Budget Preparation for 2012 & 2013

[10815L]

Hi,
we are oil and gas operating company and we are in the phase of budget preparation but, all projects in early stage, no contract is awarded yet and budget proposal came.Shell i start to calculate the cost for each project and then add % increase annually or there is any other method.
I want to seek your advise in this regard, what is the starting point.
10815L

 

[MiketheEngineer]

How high is up. Nobody can predict exaclty - but 10% should cover your butt....

 

[IRstuff]

What does "budget proposal came" mean? Have you already submitted your proposal? Your percentage increase should be in line with industry standards, otherwise, your outyears will be completely divergent from other bidders.

TTFN
faq731-376

 

[10815L]

Hi,
IRstuff, could you please explain what is industrial practice is?, i'm new in this field and my company located in africa region.
Thanks

 

[lacajun]

If you are in the conceptual phase of each of your projects, you have no idea what they're going to cost you. Feasibility is a closer estimate but is still a ±50% estimate. Only when you get to the definition phase and are ready to seek funding do you have a ±5% estimate. Good luck!

Pamela K. Quillin, P.E.
Quillin Engineering, LLC

 

[IRstuff]

"i'm new in this field and my company located in africa region."

OK, you might be new, but is your company? Are there no other companies that do similar work? How do they escalate costs? That is what industry standard refers to.

Again, your posting is very confusing about what stage you are at. Are you doing a bid for a proposal? Have you already won the contract? Who did the original bid? Why aren't they involved?

TTFN
faq731-376

 

[cvg]

5% accuracy at definition stage? sounds a bit ambitious to me, I would have thought closer to 15 - 25% plus/minus for a definition phase and 5% is nearly impossible without hard dollar quotes - you won't have those without detailed engineering first

escalation rates should cover inflation costs as a minimum and contingencies should already be included. Lacking anything else, base your future inflation on the past inflation or hire an economist.

 

[IRstuff]

5% accuracy if you are really good at documenting historical costs and really good at comparing scope for different activities. That's what we've always been told to do, i.e., maintain accurate historical records for simplifying and improving the accuracy of our bids. Of course, no on ever seems to have the time to do that, so our bids are usually guess & by golly values.

TTFN
faq731-376

 

[ScottyUK]

5% accuracy at definition stage?! I really hope my finance department aren't reading this thread!

 

[lacajun]

5% accuracy by the end of the definition phase because you're seeking corporate funding. One plant manager told us he would accept -1% and +0% and he was not joking.

I was trained that project phases are:
[ul]
[li]conceptual[/li]
[li]feasibility[/li]
[li]definition[/li]
[li]implementation[/li]
[li]start-up/closeout[/li]
[/ul]

I've always had estimates based on hard quotes prior to asking for funding to do the detailed engineering and implementation. I've not seen it done any other way.

We allowed for 10% contingency so maybe it's a matter of terminology. Or perhaps I'm old and forgetful.

Pamela K. Quillin, P.E.
Quillin Engineering, LLC

 

[cvg]

I guess I was assuming EPCM, funding for the entire enchilada, not just engineering. it would vary based on the industry.

Identification, -35% +50%
selection, -20% +35%
definition -15% +20%
execution (EPCM)-7% - +10%

add contingency to all estimates