1cost Estimate Development Guide

Global Projects Organization
Cost Estimate Development Guide
Applicability: Global Projects Organization

Approver: Stacy Ross
Approval Date: 07 May 2019
Author: Kevin Grottick
Checker: Scott Siggery
Checker Date: 30 Apr 2019
Security Classification: General
GPO Document Number: GPO-PC-GLN-00006

Revision Code: B02
Next Review Date: 30 June 2022
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Copyright © 2019. BP International Ltd. All rights reserved.
Revision history
Rev Reason for Author Checker Checker Approve Approva

Issue/Revisions Date r l
Date
B02 Refresh to align with MPcp V5 Kevin Scott 30 Apr Stacy Ross 7 May
Grottick Siggery 2019 2019
Operating Management System
OMS Sub- OMS Sub-Element Title Relevant Section(s) of this

Element Document
5.1 Project Management All
Reviewers
Name Role Type of Review Date Reviewed

Scott Siggery Manager – Global Cost Estimating Technical 30 April 2019
Team
T Palmer Lead Cost Estimator Technical 30 April 2019
R Matthew Lead Cost Estimator Technical 23 April 2019
S Morris Lead Cost Estimator Technical 24 April 2019
Stacy Ross GPO Project Controls Director Technical 07 May 2019
Donna Ward Legal Legal No review needed

11 June 2019
GPO-PC-GLN-00006 Page 2 of 46 Rev: B02

© BP p.l.c. General
Uncontrolled when printed or stored locally
Contents
Page
Foreword........................................................................................................................ 6
Introduction.................................................................................................................... 6
1 Scope and exclusions............................................................................................. 7
2 Informative references/related documents............................................................7
3 Terms and definitions............................................................................................. 7
4 Symbols and abbreviations.................................................................................... 9
5 Cost estimate development process....................................................................10
6 Estimate cost by appropriate MPcp stage and WBS.............................................11
6.1 Initiate the cost estimate basis...................................................................13
6.2 Develop the base cost estimate.................................................................16
6.2.1 Concept development 17
6.2.2 Optimize and Define stages 18
6.3 Assess allowances...................................................................................... 18
6.4 Develop owner’s cost.................................................................................. 20
7 Phase cost estimate and apply escalation............................................................21
7.1 Cost estimate consolidation........................................................................21
7.2 Phasing....................................................................................................... 21
7.3 Escalation................................................................................................... 22
7.3.1 Escalation for Concept Development and Optimize cost estimates
23
7.3.2 Escalation for estimates for Define and Execute cost estimates
23
7.3.3 Escalation guidance for work type 23
8 Quality check the cost estimate...........................................................................24
8.1 Document the cost estimate basis..............................................................24
8.2 Cost estimate metrics and norms check.....................................................24
9 Update cost estimate........................................................................................... 25
10 Evaluate preliminary UAP and AUAP.....................................................................26
10.1 Deterministic UAP and AUAP development.................................................26
10.2 Probabilistic UAP and AUAP development...................................................27
10.3 Sense testing UAP and AUAP......................................................................27
11 Mid stage cost estimating and trending...............................................................27
12 Interfaces............................................................................................................. 28
13 Deliverables.......................................................................................................... 29
Annex A - Allowances................................................................................................... 30
A.1 Weight allowance........................................................................................ 31
A.2 Equipment development allowance............................................................32

A.3 Material take-off allowance.........................................................................32

A.4 Cut and waste allowance............................................................................ 32
A.5 Design development allowance..................................................................32
A.6 Bid development......................................................................................... 33
A.7 Rework allowance....................................................................................... 33
A.8 Claims and extras allowance......................................................................33
A.9 Waiting on weather..................................................................................... 33
A.10 SIMOPs/activity allowance..........................................................................34
A.11 Brownfield allowances................................................................................ 34
A.12 EPMS estimates.......................................................................................... 34
Annex B - Brownfield projects....................................................................................... 35
B.1 Brownfield base cost estimate....................................................................35
B.2 Brownfield allowances................................................................................ 36
B.3 Brownfield owner’s cost.............................................................................. 36
B.4 Brownfield UAP considerations...................................................................36
Annex C - Owner’s cost checklist.................................................................................. 38
C.1 Established location or new country entry..................................................38
C.2 Execution approach and owner’s costs.......................................................38
C.3 Items to consider........................................................................................ 38
C.3.1 Project Management team 38
C.3.2 Project support 38
C.3.3 Field survey and support 39
C.3.4 HSE support 39
C.3.5 Communications, documentation, PR services 39
C.3.6 Office support 39
C.3.7 Miscellaneous services 39
C.3.8 Certification and insurance 40
C.3.9 Government taxes and fees 40
C.3.10 Site costs 40
Annex D - Terms and definitions................................................................................... 41
Annex E - Symbols and abbreviations..........................................................................44
Figures
Figure 1 - Cost estimating guide overview.....................................................................6

Figure 2 - Cost estimating development - process.......................................................11
Figure 3 - MPcp stage cost estimate classification.......................................................12
Figure 4 - Cost estimating EPMS/EPC ongoing development engagement...................13
Figure 5 - Conceptual cost estimating - considerations................................................14
Figure 6 - Base cost build-up in Define stage - example...............................................15
Figure 7 - Initiate cost estimate basis by MPcp stage...................................................15
Figure 8 - Develop the base cost estimate...................................................................17

Figure 9 - Allowance application................................................................................... 19

Figure 10 - Assess owner’s cost.................................................................................... 21
Figure 11 - Application of inflation and escalation rates...............................................22
Figure 12 - Application of cost escalation example......................................................23
Figure 13 - Check metrics and norms...........................................................................25
Figure 14 - Preliminary cost estimate development activities......................................28
Figure A 1 - Detail of the cost estimate components....................................................30
Figure A 2 - Weight assessment methods....................................................................31
Figure A 3 - Weight allowances.................................................................................... 31
Figure A 4 - Onshore/offshore application of the equipment development
allowance............................................................................................................. 32

Foreword
The Cost Estimate Development Guide (GPO-PC-GLN-00006) supports the
GPO Cost Estimating Procedure (GPO-PC-PRO-00007) by providing
additional context associated with the cost estimating development
process.
Introduction
The cost estimating guides have been written “by practitioners, for
practitioners”, with the objective of identifying the standard work processes
that support the development of cost estimates during each of the MPcp
stages. The cost estimating guides are underpinned by the incorporation of
lessons learned and best practices identified from recent/current projects.
The guides are broken into four distinct phases for each MPcp stage, as
shown in Figure 1.
Beginning of Throughout the Before the End of the End of the

MPcp Stage MPcp Stage MPcp Stage MPcp Stage
Cost Estimate Cost Estimate Cost Estimate Cost Estimate

Planning Guide Development Guide Review Guide Finalization Guide
 Cost estimate  Cost eestimate Basis  Project team review  Confirm final cost
initiation  Base cost  Preliminary estimate
 Cost estimate development reconciliation  Final reconciliation
Purpose  Allowances  Interface with  Basis of cost estimate
 Cost estimate kick-off  OwnerŐ
s cost Benchmarking report  Transition to cost
meeting  Co-Owner review engineering
 Phasing/ escalation
 Finance alignment  Final project review  Input to
 Cost estimate quality
 Co-Owner iinterface check benchmarking
 Cost estimate plan  UAP / AUAP  Learning
Figure 1 - Cost estimating guide overview
Purpose
The purpose is to provide the cost estimating practitioner with a set of

standard work processes that identify the principles, work processes and
deliverables to effectively deliver a cost estimate in the GPO and conform
with MPcp and GPO Cost Estimating Procedure (GPO-PC-PRO-00007).
The application of these guides by the cost estimating practitioners meets

the agenda for standardization by driving consistent work processes across
the community.

1 Scope and exclusions
This guide applies to all GPO Category A and B operated projects where an
investment decision is required (at stage gates) and in the development of
cost estimates supporting in-stage decisions such as concept narrowing. It
should be read and adopted by all who are engaged in the production and
approval of GPO cost estimates.
This document does not include any new mandatory requirements. Any
reference to a mandatory requirement in this document will cite the source
BP Requirement Document. Thus, you should exercise care when relying
upon mandatory requirements cited in this document by confirming they
have not been modified in a subsequent version of the cited BP
Requirement Document.
1 Informative references/related documents
Unless stated otherwise in the content of this document, reference to the

documents below is for information. Specific sections of the referenced
documents are given in the content of this document if conformance is
required.
GPO-PA-PRO-00001 Major Project common process (MPcp)

GPO-PC-PRO-00007 GPO Cost Estimating Procedure
GPO-PC-PRO-00031 GPO Benchmarking Procedure
Work Breakdown Structure (WBS) and Code of
GPO-PC-GLN-00018
Resources (CoR)
GPO-PC-GLN-00005 Cost Estimate Planning Guide
GPO-PC-GLN-00007 Cost Estimate Review Guide
GPO-PC-GLN-00008 Cost Estimate Finalization Guide
GPO-PC-GLN-00015 Trending and Reconciliation Guide
GPO-PC-GLN-00014 UAP Development and Management Guide
GPO-CM-PRO-00001 GPO Construction Practice
GPO-PC-TEM-00055 GPO Offshore Facilities Cost Estimating
Template
GPO-PC-TEM-00056 Onshore Cost Estimating Detailed Template
GPO-PC-TEM-00057 Onshore Cost Estimating Summary Template
GPO-PC-TEM-00059 GPO Owners Cost Estimating Template
2 Terms and definitions
Refer to Annex A for a full list of terms and definitions.

Term Definition
May: Designates a Permissive Statement – an option that is
neither mandatory nor specifically recommended.
Should: Designates a specific recommendation where
conformance is not mandatory.

3 Symbols and abbreviations
Refer to Annex B for a full list of symbols and abbreviations.
GPO Global Projects Organization
OMS Operating Management System

4 Cost estimate development process
The key for developing a credible cost estimate is to have an adequate

understanding of the project - business context, execution strategy,
contracting strategies, technical definition, and technologies to be included
in the design. The Cost Estimator should use this information to maintain a
live cost estimate basis that identifies how these parameters interact and
the impact on the cost estimate.
The availability of reliable and accurate information directly affects the

overall quality of the cost estimate. Less information may mean more
assumptions are made, increasing the threats associated with the cost
estimate. The final accuracy of the cost estimate depends on the definition
of the project and the detail of the inputs. The cost estimate plan
(developed at the conclusion of the cost estimate planning phase) should
be used as the map to obtain the agreed information that underpins the
project cost estimate.
GPO typically uses conceptual, factored, and detailed methods for cost
estimating facilities project cost. Conceptual cost estimating uses the cost
of a similar project to estimate the cost of a new project and adjusts for
scope differences. Factored cost estimating applies unit cost rates to
identified quantities. Detailed cost estimating uses the engineering build-up
to develop the cost estimate at the lowest level of the project work
breakdown (referred to as WBS in this document), one piece at a time, and
the sum of the pieces becomes the cost estimate.
As described in the GPO Cost Estimating Procedure (GPO-PC-PRO-00007),

Section 5.6.3, the Cost Estimator performs the activities shown in Figure 2
to develop a cost estimate described in Sections 5 through 10 of this guide.

Approved Cost Preliminary Cost

Estimate Plan Estimate
6.0 7.0
8.0 9.0 10.0
Cost Estimate Time Phase
Quality check Update Evaluate Preliminary
By WBS & CVP Cost Estimate
Cost Estimate Cost Estimate UAP Levels
stages & Escalation
8.1 10.1
6.1
Document Cost Probabilistic
Assess Allowance
Estimate Basis Process
8.2 10.2
6.2
Check Cost Metrics & Deterministic
Assess Owners Cost
Norms Process
6.3
Initiate Basis of Cost
Estimate
6.4
Develop Base Cost
Estimate
Figure 2 - Cost estimating development - process
5 Estimate cost by appropriate MPcp stage and WBS
Selection of the appropriate cost estimating method depends on where the

project is in its life cycle. Early in the project, when definition is limited, the
effective method should be conceptual. Once the project potential has been
identified the effective method may be detailed.
The following processes define the “Point Forward” cost estimate only, the
Cost Estimator should consider the following every time a cost estimate is
developed:
 Finance Memorandum funding up to the next governance point

 Expected funding of MPcp stage pre-Execute FM request
 Expected Execute FM request
The cost estimating classification changes as the project moves through the
MPcp stages, Figure 3Error: Reference source not found shows the cost
estimate development progression found in the GPO Cost Estimating
Procedure (GPO-PC-PRO-00007). This figure identifies the segregation of the
cost estimate for each MPcp stage. Where appropriate, the stage
components of the cost estimate should align with the agreed annual work
plan and budget.

Cost Estimate Component Classification for FMŐ

s
End of stage
Reason for Cost Concept
MPcp Stages Governance Optimize DEFINE EXECUTE
Estimate Development
Requirement
Concept
Pre GPO Development Entering the GPO Class 2 Class 5
FM
Concept Optimize GPO approval for

Class 2 Class 4
Development FM entering Optimize
DEFINE GPO approval for

Optimize Class 2 Class 3
FM entering DEFINE
EXECUTE GPO approval for

DEFINE Class 2
FM entering EXECUTE
Figure 3 - MPcp stage cost estimate classification
The Cost Estimator should produce a separate cost estimate for each of the
MPcp stages as identified in Figure 3Error: Reference source not found, with
the appropriate supporting documentation (Cost Estimate Plan and Cost
Estimate Basis).
For example:
The Concept Development FM should be supported by a Class 2 cost

estimate for funding up to the end of the Concept Development stage;
therefore, the Cost Estimator develops in conjunction with the project team
a cost estimate for the manpower and third-party studies to complete the
defined scope of work.
For the remaining life of project cost estimate in the Concept Development
FM (Optimize, Define and Execute FM requests), a Class 5 cost estimate
should be developed. This cost estimate should reflect the anticipated
duration included in the project development schedule and the involvement
of the EPMS/EPC contractors and other third-party studies.
The Cost Estimator should work with the project team and project planner
to understand whether the development schedule up to the Execute FM is
considered accelerated. The implications of an accelerated development
schedule may have an impact on the cost phasing and funding requests of
the subsequent FMs.
Figure 4 shows the interaction and interface among the cost estimate
components throughout the cost estimate development phase.
Throughout the Optimize and Define stages, the Cost Estimator should be
checking in with the independent verification team as agreed in the project
verification plan and cost estimate plan.

 Fabrication &
construction work hours
rates
 Installation w ork hours
EPMS / EPC Cost Estimate rates
Development  Local pricing
 Local productivity
 Supervision / construction
indirect
 Transportation and vessel
 M ethodology  M TO basis  M aster document
rates
 Allowances  Pricing basis register deliverables
 Contractor conditioning of
 Assumptions &  Contractor conditioning of  Execution centers
bids / quotes
exclusions bids / quotes
Development of
Finalized Cost Equipment & Construction Engineering
EPM S Cost
Estimate Plan M aterial Costs Costs Costs
Estimate Basis
BP Cost Estimator interaction, guidance & review of the cost estimate development and trends
Cost Estimating independent verification touch points per project verification plan
Figure 4 - Cost estimating EPMS/EPC ongoing development

engagement
5.1 Initiate the cost estimate basis

After the cost estimate plan is approved, the Cost Estimator should
begin to develop the cost estimate. This should start with converting
the cost estimate plan into a live cost estimate basis document for
recording the qualitative inputs to the cost estimate as they are
received. By initiating this cost estimate basis document at the
beginning of the cost estimate development process, the Cost
Estimator maintains an up to date record of the inputs and can
efficiently complete the final cost estimate basis at the conclusion of
the MPcp stage.
For the Concept Development stage, using the agreed cost estimate
plan and the work breakdown structure for this stage, the Cost
Estimator should identify and document the cost metrics that are used
to develop the cost estimate in the form of an initial cost estimate
basis document. The benchmarking team should be consulted for
appropriate internal and external metrics that can be used for the
project. The cost estimate basis is a “live” document and should be
updated periodically when either the benchmarking metrics are
updated and/or additional benchmarks/metrics that support the
development of the project definition become available.
When defining/setting the cost metrics, the Cost Estimator should
consider the impact of both the technical scope and location on the
cost metric. For instance, a remote project location may result in
selecting a metric value above the mid-point cost metric. Figure 5
identifies the categories that should be considered. The Cost Estimator
should assess the impact and agree with the Manager – Global Cost
Estimating Team the cost metric that should be used in the cost
estimating process for the project.

Categories Questions to Address Considerations for Mid Point Metric Adjustments
Is the development concept HP / HT Subsea cost impact.

Fluid Properties or normal pressure / Sweet / Sour Flowline / Pipeline Metallurgy
Fluids? Facilities considerations – Topside Weights
Is the development concept at the Facilities Weight – Transportation Barge

Technical Limits
technical limits? Water Depth – Pipe lay vessel impact
Is the technology proven / new /

Technology FLNG / GTL / HPHT
enabling?FLNG / GTL / HPHT
What supporting infrastructure is

necessary ? OwnerŐ s Costs / Shore Base
Geographic Location Location to land mass and / or Logistical issues – Helicopters / Supply Boats
habitation? Enabling Works
High Cost Location? Remote Arctic?
New country to BP? Will facilities

Affiliate buildings, housing, shore bases, warehouses, yards, boats,
Country be CAPEX or OPEX including
logistics
leases?
What are the regulatory

Local Content Impact on cost and schedule metrics
requirements for Local Content?
Regulatory and Host Host country regulations may drive Regulated projects (such as US FERC) may have a major multi-
Government differing execution requirements? million-dollar EIA/EIS requirement.
International Internationally financed projects

Does the Cost estimate address capture activity, staff, and any
Financing (US EXIM, have a commercial agreements and
third-party consultants or Lender requirements?
others) additional requirements
Is there space on the platform/site

to accommodate new equipment?
Brownfield Are there spare utility supply and Impact on cost and schedule benchmarks
infrastructure that the project can
utilize?
Figure 5 - Conceptual cost estimating - considerations
For projects in the Optimize or Define stages, this initial cost estimate
basis should confirm that the cost estimating scope and methodology
is clearly identified along with the responsible cost estimating party.
Figure 6 demonstrates an example of the layers of responsibility for
Define stage cost estimating. The Cost Estimator should confirm that
all contractor cost estimating is clearly identified and included in the
cost estimate basis. If the project updates the work scope and PEP, the
Cost Estimator should check the cost estimate plan and initial cost
estimate basis to confirm they align with the project. The Cost
Estimating Community of Practice SharePoint site contains guidance
that the Cost Estimator may provide to the contractor prior to the
contractor developing its cost estimate.

Project EPC Facilities Cost
EPMS Contractor(s)
Contractor Cost
Estimate & BP
Facilities Cost Estimate In House Subcontractor(s)
Cost Estimate
Quote / Bid / Tender EPMS Conditioning
EPMS
BP Conditioning Allowances
Figure 6 - Base cost build-up in Define stage - example
The recommended cost estimating work for initiating the cost estimate
basis is shown in Figure 7.
6.1 Concept
Pre GPO Optimize DEFINE
Initiate the Cost Development
Cost Estimate Stage Stage
Estimate Basis Stage
Concept
End of Stage FM Optimize FM DEFINE FM EXECUTE FM
Development FM
Confirm scope work Confirm scope work Confirm scope work Confirm scope work
Identify cost unit breakdown alignment breakdown alignment breakdown alignment breakdown alignment
rates & metrics with unit rates & with unit rates & with unit rates & with unit rates &
metrics available metrics available metrics available metrics available
Review the Review the

Basis considerations in Table considerations in Table
Considerations 2 for potential 2 for potential
(Table 2) adjustments to metric adjustments to metric
mid-point mid-point
EPMS/EPC to convert EPMS/EPC to convert

EPMS/EPC cost EPMS/EPC cost
estimate plan into a live estimate plan into a live
cost estimate basis cost estimate basis
EPMS/EPC EPMS/EPC may
document; updates document; updates
provide some support
Estimate Basis made as new work made as new work
to BP in this stage.
(scope & scope, execution, scope, execution,
Reference the BP cost
methodology) schedule, estimating schedule, estimating
estimate basis.
methodology and methodology and
responsibility responsibility
information becomes information becomes
available. available.
Convert BP overall cost Convert BP overall cost

estimate plan into a live estimate plan into a live
Convert cost estimate cost estimate basis cost estimate basis
plan into a live cost document; updates document; updates
estimate basis made as new BP made as new BP
Convert cost estimate
BP Estimate document that is executed work scope, executed work scope,
plan into preliminary
Basis updated as new execution, schedule, execution, schedule,
cost estimate basis
benchmarking or work estimating estimating
scope information methodology and methodology and
becomes available responsibility responsibility
information becomes information becomes
available. available.
Figure 7 - Initiate cost estimate basis by MPcp stage

5.2 Develop the base cost estimate

The base cost estimate is based on items which can be directly
measured or are otherwise directly driven by the defined scope and
PEP at a given cost basis date. The base cost estimate typically
comprises the engineering, procurement, fabrication, installation or
construction, hook-up and commissioning costs of the project. These
inputs should be identified in the cost estimate plan. The cost estimate
plan and subsequent cost estimate basis should align with the MPcp
project deliverables for the MPcp stage. Figure 8 demonstrates the
recommended cost estimating work for the development of the base
cost estimate by MPcp stage.

6.2
Concept
Develop the Pre GPO Optimize DEFINE
Development
Base Cost Cost Estimate Stage Stage
Stage
Estimate
Concept
Development FM
 EPMS/EPC
methodology of
detailed unit cost
with forced
detailed material
takeoff.
EPMS/EPC may  Quotes and bids
EPMS/EPC
provide some support may be used for
methodology of semi-
EPMS/EPC to BP in this stage significant work
detailed unit costs or
through unit rates and/ scopes.
factor costs.
or metrics.  Engineering and
construction
overhead and
support resources
should be detailed
and aligned to the
project schedule.
 Based on schedule
of deliverables with
an associated
resource plan.
 Typically comprised
 Typical base cost
of pre-FEED
components of the
engineering and BP
Define stage
PMT (OwnerŐ s
include the
Next MPcp Typically comprised of cost).
milestone
stage cost BP PMT and any  Projects may
payments for long
estimate (Class 2 identified conceptual perform brownfield
lead items,
quality) engineering studies. surveys, Subsea
engineering
surveys, and
studies, FEED
enabling work
design,
scope in the next
constructability
stage.
surveys, and
enabling work
scope in the next
stage.
 Primarily EPMS/
 Primarily EPMS/
EPC developed.
Subsequent EPC developed.
 GPO estimated
stages estimate  Calculated using unit rates and metrics.  GPO estimated
scope may include
(ensuring no  Extraordinary scope (reference Table 2) scope may include
outside of project metrics should be enabling works and
enabling works and
double dip with other infrastructure
addressed through metric adjustments or other infrastructure
next MPcp stage scope allowances. which is estimated
which is estimated
cost) using quotes and
using analogs and
other detailed
scope allowances.
methods.
Figure 8 - Develop the base cost estimate
5.2.1 Concept development

The Cost Estimator should develop the cost estimate by estimating
each work breakdown element using the appropriate cost unit rates
and/or metrics from the initial cost estimate basis. The cost estimate
should identify as a minimum the technical quantity, unit of measure,
cost metric, total cost and a narrative for each of the line items,
identifying the technical scope and cost basis. The cost estimate
should consider the planned contracting strategy. The standard GPO

cost estimate templates shown in Section 1 should be used to

document the facilities project cost estimate.
Conceptual cost estimating is built-up based on conceptual technical
quantities and typical high-level benchmarks are applied as, for
example:
FPSO Facilities cost unit rates methodology (example)
 Topsides are estimated by USD/tonne (net dry installed)
 Hull is estimated by USD/tonne or KBD (lightship weight)
 Moorings are estimated by USD/metres of water depth
 Subsea production systems are estimated by USD/well
 Flowlines and Risers are estimating by USD/inch km
 Umbilicals are estimated by USD/km
5.2.2 Optimize and Define stages

The base cost estimates for the Optimize and Define stages are
typically developed by an EPMS/EPC or other specialty contractor. The
Cost Estimating Community of Practice SharePoint site contains
additional guidance on EPMS/EPC contractor cost estimates.
BP may condition an EPMS/EPC or bid or cost estimates. Final
determination of the conditioning should be made during the cost
estimate verification process. The Cost Estimator should categorize the
costs as contracted, bid, or estimated so that the PMT can develop a
sense of how firm the base cost estimate is.
Brownfield projects typically have further scope definition concerning
the interfaces with the existing asset. Project implementation of the
GPO Construction Practice (GPO-CM-PRO-00001) along with the PEP
should address execution interfaces that should to be incorporated
into the project cost estimate. Annex N provides guidance on
brownfield projects.
On projects where an EPMS/EPC is not engaged, the cost estimate plan
should detail the additional work activities for the Cost Estimator(s) to
perform for the MPcp stage.
As described in the GPO Cost Estimating Procedure (GPO-PC-PRO-
00007) Requirement 5.6.3(e) and as shown in Figure 4, the Cost
Estimator engages the cost estimating independent verification team
at intervals throughout the estimate development as agreed in the
Project Verification Plan.
5.3 Assess allowances

Allowances are provision for elements which while not directly
measurable are expected as typical for the performance of the scope.
These may provide for items that remain to be defined, or factors
which are not engineered, but expected to impact cost. Typical
Allowances in Optimize and Define stage include:
 Design Development
 Technical allowances

 MTO allowances
 Cut and Waste
 Normal Rework
 Normal Levels of Claims and Extras
 Normal Growth on POs and contracts
 Contractor’s risk premium (dependent on terms and
conditions)
 Normal Weather Down-Time
 Risk items with probability >50%
Annex A provides further guidance on the application of allowances.
The Cost Estimator should confirm that all allowances can be justified
and are included with the appropriate scope of work estimate. Figure 9
demonstrates the recommended cost estimating work for assessing
the allowances by MPcp stage.
6.3 Concept
Assess Development
Allowances Stage
Concept
Development FM
EPMS/EPC Consult Annex A
Apply allowance
Next MPcp
percentage only to the
stage cost
Typically none base cost scope that is
estimate (Class 2
completed in the
quality)
DEFINE stage
Subsequent
stages estimate  BP may condition the EPM S/ EPC cost
(ensuring no estimate gaps – Consult Annex A. Risk items
 Typically, only risk items
double dip with should be an estimate based on analogues
next MPcp stage or other available information
cost)
Figure 9 - Allowance application

5.4 Develop owner’s cost

The types of project elements that fall under owner’s costs vary in
relation to project scope, size, location, etc. The PEP identifies scope
that should be included in the development of the owner’s cost
estimate. The Cost Estimator should use the owner’s cost checklist
found in Annex S as a basis for estimating owners costs. Owners cost
should include:
 PMT and support costs. The project team should develop
staffing plans with charge rates that are used to develop the PMT
cost estimate in the Optimize and Define stages. The Cost
Estimator along with the PCM should consult the Benchmarking
Procedure (GPO-PC-PRO-00031) on the PMT cost definitions and
cost categories for staff and other office costs and also work with
Finance when determining what Expatriate position’s monthly costs
are expected for internationally assigned team members (staff and
agency team members).
 Security and logistics. The PEP should identify personnel,
fabrication, construction, and security infrastructure requirements.
The Cost Estimator should use judgment in determining the
estimating methodology for Security and Logistics Costs. Methods
used should include resource build-up, vendor quotes, previous
project costs, project team calculations and allowances.
 Commissioning and start-up costs. The project
commissioning and start-up plans should include scope for
chemicals, commissioning equipment and consumables, vendor
representatives, and contractor support. The BP commissioning and
start-up staff costs should be included with the PMT cost.
 Surveys, studies, and other. The cost estimate plan
should identify any greenfield or brownfield field surveys and
contractor studies planned to support the engineering and/or
construction MPcp stage deliverables. Additionally, the cost
estimate plan should identify land acquisition, social projects,
capital and commissioning spares, surplus disposal, taxes and
FOREX. The Cost Estimator should use judgment in determining
the estimating methodology for other owner’s costs. Methods that
may be used include vendor quotes, previous project costs, project
team calculations, and allowances.
Cost estimates that have non-USD economic currencies should follow
GIAAP’s guidance and the agreed hedging strategy endorsed by
Finance and Treasury. The cost estimate plan should identify whether
FOREX loss/gain should be included in the estimate (as agreed with
Finance). For projects that require Co-owner final investment decision
approvals or NOC contract award approvals, the Cost Estimator should
have a discussion with the PCM and others to understand if carrying
costs should be included in the Define Stage estimate and Execute FM.
Figure 10 demonstrates the recommended cost estimating work for
assessing the Owners cost by MPcp stage.

6.4 Concept
Assess Owners Development
Cost Stage
Concept
Development FM
Detailed PMT and

Next MPcp office costs. FEED
PMT costs calculated per project staff plan. If
stage cost based on contractor
applicable, Other OwnerŐs cost based on analog
estimate (Class 2 proposal. Other
projects or quotes.
quality) OwnerŐ s cost based on
scope details
Subsequent
stages estimate
Detailed PMT cost. Remaining OwnerŐ s Cost
(ensuring no Calculated as a percentage of the base cost
items calculated based on quality of information
double dip with based on analog projects.
available from PEP and other project documents.
next MPcp stage
cost)
Figure 10 - Assess owner’s cost
6 Phase cost estimate and apply escalation
Once the cost estimate is consolidated in the standard GPO template, the
objective of this step should be to provide the application of phasing and
escalation in each MPcp stage.
6.1 Cost estimate consolidation

The overall project cost estimate should be consolidated using the
standard GPO cost estimate templates shown in Section 1. As a part of
the cost estimate plan, the Cost Estimator, in conjunction with the
PCM, should agree with Finance (typically Planning and Commercial
Operations) the phasing and escalation components to support FM
economics, Business Planning Elements (BPEs), Co-owner reporting,
and any regulatory reporting requirements. All cost should be
converted to USD using Group Economic planning assumption
exchange rates.
The cost estimate detailed calculation sheets should be consolidated
into the standard template workbook for completeness of the cost
estimate. The GPO cost estimate template should integrate capital and
expense for GPO, GOO and GWO. Once the Cost Estimator receives the
GWO and GOO estimates, the Cost Estimator should confirm that the
components align with the cost estimate plan and should incorporate
the GWO/GOO estimates with the facilities project cost estimate.
6.2 Phasing
The phasing of the GPO cost estimate is developed from the project
integrated schedule (Concept Development) or Master Control
Schedule (MCS) Level 1 (Optimize and Define). GWO and GOO should
provide their cost phasing, reflecting the GWO and GOO components

of the project development schedule. The Cost Estimator should work

with the PCM to align the phasing with the BPEs and associated
phasing frequency (quarterly, monthly) for the project.
Co-owner and government approvals should be obtained prior to the
project being sanctioned. The Define stage costs should include an
allowance to cover for time taken to get approvals. This allowance
may include a several-month provision for the BP PMT and contractors’
project teams as well as anticipated expenditures on purchased
equipment and materials.
All assumptions and clarifications on phasing should be documented in
the project cost estimate basis to support cost engineering trending.
6.3 Escalation
During the cost estimate development process, the cost estimate is
compiled utilizing rates and quotations with varying cost base dates
and validity. The calculation of the “Real Terms” cost estimate may be
a composite of historical rates and current market sourced data. To
reflect the cost of the project at completion, the cost estimate should
be adjusted for anticipated escalation over time using BP
PSCM/Bluebook inflation rates in conformance with GIAAPS and EEM.
The escalation adjusted estimate is termed a Money of the Day
(MoD) cost estimate. Figure 11 and Figure 12 show the
recommended application of escalation rates for cost estimates.
Reference to
Inflation/Escalation Rate to be Used
Date of Cost Estimate
(Awarded Purchase Orders and Contracts excluded)
Preparation
Prior time period Consult GPO Benchmarking team
– years PSCM rates from Guidance (as applicable)
– years Blue Book rate by economic currency
> 12 years US $ Blue Book rates
Figure 11 - Application of inflation and escalation rates
The escalation data source, any adjustments and associated

justification for the adjustments on escalation published rates/phasing
should be documented in the project cost estimate basis to support
cost engineering trending of escalation impacts on the project.

Time of Cost Estimate Anticipated time of Anticipated Services

Preparation PO / Contract Award Contract Period
Specific PO /
Contract award
Service Contract
őmetric
normalization dateŒ
Budget Price
őtime of
informationŒ
Historical Escalation Forward Escalation (Future)
Historical escalation, bringing costs to the current estimate base date
Future escalation, bringing costs to the anticipated time of PO/contract award
Future escalation, taking service and Lump Sum contracts (not POs) through the anticipated period of the contract
Figure 12 - Application of cost escalation example
6.3.1 Escalation for Concept Development and Optimize cost

estimates
All conceptual cost estimates should be escalated as described in
Figure 11. Utilize current PSCM guidance by project type and location
in conformance with Upstream segment guidance. PSCM Market
Intelligence should be contacted for guidance on new regions or
countries.
If any long lead equipment has been purchased, then escalation
should not be included unless the purchase order (PO) has provisions
for escalation based on indices or other terms that would escalate the
price beyond the value of the purchase order.
6.3.2 Escalation for estimates for Define and Execute cost estimates
When estimating escalation, it is recommended to escalate quarterly
for the first two years in alignment with the BPE business planning
cycle, then annually after that throughout the project life using Figure
11 as applicable. Utilize current PSCM guidance by project type and
location, for new regions or countries contact Market Intelligence.
6.3.3 Escalation guidance for work type

 Awarded firm contract (fixed price) - do not escalate unless
the contract has provisions for escalation (i.e., escalation formula,
tied to a material or labor index) or a foreign currency rate of
exchange.
 Labor - escalate from cost basis (if not current year) for the
full duration of the labor schedule. For projects that have union
agreements or other contractual adjustment formula, the Cost
Estimator should understand the agreements, when they are re-
negotiated, how long they last, and what the historical increases

have been in the last two re-negotiations (are the union

agreements indexed?).
 Equipment and bulks - if not awarded, escalate from the cost
basis (if not current year) to the full duration of the schedule to the
award date. For equipment, the vendor typically orders materials
and allocates the production schedule upon award which minimizes
future escalation exposure.
 Construction - escalate from current year annually for the
full duration of the construction schedule. Where contracts have
adjustment formulas, the Cost Estimator should understand and
model the application of these.
 Lump sum contracts - The Cost Estimator should confirm
that the bid includes escalation. It is appropriate to consider the
original contract’s duration (Example 2 years from award to
completion) and the estimate duration (Example 3 years).
Assuming all other characteristics are the same, it may be
reasonable to add further escalation to recognize the different
timeline.
 Reimbursable to lump sum contract conversion - Estimates
for items (work hours and procurement) that are planned to
become part of a lump-sum should be escalated as stated above.
When estimating a lump-sum, contractors risk premium should be
addressed through a specific allowance.
7 Quality check the cost estimate
Prior to the estimate being brought forward to the project team for review,
the Cost Estimator should be responsible for quality checking the cost
estimate to confirm there are no major calculation errors or alignment
issues with scope or execution.
The Cost Estimator should discuss the results of the quality check with the
Manager - Global Cost Estimating Team prior to full project team review of
the cost estimate.
7.1 Document the cost estimate basis

During the cost development phase, the original cost estimate plan is
converted into an initial cost estimate basis. During the MPcp stage,
the initial cost estimate basis should be updated into a more detailed
preliminary cost estimate basis document. Once the preliminary cost
estimate is developed, the responsible Cost Estimator(s) should
confirm its preliminary cost estimate basis is up to date. The Cost
Estimator should consolidate all preliminary cost estimate basis
documents into the overall preliminary project cost estimate basis.
The Cost Estimator should review all contractor cost estimate basis
documents to confirm all assumptions align with project plans and that
noted exclusions have either been estimated by the BP Cost Estimator
or agreed with the project team to be excluded from the project.
Best practice examples can be found on the Cost Estimating
Community of Practice SharePoint site.

7.2 Cost estimate metrics and norms check

Using the metrics and norms supplied by the benchmarking team, the
Cost Estimator should identify significant outlier metric data points and
develop an initial explanation of the reasons for being an outlier. The
Cost Estimator should challenge outlier metrics for appropriate
application or further review by the Manager - Global Cost Estimating
Team and project team. All metrics and norms used to check the cost
estimate should be recorded to support project team review.
Additionally, the Cost Estimator should check all calculations in the
cost estimate.
Using these metrics and norms, the Cost Estimator may determine to
apply conditioning to the EPMS/EPC or specialty contractor’s estimate
for gaps. These conditioning elements should be documented in the
cost estimate basis. If the base cost estimate does not align with the
contracting strategy (direct hire estimate when the construction is
subcontracted) then contract risk conditioning should be added
considering the country and location factors applicable. Finalization of
contractor and bid conditioning should be done in agreement with the
project team during the cost estimate verification process.
Figure 13 demonstrates the recommended cost estimating work for
summing the estimate for each MPcp stage.
8.2 Check Concept

Metrics and Development
Norms Stage
Concept
Development FM
 Formula and math check estimate

EPMS  Request EPMS contractor to provide
sanitized analog benchmarks
Next MPcp
stage cost  Formula and math check estimate
estimate (Class 2  Compare to BP internal metrics
quality)
Subsequent
stages estimate
(ensuring no  Formula and math check estimate
double dip with  compare to applicable internal and external metrics for concept type
next MPcp stage
cost)
Figure 13 - Check metrics and norms

8 Update cost estimate
Once the Cost Estimator has performed the quality check of the cost
estimate, identified corrections should be implemented by the contractor
and/or the Cost Estimator prior to full project team review. The Manager -
Global Cost Estimating Team or designee should confirm that all corrections
have been implemented.
9 Evaluate preliminary UAP and AUAP
UAP is a provision that is the difference between the base cost estimate
plus allowances plus owner’s cost-plus escalation, and the Performance
Target (PT). PT represents the mean cost anticipated when considering
uncertainty effect and risk on the project cost.
UAP provides for average outcome results for:
 Design completion uncertainty

 Market pricing uncertainty
 Rework and productivity uncertainty
 Weather uncertainty
 Estimating methodology uncertainty/accuracy
 Schedule duration uncertainty
 Exchange rate uncertainty (where considered)
 Uncertainty on cost impact of risk events and allowances
UAP is an integral part of the cost estimate covering items and costs that
cannot be defined at the time a cost estimate is produced. For all cost
estimates, the level of unallocated provision is assessed, based upon the
level of definition or detail available, market and historical data, local
knowledge and status of contract award.
AUAP is an allowance that is the difference between the Performance Target

cost estimate and the Not to Exceed (NTE) cost. Additional UAP is
determined either by judgment or probabilistically after considering the
probable impact of the identified threats and opportunities against the
Performance Target (PT). UAP and AUAP do not cover Group Level risks. The
Cost Estimator, working with the project team, should develop the
preliminary AUAP.
The UAP Development and Management Guide (GPO-PC-GLN-00014)

provides guidance for UAP and AUAP development. The UAP and AUAP
should be reviewed by the Manager - Global Cost Estimating Team prior to
project team review. The UAP and AUAP should be independently verified
through the cost estimate independent verification process in conformance
with the GPO Cost Estimating Procedure (GPO-PC-PRO-00007).
9.1 Deterministic UAP and AUAP development

Cost estimates that are in Pre-GPO and in Concept Development
should use a deterministic method to calculate UAP and AUAP. The

deterministic assessment should be informed by discussion with

project team using a standard set of criteria to assess and record the
uncertainty and risks associated with the project. An Excel framework
is available to the Cost Estimator through the Cost Estimating
Community of Practice SharePoint site.
The Cost Estimator, working with the project team, should develop the
preliminary UAP. The UAP Development and Management Guide (GPO-
PC-GLN-00014) provides further guidance for deterministic UAP
development.
9.2 Probabilistic UAP and AUAP development

Cost estimates that are in Optimize and Define should use a
probabilistic method to calculate UAP and AUAP. The probabilistic
assessment should be developed in conjunction with the project team
through a three-point analysis and identification of event risk. As a
part of the probabilistic assessment, the results from the schedule risk
analysis should be incorporated. This should be the basis and input to
the cost risk analysis models. The resulting cost risk analysis output
may be commercially sensitive information and should be shared only
as agreed with BP Legal and should be limited to the input information
feeding into a BP cost risk analysis rather than the UAP decision
outcome. UAP related information should not be shared with
contracting companies.
The Cost Estimator should develop the preliminary UAP and AUAP. The
UAP Development and Management Guide (GPO-PC-GLN-00014)
provides guidance for probabilistic UAP development.
9.3 Sense testing UAP and AUAP

Project teams may be biased when self-assessing project risks and
impacts in the occurrence probability, value of the impact and
severity. The Cost Estimator should question and test the probabilities
to confirm a robust discussion takes place. The Cost Estimator should
also have an agreed and aligned view with the Project Team on the
magnitude of the cost impact of the risk events. The Cost Estimator
should review the deterministic or cost risk assessment with the
Manager - Global Cost Estimating Team.
After the initial UAP development process, there should be a sense
testing by looking at the risk events and understand how many are
covered by the UAP and discuss with the PCM and Project Leader.
Other checks should include testing whether the key drivers of UAP are
as expected. It may be appropriate to examine sensitivities and test
the behavior of the model.
10 Mid stage cost estimating and trending
Often projects request intermittent estimating support in between stage

gates. During Concept Development there may be multiple options that
Engineering and Cost Estimating wish to evaluate for the best solution at
the greatest economic value. Often only the direct facilities’ costs are
estimated to compare cases, then during concept narrowing, the options
reduce to a few options. These options are often fully cost estimated paying

close attention to execution differences that may yield the best value
concept. The Cost Estimator should confirm with the project team if full
lifecycle costs have been provided for any mid-stage estimate.
Intermittent requests should be identified and agreed in the cost estimate

plan. If the project team has a new request, the Cost Estimator should
follow the cost estimate planning process to agree the scope, timing, and
deliverables. Significant new cost estimating work scope should be agreed
with the Manager - Global Cost Estimating Team prior to the initiation of the
work.
During the Optimize and Define stages, the Cost Estimator should support
the Project Leader and PCM through trending and updating the previous
stage approved cost estimate as described in the Trending and
Reconciliation Guide (GPO-PC-GLN-00015). The PCM, Manager - Global Cost
Estimating Team, and Cost Estimator should agree on the inputs and
outputs for cost estimates to support the trending process and record the
agreement in an updated cost estimate plan.
The project team should recognize that cost estimates prepared mid phase
are not usually of the same quality as those developed for the final end-of
phase cost estimate(s). Mid phase cost estimates may often employ the
methodologies employed for the previous MPcp stage’s final cost estimate.
Also, the mid stage cost estimates typically do not undergo a
comprehensive verification review.
11 Interfaces
The Cost Estimator should be the overall project cost estimate integrator.
As the Cost Estimator works through the cost estimate development
process, the Cost Estimator should interface with the extended project
team. The RAPID chart in Figure 14 depicts the recommended interfaces
and decision rights of the cost estimate development process.

Decommissioning Leader
General Manager (AGM )
GOO Operations Leader

GCD Pre GPO Appraisal
Development M anager/
Discipline Leads (when

Manager – Global Cost
GWO Drilling Leader/

(Optimize & DEFINE)
GPO Benchmarking
Delivery Manager
EPMS Contractor
GCD/ PCTL/ PCM
Estimating Team
Cost estimator
Project Leader
assigned)
Finance
PSCM
Step Activities
6.1 Initiate cost estimate
P/R A D P* I I
basis
6.0 6.2 Develop the Base Cost
P/R A D P* I I
Estimate Cost by Estimate
Appropriate MPcp 6.3 Assess Project
stage and WBS P/R A D I I
Allowances
6.4 Assess Owners Cost P/R A D I I I
7.0 7.1 Phasing P/R D I* I I

Phase Cost
Estimate & Apply
Escalation 7.2 Escalation P R D I
8.1 Document Cost Estimate

8.0 P/R D I
Basis
Quality Check Cost
Estimate 8.2 Check Metrics and Norms P/R D I
9.0
9.0 Correct Cost Estimate P/R D I
Update Cost Est
10.0 10.1 Deterministic UAP P A R D I I I I I

Evaluate Preliminary
UAP (Note 1) 10.2 Probabilistic UAP P A R D I I I I I
11.0 11.0 Mid Stage Cost

P/R A R D I*
Mid Stage Cost Estimating
Estimate and
Trending 11.0 Cost Estimate Trending P A R D I I* I I I I
R – Recommend / A – Agree / P - Perform / I - Input / D – Decide

* EPMS contractor involvement only when contracted to project.
** In conformance with MPcp V5 Requirement 5.4.68 őThe PCM shall propose the level of UAP, AUAP and duration contingency
based on a probabilistic risk analysis to be reviewed by the Project Leader and PLT and endorsed by the relevant VP Projects.Œ
Figure 14 - Preliminary cost estimate development activities
12 Deliverables
In conformance with the GPO Cost Estimating Procedure (GPO-PC-PRO-

00007) Section 5.6.3e, “During the Cost Estimate Development Phase, the
Cost Estimator shall deliver:
1. Intermediate independent verification check-ins as agreed in

the Project Verification Plan; and
2. Cost estimate trends against the previous MPcp stage cost
estimate in line with the Trending and Reconciliation Guide (GPO-PC-
GLN-00015).”
In conformance with the GPO Cost Estimating Procedure (GPO-PC-PRO-
00007) Section 5.6.3f, “At the conclusion of the cost estimate development
phase, the Cost Estimator shall deliver:
1. A preliminary cost estimate in conformance with the cost

estimating procedure for:
a) Life of project cost and
b) Next stage project cost estimate as applicable;
3. A preliminary cost estimate basis; and

4. Preliminary UAP recommendation developed in conformance

with the UAP Development and Management Guide (GPO-PC-GLN-
00014) methodology for the project stage.”

Annex A - Allowances
Cost estimates are predictions of future events, therefore at the time that a
cost estimate is developed there may be items that even the best possible
project definition does not identify, but that are historically known to have
occurred. These predictable, but indefinable, costs should be included
within the body of the cost estimate as allowances. Whichever allowances
are applied, it is important to record the rationale for their application. This
forms an important part of cost estimate validation.
Allowances should not be confused with UAP. Allowances are added to the
body of the cost estimate to cover things such as wastage, growth and
refinement which historically occur over a project’s lifecycle. UAP is added
to cover the effect of uncertainty and risk events which may be related to a
project, a part of that UAP may result from an assessment that allowance
levels considered within a cost estimate might either not be expended or
might be insufficient to address poor outcome. Both UAP and allowances
tend to reduce as designs mature.
As depicted in Figure A 1, allowances are a component of the Project Cost

Estimate.
Not To Exceed Additional Unallocated Provision (AUAP) Excluded from Not To

Target Provision addresses the difference between Performance Target (PT) and Not to Exceed Exceed (NTE)
(NTE) (NTE) cost (typically P90 in probabilistic assessments). This cost will be determined by a  Force majeure
collaborative assessment having taken into account the expected cost and the impact of the  Major changes
risks that have been assessed. AUAP provides for high end outcome results (typically P90)  Political upheaval
for the factors Identified and described in UAP, with particular emphasis on risk events.  Major location change
Where events have been specifically excluded from the analysis, the AUAP will not allow for  Major legislation change
those items.  Major industrial dispute
 Bankruptcy of a major
Performance Unallocated Provision (UAP) contractor
Target Provision is the difference between the Base Cost Estimate cost and the Performance Target  Natural disasters
(PT) (PT). PT represents the average cost anticipated when considering the effect of uncertainties
and risk on the project cost. UAP provides for average outcome results for:
 Design completion uncertainty
 Market pricing uncertainty
 Rework & productivity uncertainty
 Weather uncertainty
 Estimating methodology uncertainty/accuracy
 Schedule duration uncertainty
 Exchange rate uncertainty(where considered)
 Uncertainty on cost impact of risk events and allowances
Risk items with probability >50% should be included in the project cost estimate
Project Cost Base Cost Estimate Allowances

Estimate Those items which can be directly Provision for elements which while not
measured, or are otherwise directly driven directly measurable are expected as typical
by the defined scope and PEP. At a given for the performance of the scope.
cost basis date These may provide for items that remain to
 Scope (SoR) be defined, or factors which are not
 Design Basis (BoD) engineered, but expected to impact cost.
 Schedule (MCS) Typical Allowances
 Execution Plans (PEP)  Design Development
 Present – Market Pricing/Conditions  Technical allowances
 Current Legislation & Regulation  MTO allowances
 Equipment specifications  Cut and Waste
 Material Take-Offs  Normal Levels of Claims & Extras
 Duties & Taxes  Normal Growth on POŐs and contracts
 Office costs  Normal Weather Down-Time
 Temporary services Risk items with probability >50%
 Exchange Rate Basis
 Location & Labor Productivity Factors
 Forward Escalation
 Late Project Updates
Figure A 1 - Detail of the cost estimate components

Annex B Weight allowance

Weight allowances may often be added by engineering. As such,
before applying weight allowance, the Cost Estimator should align the
weight definition and application with Engineering. In early project
phases, this may be the GCD Project Development Engineer.
The weights that are presented in an engineering contractor’s weight
report are net and gross weight. The net weight is developed by the
contractor’s discipline engineers. This is developed by several means
depending on the MPcp stage. Figure A 2 below provides an overview
of the typical method of estimating the weight of a facility.
MPcp Stages Typical Net Weight Basis
Volumetric Scaling / Scaling from previous projects / as a percentage of equipment

Concept Development
weight
Volumetric Scaling / Scaling from previous projects / as a percentage of equipment

Optimize
weight and / or Preliminary Material Take Off
DEFINE Preliminary Material Take Off
EXECUTE Material Take Off
Figure A 2 - Weight assessment methods
Weight allowances tend to reduce as project definition increases. This

reflects the improved reliability of the scope definition as engineering,
and later, vendor information is developed in the technical definition.
Weight
Allowance Gross Weight
Net Weight
Concept
Optimize DEFINE EXECUTE
Development
Figure A 3 - Weight allowances

Annex C Equipment development allowance

The equipment development allowance is an adjustment to the
estimated tagged items to provide for nominal and routine changes in
design. The equipment development allowance may be included in the
detail of the cost estimate and is considered as part of the project cost
estimate. The magnitude of the equipment development allowance is
a function of the amount of design information available to the Cost
Estimator and it decreases as the maturity of the estimate increases. It
is anticipated that all the equipment development allowances are
expended during the project.
An example of equipment development would be an allowance for
nozzle and clip changes on fabricated vessels.
Historical Data
Equipment Estimated Budget Vendor Firm Vendor
Equipment Cost
Account Equipment Costs Quotations Quotation
Curves
Equipment
Development No No Yes Yes
Allowance
Figure A 4 - Onshore/offshore application of the equipment

development allowance
Annex D Material take-off allowance

An allowance may be added recognizing the MTO state of
completeness in relation to the current design basis and the current
stage of design. This may cover things like field run piping or other
items that may not be explicitly identified on drawings, or otherwise
provide for levels of detail beyond that which is covered by the current
MTO.
This allowance may be applied to material quantities and should also
be reflected in related fabrication and installation accounts.
Annex E Cut and waste allowance

The cut and waste allowance is intended to cover the additional bulk
material that is procured to compensate for over-buying requirements
for items. (For example: where 5 meters of pipe are called for, there is
typically a cut and waste arising from the typical procurement of pipe
in 6m lengths. The cut 1m of pipe may easily end up as waste).
This allowance may be applied to procured materials and may be
reflected in (but should not be reflected in) fabrication and installation
accounts.
Annex F Design development allowance

Design development allowance is an allowance to address the growth
in design that history shows may likely occur between estimate
production and the final POs/contracts. This typically covers equipment
and material adjustments that occur through the normal evolution of
engineering, from initial diagrams, layouts and specifications to final
(IFC) design. For example, changes in layout/orientation, etc. Design

development is not intended to cover basis of design or other such

significant scope changes.
This allowance applies to both purchased material and labor to
install/construct. It may be added either at component level or as a
line item in the estimate summary.
Annex G Bid development

Bid development allowances (also referred to as conditioning) should
be added to bridge the gap in cost between a vendor’s initial bid for a
contract or procurement package and the expected final outturn cost
incurred by the project.
Regular contact with the project PSCM lead is prudent as they may be
able to provide guidance on a vendor’s historical track record in terms
of first quotation accuracy, typical late additions and performance
which may inform a decision on bid development.
This allowance may be added to market pricing within the estimate
based on technical and commercial bid evaluations, the experience of
Cost Estimators and discussions with PSCM.
Annex H Rework allowance

The rework allowance covers the likely occurrence of rework in the
fabrication yard or construction site, such as dismantling and re-
routing of pipe due to field interferences. Where quality of work issues
are known to exist, this may influence the assessment of this
allowance.
This allowance may normally be applied at a summary level which
may be differentiated by work area.
Annex I Claims and extras allowance

This allowance is applied to the labor element of a construction
subcontract to cover for claims and extra field instructions between
the BP/EPMS contractor PMT and the main works contractor and their
subcontractors that typically occur during the construction phase of
the project.
This allowance may normally be applied at a summary level which
may be differentiated by work area.
Annex J Waiting on weather

Waiting on Weather (WoW) is an important allowance within an
estimate containing offshore or subsea scope. Waiting on weather
addresses normal levels of delay to the marine installation campaigns
due to inclement weather conditions.
Communication with both the marine engineers and project planners is
key in capturing this allowance as accurately as possible.
This allowance is typically added to the marine installation schedule by
the marine engineer or planner but if not, may be added by Cost
Estimator to the prescribed amount of days per activity, per vessel,
within the body of the estimate.

Annex K SIMOPs/activity allowance

In circumstances where activities may be interrupted due to other
activities such as drilling activity, vessel movements or operations
activities, it may be appropriate to make allowance for an anticipated
level of disruption. As any allowance of this kind tends to be highly
specific to the circumstances of the project, recording the rationale for
the allowance should be of importance.
Annex L Brownfield allowances

Discussed in Annex N.
Annex M EPMS estimates

Being aware of what allowances have been added by the design team
should also help to confirm completeness of the estimate. If an EPMS
contractor is providing the project cost estimate, it is the BP Cost
Estimator’s responsibility to confirm that appropriate allowances have
been added and to record this in the Basis of Estimate document.

Annex N - Brownfield projects

The requirements for brownfield cost estimates are generally higher than
greenfield. This is due to the necessity of defining the technical scope of
work and developing an execution plan that allows the project to be
planned with GOO and GWO and often executed in a limited time window.
The cost estimate planning stage for a brownfield project is key for success.
The engagement of the project team, especially the
Engineering/Construction and Operation representatives, provides the Cost
Estimator the ability to understand the level of deliverables to support the
cost estimate and meet MPcp requirements.
The Cost Estimator should thoroughly document the assumptions and

exclusions that underpin the cost estimate throughout the MPcp stage, and
these should be tested regularly with the project team to confirm
alignment.
Annex O Brownfield base cost estimate

For Concept Development cost estimates the application of an all-
inclusive cost per ton may be the prudent cost estimating method,
however alignment to MPcp requirements may mean that the level of
definition for the cost estimate indicates a different cost estimating
approach. It is recommended to consider MPcp requirements at the
cost estimating planning stage and agree with the PDM/Construction
Manager the data that is used to support the cost estimate
development.
For Optimize and Define stage cost estimates, the level of detail leads
the EPMS/EPC/other contractor Cost Estimator to use “First Principles”
techniques, in the cost estimating of the “work packs”. The Cost
Estimator should understand the EPMS contractor assumptions on
direct work hours generation, the indirect hour uplift and non-
productive time factors included in the cost estimate and the
assumptions that have been used in the man hour rate calculations to
confirm alignment.
The factors that should be considered are as follows:
 Pace of the Project – brownfield and “Fast Track” are not
synonymous
 GOO activity planning requirements
 GOO project personnel to support the construction phase
(Permitting)
 Field surveys
 Access to worksites (Demolition for access)
 Shutdown and purging requirements
 Hydrocarbon live or free facility
 PoB limits of the platform

 Accommodation of workforces (Flotel or existing accommodation

module)
 Hotel services costs (Laundry, Food, etc.)
 Logistics (personnel, equipment and materials)
 Lifting requirements (Deck cranes/HLV)
 Platform 500m zone lifting exclusion area - proximity to
platforms /architecture/moorings, lifting exclusion zones
 Laydown areas, access to work faces/sites and SIMOPs
 Confined and congested construction work-faces/site
 Preservation of equipment/systems
 “Hot Work” restrictions - habitat requirements
 Weather impacts
 The liquidation of the construction work hours during the
construction duration, (peak manning, number of shifts and
supervision)
Annex P Brownfield allowances

The allowances described in Annex A may apply for brownfield
projects; however, it is worth considering additional levels of
complexity which may apply as a result of:
 Undiscovered/unknown scope. It is very common for work in
existing facilities to uncover additional work above that which was
planned.
 Scope definition can be more complex than with greenfield
scopes. Maturity of tie-in locations, surveys to confirm facility
configuration and inspection to confirm condition of existing
infrastructure may all influence final outcome.
 Increased potential for rework in Engineering and
Construction as information emerges.
Annex Q Brownfield owner’s cost

When developing the Owner’s cost, the Cost Estimator should
thoroughly review the PEP and schedule to cost estimate, the
additional PMT necessary for turnarounds and additional planning
coordination with the asset. The Cost Estimator should review the
construction contractor management plans and cost estimates
thoroughly to confirm that any exclusions have been addressed either
through a request for the contractor to add or through the BP Owner’s
cost estimate.
Annex R Brownfield UAP considerations

When evaluating the project level UAP and AUAP, the Cost Estimator
should consider the following in the uncertainty and risk events
modelled in the deterministic or probabilistic tool:

 Emerging work scopes

 The variability around the assumptions on Direct Work
Hours/Indirect Uplift/Non-Productive Time/and the factors that could
affect the base assumptions
 Level of site verification informing the project scope
 GOO interfaces to support the planning and development phases
 Engineering definition to support the procurement schedule
 Engineering definition to support the construction schedule
 Work pack identification and generation
 Availability of work packs to support the construction schedule
 Offshore Construction workforce ramp up
 GOO workforce availability to support the permitting process
including other major GOO initiatives
 Shift working/crew changes

Annex S - Owner’s cost checklist

Owner’s costs consist of more than just a group of BP company personnel to
oversee a project’s development. While the methodology of arriving at a
value to address owner's costs may vary according to the development
phase of the project.
Annex T Established location or new country entry

Set-up of a new country presence is a complex and resource intensive
set of activities. While the costs of these tend not to be borne by a
single project, it remains that where a project requires new offices to
be set-up, this should be taken into consideration.
Projects should of course consider whether the main project scope
requires new support infrastructure.
Annex U Execution approach and owner’s costs

The execution approaches a project takes may have a significant
influence on the owner’s cost, with an arms-length Lump-Sum contract
approach having a different requirement for BP personnel than a
project following a more self-perform, direct contracting approach.
Annex V Items to consider

The check-list provided here, while not exclusive, may be of use for
those preparing estimates in preparation for EFM, and for the
development of owners’ cost estimates for the upcoming phase,
whether that be Optimize, Define or Execute.
Annex W Project Management team

The GPO Benchmarking team should be consulted for further
definitions.
 Project Directorate
 Commercial team
 Engineering and facilities team
 Services team
 Sub-surface team
 Wells team
 Contracts
Annex X Project support

 BP technical support including centralized GPO support and
allocations
 BP Legal support
 BP HSE support

 QA/QC inspection and certification

 IT/digital business charge ins
 Local office costs
 Co-owner support costs
Annex Y Field survey and support

 Sub-surface surveys
 Photography services
 Satellite data/mapping services
 Site investigation surveys (incl. geotechnical)
 Archaeological and environmental surveys
 Land and right-of-way purchase
 Marine warranty surveyor
Annex Z HSE support

 In-country medical support/equipment
 Environmental consultants
 Safety consultants
Annex AA Communications, documentation, PR services

 Translation services
 Project publicity materials (i.e. video, brochures etc.)
 Documentation archiving and close out
Annex BB Office support

 Office equipment
 Office supplies
 Office space
 Office/site vehicles
Annex CC Miscellaneous services

 IPA benchmarking
 Meteorological services
 Oceanographic services
 Third-party consultant services (i.e. environmental)
 Process licensor fees
 Vendor Representatives Commissioning/Start up
 Import duties and surcharges

 Community support costs and social projects

 In Country logistics – transport, accommodation, visa's etc.
 Finance costs/currency hedging
 Studies and front-end engineering costs
Annex DD Certification and insurance

 Certifying authority costs
 Permits and consents
 Construction all risk insurance
 Marine cargo insurance
Annex EE Government taxes and fees

 Taxes
 Import duties
 Levies
Annex FF Site costs

 Temporary and permanent camps
 Catering
 Radios and communications equipment
 Security facilities and personnel
 Project security team
 National security team
 Security vehicles
 Safety and security training
 Protective facilities

Annex A - Terms and definitions

The following terminology reference is for cost estimating specific
terminology and is supplementary to MPcp and the various project controls
procedures and guides.
Term Definition
Allowance: Additional costs included in estimates to cover known
but undefined requirements for an individual activity,
work item, account, or sub-account. Allowances are
included in the estimate and are not part of UAP or
AUAP.
Base Cost The summation of the costs for all of the project
Estimate: facilities (excluding allowances, owners cost,
escalation, and UAP).
Basis of Design The facilities and Major Projects Wells BoD documents
(BoD): define the respective technical basis for the project.
It represents the conversion of the Business
Requirements (given in the Statement of
Requirements) into a technical basis for the project.
Capital Expenditure incurred to acquire or construct an asset
Expenditure that is retained to generate income.
(CAPEX):
Conceptual Process which uses the cost of a similar project to
Estimating: estimate the cost of a new prospect/project and
adjusts for scope differences.
Decommissioning: The process of removal or abandonment of an asset
after production has ceased.
Detailed Process which uses the engineering build-up to
Estimating: develop the cost estimate at the lowest level of the
project work breakdown (referred to as WBS in this
document).
Drilling Capital Expenditures for Wells
Expenditure
(DRILLEX):
Escalation: Escalation guidance is provided by PSCM Market
Intelligence for use in estimating GPO capital projects.
Factored Process which applies unit cost rates to identified
Estimating: quantities.
Finance Finance Memorandum; as defined in GIAAPs
Memorandum http://giaap.bpweb.bp.com/
(FM):
Foreign Exchange Foreign Exchange - the activities around the use of
(FOREX): more than one currency other than USD
Insurance Insurance spares have long lead times and/or are
(Capital) Spares: high value items which are needed to confirm ability
to operate at normal capacity.

Long Lead Items: Those components of a system or piece of equipment

for which the times to design and fabricate are the
longest and for which an early commitment of funds
may be desirable or necessary in order to meet the
earliest possible date of system completion.
Life of Field: The span of a field or asset from appraisal to
cessation of production.
Money of the Day: The Money-of-the-Day cost is today's money adjusted
for current market escalation in conformance with
PSCM guidance.
Not to Exceed: This is applied to a capital cost estimate and is the
amount requested in the appropriate GIAAP document
(such as the Execute FM). It is the level up to which
there is authority to spend. The NTE is agreed by the
COO Projects and is typically informed by the P90 cost
outcomes determined by probabilistic assessment.
Point Forward Estimate excludes sunk costs. Estimate specifies the
Estimate: start date and/or the MPcp stage of the project cost.
Owners Cost: Includes Project Management Team (PMT), office,
security and logistics, commissioning and start-up,
and other project related costs not directly
attributable to the permanent facilities. The GPO
Benchmarking team should be consulted for the
detailed definition of the PMT costs.
Operating Expenditure that is not capital in nature (is consumed
Expenditures immediately or within the current year and which
(OPEX): does not increase the value of an income-generating
asset or qualify as an asset).
Performance Project performance targets agreed by the COO
Target: projects that represent realistic and achievable
project outcomes, informed by the “mean” outcomes
determined by probabilistic assessment.
Risk: An event (or set of circumstances) that, if it occurs,
would have a material effect positive or negative, on
the final value of a project. Risks with a positive
impact are called opportunities while those with a
negative impact are called threats.
SIMOPs: Simultaneous Operations: Simultaneous conduct of
independent operations in which the events of any
one operation may impact the safety of personnel or
equipment and the environment of another operation.
Statement of Describes the fundamental business requirements
Requirements and success factors for the project and forms the
(SoR): basis upon which project objectives, technical
definition and execution planning are developed.
Sunk Cost: Project cost incurred to date consistent with the cost
engineering definition of value of work done.

Today's Money: The costs based on the value of today's money,

meaning current year costs. This includes current
market factors but excludes future inflation.
Work Breakdown A framework defining the basic building blocks for the
Structure (WBS): work to be performed on a Project. The work
breakdown structure provides logical and manageable
groups or compartments against which to structure
cost and schedule information.

Annex B - Symbols and abbreviations

For this document the following symbols and abbreviations apply:
AUAP Additional Unallocated Provision
BPE Business Plan Element
CAPEX Capital Expenditure
EEM Economics Evaluation Methodology
EFM Execute Financial Memorandum
EIA / EIS Environmental Impact Assessment / Statement
EPC Engineering, Procurement, and Construction
EPMS Engineering, Procurement, Management Service
FEED Front End Engineering and Design
FLNG Floating Liquefied Natural Gas
FOREX Foreign Exchange
FM Finance Memorandum: As defined in GIAAP
GCD Global Concept Development
GTL Gas to Liquids Technology
GOO Global Operations Organization
GPO Global Projects Organization
GWO Global Wells Organization
HP/HT High Pressure/High Temperature
HSE Health, Safety, Security and Environment
HVL Heavy Lift Vessel
IA Issuing Authority
IFC Issued for Construction
IPA Independent Project Analysis
IT Information Technology
kBD Thousands of Barrels per Dad

MCS Master Control Schedule
MPcp Major Projects common process
MTO Material Take-off
NOC National Oil Company
NTE Not To Exceed
OPEX Operating Expenditure
PCM Project Controls Manager
PCTL Project Controls Team Lead
PDM Project Development Manager
PEP Project Execution Plan
PGM Project General Manager
PMT Project Management Team
PO Purchase Order
PR Public Relations
PSPC Project Staff Planning and Control (database)
PT Performance Target
QA/QC Quality Assurance / Quality Control
RAPID Recommend, Agree, Perform, Input, Decide
UAP Unallocated Provision
USD US Dollars
US FERC United States Federal Energy Regulatory Commission
VP Vice President
WBS Work Breakdown Structure


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Global Projects Organization

Cost Estimate Development Guide

Applicability: Global Projects Organization

GPO Document Number: GPO-PC-GLN-00006

Use and Interpretation of this document

Rev Reason for Author Checker Checker Approve Approva

Operating Management System

OMS Sub- OMS Sub-Element Title Relevant Section(s) of this

Name Role Type of Review Date Reviewed

R Matthew Lead Cost Estimator Technical 23 April 2019

S Morris Lead Cost Estimator Technical 24 April 2019

Stacy Ross GPO Project Controls Director Technical 07 May 2019

Donna Ward Legal Legal No review needed

GPO-PC-GLN-00006 Page 2 of 46 Rev: B02

GPO-PC-GLN-00006 Page 3 of 46 Rev: B02

A.3 Material take-off allowance.........................................................................32

Figure 1 - Cost estimating guide overview.....................................................................6

GPO-PC-GLN-00006 Page 4 of 46 Rev: B02

Figure 9 - Allowance application................................................................................... 19

GPO-PC-GLN-00006 Page 5 of 46 Rev: B02

Beginning of Throughout the Before the End of the End of the

Cost Estimate Cost Estimate Cost Estimate Cost Estimate

Figure 1 - Cost estimating guide overview

The purpose is to provide the cost estimating practitioner with a set of

The application of these guides by the cost estimating practitioners meets

GPO-PC-GLN-00006 Page 6 of 46 Rev: B02

1 Scope and exclusions

1 Informative references/related documents

Unless stated otherwise in the content of this document, reference to the

GPO-PA-PRO-00001 Major Project common process (MPcp)

2 Terms and definitions

Refer to Annex A for a full list of terms and definitions.

GPO-PC-GLN-00006 Page 7 of 46 Rev: B02

GPO-PC-GLN-00006 Page 8 of 46 Rev: B02

3 Symbols and abbreviations

Refer to Annex B for a full list of symbols and abbreviations.

GPO Global Projects Organization

OMS Operating Management System

GPO-PC-GLN-00006 Page 9 of 46 Rev: B02

4 Cost estimate development process

The key for developing a credible cost estimate is to have an adequate

The availability of reliable and accurate information directly affects the

As described in the GPO Cost Estimating Procedure (GPO-PC-PRO-00007),

GPO-PC-GLN-00006 Page 10 of 46 Rev: B02

Approved Cost Preliminary Cost

Figure 2 - Cost estimating development - process

5 Estimate cost by appropriate MPcp stage and WBS

Selection of the appropriate cost estimating method depends on where the

 Finance Memorandum funding up to the next governance point

GPO-PC-GLN-00006 Page 11 of 46 Rev: B02

Cost Estimate Component Classification for FMŐ

Concept Optimize GPO approval for

DEFINE GPO approval for

EXECUTE GPO approval for

Figure 3 - MPcp stage cost estimate classification

The Concept Development FM should be supported by a Class 2 cost

GPO-PC-GLN-00006 Page 12 of 46 Rev: B02

Figure 4 - Cost estimating EPMS/EPC ongoing development

5.1 Initiate the cost estimate basis

GPO-PC-GLN-00006 Page 13 of 46 Rev: B02

Categories Questions to Address Considerations for Mid Point Metric Adjustments

Is the development concept HP / HT Subsea cost impact.

Is the development concept at the Facilities Weight – Transportation Barge