Why Roebling

Industries

Company

Resources

Get Started

Understanding capital project development terms

Our glossary is your go-to resource with plain definitions of the terms process engineers, estimators, and capital planners use to evaluate industrial capital projects.

Feasibility & techno-economic analysis

Techno-economic analysis

A techno-economic analysis is a study that combines the engineering design of a process with its costs and financial outcomes to determine whether a project is worth building.

A TEA links the physical process (what equipment is needed, how much material and energy it consumes) to the economics (what it costs to build, what it costs to operate, and what it produces). It answers the core early-stage question: does this make money, and under what conditions? At feasibility stage, the answer depends heavily on assumptions that are still uncertain, which is why a TEA built on a single scenario can create false confidence.

Also called:

technical economic analysis, techno-economic model, feasibility model

Feasibility study

A feasibility study evaluates whether a proposed industrial project is technically possible and economically viable before significant capital is committed.

It typically covers the process design basis, a capital cost estimate, an operating cost estimate, and a financial outcome. Early feasibility work carries a high number of open questions and unproven assumptions, so the value of the study comes less from a single answer and more from understanding which decisions and inputs drive the outcome.

Front-End Loading

Front-End Loading is the staged process of defining and de-risking a capital project before the decision to build, usually structured as FEL-0 through FEL-3.

Each stage adds engineering definition and narrows cost uncertainty. FEL-0 and FEL-1 are concept and feasibility (broad ranges, many open decisions); FEL-2 is preliminary design; FEL-3 is detailed enough to support a final investment decision. A large share of FEL packages never advance, which is why getting the early stages right with a stronger design basis matters before thousands of engineering hours are spent.

Also called:

stage-gate process, front-end engineering, FEL stages

Design basis

A design basis is the set of assumptions, requirements, and constraints that a process and facility design is built around.

It includes target production capacity, feedstocks, product specifications, site conditions, and key process parameters. A weak or premature design basis is a common cause of projects that get poorly scoped early and then run over budget or schedule once built.

Scale-up

Scale-up is the process of taking a design proven at pilot or lab scale and engineering it for commercial production volumes.

Costs and equipment do not scale linearly. The same unit operations may apply, but sizing, pricing, utility demand, and real estate change substantially between a pilot plant and a full commercial facility. Modeling each scale separately is how teams understand where the economics break.

Also called:

pilot to commercial, commercialization

Bankable feasibility study

A bankable feasibility study is a feasibility study detailed enough that lenders and investors will finance the project on its numbers.

It is usually a definitive study with a Class 3 estimate, vendor quotes, a confirmed site, and an independent review.

Also called:

BFS, definitive feasibility study

Final Investment Decision

The final investment decision is the point at which a company commits capital to build a project.

Everything before FID is exploration, estimating, and definition; everything after belongs to construction.

Also called:

FID, sanction, project approval

FEL-1

FEL-1 is the first front-end loading stage, where a project team tests whether a business opportunity is worth pursuing.

Deliverables are a concept, a Class 5 capital estimate, and a go or no-go recommendation.

Also called:

appraise, opportunity assessment

FEL-2

FEL-2 is the option selection stage, where several concepts are compared and one is carried forward.

Deliverables include a design basis, process flow diagrams, and a Class 4 estimate.

Also called:

select, pre-FEED, conceptual design

FEL-3

FEL-3 is the definition stage, where the selected concept is engineered far enough to sanction.

Deliverables include P&IDs, equipment lists, an execution plan, and a Class 3 estimate ready for FID.

Also called:

define, FEED

Pre-FEED

A pre-FEED study develops a concept into a defined scope and design basis before front-end engineering design begins.

It usually delivers process flow diagrams, major equipment sizing, and a Class 4 estimate.

Also called:

FEL-2, conceptual engineering

Front-end engineering design

Front-end engineering design is the engineering work that fixes scope, cost, and schedule before a final investment decision.

It produces the package an EPC contractor bids against.

Also called:

FEL-3, define phase, basic engineering

Scoping study

A scoping study is an early evaluation of whether a project concept deserves further study.

In mining it is the equivalent of a PEA; in process industries it sits close to FEL-1.

Also called:

PEA, concept study

Preliminary economic assessment

A preliminary economic assessment is the first economic study of a mineral project, based on early resource estimates.

Under NI 43-101 it may use inferred resources and is not sufficient to declare reserves.

Also called:

PEA, scoping study

Prefeasibility study

A prefeasibility study compares the viable development options for a mineral project and selects one for detailed study.

It supports declaring probable reserves and typically carries a Class 4 estimate.

Also called:

PFS

Definitive feasibility study

A definitive feasibility study is the final technical and economic study before a mining project is financed and built.

It supports declaring proven reserves and carries an estimate detailed enough for lenders.

Also called:

DFS, bankable feasibility study

Concept select

Concept select is the stage where a project team compares development options and commits to one for further definition.

It is the oil and gas term for FEL-2.

Also called:

select phase, optioneering

Option space

The option space is the full set of designs, feedstocks, sites, and capacities a project could take.

Conventional studies price two or three options; screening the whole space early is how the best case is found.

Also called:

design space, scenario set

Process engineering

Process simulation

Process simulation uses software to model how a chemical or industrial process behaves, calculating the flows, temperatures, pressures, and conversions at each step.

Simulation establishes the physical reality of a process before any equipment is sized or costed. Traditional simulators are built for detailed process design and rigorous thermodynamics, which requires a level of process definition that early feasibility work does not yet have.

Also called:

process modeling, flowsheet simulation

Heat and material balance

A heat and material balance is an accounting of all mass and energy entering and leaving each step of a process, confirming that nothing is created or destroyed.

It is the foundation of any credible process model. The mass and energy balance determines how much raw material and utility each piece of equipment consumes, which in turn drives both operating cost and equipment sizing. In a spreadsheet, mass does not have to balance, which makes errors easy to introduce and hard to find.

Also called:

mass and energy balance, mass balance, H&MB

Unit operation

A unit operation is a single distinct step in a process, such as fermentation, distillation, centrifugation, or filtration.

Industrial processes are built by connecting unit operations into a sequence. Each unit operation represents both a physical transformation and a physical piece of equipment, which is what links the process model to the equipment list and the capital cost estimate.

Process Flow Diagram

A Process Flow Diagram is a schematic showing the major equipment, flow paths, and operating conditions of a process.

A PFD communicates how a process works at a level appropriate for feasibility and conceptual engineering. It is less detailed than a Piping and Instrumentation Diagram (P&ID), which adds the instrumentation and control detail needed for detailed design and construction.

Also called:

flow sheet, BFD (block flow diagram)

Equipment sizing

Equipment sizing is the calculation of the required capacity of each piece of equipment based on the process flows it must handle.

Sizing flows directly from the heat and material balance. Realistic sizing matters because equipment has real capacity limits. A chiller or vessel specified beyond what is commercially manufactured produces a cost estimate that cannot be built, and undersized utilities get missed entirely.

Live model

A live model is a process and economic model that updates every output when any input changes.

It differs from a static study or spreadsheet, which is fixed on the day it is delivered.

Also called:

integrated model

Capital & cost estimation

Capital expenditure

CAPEX is the total cost to build a facility, including equipment, installation, construction, and the indirect costs of engineering and project management.

In a feasibility model, CAPEX is built up from a sized and priced equipment list, then expanded with factors that account for everything required to turn loose equipment into an operating facility. It is one of the two cost numbers, alongside operating cost, that determine whether a project is viable.

Total Installed Cost

Total Installed Cost is the full cost of equipment plus everything needed to install and connect it into a working facility.

TIC starts with the bare equipment cost and adds piping, instrumentation, electrical, foundations, buildings, and construction. It is the difference between what equipment costs to purchase and what it costs to actually put into the ground and operate.

Also called:

total installed capital cost, installed cost

Bare equipment cost

Bare equipment cost is the purchase price of all major equipment in a process, before any installation or construction costs are added.

It is the sum of the sized and priced equipment list and serves as the starting point for a factored capital estimate. Bare equipment cost typically represents only a fraction of the total installed cost of a facility.

Also called:

purchased equipment cost

Factored cost estimate

A factored cost estimate builds up total capital cost by applying multipliers to the bare equipment cost to account for installation, piping, electrical, construction, and indirects.

This method is standard for early-stage estimating because it produces a credible total capital number quickly, without needing detailed quotes for every line item. The accuracy depends on the quality of the equipment costs and the factors applied.

Also called:

equipment-factored estimate

Class 4 / Level 4 estimate

A Class 4 estimate is a capital cost estimate produced at the feasibility or concept stage, with an accuracy range typically between minus 30 and plus 50 percent.

It is appropriate when process definition is still low and many decisions remain open. The point of a feasibility-stage estimate is not precision; it is to understand the order of magnitude, the major cost drivers, and how sensitive the project is to its assumptions.

Also called:

Level 4 estimate, feasibility estimate, AACE Class 4

Indirect costs

Indirect costs are project costs not tied to a specific piece of equipment, such as engineering, procurement, construction management, and contingency.

They are added on top of direct costs in a capital estimate and can represent a substantial share of total installed cost. Underestimating indirects is a frequent contributor to capital overruns.

Location factor

A location factor adjusts a capital cost estimate to reflect the labor, material, and construction costs of a specific country or region.

The same facility costs different amounts to build in the US, Europe, Asia, or Latin America. Location factors, along with regional utility and raw material costs, let teams compare the economics of building in different places.

Class 5 estimate

A Class 5 estimate is the earliest capital cost estimate under the AACE system, made with 0 to 2 percent of project definition.

Accuracy is typically minus 20 to 50 percent and plus 30 to 100 percent, which is why it is used for screening, not funding.

Also called:

order-of-magnitude estimate, AACE Class 5

Class 3 estimate

A Class 3 estimate is the capital cost estimate used to authorize a project, made with 10 to 40 percent of project definition.

Accuracy is typically minus 10 to 20 percent and plus 10 to 30 percent; it supports FID and financing.

Also called:

budget authorization estimate, control estimate

Lang factor

A Lang factor is a single multiplier applied to total purchased equipment cost to estimate total installed plant cost.

Values run roughly 3 to 5 depending on whether the plant handles solids, fluids, or both; it is the simplest form of factored estimate.

Also called:

overall installation factor

Contingency

Contingency is the amount added to a cost estimate to cover costs that are expected but not yet identified.

It shrinks as project definition improves, from 30 percent or more at Class 5 to around 10 percent at Class 3.

Also called:

estimate contingency

ISBL and OSBL

ISBL is the process equipment inside the battery limits of a plant; OSBL is the utilities, storage, and infrastructure that support it.

OSBL often adds 20 to 50 percent to ISBL cost and is a common source of underestimates.

Also called:

inside and outside battery limits, on-site and off-site

Operating & financial modeling

Operating expenditure

OPEX is the recurring cost of running a facility, including raw materials, utilities, labor, maintenance, and overhead.

Operating cost is derived directly from the process model: the mass and energy balance determines consumption of feedstocks and utilities, and the facility design determines labor and fixed costs. Together with CAPEX, it sets the full economics of production.

Cost of Goods Sold

Cost of Goods Sold is the total cost to produce one unit of product, usually expressed as dollars per kilogram or per ton.

COGS combines variable costs (raw materials, utilities, consumables) and an allocation of fixed costs (labor, maintenance, depreciation). It is the number that determines what price hits a target margin, and the threshold that yield, titer, and throughput improvements are measured against.

Also called:

cost of manufacture, unit production cost, cost per kg

Fixed vs. variable costs

Variable costs change with production volume; fixed costs do not.

Raw materials and utilities are variable: produce more, spend more. Labor, maintenance, real estate, and SG&A are largely fixed: they are incurred regardless of output. Separating the two is what lets a model show how unit economics change as a facility scales up or down.

Financial model

A financial model translates a project's capital and operating costs into financial outcomes such as cash flow, returns, and break-even.

It layers in financing structure (the mix of debt and equity), revenue, and time to produce the numbers an investment decision rests on. In an integrated model, the financial outputs are a direct, traceable consequence of the process and cost assumptions rather than a separate spreadsheet that has to be manually reconciled.

Debt and equity financing

Debt and equity financing is the mix of borrowed money and invested capital used to fund a project, which directly affects its returns.

The financing structure changes the fully-loaded cost of production and the return on capital, independent of the engineering. Being able to test different structures against the same process model is part of underwriting whether a project is fundable.

Also called:

capital structure, financing structure

Life Cycle Assessment

A Life Cycle Assessment quantifies the environmental impact of producing something, most often its carbon footprint.

When the carbon model is connected to the process model, the product carbon footprint updates alongside cost as the design changes, allowing CAPEX, OPEX, and carbon to be traded off against each other rather than analyzed separately.

Also called:

product carbon footprint, PCF, CI score

Net present value and internal rate of return

NPV is the value today of a project's future cash flows less its investment; IRR is the discount rate at which NPV equals zero.

Together they are the standard tests of whether a capital project earns its cost of capital.

Also called:

NPV, IRR

Levelized cost

Levelized cost is the average cost per unit of output over a project's life, including capital and operating costs.

LCOE applies to electricity and LCOH to hydrogen; both let projects with different lifetimes be compared.

Also called:

LCOE, LCOH

Owner's engineer

An owner's engineer is an independent engineering firm that represents the project owner's interests during studies and construction.

It reviews contractor deliverables, checks estimates, and advises the owner on technical decisions.

Also called:

OE, independent engineer

EPC and EPCM

EPC is a contract where one contractor engineers, procures, and constructs the plant for a fixed price; EPCM is one where the contractor manages construction on the owner's behalf.

EPC shifts cost risk to the contractor at a premium; EPCM keeps it with the owner.

Also called:

turnkey (EPC)

Scenario & risk analysis

Scenario analysis

Scenario analysis compares a project under different defined sets of assumptions, such as a downside, baseline, and upside case.

Each scenario can vary the inputs that matter for a given decision while holding the rest constant. Scenarios do not have to be downside, baseline, and upside; they can represent different sites, scales, process routes, or operating conditions. The purpose is to avoid deciding on a single set of assumptions that will not hold.

Sensitivity analysis

Sensitivity analysis measures how much a project's outcome changes when each input is varied, to identify which assumptions matter most.

By sweeping inputs across their plausible ranges, it separates the variables that move the economics from the ones that do not. This is what lets a team focus effort on the few high-impact, high-uncertainty inputs instead of refining numbers that have no bearing on the decision.

Uncertainty analysis

Uncertainty analysis assigns ranges or probability distributions to inputs and propagates that uncertainty through the model to show a range of possible outcomes.

It differs from scenario analysis: scenarios are discrete defined cases, while uncertainty analysis quantifies the spread of results given how confident you are in each input. Inputs known from a recent quote carry tight bounds; inputs estimated without a good reference carry wide ones.

Also called:

uncertainty quantification, uncertainty bounds

Monte Carlo simulation

Monte Carlo simulation runs a model many times with inputs drawn at random from their probability distributions, producing a statistical range of outcomes.

Rather than a single answer, it gives a distribution: the likelihood that a project lands within a given cost or margin range. It requires defining inputs as distributions rather than single values, which is how teams move from a point estimate to a quantified view of risk.

Tornado diagram

A tornado diagram is a chart that ranks inputs by how much each one affects the outcome, with the most influential variables shown at the top.

It is a standard output of sensitivity and uncertainty analysis. The shape makes it immediately clear which two or three assumptions drive most of the risk in a project, and which ones can be safely left as rough estimates.

Greenfield vs. brownfield

A greenfield project builds a new facility from scratch; a brownfield project modifies or expands existing infrastructure.

The distinction changes the cost model significantly. A brownfield estimate zeroes out equipment and infrastructure that already exists, while a greenfield estimate prices the entire facility. Modeling both is common when a team is deciding whether to retrofit or build new.

Newsletter