Determine the contingency and appropriate confidence interval based on the estimate category.
Example of Setting
Contingency The example is for a project in the early stages of development that requires an order-of-magnitude contingency estimate so the team can evaluate the economics surrounding the technology. The team is considering technology that is licensed from an experienced contractor and that has been commercially demonstrated on a similar scale, but is new to Chevron.
Site-Specific Parameters
The current definition status of the project stands as follows: The project team knows Chevron’s applicable environmental
standards for the project but not the site-specific requirements because they have not yet selected a location for the project.
The project team has not begun the process of obtaining permits because the location of the project is unknown.
Project’s Elements
Characteristics Estimate
Unclassified Class A Class B
Site-Specific Parameters
Health/Safety Reviews
Not considered No reviews, but company standards considered.
No reviews, but company & site- specific standards considered. Permits Not considered Appropriate regulations
identified.
Formal application process not begun; but appropriate parties contacted.
Plot Plans No plan Block layout of major equipment.
Some detail of physical scope both onplot and offplot, with preliminary drawings.
Soils Data Non-existent Considered, but not begun. Testing begun, but incomplete. Project
Execution Plan
Project Execution Plan
No plan Core project team & probable completion date established coupled with preliminary engineering involvement.
Project team & possible contracting strategies identified, with defined major milestones.
Engineering Parameters
User/Plant Input Expressed general interest, with no involvement
Involved in process selection. Involved in maintainability and operability scopes.
Business Unit Input None Engineering assessment of technology; understanding of general business climate.
Scope of project identified.
Percentage Total Engineering
No engineering Some engineering input, less than 3 percent complete.
No more than 5 percent complete, Prelim. P&ID’s and heat and materials balances. SITE-SPECIFIC PARAMETERS
Health/Safety Reviews: Considers all local, state, and federal government requirements (e.g., local worker safety, equipment safety, and OSHA standards) for the site when assessing the extent to which health and safety requirements are incorporated into the cost estimate.
Permits/Environmental Requirements: An assessment of the extent to which environmental requirements (e.g., applicable solid-waste-disposal standards, all EPA requirements,such as National Clean Air Act, and any specific local requirements) have been incorporated in the cost estimate.
Unit Configurations and Plot Plans: Includes the extent to which equipment configurations are final and process units (on-site and off-site) are configured to the site.
Soils, Hydrology and Analogous Data: Includes an assessment of the quality of the soils, hydrology, and analogous data available when preparing the estimate. Taken together, these data provide an overall picture of the site, including its qualities and limitations, as a location for the proposed project.
Soils data refers to a set of information that describes the site technically and includes items such as the grade of the site, how much weight the soil can bear, whether there are any hidden subsurface structures or unusual geologic formations, and whether the soil contains any materials requiring cleanup prior to the initiation of construction.
Hydrology data refers to the distribution and circulation of water in, on, and around the site.
Analogous data is intended to capture information regarding the quality and suitability of existing facilities that will be used on the project such as piping support, utilities, etc.
PROJECT EXECUTION PLAN
Project Execution Plan: Evaluates the extent to which a fully-integrated project schedule (with major and minor milestones), a contracting strategy, and a quality assurance plan have been developed.
ENGINEERING PARAMETERS
User/Plant Input: Evaluates the extent to which the local operating group has become involved in the progress of the project. Business Unit Input: Evaluates the extent to which the business group (Operating Company Management) has become involved in the progress of the project.
Percentage Total Engineering: Refers to projects with less than five percent of the project’s total design complete. Figure 313-10. Measuring Early Front-End Loading
Given that Chevron has some knowledge of technology and its physical requirements, block layouts of equipment exist but there is little detail.
Although the project will be located at a Chevron installation, soils and hydrology data are not available because the site is unknown. This suggests that such data have been considered but testing has yet to begin.
These four items suggest that the estimate class is predominantly in the Class A category.
Project Execution Plan
The status of the project execution plan is as follows:
A project team consisting of a project manager, business
representative, operations representative, and lead engineer has been assigned to the project.
Beyond this core team, only tentative assignments have been made for other personnel.
Management issued a directive about commercializing the technology within a given time frame, but without a specific date.
The project team has addressed the project’s milestones tentatively, but not in full detail. The milestones are based on preliminary engineering studies.
This status places the project execution plan between the Class A and Class B categories.
Engineering Parameters
The engineering status of the project is as follows:
Operating company input has centered around process selection and is moving toward evaluating the maintenance and operational
requirements of the technology being investigated for this project. The business unit has yet to make the capacity requirements of the plant clear, but has indicated a reasonable range.
Marked-Up Table
Figure 313-11 is a marked copy of the table from Figure 313-10,
Measuring Early Front-End Loading. It includes the information from the example.
The project definition suggests that the project lies somewhere
between the Class A and Class B categories, but leans toward Class A. Because the technology being considered is proven even though new to Chevron, the data in Figures 313-8 and 313-9 applies.
Based on the information provided, a contingency of approximately 35 percent with a 50 percent confidence interval of 25 - 50 percent is appropriate as suggested by the table and graph.
Project’s Elements
Characteristics Estimate
Unclassified Class A Class B
Site-Specific Parameters
Health/Safety Reviews
Not considered No reviews, but company standards considered.
No reviews, but company & site-specific standards considered.
Permits Not considered Appropriate regulations identified.
Formal application process not begun; but appropriate parties
contacted. Plot Plans No plan Block layout of major
equipment.
Some detail of physical scope both onplot and offplot, with preliminary drawings. Soils Data Non-existent Considered, but not begun. Testing begun, but incomplete.
Project Execution Plan
Project Execution Plan
No plan Core project team & probable completion date established coupled with preliminary engineering involvement.
Project team & possible contracting strategies identified, with defined major milestones. Engineering
Parameters
User/Plant Input Expressed general interest, with no involvement
Involved in process selection.
Involved in maintainability and operability scopes. Business Unit Input None Engineering assessment
of technology; understand- ing of general business climate.
Scope of project identified.
Percentage Total Engineering
No engineering Some engineering input, less than 3 percent complete.
No more than 5 percent complete, Prelim. P&ID’s and heat & material balances. Figure 313-11. Measuring Early Front-End Loading—Completed for Example Project