Development of Factored Cost Estimates
Factored estimating derives a whole-plant total installed cost from one well-estimated equipment cost — multiplied by factors that capture the bulks, labour, and indirects around it. The engine of early process-industry estimates. Built on AACE 59R-10.
What factored estimating is
This is the engine behind the early estimate classes you met in Module 2A (Class 5–4 for process plants). It works because, across many similar projects, the ratio of total cost to equipment cost is stable enough to predict. Capture that ratio as a factor, and a single well-estimated equipment cost unlocks a whole-plant estimate.
How factored estimating works
The simplest form applies one overall factor to total equipment cost:
Total installed cost = Equipment cost × overall factor
More refined versions apply different factors to different cost components (piping, electrical, instrumentation, civil, installation, indirects), and may vary the factor by equipment type or material — the well-known Lang factors and Hand factors are classic examples of this approach.
Single-factor worked example
Worked example| Total major equipment cost | $2,000,000 |
| Overall installation factor | 3.5 |
| Total installed cost = 2.0M × 3.5 | $7,000,000 |
A $7.0M total installed cost — of which $5.0M (71%) is the non-equipment "factored" portion: piping, civil, installation labour, and indirects that the factor accounts for. From one equipment number, a whole-plant estimate.
Factored estimate calculator
Set the equipment cost and the installation factor to see total installed cost and the equipment vs. factored split:
Factored estimate
Try it yourselfTotal installed cost = equipment cost × factor. Set both to see the equipment vs. factored split.
Cautions
Factored estimating is powerful but has clear limits. Respect them:
Two more limits worth remembering: factored estimates suit equipment-dominated industries (process, power) far better than, say, civil-heavy projects where equipment is a small fraction; and they're early-phase methods — as design matures, you move from factors to detailed take-off (the Class 3→1 progression). Using a factor when you have the detail for a real take-off leaves accuracy on the table.
Ten things to remember
- Factored estimating derives total installed cost by applying factors to equipment cost.
- It's the engine of early estimate classes (Class 5–4 in process industries).
- Equipment is the anchor — it's pinned down earliest; everything scales with it.
- Simplest form: TIC = equipment × overall factor; e.g. $2M × 3.5 = $7M.
- Refined forms use component factors — Lang and Hand factors are classics.
- Factors come from historical data — only as good as the projects behind them.
- At high factors, the factor does most of the work — get it right.
- The factor must fit the project — type, size, location, complexity.
- Best for equipment-dominated industries — process, power; weaker for civil-heavy work.
- It's an early-phase method — shift to detailed take-off as design matures.
Glossary
- Bulks
- Piping, electrical, instrumentation materials.
- Factored estimate
- An estimate from equipment cost × factors.
- Hand factor
- Factors applied by equipment type for more refinement.
- Historical data
- Past-project ratios from which factors are derived.
- Indirects
- Non-direct costs (engineering, supervision, etc.).
- Installation factor
- A multiplier from equipment cost to installed cost.
- Lang factor
- A classic overall factor for plant cost from equipment cost.
- Total installed cost (TIC)
- Full cost of equipment installed and ready, with bulks and indirects.