EPEM
already accumulated cost ( sunk cost ) can be held at a reasonable level , compared to a situation when the project is stopped at a later stage when cost incurred is at a much higher level .
The level of project definition determines the development status . The class estimate methodology for development of cost estimates as defined by the organization Association for the Advancement of Cost Engineering ( hereinafter referred to as AACE ), represents widely recognized test criteria for development status . AACE has defined the estimate classes 5 to 1 , each class representing improved estimate accuracy and thus increased project definition or maturity . of -35%/+ 50 %, where both figures represents the lower and the upper limits respectively .
FEL-2 ( Scope Development ) FEL-2 shall identify the best business concept and mature this concept sufficiently to enable the project owner to decide whether to proceed to FEL-3 ( Project Planning ) or not .
FEL-2 is referred to as a concept development phase or scope development phase . The main purpose is to define products , processes , raw materials and external environment issues , ending up with one single project scope that is the best fit for the given business opportunity .
EPEM has adopted the AACE class estimate methodology as part of the governing methodology for all industrial projects .
Requirements for individual phases in EPEM
General The start of a phase normally requires the deliverables from the previous phase to be approved by the project owner .
FEL 1 ( Business Planning ) FEL-1 is a study to select investment projects that support Elkem ' s strategic plan .
The study shall document a strategic fit with the business unit ’ s over-all business goals , further it should establish both preliminary CAPEX and OPEX estimates as well as a detail business case analysis , including but not limited to a market and raw materials strategy .
The level of project definition at completion of FEL-1 is approximately 3 % and the AACE Class 5 Cost estimate shall have an accuracy range
In many cases , the choice of site with associated applications for planning permission and emission / discharge permits will be critical for the start of construction . It is accordingly recommended to start possible site studies during FEL-2 .
The level of project definition at completion of FEL-2 is approximately 10 % and an AACE Class 4 estimate shall be produced as part of the deliverables , having an accuracy range of - 25 % / + 35 %.
FEL-3 ( Project Planning ) The main purpose of FEL-3 is to develop a set of engineering documents ( design basis package ) that incorporate site-specific conditions and a plan for executing the project , such that reliable cost and schedule estimates can be established . FEL-3 covers the development of the plant / technical solution , detailed analysis of and conclusions on the solution ’ s business case including a complete risk analysis , the final choice of the site location , basic engineering for the plant , development of a procurement strategy and mas-
36 PROSJEKTLEDELSE • NR . 1 2021