Global Business Environment
for desalination and water treatment projects
10. Costs forecasting
High accuracy of the project costs prediction is important for successful bidding. GBE targets
the “definitive estimate” category with the accuracy of ± 12%.
The latter is sufficient to produce a competitive bid submission. For comparison, the highest level of estimate
- detailed one (when major purchase orders have been placed) is expected to produce accuracy within ± 5%.
To assure so high accuracy of the price prediction GBE uses extensive project metrics and produces a set
of interrelated indexes and parameters for any equipment piece depicted on the P&I diagram and
on the one-line electrical diagram.
GBE adopts a multi-level approach to the price prediction. At the high level it uses rich historical database
and proprietary set of semi-empirical equations linking the purchase price, weights and dimensions to the equipment
design parameters: type, capacity, pressure rating, etc,... If no equations are found matching the requested equipment class,
process conditions and time “depth” of 3 years, then less accurate methods with the time depth of 6 years
or analog methods or published capacity-factored curves are used. The adopted multi-level approach leaves
no questions without answers.
GBE offers unique procedure for the piping cost prediction which is not based on the MTO (material take-off)
of piping isometrics. The latter is not available at the bid preparation stage. For desalination projects
the piping costs are comparable with the process capital and can not be calculated as percentage of
the installed equipment costs.
There exists a considerable time lapse between quotation, acceptance of tender and commencement of the project execution.
If the bidder is committed to a fixed price at the tender date then all subsequent increases in cost during
the project engineering and throughout the construction period, must be borne by the bidder unless a provision
is made in the quotation to cover the cost increases of material and labor.
In the past, the water treatment industry has tended to quote on a fixed price basis for the greater part of its turnover.
Today, however, with worldwide cost variations, there is a growing tendency for bidders to ask for a contract price
adjustment clause to be included and for clients to accept its inclusion and thus ensuring fair distribution of
risk and reimbursement for work done between both parties.
GBE automatically adjusts prices using constantly recorded family of price indexes for materials, labor, fuel,
electricity and currency exchange. For each specific class of equipment GBE establishes key cost drivers based on
the historical price data stored in the database. GBE produces contract price adjustment equation to be included
into commercial offer of the bidder.