Cost Estimate Classification System – As Applied in Engineering, Procurement, and Construction for the Process Industries 4of 10 November 29, 2011 Copyright © AACE® International AACE® International Recommended Practices Figure 1 – Example of the Variability in Accuracy Ranges for a Process Industry Estimate DETERMINATION OF THE COST ESTIMATE CLASS The cost estimator makes the determination of the estimate class based upon the maturity level of project definition based on the status of specific key planning and design deliverables. The percent design completion may be correlated with the status, but the percentage should not be used as the Class determinate. While the determination of the status (and hence class) is somewhat subjective, having standards for the design input data, completeness and quality of the design deliverables will serve to make the determination more objective. CHARACTERISTICS OF THE ESTIMATE CLASSES The following tables (2a through 2e) provide detailed descriptions of the five estimate classifications as applied in the process industries. They are presented in the order of least-defined estimates to the most-defined estimates. These descriptions include brief discussions of each of the estimate characteristics that define an estimate class. -50 -40 -30 -20 -10 0 10 20 30 40 50 60 70 80 90 100 0 102030405060708090100Growth from Estimated Costs Including Contingency (%)Maturity Level of Project Definition Deliverables (%) Class 4 Class 3 Class 2 Class 1 Class 5 18R-97: Cost Estimate Classification System –As Applied in Engineering, Procurement, and Construction for the Process Industries 5of 10 November 29, 2011 Copyright © AACE® International AACE® International Recommended Practices For each table, the following information is provided: • Description: a short description of the class of estimate, including a brief listing of the expected estimate inputs based on the maturity level of project definition deliverables. The “minimum” inputs reflect the range of industry experience, but would not generally be recommended. • Maturity Level of Project Definition Deliverables (Primary Characteristic): Describes a particularly key deliverable and a typical target status in stage-gate decision processes, plus an indication of approximate percent of full definition of project and technical deliverables. For the process industries, this correlates with the percent of engineering and design complete. • End Usage (Secondary Characteristic): a short discussion of the possible end usage of this class of estimate. • Estimating Methodology (Secondary Characteristic): a listing of the possible estimating methods that may be employed to develop an estimate of this class. • Expected Accuracy Range (Secondary Characteristic): typical variation in low and high ranges after the application of contingency (determined at a 50% level of confidence). Typically, this represents about 80% confidence that the actual cost will fall within the bounds of the low and high ranges. The estimate confidence interval or accuracy range is driven by the reliability of the scope information available at the time of the estimate in addition to the other variables and risk identified above. • Alternate Estimate Names, Terms, Expressions, Synonyms: this section provides other commonly used names that an estimate of this class might be known by. These alternate names are not endorsed by this Recommended Practice. The user is cautioned that an alternative name may not always be correlated with the class of estimate as identified in Tables 2a-2e. CLASS 5 ESTIMATE Description: Class 5 estimates are generally prepared based on very limited information, and subsequently have wide accuracy ranges. As such, some companies and organizations have elected to determine that due to the inherent inaccuracies, such estimates cannot be classified in a conventional and systematic manner. Class 5 estimates, due to the requirements of end use, may be prepared within a very limited amount of time and with little effort expended—sometimes requiring less than an hour to prepare. Often, little more than proposed plant type, location, and capacity are known at the time of estimate preparation. Maturity Level of Project Definition Deliverables: Key deliverable and target status: Block flow diagram agreed by key stakeholders. 0% to 2% of full project definition. End Usage: Class 5 estimates are prepared for any number of strategic business planning purposes, such as but not limited to market studies, assessment of initial viability, evaluation of alternate schemes, project screening, project location studies, evaluation of resource needs and budgeting, long-range capital planning, etc. Estimating Methodology: Class 5 estimates generally use stochastic estimating methods such as cost/capacity curves and factors, scale of operations factors, Lang factors, Hand factors, Chilton factors, Peters- Timmerhaus factors, Guthrie factors, and other parametric and modeling techniques. Expected Accuracy Range: Typical accuracy ranges for Class 5 estimates are -20% to -50% on the low side, and +30% to +100% on the high side, depending on the technological complexity of the project, appropriate reference information and other risks ( after inclusion of an appropriate contingency determination). Ranges could exceed those shown if there are unusual risks. Alternate Estimate Names, Terms, Expressions, Synonyms: Ratio, ballpark, blue sky, seat-of-pants, ROM, idea study, prospect estimate, concession license estimate, guesstimate, rule-of-thumb. Table 2a – Class 5 Estimate 18R-97: Cost Estimate Classification System –As Applied in Engineering, Procurement, and Construction for the Process Industries 6of 10 November 29, 2011 Copyright © AACE® International AACE® International Recommended Practices CLASS 4 ESTIMATE Description: Class 4 estimates are generally prepared based on limited information and subsequently have fairly wide accuracy ranges. They are typically used for project screening, determination of feasibility, concept evaluation, and preliminary budget approval. Typically, engineering is from 1% to 15% complete, and would comprise at a minimum the following: plant capacity, block schematics, indicated layout, process flow diagrams (PFDs) for main process systems, and preliminary engineered process and utility equipment lists. Maturity Level of Project Definition Deliverables: Key deliverable and target status: Process flow diagrams (PFDs) issued for design. 1% to 15% of full project definition. End Usage: Class 4 estimates are prepared for a number of purposes, such as but not limited to, detailed strategic planning, business development, project screening at more developed stages, alternative scheme analysis, confirmation of economic and/or technical feasibility, and preliminary budget approval or approval to proceed to next stage. Estimating Methodology: Class 4 estimates generally use stochastic estimating methods such as equipment factors, Lang factors, Hand factors, Chilton factors, Peters-Timmerhaus factors, Guthrie factors, the Miller method, gross unit costs/ratios, and other parametric and modeling techniques. Expected Accuracy Range: Typical accuracy ranges for Class 4 estimates are -15% to -30% on the low side, and +20% to +50% on the high side, depending on the technological complexity of the project, appropriate reference information, and other risks (after inclusion of an appropriate contingency determination). Ranges could exceed those shown if there are unusual risks. Alternate Estimate Names, Terms, Expressions, Synonyms: Screening, top-down, feasibility (pre-feasibility for metals processes), authorization, factored, pre-design, pre-study. Table 2b – Class 4 Estimate CLASS 3 ESTIMATE Description: Class 3 estimates are generally prepared to form the basis for budget authorization, appropriation, and/or funding. As such, they typically form the initial control estimate against which all actual costs and resources will be monitored. Typically, engineering is from 10% to 40% complete, and would comprise at a minimum the following: process flow diagrams, utility flow diagrams, preliminary piping and instrument diagrams, plot plan, developed layout drawings, and essentially complete engineered process and utility equipment lists. Maturity Level of Project Definition Deliverables: Key deliverable and target status: Piping and instrumentation diagrams (P&IDs) issued for design. 10% to 40% of full project definition. End Usage: Class 3 estimates are typically prepared to support full project funding requests, and become the first of the project phase control estimates against which all actual costs and resources will be monitored for variations to the budget. They are used as the project budget until replaced by more detailed estimates. In many owner organizations, a Class 3 estimate is often the last estimate required and could very well form the only basis for cost/schedule control. Estimating Methodology: Class 3 estimates generally involve more deterministic estimating methods than stochastic methods. They usually involve predominant use of unit cost line items, although these may be at an assembly level of detail rather than individual components. Factoring and other stochastic methods may be used to estimate less-significant areas of the project. Expected Accuracy Range: Typical accuracy ranges for Class 3 estimates are -10% to -20% on the low side, and +10% to +30% on the high side, depending on the technological complexity of the project, appropriate reference information, and other risks (after inclusion of an appropriate contingency determination). Ranges could exceed those shown if there are unusual risks. Alternate Estimate Names, Terms, Expressions, Synonyms: Budget, scope, sanction, semi-detailed, authorization, preliminary control, concept study, feasibility (for metals processes) development, basic engineering phase estimate, target estimate. Table 2c – Class 3 Estimate 18R-97: Cost Estimate Classification System –As Applied in Engineering, Procurement, and Construction for the Process Industries 7of 10 November 29, 2011 Copyright © AACE® International AACE® International Recommended Practices CLASS 2 ESTIMATE Description: Class 2 estimates are generally prepared to form a detailed contractor control baseline (and update the owner control baseline) against which all project work is monitored in terms of cost and progress control. For contractors, this class of estimate is often used as the bid estimate to establish contract value. Typically, engineering is from 30% to 75% complete, and would comprise at a minimum the following: process flow diagrams, utility flow diagrams, piping and instrument diagrams, heat and material balances, final plot plan, final layout drawings, complete engineered process and utility equipment lists, single line diagrams for electrical, electrical equipment and motor schedules, vendor quotations, detailed project execution plans, resourcing and work force plans, etc. Maturity Level of Project Definition Deliverables: Key deliverable and target status: All specifications and datasheets complete including for instrumentation. 30% to 75% of full project definition. End Usage: Class 2 estimates are typically prepared as the detailed contractor control baseline (and update the owner control baseline) against which all actual costs and resources will now be monitored for variations to the budget, and form a part of the change management program. Estimating Methodology: Class 2 estimates generally involve a high degree of deterministic estimating methods. Class 2 estimates are prepared in great detail, and often involve tens of thousands of unit cost line items. For those areas of the project still undefined, an assumed level of detail takeoff (forced detail) may be developed to use as line items in the estimate instead of relying on factoring methods. Expected Accuracy Range: Typical accuracy ranges for Class 2 estimates are -5% to -15% on the low side, and +5% to +20% on the high side, depending on the technological complexity of the project, appropriate reference information, and other risks (after inclusion of an appropriate contingency determination). Ranges could exceed those shown if there are unusual risks. Alternate Estimate Names, Terms, Expressions, Synonyms: Detailed control, forced detail, execution phase, master control, engineering, bid, tender, change order estimate. Table 2d – Class 2 Estimate 18R-97: Cost Estimate Classification System –As Applied in Engineering, Procurement, and Construction for the Process Industries 8of 10 November 29, 2011 Copyright © AACE® International AACE® International Recommended Practices CLASS 1 ESTIMATE Description: Class 1 estimates are generally prepared for discrete parts or sections of the total project rather than generating this level of detail for the entire project. The parts of the project estimated at this level of detail will typically be used by subcontractors for bids, or by owners for check estimates. The updated estimate is often referred to as the current control estimate and becomes the new baseline for cost/schedule control of the project. Class 1 estimates may be prepared for parts of the project to comprise a fair price estimate or bid check estimate to compare against a contractor’s bid estimate, or to evaluate/dispute claims. Typically, overall engineering is from 65% to 100% complete (some parts or packages may be complete and others not), and would comprise virtually all engineering and design documentation of the project, and complete project execution and commissioning plans. Maturity Level of Project Definition Deliverables: Key deliverable and target status: All deliverables in the maturity matrix complete. 65% to 100% of full project definition. End Usage: Generally, owners and EPC contractors use Class 1 estimates to support their change management process. They may be used to evaluate bid checking, to support vendor/contractor negotiations, or for claim evaluations and dispute resolution. Construction contractors may prepare Class 1 estimates to support their bidding and to act as their final control baseline against which all actual costs and resources will now be monitored for variations to their bid. During construction, Class 1 estimates may be prepared to support change management. Estimating Methodology: Class 1 estimates generally involve the highest degree of deterministic estimating methods, and require a great amount of effort. Class 1 estimates are prepared in great detail, and thus are usually performed on only the most important or critical areas of the project. All items in the estimate are usually unit cost line items based on actual design quantities. Expected Accuracy Range: Typical accuracy ranges for Class 1 estimates are -3% to -10% on the low side, and +3% to +15% on the high side, depending on the technological complexity of the project, appropriate reference information, and other risks (after inclusion of an appropriate contingency determination). Ranges could exceed those shown if there are unusual risks. Alternate Estimate Names, Terms, Expressions, Synonyms: Full detail, release, fall-out, tender, firm price, bottoms-up, final, detailed control, forced detail, execution phase, master control, fair price, definitive, change order estimate. Table 2e – Class 1 Estimate ESTIMATE INPUT CHECKLIST AND MATURITY MATRIX Table 3 maps the extent and maturity of estimate input information (deliverables) against the five estimate classification levels. This is a checklist of basic deliverables found in common practice in the process industries. The maturity level is an approximation of the completion status of the deliverable. The completion is indicated by the following letters. • None (blank): development of the deliverable has not begun. • Started (S): work on the deliverable has begun. Development is typically limited to sketches, rough outlines, or similar levels of early completion. • Preliminary (P): work on the deliverable is advanced. Interim, cross-functional reviews have usually been conducted. Development may be near completion except for final reviews and approvals. • Complete (C): the deliverable has been reviewed and approved as appropriate. 18R-97: Cost Estimate Classification System –As Applied in Engineering, Procurement, and Construction for the Process Industries 9of 10 November 29, 2011 Copyright © AACE® International AACE® International Recommended Practices ESTIMATE CLASSIFICATION CLASS 5 CLASS 4 CLASS 3 CLASS 2 CLASS 1 MATURITY LEVEL OF PROJECT DEFINITION DELIVERABLES 0% to 2% 1% to 15% 10% to 40% 30% to 75% 65% to 100% General Project Data: Project Scope Description General Preliminary Defined Defined Defined Plant Production/Facility Capacity Assumed Preliminary Defined Defined Defined Plant Location General Approximate Specific Specific Specific Soils & Hydrology None Preliminary Defined Defined Defined Integrated Project Plan None Preliminary Defined Defined Defined Project Master Schedule None Preliminary Defined Defined Defined Escalation Strategy None Preliminary Defined Defined Defined Work Breakdown Structure None Preliminary Defined Defined Defined Project Code of Accounts None Preliminary Defined Defined Defined Contracting Strategy Assumed Assumed Preliminary Defined Defined Engineering Deliverables: Block Flow Diagrams S/P P/C C C C Plot Plans S/P C C C Process Flow Diagrams (PFDs) P C C C Utility Flow Diagrams (UFDs) S/P C C C Piping & Instrument Diagrams (P&IDs) S/P C C C Heat & Material Balances S/P C C C Process Equipment List S/P C C C Utility Equipment List S/P C C C Electrical One-Line Drawings S/P C C C Specifications & Datasheets S P/C C C General Equipment Arrangement Drawings S C C C Spare Parts Listings P P C Mechanical Discipline Drawings S/P P/C C Electrical Discipline Drawings S/P P/C C Instrumentation/Control System Discipline Drawings S/P P/C C Civil/Structural/Site Discipline Drawings S/P P/C C Table 3 – Estimate Input Checklist and Maturity Matrix (Primary Classification Determinate) 18R-97: Cost Estimate Classification System –As Applied in Engineering, Procurement, and Construction for the Process Industries 10 of 10 November 29, 2011 Copyright © AACE® International AACE® International Recommended Practices REFERENCES 1. AACE International, Recommended Practice No.17R-97, Cost Estimate Classification System, AACE International, Morgantown, WV. (latest revision) 2. Hollmann, John K., PE CCE, Editor, Total Cost Management Framework: An Integrated Approach to Portfolio, Program and Project Management, AACE International, Morgantown, WV, 2006. 3. AACE International, Recommended Practice 10S-90, Cost Engineering Terminology, AACE International, Morgantown, WV. (latest revision). 4. John R. Heizelman, Estimating Factors for Process Plants, 1988 AACE Transactions, V.3, AACE International, Morgantown, WV, 1988. 5. K.T. Yeo, The Cost Engineer Journal, UK Vol. 27, No. 6, 1989. 6. Stevens, G. and T. Davis, How Accurate are Capital Cost Estimates?, 1988 AACE Transactions, B.4, AACE International. Morgantown, WV, 1988. (* Class 3 is inferred) 7. Behrenbruch, Peter, article in Journal of Petroleum Technology, Vol. 45, No. 8, Society of Petroleum Engineers, August 1993. 8. AACE International, Recommended Practice 42R-08, Risk Analysis and Contingency Determination Using Parametric Estimating, AACE International, Morgantown, WV, (latest revision). CONTRIBUTORS Peter Christensen, CCE (Author) Larry R. Dysert, CCC CEP (Author) Jennifer Bates, CCE Jeffery J. Borowicz, CCE CEP PSP Peter R. Bredehoeft, Jr. CEP Robert B. Brown, PE Dorothy J. Burton Robert C. Creese, PE CCE John K. Hollmann, PE CCE CEP Kenneth K. Humphreys, PE CCE Donald F. McDonald, Jr. PE CCE PSP C. Arthur Miller Todd W. Pickett, CCC CEP Bernard A. Pietlock, CCC CEP Wesley R. Querns, CCE Don L. Short, II CEP H. Lance Stephenson, CCC James D. Whiteside, II PE