You have been asked to prepare a quick estimate of the construction cost for a coal-fired electricity generating plant and facilities. A work breakdown structure (levels one through three) is shown is Table P3-27. You have the following information available:
€¢ A coal-fired generating plant twice the size of the one you are estimating was built in 1988. The 1988 boiler (1.2) and boiler support system (1.3) cost $110 million. The cost index for boilers was 110 in 1988, it is 492 in 2011. The cost capacity factor for similar boilers and support systems is 0.9. The 600-acre site is on property you already own, but improvements (1.1.1) and roads (1.1.2) will cost $2,000 per acre, and railroads (1.1.3) will cost $3,000,000. Project integration (1.9) is projected to cost 3% of all other construction costs.

€¢ The security systems (1.5.4) are expected to cost $1,500 per acre, according to recent (2011) construction of similar plants. All other support facilities and equipment (1.5) elements are to be built by Viscount Engineering. Viscount Engineering has built the support facilities and equipment elements for two similar generating plants. Their experience is expected to reduce labor requirements substantially; a 90% learning curve can be assumed. Viscount built the support facilities and equipment on their first job in 95,000 hours. For this project, viscount's labor will be billed to you at $60 per hour. Viscount estimates that materials for the construction of the support facilities and equipment elements (except 1.5.4) will cost you $15,000,000.
€¢ The coal storage facility (1.4) for the coal-fired generating plant built in 1988 cost $5 million. Although your plant is smaller, you require the same size coal storage facility as the 1988 plant. You assume you can apply the cost index for similar boilers to the coal storage facility.
What is your estimated 2011 cost for building the coal-fired generating facility? Summarize your calculations in a cost estimating worksheet, and state the assumptions you make.

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TABLE P3-27 Work Breakdown Structure for Problem 3-27 PROJECT: Coal-Fired Electricity Generating Plant and Facilities Line No Title WBS Element Code Coal-fired power plant Site Land improvements Roads, parking, and paved areas Railroads Boiler Furnace Pressure vessel Heat exchange system Generators Boiler support system Coal transport system Coal pulverizing systenm Instrumentation and control Ash disposal system Transformers and distribution Coal storage facility Stockpile reclaim system Rail car dump Coal handling equipment Support facilities and equipment Hazardous waste systems Support equipment Utilities and communications system Security systems Project integration Project management Environmental management Project safety Quality assurance Test, start-up, and transition management 005 006 11.3 1.2 1.2.1 12.2 1.2.3 1.2.4 1.3 1.3.1 1.3.2 010 011 012 1.4 1.4.1 1.4.2 018 019 021 023 15.1 1.5.2 1.5.3 15.4 026 1.9.2 1.9.3 19.4 1.9.5 031