Benchmarking

Biomass Power Plant Benchmarking (Open-Source Example)

Vikas KhaitanLeave a comment

In one of my past blogs, I developed and shared an open-source benchmarking example for gas and coal fired power plants. I have now developed another open-source benchmarking graph, using internet-based data, for a typical biomass power plant project. I have mostly used news articles giving the total value of the contract and capacity in Megawatt (MW) of the power plant.

20240622 Biomass Power Plant Benchmarking (Open Source)-Rev0 (free Resource)Download

The data is tabulated (in the attached Excel file) with links to the various websites for cross-checking purposes. Within the file I have also escalated the contract values to the current year using a nominal escalation factor (which will vary depending on the market conditions). This can be modified to any future year when needed. This gives a feel of what the market has paid for a typical biomass power plant. These are not out-turn costs but initial awarded values and thus should be treated as such. This is not exact but gives an idea.

No two projects are similar in scope, but what this does is to give an opportunity to the reviewers to understand any special / specific requirements of a project which might make the current project estimate different (like additional fuel conditioning, remote location, additional transmission lines, piling requirement, etc.). The overall plant cost will also vary based on the technology used, quality of fuel used, efficiency of the plant etc.

Also to be noted is that this is only an EPC cost and any Pre-FEED, FEED, other Owner’s costs, service agreements, operation & maintenance costs are to be added separately as needed.

This can be used in addition to or in the absence of any in-house or any third-party benchmarking data. This can be easily shared with anybody and can be used as a cross-check of the detailed biomass power plant estimate at a $/MW level.

The graph is also suitable for coming up with quick order of magnitude estimates for bid / no-bid analysis, initial project sanctions, bid evaluations, etc.

The graph shows the typical trend of reducing unit cost for larger capacity plants.

I have just done some research to show what can be possible with freely available data and so the graph is not considered comprehensive and can be enhanced with more data points if further research is undertaken. Location / area specific graphs can also be generated if enough data points could be gathered.

Feel free to use this as you see fit with or without modifications.

Special Notes:

Note1: Various studies show that depending on how the estimate was performed, the actual out-turn cost could potentially be much higher. For this reason, note that in this graph, I have also indicated a 75% cost overrun (as an example) to show how the actual out-turn cost might look like. This percentage can be varied within the Excel file to see various sensitivities.

Note2: I have also plotted some additional data points on the graph using cost data published by IRENA (Renewable Power Generation Costs in 2022), suitably escalated to the current year. I have used the high data for North America (see page 181 of the IRENA report) as an example for comparison with my internet based open-source data. I am suggesting that this can be used as another cross-check.

Note3: For some projects, O&M for number of years was included within the award value, which I have subtracted (using a nominal O&M cost per year). This can also be modified as needed within the Excel file.

Tank Farm Benchmarking (Open Source Example)

Vikas KhaitanLeave a comment

I have developed an open source benchmarking graph, using internet-based data, for oil storage tank farm projects. I have mostly used news articles giving the total value of the contract and total storage capacity in cubic meters (cu m) of the tank farm.

20210818 Tank Farm Benchmarking (Open Source)-Rev2Download

The data is tabulated (in the attached Excel file) with links to the various websites for cross-checking purposes. Within the file I have also escalated the contract values to the current year using a nominal escalation factor (which will vary depending on the market conditions). This can be modified to any future year when needed. This gives a feel of what the market has paid for a typical tank farm of a particular total capacity. These are not out-turn costs but initial awarded values and thus should be treated as such. This is not exact but gives an idea.

No two projects are similar in scope, but what this does is to give an opportunity to the reviewers to understand any special / specific requirements of a project which might make the current project estimate different (like remote location, additional piping, additional pumping, additional pipelines, piling requirement, etc.).

Also, to be noted is that this is only an EPC cost and any Pre-FEED, FEED, other Owner’s costs, service agreements, operation & maintenance costs are to be added separately as needed.

This can be used in addition to or in the absence of any in-house or any third-party benchmarking data. This can be easily shared with anybody and can be used as a cross-check of the detailed tank farm estimates at a $/cu m level.

The graph is also suitable for coming up with quick order of magnitude estimates for bid / no-bid analysis, initial project sanctions, bid evaluations, etc.

The graph shows the typical trend of reducing unit cost for larger capacity tank farms.

20210818 Tank Farm Benchmarking (Open Source)-Rev2

I have just done some research to show what can be possible with freely available data and so the graph is not considered comprehensive and can be enhanced with more data points if further research is undertaken. Location / area specific graphs can also be generated if enough data points could be gathered.

Feel free to use this as you see fit with or without modifications.

Special Note:

This analysis could be used to benchmark the complete project cost of any site-built tank.

Sometimes, site-built tanks are included as part of larger projects. In those estimates, the site-built tanks are considered as part of the process equipment items and are typically costed as part of the equipment list. In those situations, it would be a mistake to include the total site-built tank project cost (as per this benchmarking analysis) within the equipment cost account. I would suggest including only the steel supply & prefabrication cost for the tank as part of the equipment cost, which would typically be around 25-30% of the overall tank farm cost (as benchmarked here).

Apart from the steel supply & prefabrication, the other costs which make up a complete tank farm project include all civil works including bunds (if required), installation costs, and the costs of supply, fabrication and installation of all the associated piping, electricals, instrumentation and control items. Finally, costs such as shipping, spares, engineering, project management, site mobilisation, construction management, commissioning and any risks and mark-ups are also part of the overall tank farm project cost.

These additional costs are generally added to the estimate of the whole plant and is not separated out for the site-built tanks within the plant.

Piling Costs: Rough Estimate Model for Benchmarking

Vikas Khaitan1 Comment

Once when trying to benchmark piling costs with available information from various in-house projects, the data showed an apparently inexplicable variation in the $/m rate for the piling works. In some cases, it showed 2-3 times the $/m rate for the same diameter, and in other cases, the data showed similar $/m rate even though the diameters varied between projects.

After the initial failed benchmarking exercise, I started considering the technicalities of piling and understood that there are different kinds of piling specified for various projects depending on different soil and project conditions. I realised that I was making the mistake of comparing the $/m rate of different piling types used in different projects. This wrong comparison had created the above-mentioned variations in the overall rate.  At this point, I separated the available data into the various types of pilings. That was a good start, but then I did not have enough data points for the individual piling types to be able to generate any sensible benchmarking curves.

But benchmarking was needed for the estimate approval process.

To meet this need, I developed a small estimate model to calculate the rough $/m cost for various types of piling and for various diameters. I assumed an indicative length of pile to generate the graph. I used indicative material and labour rates, norms and productivity factors to calculate the cost of the various types of piling. I included an indicative hiring cost of piling hammer or rig as required for a specific type of piling work. All these inputs and assumptions could be modified for specific project and location to help generate a customised benchmarking graph. I have also assumed a total number of pile for this specific example and would caution that the per meter rate could substantially vary if the total quantity is significantly different. But this still gives an idea and relative cost differences

The attached file shows the proposed working.

Piling Rough Estimate Model for Benchmarking-Rev0 (free resource)

This shows how the costs could possibly vary with diameter and piling type and can be used as an in-house estimated benchmarking graph. Any past project data (if available) could be superimposed on this graph for easy comparison. Any contractor bids can then be compared against this graph to demonstrate the reasonableness of market pricing. This can also help the engineers choose and compare more than one piling type, if technically suitable, to use in a project.

Power Plant Benchmarking (Open Source Example)

Vikas Khaitan2 Comments

I have developed an open source benchmarking graph, using internet based data, for a typical power plant project. I have mostly used news articles giving the total value of the contract and capacity in Megawatt (MW) of the power plant and the type of fuel used. I have done it for only gas and coal fired power plants. This can be extended to other types as well.

Power Plant Benchmarking (Open Source)-Rev0 (free resource)

 

The data is tabulated (in the attached Excel file) with links to the various websites for cross-checking purposes. Within the file I have also escalated the contract values to the current year using a nominal escalation factor (which will vary depending on the market conditions). This can be modified to any future year when needed. This gives a feel of what the market has paid for a typical power plant. These are not out-turn costs but initial awarded values and thus should be treated as such. This is not exact, but gives an idea.

No two projects are similar in scope, but what this does is to give an opportunity to the reviewers to understand any special / specific requirements of a project which might make the current project estimate different (like additional fuel conditioning, remote location, additional transmission lines, additional fuel pipeline, piling requirement, etc.). The overall plant cost will also vary based on the technology used, quality of fuel used, efficiency of the plant etc.

Also to be noted is that this is only an EPC cost and any Pre-FEED, FEED, other Owner’s costs, service agreements, operation & maintenance costs are to be added separately as needed.

This can be used in addition to or in the absence of any in-house or any third party benchmarking data. This can be easily shared with anybody and can be used as a cross-check of the detailed power plant estimate at a $/MW level.

The graph is also suitable for coming up with quick order of magnitude estimates for bid / no-bid analysis, initial project sanctions, bid evaluations, etc.

The graph shows the typical trend of reducing unit cost for larger capacity plants.

20160425 Power Plant Benchmarking (Open Source)-Rev0

I have just done some research to show what can be possible with freely available data and so the graph is not considered comprehensive and can be enhanced with more data points if further research is undertaken. Location / area specific graphs can also be generated if enough data points could be gathered.

Feel free to use this as you see fit with or without modifications.

Open Source Benchmarking

Vikas Khaitan2 Comments

Benchmarking is one of the critical aspects of estimating. Any estimate when supported with suitable benchmarking, becomes easier to explain and get approvals for. It is a ‘top down’ approach to validate / cross-check any estimate. Benchmarking also helps to identify the major differences in scope of the current project from a typical project from around the globe. Benchmarks are very useful during commercial bid evaluations to demonstrate that the best value is being obtained from the market.

If sufficient historical data from similar previously executed projects is available within the organisation, then suitable in-house benchmarks can be developed to support the current estimate. Alternatively, there are specialist companies who provide third party benchmarking services for specific type of projects. These companies have collected data from various owners & contractors and have built up their own databases to respond to various benchmarking requests.

However, for some projects, there may not be any suitable in-house databases available and for various reasons (lack of funds, time required to place a contract, etc.) engagement of a third party might be difficult. In those cases, instead of not providing any benchmarking to support the estimate during the review process, I would recommend trying to generate a fit-for-purpose benchmark curve using open source information from the internet. A surprising amount of usable information is freely available on the internet, through news reporting, company websites, government announcements, etc. It might sometimes need a significant number of estimator-hours to undertake internet research to find any suitable data, but when generated could prove to be very useful.

For example, for power plant projects, there could be news articles on the internet when a major contract is placed with its value and MW capacity. If enough data is gathered from the internet, then an overall cost Vs capacity (MW) curve could be generated as a benchmarking tool, roughly showing the market values of different capacity power plants.

Similarly for pipeline projects, news articles might advertise the total value and the pipeline diameter and length when a major project is awarded. A benchmark graph could be generated for the cost/km value against the various diameters.

No two projects are exactly similar, but this kind of benchmarking will definitely give an idea of the expected range. They can also be used during concept engineering and also for bid / no-bid analysis.

Such benchmarking can be used in addition to or in the absence of any in-house or any third party benchmarking data. These graphs would be free of cost, fully transparent and auditable and can be easily shared with everybody as there would be no proprietary data issues.

Clients always want to know (at a very high level) how much others have paid for a similar project. They will definitely do their own research, but if the estimate comes with this kind of supporting document, it immediately generates that extra level of confidence in the estimate.

Case in Point: During the approval process for the sanctioning of project X, in addition to the in-house benchmarking graph and also third party check-estimates, I prepared and successfully presented additional internet based open source benchmarking graph as a supporting document with the overall estimate. This was done to generate additional confidence in the estimate presented and also to demonstrate what unit price others were paying for similar projects.

In another project, there was no in-house data, and the third party benchmarking exercise was perceived to be too expensive for the project budget. I successfully developed and presented a suitable internet based open source benchmarking graph which was well received both by the internal management and also the client’s team including government authorities.

Note: It may not always be possible, for a particular kind of project, to generate any suitable benchmarking based on internet based information.

I will upload some self-made, open source benchmarking examples for reference and guidance in some of the future blogs. They will be suitable to use as is and can always also be modified to meet specific needs and escalated to any future year as needed.

This article was published as an opinion piece in July-2018, in the Project Control Professional which is the journal of The Association of Cost Engineers.