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BUSINESS & PROJECT DEVELOPMENT

COST ESTIMATING & RISK ANALYSIS

REM Pipeline Consultants, LLC can develop or assist in the development of project Cost Estimates for operating company business development and engineering personnel. The cost estimates developed by our personnel may include not only capital costs, but also operating and maintenance costs. For a given pipeline or related facility design, we will develop a NPV (net present value) of capital and operating costs so that alternative designs can be compared on an equal basis. With this analysis of cost, the right project design to meet the operating company’s business objectives can be more readily chosen.

Cost estimates are generally classified with a plus or minus percentage (+/- %) of expected potential cost variation. Cost estimates follow the project phases as shown in the Project Phases and Cost Estimate Quality figure below. Obviously, some cost items have more inherent risk than others. As a part of the cost estimating process, we identify the expected margin of error for each major cost item. By risk weighting the cost estimate the business development and economics managers can make more informed decisions.

On larger projects, we recommend that a thorough risk analysis of the cost estimate and schedule be conducted. Our personnel can identify the areas of risk that are associated with any project, particularly related to the potential for cost variations, but also due to political, permitting, right of way availability, material availability and other issues which can have significant adverse affects on the final cost and schedule for a project.

Our personnel have the experience to advise the operating company of strategies to mitigate the risk inherent with each cost item so that a project can be can be more readily built within budget and schedule.

We strongly recommend that the cost and schedule be reviewed at regular intervals during the design and construction process. This allows for project plan adjustments to be made if necessary during the project execution to avoid cost overruns or schedule delays. These overruns or delays may develop due to changing site conditions, changes in commodity and/or labor pricing and changes due to “scope creep”. By identifying potentially cost overruns at an early stage of the project, effective steps can be taken to mitigate the additional costs before they are incurred, at which point it is too late.

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