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Updating the Lang Factor and Testing its Accuracy, Reliability and Precision as a Stochastic Cost Estimating Method

FEATURED PAPER 

By Yosep Asro Wain, CCP

Jakarta, Indonesia
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ABSTRACT

The Lang factor is a one of the factored estimating techniques that is recommended American Association of Cost Engineers (AACE) International for class 4 and class 5 estimates. This method was proposed by Hans J. Lang in 1940’s use a simple formula: consist of a set of factor multiplied by the Total Equipment Cost (TEC) to obtain the Total Plant Cost (TPC). These factors are 3.10 for solid plant, 3.63 for solid-fluids plant and 4.74 for fluids plant.

Over the ensuing decades, several people tried to calculate the Lang factor by using their current data.

In this paper, the fluid plant Lang factor was updated and tested its accuracy, precision and reliability by using historical project data from a major Indonesian national oil company.

The result of updating and testing show that while the Lang factor is appropriate for use for Class 4-5 estimates, because it exhibits such a high degree of variability; it is not recommended for creating high accurate, reliable or precise of cost estimates.

Keywords: Lang factor, Factorized Estimating, Cost Estimating, Stochastic Cost Estimating, Parametric Cost Estimating, Equipment Factor Cost Estimating, Statistical Analysis, Monte Carlo Simulation.

  • Cost Estimation in the Project.

Cost estimating is the predictive process used to quantify, cost, and price the resources required by the scope of an investment option, activity, or project [1]. In that regard, cost estimating contains two thinks, namely resources quantification and resources pricing or costing. In resources quantification, the project scope definition in the form of the work breakdown structure (WBS) and the work statement may be used to identify the activities that make up the work, and further, each activity is decomposed into detailed items so that labor hours, material, equipment and subcontract are itemized and quantified [2]. In resources pricing, any methodology such as stochastic, factored, or deterministic may be used to cost the resources.

The cost estimating process is carried out during the entire of the project life cycle. At beginning of the project where scope definition is still roughly, the accuracy of the cost estimation is low. As the project definition go to more detail, then the accuracy of the cost estimation become higher. 

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About the Author

pmwj27-oct2014-Wain-AUTHOR IMAGEYosep Asro Wain flag-indonesia

Jakarta, Indonesia

Yosep Asro Wain is a professional in oil and gas, especially in refinery fields with 20 years experiences. The most of his job are in the project management field, namely project engineering design, project budgeting, project cost estimating, project cost control, project scheduling and contract engineering. He is currently a cost engineering specialist at Engineering Center, Refinery Directorate of Pertamina. Yosep holds a bachelor degree in Electrical Engineering (in Control Engineering field) from Bandung Institute of Technology (ITB), and is a Certified Cost Professional (CCP-AACEI). He is also a senior process control and instrumentation engineer. He lives in Jakarta, Indonesia and can be contacted at yo[email protected].