How do you cope with the challenges of FEED cost estimation in complex and dynamic environments?

1 Understand the scope

The first step in FEED cost estimation is to understand the scope of the project, including the objectives, deliverables, specifications, and assumptions. The scope should be clear, consistent, and comprehensive, and aligned with the client's expectations and requirements. A well-defined scope can help you avoid scope creep, which can lead to cost overruns, delays, and disputes. You should also establish a change management process to handle any scope changes that may arise during the project.

2 Use reliable data

The quality of your cost estimation depends largely on the quality of your data. You should use reliable, accurate, and up-to-date data sources, such as historical data, market data, vendor quotes, or expert opinions. You should also verify and validate your data, and document your sources and assumptions. Using reliable data can help you reduce the uncertainty and variability of your cost estimation, and improve your confidence and credibility.

3 Apply appropriate methods

There are various methods and tools available for FEED cost estimation, such as parametric, analogous, bottom-up, or top-down methods. You should select the most appropriate method for your project, based on the level of detail, accuracy, and complexity required. You should also use software tools that can facilitate and automate your cost estimation process, such as spreadsheets, databases, or specialized software. You should also ensure that your methods and tools are consistent, transparent, and traceable.

4 Incorporate risk and contingency

FEED cost estimation is inherently uncertain and dynamic, as there are many factors that can affect the project's costs, such as design changes, market fluctuations, technical issues, or regulatory changes. You should incorporate risk and contingency analysis into your cost estimation process, to account for the potential deviations and variations from your baseline estimate. You should identify and quantify the main sources of risk and uncertainty, and apply appropriate risk mitigation strategies. You should also allocate a reasonable contingency amount, based on the level of risk and uncertainty, and the project's tolerance.

5 Communicate and review

The final step in FEED cost estimation is to communicate and review your estimate with the relevant stakeholders, such as the client, the management, the team, or the contractors. You should present your estimate in a clear, concise, and comprehensive manner, highlighting the key assumptions, risks, and uncertainties. You should also solicit feedback and input from the stakeholders, and address any questions or concerns they may have. You should also review and update your estimate regularly, as the project progresses and new information becomes available.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?