Appropriation Estimates

Appropriation Estimates

As a project scope is developed and refined, it progresses to a point where it is budgeted into a corporate
capital building program budget. Assuming the potential benefits are greater than the estimated costs, a
sum of money is set aside to cover the project expenses. From this process of appropriation comes the
name of the most refined level of conceptual estimate. This level of estimate requires more knowledge
and effort than the previously discussed estimates.
These estimating methods reflect a greater degree of accuracy. Appropriation estimates should be
between ±10 to 20%. As with the other forms of conceptual estimates, several methods are available for
preparing appropriation estimates.

Parametric Estimating/Panel Method

This method employs a database in which key project parameters, project systems, or panels (as in the
case of buildings) that are priced from past projects using appropriate units are recorded. The costs of
each parameter or panel are computed separately and multiplied by the number of panels of each kind.
Major unique features are priced separately and included as separate line items. Numerous parametric
systems exist for different types of projects. For process plants, the process systems and piping are the

Bay Method

This method is appropriate for buildings or projects
that consist of a number of repetitive or similar units.
In the plan view of a warehouse building shown in
Fig. 1.1, the building is made up of three types of bays.
The only difference between them is the number of
outside walls. By performing a definitive estimate of the
cost of each of these bay types, an appropriation estimate
can be made by multiplying this bay cost times
the number of similar bays and totaling for the three
bay types.

Plant Component Ratio

This method requires a great deal more information than other methods used in the process industry.
Definitive costs of the major pieces of equipment are needed. These can be determined from historical
records or published data sources. Historical records also provide the data that identifies the relative
percentage of all other items. The total project cost is then estimated as follows:


TPC =ET/1 – PT


where TPC = total plant cost
ET = total estimated equipment cost
PT = sum of percentages of other items or phases (major account divisions).