Review of cost estimation in new technologies: implications for energy process plants

Estimates of capital costs of pioneer energy process plants have been poor predictors of actual capital costs. Pre-design and early design estimates (even in constant dollars) have routinely understated definitive design estimates or ultimate costs by more than 100% for oil shale, coal gasification and liquefaction, tar sands, solid waste, and nuclear fuel reprocessing plants. This phenomenon of cost growth creates significant planning and management problems for both industry and the Department of Energy. For industry, cost growth has led to canceled plans, wasted costly design efforts, and in some cases significant losses when premature capital commitments have been made. For government energy officials, cost growth has made R and D allocation decisions difficult, has increased the uncertainty in supply planning, and has hampered commercialization planning efforts. This report reviews literature on cost estimation in several areas involving major capital expenditure programs: energy process plants, major weapons systems acquisition, public works and large construction projects, and cost-estimating techniques and problems for chemical process plants. One of the goals of this review was to aid in the development of a conceptual framework for the study.