HACKNEY MODEL FOR CONTINGENGY AND ACCURACY RANGE ANALYSIS: RATING WORKSHEET

Reference: Hackney, John W. (Kenneth K. Humphreys, Editor), Control and Management of Capital Projects, 2nd Edition, AACE International, 2002
This is an illustrative and educational appendix to AACE Recommended Practices 42R-08 and 43R-08. AACE accepts no responsibility for its use.
INSTRUCTIONS :
1) Review the source documentation
2) Review the "MAXIMUM" weights for each item. This indicates the relative impact of that item on the overall project if the definition of that particular item is completely unknown or undefined.
3) If the definition of the item is complete, full, or not applicable to the project, enter a zero (0) in the "RATING"
4) Enter ratings in all of the blue cells for each category of definition items
5) After all the ratings are established, the overall rating is shown at the bottom of the worksheet.
6) Go to the Worksheet labeled "Hackney-Contingency" to enter the estimate base costs and review the contingency and range values.

DEFINITION
ENTER PROJECT DEFINITION RATINGS IN BLUE CELLS BELOW: RATINGS
GENERAL PROJECT BASIS
ITEM MAXIMUM RATING ITEM MAXIMUM RATING ITEM MAXIMUM RATING ITEM MAXIMUM RATING
PRODUCTS AND BY-PRODUCTS PROCESS BACKGROUND RAW MATERIALS UTILITIES & SERVICES
MAX 450
Quantity 50 50 Theoretical Only (160-200) Quantity [yield ratio) 50 50 Utilities 15 15
Physical Form 15 15 Laboratory Only (110-160) Physical Form 15 15 Receiving 10 10
Chemical Compositlon 15 15 Pilot Plant (60-110) Chemical Composition 15 15 Shipping 10 10 GENERAL
200
Allowable Impurities 10 10 Semicommercial Plant (20-60) Allowable Impurities 10 10 Special Service Buildings 8 8 PROJECT BASIS 450
Wastes 10 10 Full-Scale Plant (0-20) Source 10 10 Special Senrice Systems 7 7 SUBTOTAL
Subtotal 100 100 Overall Rating 200 Subtotal 100 100 Subtotal 50 50

OWNERSHIP FACTOR (OF) PROCESS

Private Sector 1.00 BASIS 6.82
Public Sector 1.12 1.24 MULTIPLIER
Mixed Ownership 1.24

PROCESS DESIGN DEFINITION

ITEM MAXIMUM RATING ITEM MAXIMUM RATING ITEM MAXIMUM RATING ITEM MAXIMUM RATING
FLOW BALANCES MAJOR EQUIPMENT - TYPE AND SIZE MATERIALS OF CONSTRUCTION REVIEW OF PROCESS DESIGN
MAX 270
Material 30 30 Process 50 50 Identical service exper. 0 With Research & Development 50 50
Heat 20 20 Storage. Raw Material 10 10 Identical brief exper. 10 With Operations 20 20
PROCESS DESIGN
Electricity (process] 20 20 StorGe. In-process 10 10 Similar Service exper. 15 Subtotal 70 70
DEFINITION 270
Subtotal 70 70 Storage, Products 10 10 Laboratory, complete 20 50 SUBTOTAL
Subtotal 80 80 Laboratory, preliminary 30
No exper. this service 50
Subtotal 50

SlTE INFORMATION
ITEM MAXIMUM RATING ITEM MAXIMUM RATING ITEM MAXIMUM RATING ITEM MAXIMUM RATING
SURVEYS CLIMATOLOGICAL INFORMATION REUSEABLE EQUIPMENT YARD IMPROVEMENTS AVAILABLE
MAX 451
Obstructions & Interferences 20 20 Rainfall. flooding 10 10 Type 5 5 Railroads & docks 5 5
Topographic & Property 10 10 Wind, earthquake 10 10 Size 5 5 Roads. pavements & sldewalk 5 5
Subsoil 15 15 Temperature, dust 5 5 Materials of construction 5 5 Fencing. planting & lighting 2 2 SlTE
Labor conditions 40 40 Subtotal 25 25 Condition 10 10 Water supply & treatment 3 3 INFORMATION 451
Subtotal 85 85 Subtotal 25 25 Stacks, common service 5 5 SUBTOTAL
ORDINANCES AND REGULATIONS Storm sewer systems 5 5
BUILDINGS AVAILABLE Air & water pollution 68 68 REUSEABLE SUPPORTS, PIPING & ELECTRICAL Sewage treatment & sewers 2 2
Process space 10 10 Personnel hazards 68 68 Type 5 5 Waste Treatment & proc. sew 13 13
Office. control rooms & lab 3 3 Zoning & building 10 10 Size 5 5 Subtotal 40 40
Toilet, lunch & change room 4 4 Subtotal 146 146 Materials of construction 5 5
Maintenance & Stores space 3 3 Condition 10 10 REVIEW OF SITE INFORMATION
Condition 10 10 UTILITIES AVAILABLE Subtotal 25 25 With Operations 25 25
Subtotal 30 30 Power 10 10 With Construction 25 25
Water 5 5
Steam & Condensate 5 5
Fuel, Service gases & refrig. 5 5
Subtotal 25 25

ENGINEERING DESIGN STATUS

ITEM MAXIMUM RATING ITEM MAXIMUM RATING ITEM MAXIMUM RATING ITEM MAXIMUM RATING
LAYOUTS AUXILIARY EQUIP. - TYPE AND SIZE YARD IMPROVEMENTS, TYPE & SIZE HAZARD CONTROL SPECIFICATIONS
EDS ST 395
General Plant 15 15 Dry & packaged movement 10 10 Clearing. grading & fill 7 7 Heat, dust & fumes 8 8
Process, plan 15 15 Pumps. compr. blowers & fan 10 10 Subsoil drainage & piling 7 7 Explosion & fire 8 8
Process, elevations 5 5 Instruments & control valve 10 10 Roads, parking. walks, RR&Dock 10 10 Air & water pollution 8 8
Subtotal 35 35 Control centers & computers 25 25 Fencing, planting & lighting 2 2 Other personnel hazards 6 6 ENGINEERING
DESIGN STATUS 395
Power conversion & control 10 10 Water supply & treatment 3 3 Subtotal 30 30 SUBTOTAL
LINE DIAGRAMS Major spares 5 5 Stacks, common service 5 5
Process piping & ducts 15 15 Subtotal 70 70 Storm sewer systems 5 5 REVIEW OF ENGINEERING DESIGN BY
Dry material movement 10 10 Sewage treatment & sewers 3 3 Research & Development 20 20
Supply & Dtstrib. - Power 10 10 BUILDINGS, TYPE & SIZE Waste treat & prw sewers 13 13 Hazard control specialists 20 20
Steam & Condensate 7 7 Process 20 20 Subtotal 55 55 EPA. OSHA. other authorities 20 20
Water 5 5 Office. control rooms & lab 5 5 Operations; incl. shutdowns 20 20
Fuel. serv gases & refrig. 3 3 Toilet. lunch & change room 5 5 COATINGS Constructlon; incl. schedul 20 20
Subtotal 50 50 Maintenance & stores 5 5 Insulation and Heat Tracing 12 12 Subtotal 100 100
Subtotal 35 35 Painting and Surface Treatment 8 8
Subtotal 20 20

DETAILED DESIGN STATUS

ITEM MAXIMUM RATING ITEM MAXIMUM RATING
DRAWINGS AND BILLS OF MATERIALS REVIEW OF ENGINEERING DESIGN BY
MAX 80
Structural 3 3 Research & Development 3 3
Storage 3 3 Hazard control specialists 2 2
PipIng 13 13 EPA. OSHA. other authorities 10 10 DETAILED DESIGN
Equipment 4 4 Operations; incl. shutdowns 10 10 STATUS 80
Instruments 3 3 Constructlon; incl. schedul 10 10 SUBTOTAL
Control Centers & Computers 3 3 Subtotal 35 35
Insulation 2 2
Electrical 9 9
Stte Improvements 5 5
Subtotal 45 45

FIELD PERFORMANCE STATUS

ITEM MAXIMUM RATING
FIELD PERFORMANCE STATUS 50 50

OVERALL RATINGS
ITEM MAXIMUM RATING
PROJECT STATUS RATING 1246 1246
OVERALL PROJECT RATING 8498 8498

AACE International Ratings Worksheet Hackney Model

 HACKNEY MODEL FOR CONTINGENGY AND ACCURACY RANGE ANALYSIS:
Contingency and Range Results
Reference: Hackney, John W. (Kenneth H. Humphreys, Editor), Control and Management of Capital Projects, 2nd Edition, AACE
International, 2002

This is an illustrative and educational appendix to AACE Recommended Practices 42R-08 and 43R-08. AACE accepts no responsibility for
its use.
INSTRUCTIONS :
1) Determine the definition rating using the worksheet labeled "Hackney Model-Ratings"
2) Enter the base estimate costs, excluding contingency, in the blue cell.
3) Review the resulting contingency and range values for different levels of confidence of overrun

Base Data
Base cost estimate, $MM BC 50.0 excl contingency allowances
Overall defnition rating DR 8498 from "Hackney Model-Ratings" worksheet
Forecast period to mid-exp/yrs P 3.0 years to mid-expenditure
Contingency Allowance - Even Chance (p50)
Even-chance, 50% overrun probability EC% 484.4 % DR*.057 = EC%
Total allowance, $MM ECA 242.2 BC*EC%/lOO = ECA
Total cost, incl Allowance, $MM 292.2 BC*(l + EC%/lOO)
Accuracy Range Calculations
Min Actual, 90% will exceed
Base estimate overrun MiOR% 170.0 % DR*0.020 = MiOR%
Even-chanceMin Actual EC/MiAC% 216.5 % (100 + EC%)/(100 + MiOR%)*lOO = EC/MiAC%
Dev Even-chance from Min Actual MiO% 116.5 % (EC/MiAC%) - 100 = MiO%
Max Actual, 10% will exceed
Base estimate overrun MaOR% 934.8 % DR*0.110 = MaOR%
Even-chanceMax Actual EC/MaAC% 56.5 % (100 + EC%)/(100 + MaOR%)*100 = EC/MaAC%
Dev Even-chance from Max Actual MaO% -43.5 % (EC/MaAC%) - 100 = MaO%
Accuracy Ranges, ± % of Actual-Project
Historical Costs, Mean Range HC% 80.0 % (Mi0% - MaO%)/2 = HC%
Forecast Error of Data (1 yr avg) DCF% 3 % 3*11.32= DCF%
Cost Forecast CF% 12.8 % 3*P*1.32= CF%
Project Costs PC% 81.0 % (HC%2 - DCF%2*CF%2)0.5 = PC%
Accuracy Ranges, + % of Even-chance Estimate
Min, 0.80 Range -20.3 MiAR% -44.7 % (100/(100+ PC%))*100 - 100 = MiAR%
Min, 0.68 Range (1 std dev) -16.6 8 MiOSD% -38.7 % (100/(100 + PC%/1.28))*100 - 100 = MiOSD%
Max, 0.68 Range (1 std dev) 24.8 MaOSD% 172.1 % (100/(100 - PC%/1.28))*100 - 100 = MaOSD%
Max, 0.80 Range 34.1 MaAR% 425.2 % (100/(100 - PC%))*100 - 100 = MaAR%
Contingency and Accuracy Range Results
Contingency Allowance Alternates-% of Base Estimate
Min Actual, 90% Overruns MiE 222.9 % (MiAR% +100)*(EC% +100)/100 - 100
Min (1 std dev), 84% overruns MiOSDE 258.0 % (MiOSD% +100)*(EC%+100)/100-100
Even-chance, 50% overruns ECE 484.4 % (0 +100)*(EC% + 100)/100 - 100
Max (1 std dev), 16% overruns MaOSDE 1490.1 % (MaOSD% +100)*(EC%+100)/100-100
Not-to-exceed, 10% overruns MaE 2969.1 % (MaAR% +100)*(EC% +100)/100 - 100
Contingency Allowance Alternates, $MM
Min Actual, 90% Overruns 111.5 MiE/100*BC
Min (1 std dev), 84% overruns 129.0 MiOSDE/100*BC
Even-chance, 50% overruns 242.2 ECE/100*BC=ECA
Max (1 std dev), 16% overruns 745.1 MaOSDE/100*BC
Not-to-exceed, 10% overruns 1,484.6 MaE/100*BC
Total Cost Including Alternate Allowances, $MM
Minimal, 90% overruns 161.5 MiE (as cost) + BC
Min (1 std dev), 84% overruns 179.0 MiOSDE (as cost) + BC
Even-chance, 50% overruns 292.2 ECE (as cost) +BC
Max (1 std dev), 16% overruns 795.1 MaOSDE (as cost) + BC
Not-to-exceed, 10% overruns 1,534.6 MaE (as cost) + BC

Notes:
1) This applies to typical process plant projects with a significant extent of work in all disciplines such as equipment, steel, concrete, pipe,
electrical, instrumention, coatings, and do on. This is typical for oil and gas, chemical, wet mineral processing, and other processes with a
significant extent of piping. Processes with minimal piping (e.g., some mining, dry mineral processing, etc.) will tend to experience less
growth given the preponderance of equipment costs which are less subject to cost growth.

AACE International Contingency and Accuracy Range Hackney Model

 RAND MODEL FOR CONTINGENCY ANALYSIS AND ACCURACY
Reference: Merrow, E. W. et al., Understanding Cost Growth and Performance Shortfalls in Pioneer Process Plants, Publication R-2569-DOE, RAND
publication for the US Department of Energy, 1981. Used with permission from RAND Corporation.
INSTRUCTIONS :
1) Review the source documentation and description of variables
2) Enter the "RATING"in the blue cells (must be within the range shown for each item)
3) After all the ratings are established, the overall mean cost growth is shown at the bottom of the worksheet.

VARIABLES SYMBOLOGY/RATING DESCRIPTION RANGE RATING

PROCESS INFORMATION AND UNPROVEN TECHNOLOGY
Percent of capital cost in technology unproven in commercial use PCTNEW (%) 0 - 100 0
No of steps (counted on block basis) incorporating new technology NEWSTEPS (No.) 1+
No of new steps/Total no of steps in plant FRACNEW (No.) 1+
No of integrations of proven steps that have not been integrated in
commercial use before NEWINT (No.) 1+
These were not
Percent of heat & mass balance equations based on actual data from found to be the
prior plants rather than calculated theory BALEQ (%) 0-100 most significant
Whether or not the plant entailed equipment that has not been used drivers, but are
correlated with
before commercially Y/N increased risk
Whether this was the first time that a technology had been used
commercially Y/N
Whether this was the first experience of the company with technology
used in the plant Y/N
TECHNICAL DESIGN PROBLEMS

Impurity Buildup/Catalyst Deactivation IMPURITY Scale from 0 (No Problem) to 5 (Major 0-5 0
Problem)
Feedstock characterization Scale from 0 (No Problem) to 5 (Major Problem) 0-5
These were not
Temperature tolerances Scale from 0 (No Problem) to 5 (Major Problem) 0-5 found to be the
Process pressure Scale from 0 (No Problem) to 5 (Major Problem) 0-5 most significant
Scale from 0 (No Problem) to 5 (Major Problem) 0-5 drivers, but are
Corrosive Materials correlated with
Abrasive Materials Scale from 0 (No Problem) to 5 (Major Problem) 0-5 increased risk
Solid/Liquid/Gas/Waste handling Scale from 0 (No Problem) to 5 (Major Problem) 0-5
LEVEL OF PROJECT INFORMATION

Scale as:
1 Design Specifications (Engineering Completed)
Level of Engineering Completed 2 Study Design (Moderate/Extensive Basis) FEL 3 1-4 2
3 Study Design (Limited Basis) FEL 2
4 Screening Study (Least Definition) FEL 1
Degree of definition about specific plant by quality of information on Scale each as:
1) Onsite/offsite unit configuration (plot plan) 1 Definitive/Completed Work 1-4 2
2) Soil/hydrology 2 Preliminary/Limited Work 1-4 2
3) HSE requirements 3 Assumed/Implicit Analysis 1-4 2
4) Environmental requirements 4 Not Used in Cost Estimate At All 1-4 2
Avg Degree of definition for each of the 4 site information variables, plus the Level of Engineering Completed 2-8 4
PLANT COMPLEXITY
Count of Number of Continuously Linked process steps or block units
COMPLEXITY >=1 5
in the plant (examine block flow diagram)
ESTIMATE DETAIL OR INCLUSIVENESS OF ITEMS IN BASE ESTIMATE
Land purchase/Leases/Property Rentals Code as 1 if included, 0 if excluded 0 or 1 0
Initial Plant Inventory/Warehouse parts/catalyst Code as 1 if included, 0 if excluded 0 or 1 1
Pre Operating Personnel costs Code as 1 if included, 0 if excluded 0 or 1 1
Percentage of items above included in base estimate 2-8 66.7
INTERACTION OF PROCESS INFORMATION AND PROJECT DEFINITION
1) Exploratory/Predevelopment (When process information is obtained
from small scale laboratory experiments & literature)
2) Development (When Coordinated R&D program is under way)
3) Precommercialization (When pilot work of demonstration type has Code as 1 if state of development is (1) or (2), 0 if (3)
0 or 1 0
started & there are sufficient data to start design on an commercial unit or (4)
or large demonstration plant)
4) Completed Development (When major process uncertainties have
been resolved)
COST GROWTH (Second Cut Model) = a - X1*PCTNEW - X2*IMPURITY - X3*COMPLEXITY + X4*INCLUSIVENESS - X5*PROJECT DEFINITION -
X6*PROJECT DEFINITION if Process Development in R&D stage
where, a=1.12196, X1=-0.00297, X2=-0.02125, X3=-0.01137, X4=0.00111, X5=-0.04011, X6=-0.06361
COST GROWTH = Estimate/Actual 0.979
Actual/Estimate (1/above) 1.022
As Percentage over Base Estimate (mean cost growth) 2.2%
Notes:
1) This applies to typical process plant projects with a significant extent of work in all disciplines such as equipment, steel, concrete, pipe, electrical,
instrumention, coatings, and do on. This is typical for oil and gas, chemical, wet mineral processing, and other processes with a significant extent of piping.
Processes with minimal piping (e.g., some mining, dry mineral processing, etc.) will tend to experience less growth given the preponderance of equipment costs
which are less subject to cost growth.

2) As with the Hackney model, cost growth expressed as a ratio of estimate/actual tends to be more normally distributed and was therefore used in the model
development regression analysis
3) The model excludes the impact of escalation, regulatory changes, labor strikes, bad weather and other external factors and major scope change
4) The extent to which the above factors account for cost growth by the amounts implied by their coefficients will depend on how closely the characteristics of a
candidate project compare to those of the industry projects in the model database.
5) The representativeness of this model vis-à-vis any other project being unknown, the cost growth model must will be applied with care considering the
sampling framework and database characteristics and the company's own experience on past projects.
6) Refer to the RP 42R-08 for information on how to estimate accuracy ranges using the "contingency as standard deviation" concept.

AACE International Information used with permission from RAND Corporation RAND Model