W15_SSG_Refining Cost Estimate Using AACE, ANSI Standard Z94.0 and Frond End Loading


PROBLEM DEFINITION

We are now in the stage of requesting Budget approval from Head Quarter. In order to be able to reach that approval, we have to ensure that the budget shall be approved by Indonesian Government (Recovered). Following the strategy, we submit the AFE (approved for Expenditure) for review and approval.

Compared to Plan of Development (POD), it shows that there is increment expected cost from POD, and we need to justify this increment from estimating point of view.

DEVELOPMENT OF FEASIBLE ALTERNATIVES

One of the tools to measure whether our estimate is “justifiable or not” is by using the class estimate of AACE to ensure that our estimate of AFE is still acceptable compared to Plan of Development from estimating best practice point of view.

Figure 1.Comparison of Classification Practise.

DEVELOPMENT OF OUTCOMES FOR EACH ALTERNATIVE

On Level 0 (overall), Variance AFE vs. POD is +19.6% (increase). But in Level 1 (Package) some of them are less than +19.6% and some are more than 16.6%.

Figure 2. Plan of Development & AFE Estimate Status

SELECTION OF CRITERIA

Since the POD estimate is based on the Basic Design and Concept Selection phase, the estimate range shall be on Class 3 (Preliminary Estimate). While the AFE estimate is based on Frond End Engineering Design (FEED) and shall be in the class 2.

Figure 3. Front End Loading Schematic

 

ANALYSIS FOR THE ALTERNATIVES

Base on the Figure 3. Above, it showed that Class 3 estimate range shall be +30% to -10% and this will applicable for POD cost estimate. While, AFE estimate is based on FEED and shall be in the Class 2 estimate range +15% and -5% compared to final value. The increment cost from Class 3 to Class 2 is +15% to -5%. Based on this range acceptance we can identified which estimate is acceptable or not per WBS.

Figure 4. Estimate status of each WBS based on Front End Load Schematic, ANSI Standard Z94.0 and Estimate Class of AACE 1972.

SELECTION ON THE PREFERRED ALTERNATIVES

Since most of the variance out of the estimate class range, the justification is mandatory.

 

PERFORMANCE MONITORING AND POST EVALUATION RESULT

The detail estimate to level of quantity is mandatory to justify the cost increment from both the FEED and Basic Engineering point of view to justify the quantity and the rate increment is still justifiable.

REFERENCES

Giammalvo, P.D.  (2013). AACE Certification Preparation  Course-2nd day module. (pp 72-73). Jakarta.

AACE International (2005).Cost Estimate Classification System – As Applied in Engineering, Procurement, and Construction for Process Industries. Retrieved on December 31, 2013 from  http://purchasing.borough.kenai.ak.us/docs/AACE_CLASSIFICATION_SYSTEM.pdf

Milton H. Jones, PMP(2004). The Case for Front End Loading (FEL) and Constructability Reviews. Retrieved on December 31, 2013 from http://www.pmccinc.com/images/FrontEndLoading2004-09.pdf

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1 Comment

Filed under Sutoyo S, Week 15

One response to “W15_SSG_Refining Cost Estimate Using AACE, ANSI Standard Z94.0 and Frond End Loading

  1. Nice work on this Pak Sutoyo!!!

    I hope you are working on your PROBLEMS from Humphrey’s now?

    BR,
    Dr. PDG, Jakarta

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