Factors are generally considered a ratio of the total cost of installing a process plant proportional to the cost of its major Mechanical components. Parametric estimating is the use of statistic applied to a number of or single known value to develop an order of magnitude cost.
Factors are highly debated issues and opinions vary in all cases, but they are a useful benchmarking tool against previous projects of the same degree of technicality.
Analysing projects and building a statistical record of the relationships of various disciplines and actions takes factoring to a higher level and allows for multiple assumptions and calculations to be made to develop all or part of a cost evaluation of a project wether that be determining the build-up of the project by discipline and section from a single project value or determining the total coast of a project be extrapolating the disciplines from a single known value. Bottom op or top down this method is a useful tool.
By applying a second number or set such as the labour rate or rates for various disciplines you can take a projected dollar value and come up with an estimated workforce or workforce by discipline.
The Capital cost of the Mechanical equipment can be developed very early in the scoping stage of the project from the equipment list devised during the process engineering, well before any layout, design or detailing of commodities and other material and labour issues have been addressed.
These factors were first introduced into the main stream by H J Lang in Chemical Engineering magazine in 1947 as a method for estimating the total installation cost for plant and equipment. Others have also fixed their names to derivations over the years, the figures in this publication are those developed by the author while assessing many project CAPEX estimates and costs, each project requires its own review to determine the relevance to the job at hand.
If you calculate the capital cost of all the mechanical equipment, then multiply that cost by 3.0, in the case of a mineral processing plant noted below, you will obtain a rough estimate of the total installed cost of the plant allowing for all equipment, materials and construction.
The accuracy of this estimate method usually is +/- 35%. Dependant on how relevant your data is to the project as a direct comparison.
Typical Factors for Minerals Mechanical separation processing plant with Crushing, Mag or gravity separation .Grinding, Flotation, filtration and Thickening.
| Discipline Percentages as a Precent of Project total Construction Costs | ||||
| Figured Round to full % for clarity | ||||
| Discipline | Percentage Of Mechanical Project Cost | Percentage of total Project | Total Contractor Labour/ Overhead Percentage | Materials Percentage |
| Mechanical | 100% | 33% | 15% | 85% |
| Earthworks | 14% | 5% | 84% | 16% |
| Civil Works | 40% | 13% | 64% | 36% |
| Platework | 10% | 3% | 39% | 61% |
| Structural Steel | 37% | 12% | 30% | 70% |
| Piping | 20% | 7% | 60% | 40% |
| Electrical | 48% | 16% | 44% | 56% |
| Instruments | 7% | 2% | 25% | 75% |
| Buildings Admin | 6% | 2% | 13% | 87% |
| Building Ops | 13% | 4% | 15% | 85% |
| Freight | 5% | 2% | ||
| Total Percentages | 300% | 100% | 35% | 65% |
Typical Factors for Minerals Mechanical separation processing plant with the additional costs associated with Pressure Leach and/or absorption.
| Discipline Percentages as a Percent of Project total Construction Costs | |||||
| Figured Round to full % for clarity | |||||
| Discipline | Percentage Of Mechanical Project Cost | Percentage of total Project | Total Contractor Labour/ Overhead Percentage | Materials Percentage | |
| Mechanical | 100% | 26% | 15% | 85% | |
| Earthworks | 18% | 5% | 84% | 16% | |
| Civil Works | 41% | 11% | 64% | 36% | |
| Platework | 42% | 11% | 39% | 61% | |
| Structural Steel | 37% | 10% | 30% | 70% | |
| Piping | 46% | 12% | 60% | 40% | |
| Electrical | 54% | 14% | 44% | 56% | |
| Instruments | 16% | 4% | 25% | 75% | |
| Buildings Admin | 7% | 2% | 13% | 87% | |
| Building Ops | 15% | 4% | 15% | 85% | |
| Freight | 8% | 2% | |||
| Total Percentages | 384% | 100% | 35% | 65% | |
| Contractor Gang Rate split | Labour Directs % | Labour Indirects % | |||
| 44% | 56% | ||||
The following table is subjective; it is open to much personal insight from various parties. EPCM for instance has numerous percentages associated with different projects, in country work should be set at the mean value of the same genera, while the engineering and management for work in Africa for instances will be more difficult and should be higher than the mean. My experience for a non-Oil and Gas project suggests that 15% of the total project value is realistic. Although some mining companies in Australia allow 25% plus due to their high levels of micro management.
| INDIRECTS | % Applicable |
| Field Indirects (% of Total Direct Cost) | 4.0% |
| EPCM (% of Total Project) | 15.0% |
| SPARES (% OF MECHANICAL) | 5.0% |
| Contingency | 15.0% |
| Insurances | 3.2% |
| 42.2% |
The following table represents the average percentages for each process and utilities area of a typical mine process plant. This break up is related to material handling, Gravity and filtration type processes there relevance to other types of projects is not inferred, but when comparing the individual split to similar plants it does fall within a level suitable for order of magnitude estimating and planning for studies leading up to construction.
| Project Area Percentage of Total Project $ Cost | |
| Process Area | % of overall Project |
| Crushing Primary and secondary | 17% |
| Crushing tertiary | 11% |
| Primary Grinding | 15% |
| Secondary Grinding | 7% |
| Concentrate Floatation Thickening Filtration | 23% |
| Tails Thickening, Filtration | 15% |
| Plant Serves. – Water | 4% |
| Plant Serves. – Air | 1% |
| Plant Serves. – Emergency Serves. | 2% |
| Plant Serves. – Common | 2% |
| Plant Inf. – E’works & Drainage | 3% |
| 100% | |
Labour Statistics for construction projects are difficult to define, the following table represent the actual percentage split on several real projects undertaking the Structural, Mechanical and piping components of major mine process construction.
| Labour % of discipline for a typical Structural Mechanical and Piping Contract | ||
| Discipline | Direct Indirect split | Discipline by total project |
| Mechanical fitters | 14% | 10% |
| Riggers | 25% | 19% |
| Scaffolders | 6% | 5% |
| Trades Assistant | 10% | 8% |
| Crane driver | 8% | 6% |
| Dog Man | 6% | 5% |
| Boilermakers | 10% | 8% |
| Pipe Fitters | 5% | 3% |
| Welders | 6% | 5% |
| Poly Welders | 8% | 6% |
| Storemen | 3% | 2% |
| 100% | 76% | |
| Management and supervision | 16% | |
| Cleaning Staff | 2% | |
| Off-site support | 5% | |
| 24% | ||
Practical Example
If a discipline such as Mechanical fitters represents 14% of the direct workforce and the mechanical component of the project represents 33% of the value by using a calculated value for an hourly labour rate you can calculate the cost and hours associated with a project construction phase using these statistics to define a projects manning levels.
e.g. your project value using the Factoring method is $300,000,000.00 of this the mechanical component is 33% or $100,000,000.00 (rounded for clarification) from these statistics you can calculate that mechanical installation labour attributes 15% of the cost for the discipline. Using a Notional Gang rate ( see Page XXX) of say $198.00 per hour for all associated direct costs its simple to determine the number of hours attributed to installing the mechanical components
(300,000,000 x 0.33) x 0.15
$14,850,000 Value of the Mechanical Labour
Divide Value by Notational Rate
14,850,000/198.00 75000 Mechanical Hours
Dived Hours by working hours per day (11 hour day)
76154 / 11 6923 Man-Days
Using good estimating practice and construction site knowledge assume a crew size in this case we choose 45 men
6923 /45 154 Crew days or 5.1 crew months not including R&R
Construction Project circa 2012 in Australia generally run on a 4 week on and 1 week off roster, although some are less but economic factors for both Client owner and crew will dictate the reality, this requires a total mechanical workforce of 45 plus 25% or 56 crew to cover the R&R period.
What these statics show is that using one known number, being the total project estimated value you can calculate with some degree of confidence your workforce numbers, and using a graphical extrapolation of your project show predicted workforce number for each discipline on the project duration.
Applying the factored percentages to each aspect of the project as has been demonstrated above and then applying a progressive ramp up and ramp down of your project over time you can create a manning histogram for your total project for all disciplines including engineering (using the average per hour rate for engineering)
By applying a project estimated cost to a spread sheet for direct and Engineer labour populated with the calculations by percentage for each discipline and the ramp up and down from known projects a histogram as shown below is possible, the project below was calculated from a single known value of $2.79 billion
To calculate the associated labour hours requires a dollar value per direct labour hour at the workface, this is done by developing what is known as a notional gang rate sometime known as an all-in rate.
A notional gang rate allows for Labour direct costs that have been calculated using Industry gazetted labour rates (Awards).
Based on the award a notional gang rate is calculated for various disciplines. The notional gang rates include direct labour cost based on generally 65 hour working week, site allowances, statutory allowances, trade allowances, superannuation, taxes, accommodation, R&R costs, airfares, and travel time. The notional gang rates also include project support personnel, site supervision and non-manual support personnel, construction equipment, small tools, on site transport, safety clothing, inductions, consumables etc.
In the instance described a Notion rate of $198.00 dollars was chosen.
This is divided into two base figures the first being the cost of the direct worker per hour on the site allowing for all costs both wages, supportive and statutory.
Labour includes the base rate per man-hour for normal time at 36 hours per week, values for overtime is then calculated for time and a half and double time rates up to a weekly number of hours of 65. Additional to this is Superannuation, penalties, site allowance, insurances both direct and indirect, travel, accommodation, R&R time and all company administrative costs.
The second value calculates all the supporting infrastructure, developing a cost for management, construction equipment, site offices and facilities, all consumables including fuels, support infrastructure, freight for construction plant, HR imposts etc. This number is then divided by the total direct hours in the project or project package to produce a single cost per man-hours for all required man-hours at the workface.
