This document outlines the key stages in a project initiation and engineering process. It discusses project licensing, conceptual design, basic engineering, front-end engineering design, and detailed engineering. It also covers types of project cost estimates including order of magnitude estimates (+/- 60%), study estimates (+/- 30%), preliminary estimates (+/- 20%), definitive estimates (+/- 10%), and detailed estimates (+/- 5%). Accurate cost estimates are important for assessing funding needs, economic viability, and avoiding under- or over-funding of projects.

1. Module 2: Project Initiation
• Project initiation
• Feasibility reports of various types
• Project selection criteria
• Project licensing
• Basic and detailed engineering
• Guarantees, Liabilities
• Risk insurance
• Types of estimates.

2. Project Licensing
• Refers to right for using the technology or technical know-how for the
project
• Licensing agreement would give the company/client the right to use
and transfer patented/unpatented technology

3. Basic & Detailed Engineering
• The design phase of the project consists of the following four stages:-
Conceptual Design
Basic Engineering
Front End Engineering Design
Detail Engineering

4. Conceptual Design
• It is a study phase in which ideas and possibilities are evaluated
• Output of this phase includes:-
basic process concept
a preliminary schedule
a rough cost estimate

5. • Conceptual design covers:-
Literature survey
Development of an idea from scratch
Concept development
Conceptualization of process schemes
Concept refinement
Preliminary process flow diagram
Overall heat & mass balance
Conceptual layout
Order of magnitude cost

6. Basic Engineering
• It consists of core documentation of projects
Process Flow Diagrams
Heat & Mass Balances
P & ID’s
Control
Basic Equipment Sizing
Conceptual Layout
Preliminary Plot Plan

7. Utility consumption figures
Schematic drawing of equipment on each floor
Analysis & Sizing of safety valves
Control valve hydraulics & process specifications

8. Front End Engineering Design
• It reflects all technical specific requirements and avoid any significant
changes during execution of the same
• It covers
Basis of Design
Feasibility Study
Preparation of the specifications
Mechanical data sheets of the main equipment

9. Incorporating the specific requirements of codes & standards to be
applied to the project
Standards to be applied to the project
Development of process and utility P & ID released for detail
engineering
Preparation of tender packages for the main equipment
Development of detailed plot plans and hazardous areas
Elaboration of the main piping, instrument, electrical and civil work
layout

10. Detail Engineering
• It includes the extraction of all essential information from all the basic
engineering drawings and calculations to provide the exact drawings
in detail for all production, fabrication & erection items and in turn
the detail of entire project along with the precise bill of quantities and
specifications for each of the equipment

11. • It covers
Equipment List
Process Data Sheet
Reconfirmation of the process and mechanical design of all
equipment
Detailed specifications for vendor supplied items such as pumps,
compressors etc.
Management of vendor drawings
P & ID
HAZOP
Valve List

12. Control valve data sheet
Relief valve data sheet
Detailed piping drawings, including isometrics and stress calculations
Bill of Quantities
Detailed drawings and documents related to instrumentation,
electrical facilities and civil works
Startup procedures, operating and commissioning manuals

13. Types of Project Cost Estimates
• A project cost estimate is required not only for assessing fund
requirement but also for ascertaining the economic viability of the
project
• The estimate should be accurate
• Else, the fund plan will consequently be inaccurate
• The unit will face acute shortage of funds and this may lead to the
suspension of the project or at least considerable delay
• Delay in turn will increase the overall cost of the project rendering it
economically less viable or even sick

14. • If the project cost is overestimated, the project may fail to receive the
green signal due to its lower profitability in comparison to other
competitive projects
• If excessive funds are committed to any project due to over estimate,
several other needy projects will unnecessarily be deprived of funds
• An accurate estimate is therefore essential not only for getting a
project cleared but also to ensure adequate profitability

15. • But accuracy in a project is not easy to ensure because of the non
availability of the required information
• The required information gets developed only successively, but a cost
estimate is required even on the first day of the project at least to
assess the magnitude of the investment involved
• Since full information on a project for accurate estimate can be
obtained only on completion of the project one has to make repeated
estimates at different stages of the project life cycle

16. • There are roughly five types of estimates that are made during the life
cycle of a project
a) Order of magnitude estimate (+/- 60%)
b) Study Estimate (+/- 30%)
c) Preliminary Estimate (+/- 20%)
d) Definitive Estimate (+/- 10%)
e) Detailed Estimate (+/- 5%)
• These estimates have different accuracies depending on information
availability
• They are accordingly put to different uses

17. Order of Magnitude Estimate