Complete plant of engineering

Need to study the feasibility of a project

The need to address the development of engineering by steps is evident when we consider the possibility for the arise of situations leading to the stop of a project.

First, there is always the possibility for a project to be technically feasible while the return on investment is too low, and therefore not enough interesting from a financial standpoint. In this case, the project is feasible but not economically attractive and thus is not pursued by the developer.

Secondly, banks are often more interested in cash flow during the period of debt repayment than on the overall economic result of a project. So a project could be economically feasible and interesting to his promoters, but its cash flows are not particularly attractive for the banking and financial system - for its  entity or for the way in which it shows up over time.

Stages of development of Information

The phases of the engineering are defined below.

Conceptual engineering

Responds to the need of giving a first estimate of the costs and the likely outcome of a project, based on a minimal development of engineering (typically around 2%). 
This type of study can be developed in a short period of time, and at relatively low cost. 
In general, the investment is estimated based on typical parameters that define the size of the project (treated daily quantities, kW of energy produced). 
The cost estimate is just rough, and is detailed to a minimum. It is developed according to a top-down scheme, starting from an estimate of ​​the overall cost of the new system to deduce the cost of individual modules, without excessive detail.

Pre-feasibility Study

In this case the estimate of the cost for the project is based on a more thorough development of engineering (2 to 30%). 
In principle, the development of engineering allows to define preliminary design specifications and to identify the scope of supply. 
However the design is not pushed to a level that could develop a real preconstruction estimate. Quantitative data are estimated based on the experience of similar projects. 
This study can be completed relatively quickly and cheaply, usually when there is enough pressure to quickly obtain sufficiently reliable information, but not enough to recommend the beginning of  a detailed study. 
While the cost is still estimated on the basis of a "top-down" scheme, using analogies, empirical rules and experience of similar plants, nevertheless it can take advantage of more detailed information, which although not specific to the project are derived by analogy from similar projects. 
The preliminary estimate is detailed at the level of system modules (packages).

Feasibility Study

Takes as input data and information those generated by the conceptual or preliminary study. 
The development of engineering is still partial, but already sufficiently large (60-80%). 
The basic parameters that describe the operation of the system and the subsystem in which it is composed are defined with sufficient precision.
Specifications, contract documents, information on the location of new plant and some specific drawings are already available. 
Bill of quantities or itemised estimates allows to deliver budgetary inquiries to potential suppliers of machinery and equipment, and then to have a better idea of ​​what could be the cost for the project. 
In fact, the cost estimation is defined at the level of plant and the main machinery composing the different modules of the system, and developed with the method "bottom up": the cost of the system as a whole is the sum of the cost to realize the individual modules, as budgetary bids from potential suppliers for the main components (machinery and equipment) are already available.

Basic engineering

At this level the cost is known and accurate. All the parameters that define the operation of the system and its subsystems have been defined (engineering completed between 80 and 100%). 
The scope of supply is defined in detail, and all the data for the specific project and location are known and available. 
Specifications and designs are developed and used to define bill of quantities and/or itemised estimates, and to issue invitations to tender or to start the auction (bidding) with suppliers of goods and services. 
The technical and economic alignment of the offers received from potential subcontractors, and the selection of specific providers are made at this stage of the process.
Accordingly, the estimated costs can be described in detail with bottom-up approach, i.e. starting from the costs for individual machines, equipment and systems included in the different modules of the system, and considering both the direct and the indirect costs.