Transcript Factored Cost Estimates (With Inflation Indexing)

Factored Cost Estimates
(With Inflation Indexing)
©2002 Dr. Bradley C Paul
Example of Factored Cost
Estimating

Shaft Sinking - USBM Cost Estimating
System
–
Shaft sinking cost a function of 3 curves
 Labor
 Supplies
 Equipment
–
Operation
All functions are dependent on shaft area
 Note
that with one parameter (how big do you want
it?) you can do all costs without engineering detail
–
Output is cost per meter of shaft sunk (need to
know how deep you’ll go)
The Labor Curve

YL = 615.595 * (X)0.542
–

We were doing a 20 ft diameter shaft
–

X is the shaft area in square meters
about 29.2 meters square
Plug and Chug
–
$3833/meter of depth
Modification Factors
Difficulty and cost of a shaft is a function of
both size and rock hardness
 Adjusting for rock hardness

–
–
–

FL = 0.388*(C)0.093
C is average rock strength in psi
suppose this is a coal operation through
sedimentary rock with 17,000 psi
Plug and Chug
–
0.96
Applying Modification Factor
$3,833.16/meter * 0.96 = $3,679.65
 Shaft Depth

–
better consider that we do leave a sump area
below the last level accessed
 (obviously
–
750 feet of depth
 about
–
need some industry specific knowledge)
228.66 meters
Estimated Shaft Cost for Labor
 $841,343
The Cost Indexing Bugaboo

Cost base for USBM CES is 1984
–

Need to inflation adjust
Use US Bureau of Labor Statistics
–
–
–
Can’t really use the PPI this time
PPI is an index of what industries sell their
goods for
This is a labor cost
 BLS
still has an index
Raiding the BLS Web Site
Go to www.bls.gov
 Under Industries

–

Takes to Compensation Cost Trends Area
Home Page
–

Go to employment costs
Go to get detailed statistics
Look at Create Customized Tables
–
Choose Employer Cost for Employee
Compensation (ECEC)
Continue the Raid

Now on National Employment, Hours and
Earnings area
–
Select “Average Hourly Earnings of Production
Workers”


do note that these earnings figures are not going to include
fringe costs
Note that these kinds of figures can be selected for a region of
the country too
–
–
Since we are updating a national average manual we need to use
the national statistics
Select Mining code 100000

Note that could pick specific industries within mining
–
we are working coal but shaft sinking is sort of its own area
Continuing the Excitement
Send the computer to Fetch your data
 comes back with data that doesn't go back
far enough

–

reset the year range and send it out again
This time it returns with answers
Here Come the Goodies
Year
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Annual
11.57
11.53
11.64
11.66
11.61
11.63
11.63
11.63
11.72
11.58
11.63
11.71
11.63
1984
11.86
11.9
11.91
11.93
11.88
12.01
11.91
11.98
12.04
11.99
12.05
12.25
11.98
1985
12.22
12.3
12.33
12.42
12.43
12.5
12.5
12.53
12.54
12.53
12.61
12.67
12.46
1986
12.72
12.63
12.58
12.51
12.51
12.53
12.42
12.42
12.52
12.45
12.57
12.64
12.54
1987
12.84
12.79
12.66
12.68
12.63
12.66
12.78
12.74
12.88
12.88
12.97
13.1
12.8
1988
13.28
13.32
13.24
13.28
13.23
13.14
13.07
13.24
13.3
13.25
13.29
13.49
13.26
1989
13.49
13.49
13.61
13.7
13.6
13.69
13.73
13.65
13.84
13.71
13.8
13.85
13.68
1990
14.17
14.07
14.06
14.09
14.08
14.22
14.18
14.14
14.33
14.13
14.29
14.52
14.19
1991
14.61
14.54
14.56
14.54
14.48
14.53
14.5
14.48
14.6
14.48
14.61
14.58
14.54
1992
14.73
14.6
14.71
14.89
14.72
14.59
14.48
14.44
14.53
14.46
14.43
14.67
14.6
1993
15.06
14.92
14.84
14.96
14.83
14.73
14.72
14.68
14.91
14.89
14.95
15.08
14.88
1994
15.23
15.24
15.22
15.3
15.19
15.23
15.34
15.29
15.35
15.33
15.35
15.54
15.3
1995
15.63
15.61
15.5
15.55
15.45
15.59
15.55
15.52
15.74
15.56
15.69
15.97
15.62
1996
16.2
16.09
16.01
16.08
16
16.13
16.05
15.96
16.24
16.19
16.38
16.49
16.15
1997
16.6
16.85
16.85
16.8
16.68
16.69
16.77
16.9
17.13
17.1
17.31
17.33
16.91
1998
17.27
17.12
17.06
17.03
16.96
16.92
17.12
16.98
17.02
17.08
16.93
17.07
17.05
1999
17.23
17.12
17.16
17.3
17.21
17.14
17.19
17.11
17.13
17.25
17.28
17.49
17.22
2000
17.61
17.55
17.51
17.54
17.42
17.53
17.61
17.47
17.61
17.72
17.61
17.58
17.56
2001
17.89
17.76
17.73
17.7
17.74
17.65
17.76
17.71
17.8 17.79(p) 17.89(p) Â
Â
2002
n : NAICS 2002 replaces SIC beginning June 2003. See http://www.bls.gov/ces/cesnaics.htm for details.
p : preliminary
Using the Goodies

Our figures give average wage excluding
fringe
–

Our cost manual gave employer cost including fringe as $16.35/hr
in 1984
Fringe costs are usually a function of wage
–
–
–
–
–
paid vacation
workmans comp
unemployment
retirement
(Health insurance probably only stick in the mud)
Response - Use it as an Index

Labor cost in 1984 dollars
–

$841,343
Indexing
–
–
$841,343*17.89/11.63
Plug and Chug
 $1,294,000
(with just a little rounding)
 updated to Nov. 2002
Our Next Exciting Task

Supply Operating Cost
–

Plug and Chug
–
–

YS=182.051*(X)0.558
X = 29.2 square meters
$1196.43/meter
Adjust it for Rock Hardness
–
–
–
FS=0.579*(C)0.033
C = 17,000 psi
Plug and Chug 0.9798
Finish Getting Our 1984 Cost

Apply rock hardness correction
–

$1196.43 * 0.9798 = $1172.22
Use the depth of the shaft
–
228.66 * $1172.22 = $268,000
 (note

that rounding is being done down road)
Leaves us with need to update to current
costs
–
Our contractor probably buys direct from
wholesaler (PPI type update)
A Specific Basket of Goods

Needs specific supplies
–
–
–
–
–

21% cost due to explosives
34% steel items
38% misc items
6% electricity
1% timber
We will need a weighted average of several
cost indices
–
PPI is broken down into specific sub-indexes
Indices to Use

Have to use codes to get
–
–
past has been SIC code number (from IRS)
June 2003 plans to switch to NAIC codes
 probably
–
Numbers won’t change much for mining
 Heaven

a NAFTA issue
help the service industries
Chemical is 06
–
Explosives are a specific type of chemical
 067902

Iron and Steel 101 for the steel items
More Indices

Miscellaneous Items
–
Use PPI industrial commodities index
 already
a weighted average we don’t want to worry
about

Electricity
–
–

05 is energy
0543 is industrial power
Timber
–
–
08 is wood products
Mines use mostly softwood - 0811
Time to Run and Fetch
Go to BLS home page
 Select Industrial

–

Takes you to PPI home page
–
–

PPI
Go to Get Detailed Statistics
Select Create Customized Tables Commodity
Data
Let the Fishing Begin
Index Values

Explosives
–
–

Steel Items
–
–

1984 = 103.6
2002 = 149.7
1984 = 105.3
2002 = 117.9
Misc Items (Industrial Commod)
–
–
1984 = 103.3
2002 = 134.9
More Index Values

Industrial Electric Power
–
–

1984 = 108.4
2002 = 140.1
Timber
–
–
1984 = 110
2002 = 167
Break Our Shaft Supplies Cost
Down for Indexing

Explosives
–
–
$268,000 * 21% = $56,288
Index
 $56,288

* 149.7/103.6 = $81,335
Steel Items
–
–
$268,000 * 34% = $91,133
Index
 $91,133
* 117.9/105.3 = $102,038
Break Down and Index

Misc Items
–
–
$268,000 * 38% = $101,855
Index
 $101,855

Electricity
–
–

* 134.9/103.3 = $133,013
$268,000 * 6% = $16,082 * 140.1/108.4
Crank = $20,785
Timber 1%
–
$2,680 * 167/110 = $4,069
Recombine
Explosives $81,335
 Steel Items $102,038
 Misc Items $133,013
 Electricity
$20,785
 Timber
$4,069
 Total
$341,241

Last Cost Component

Equipment Operating Cost
–
–
–
YE= 681.476 * (X)0.407
$2,690.73
Hardness Adjustment
 FE=0.715*(C)0.033
–

gives 0.986 for 17000 psi rock
1984 cost for shaft of depth $606,691
Breakdown
–
–
–
88% Repair parts
7% Fuel and Lubrication
5% Tires
Selecting Indices

Repair Parts - Use Construction Machinery and Equipment
–

Fuel and Lubricants - Use Refined Petroleum Products
–

$42,468 * 86.2/87.4 = $41,885
Tires - Use bus and off-highway industrial vehicle tires
–

$533,888*151.7/103.8 = $780,258
$30,335 * 90.6/83.4 = $32,953
Total Equipment Operating $855,097
Cost of Pre-Feasibility Shaft
Estimate
Labor
$1,294,000
 Supplies
$341,241
 Equipment $855,097
 Total
$2,491,000

Understanding Whats Included
Cost of Shaft Sinking
 Installation of Guides
 Installation of Manways
 Air, Water, Communications Lines
 Does not include Hoist
 Does not include Ore Pockets

Where to Get All This Stuff

After Lecture on Website See Resources on
Pre-Feasibility Estimates page
–
–
–
–
Links to Bureau of Mines Cost Estimating
System
Links to Bureau of Labor Statistics Web Site
Links to Cost Indices collected from Web Site
to Nov. 2002
Links to Cost Indices from Western Mine Cost
Service