IEEE 3001 STANDARDS:

POWER SYSTEMS DESIGN

IEEE Std 3001.4 -2020 ™

Recommended Practice
for Estimating the Costs of
Industrial and Commercial
Power Systems

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 IEEE Std 3001.4™-2020

IEEE Recommended Practice for

Estimating the Costs of Industrial
and Commercial Power Systems

Sponsor

Industrial and Commercial Power Systems Standards Development Committee

of the
IEEE Industry Applications Society

Approved 5 March 2020

IEEE SA Standards Board

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 Abstract: Described in this recommended practice are methods for estimating the costs of industrial
and commercial power systems, both new and those undergoing expansion or modernization. This
recommended practice is restricted to the development of the relative capital cost of industrial and
commercial power distribution systems. While this document briefly points out considerations related
to total cost or true cost, as well as some technical considerations, other standards and references
should be referred to for a thorough analysis of these aspects of power distribution systems. This
recommended practice is likely to be of greatest value to the power-oriented engineer with limited
experience in this area. It can also be an aid to all engineers responsible for the electrical design of
industrial and commercial power systems.

Keywords: costs, cost estimating, estimating, IEEE 3001.4, industrial and commercial power
systems, net present value, relative capital cost

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 Participants

At the time this IEEE recommended practice was completed, the Power System Design Working Group had
the following membership:

Gary H. Fox, Chair

Nikhil Bodhankar, Vice Chair

Neal Dowling Yazhou (Joel) Liu Stephen Paro

Erling Hesla Daniel Neeser Kent Sayler
Robert Hoerauf Dennis Neitzel Peter Sutherland
John Kay Dennis Nielsen Marcelo Valdes
Duane Leschert Lorraine Padden Van Wagner

The following members of the individual balloting committee voted on this recommended practice. Balloters
may have voted for approval, disapproval, or abstention.

Mohammed Ashraf Ali Robert Hoerauf Christopher Petrola

William Ackerman Richard Holub Moises Ramos
Robert Arno Laszlo Kadar James Reilly
James Babcock Piotr Karocki John Roach
Robert Beavers John Kay Charles Rogers
Wallace Binder Peter Kelly Ryandi Ryandi
Frederick Brockhurst Yuri Khersonsky Trevor Sawatzky
Demetrio Bucaneg Jr Jim Kulchisky Bartien Sayogo
William Byrd Mikhail Lagoda Kenneth Sedziol
Paul Cardinal Chung-Yiu Lam Robert Seitz
Davide De Luca Wei-Jen Lee Jerry Smith
Neal Dowling Duane Leschert Gary Smullin
Donald Dunn Jose Marrero Kris Sommerstad
Kevin Fellhoelter Daleep Mohla Peter Sutherland
Paul Forquer Daniel Neeser Donald Swing
Gary Fox Dennis Neitzel David Tepen
Carl Fredericks Joe Nims Marcelo Valdes
Randall Groves Lorraine Padden Van Wagner
James Harvey Sergio Panetta Keith Waters
Erling Hesla Antony Parsons Dean Yager
Werner Hoelzl Howard Penrose Jian Yu

When the IEEE SA Standards Board approved this recommended practice on 5 March 2020, it had the
following membership:

Gary Hoffman, Chair

Jon Walter Rosdahl, Vice Chair
Jean-Philippe Faure, Past Chair
Konstantinos Karachalios, Secretary

Ted Burse David J. Law Mehmet Ulema

J. Travis Griffith Howard Li Lei Wang
Grace Gu Dong Liu Sha Wei
Guido R. Hiertz Kevin Lu Philip B. Winston
Joseph L. Koepfinger* Paul Nikolich Daidi Zhong
John D. Kulick Damir Novosel Jingyi Zhou
Dorothy Stanley

*Member Emeritus

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 7
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 Introduction

This introduction is not part of IEEE Std 3001.4–2020, IEEE Recommended Practice for Estimating the Costs of
Industrial and Commercial Power Systems.

IEEE 3000 Series®

This recommended practice was developed by the Industrial and Commercial Power Systems Standards
Development Committee of the IEEE Industry Applications Society as part of a project to repackage IEEE’s
popular series of “color books.” The goal of this project is to speed up the revision process, eliminate duplicate
material, and facilitate use of modern publishing and distribution technologies.

When this project is completed, the technical material included in the 13 “color books” will be included in a
series of new standards. Approximately 60 additional “dot” standards, organized into the following categories,
will provide in-depth treatment of many of the topics formerly covered in the color books:

— Power Systems Design (3001 series)

— Power Systems Analysis (3002 series)
— Power Systems Grounding (3003 series)
— Protection and Coordination (3004 series)
— Emergency, Stand-By Power, and Energy Management Systems (3005 series)
— Power Systems Reliability (3006 series)
— Power Systems Maintenance, Operations, and Safety (3007 series)

In many cases, the material in a “dot” standard comes from a particular chapter of a particular color book. In
other cases, material from several color books has been combined into a new “dot” standard.

The material in this recommended practice largely comes from IEEE Std 141™-1993, IEEE Recommended
Practice for Electric Power Distribution in Industrial Plants, (IEEE Red Book™).

IEEE Std 3001.4™

This publication provides a recommended practice for the electrical design of commercial and industrial
facilities. It is likely to be of greatest value to the power-oriented engineer with limited commercial or industrial
plant experience. It can also be an aid to all engineers responsible for the electrical design of commercial and
industrial facilities. However, it is not intended as a replacement for the many excellent engineering texts and
handbooks commonly in use, nor is it detailed enough to be a design manual. It should be considered a guide
and general reference on electrical design for commercial and industrial facilities.

Tables, charts, and other information that have been extracted from codes, standards, and other technical
literature are included in this publication. Their inclusion is for illustrative purposes; where technical accuracy
is important, the latest version of the referenced document should be consulted to assure use of complete, up-
to-date, and accurate information.

8
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 Contents

1. Scope��������������������������������������������������������������������������������������������������������������������������������������������������������� 10

2. Normative references�������������������������������������������������������������������������������������������������������������������������������� 10

3. Definitions, abbreviations, and acronyms������������������������������������������������������������������������������������������������� 10

3.1 Definitions������������������������������������������������������������������������������������������������������������������������������������������ 10
3.2 Abbreviations and acronyms�������������������������������������������������������������������������������������������������������������� 11

4. Estimating, a critical process to project success���������������������������������������������������������������������������������������� 11

4.1 Introduction���������������������������������������������������������������������������������������������������������������������������������������� 11
4.2 Cost estimating users and uses������������������������������������������������������������������������������������������������������������ 14
4.3 Capital costs (company practices, accounting practices)�������������������������������������������������������������������� 15
4.4 Commissioning and training costs������������������������������������������������������������������������������������������������������ 15
4.5 Operating costs, installed cost plus variables, inflation���������������������������������������������������������������������� 16
4.6 Total cost (return on investment, net present value, operating life)����������������������������������������������������� 16
4.7 Required information������������������������������������������������������������������������������������������������������������������������� 18

5. Factors to consider������������������������������������������������������������������������������������������������������������������������������������ 19

6. Preparing the estimate������������������������������������������������������������������������������������������������������������������������������� 20

6.1 General����������������������������������������������������������������������������������������������������������������������������������������������� 20
6.2 Company practice������������������������������������������������������������������������������������������������������������������������������� 21
6.3 Third party tools and programs (commercial software)���������������������������������������������������������������������� 21
6.4 Project feedback, comparison with estimate, update procedures�������������������������������������������������������� 21
6.5 Classes of estimates���������������������������������������������������������������������������������������������������������������������������� 22
6.6 Detailed estimate�������������������������������������������������������������������������������������������������������������������������������� 22
6.7 Cost categories����������������������������������������������������������������������������������������������������������������������������������� 23

Annex A (informative) Example�������������������������������������������������������������������������������������������������������������������� 25

Annex B (informative) Selected sources for estimating information������������������������������������������������������������� 37

Annex C (informative) Bibliography������������������������������������������������������������������������������������������������������������� 38

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 IEEE Recommended Practice for
Estimating the Costs of Industrial
and Commercial Power Systems

1. Scope
This recommended practice describes how to estimate the costs of industrial and commercial power systems,
both new and those undergoing expansion or modernization. This recommended practice is restricted to the
development of the relative capital cost of industrial and commercial power distribution systems. While
this document briefly points out considerations related to total cost or true cost, as well as some technical
considerations, other standards and references should be referred to for a thorough analysis of these aspects of
power distribution systems. This recommended practice is likely to be of greatest value to the power-oriented
engineer with limited experience in this area. It can also be an aid to all engineers responsible for the electrical
design of industrial and commercial power systems.

2. Normative references
The following referenced documents are indispensable for the application of this document (i.e., they must
be understood and used, so each referenced document is cited in text and its relationship to this document is
explained). For dated references, only the edition cited applies. For undated references, the latest edition of the
referenced document (including any amendments or corrigenda) applies.

AACE 18R, Cost Estimate Classification System—As Applied in Engineering, Procurement, and Construction
for the Process Industries, AACE International.1

3. Definitions, abbreviations, and acronyms

3.1 Definitions
For the purposes of this document, the following terms and definitions apply. The IEEE Standards Dictionary
Online should be consulted for terms not defined in this clause.2 Regarding terms used for finance and
investment, e.g., rate of return, cost of money, internal rate of return, payback rate, return on investment, etc.,
refer to definitions by the Downes and Goodman dictionary [B3].3

detailed estimate: The definitive amount of individual components, resources, and duration to execute the
project.

1
AACE International publications are available online at https://​web​.aacei​.org/​.
2
IEEE Standards Dictionary Online is available at: http://​dictionary​.ieee​.org.
3
The numbers in brackets correspond to those of the bibliography in Annex C.

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 IEEE Std 3001.4-2020
IEEE Recommended Practice for Estimating the Costs of Industrial and Commercial Power Systems

NOTE—This is most accurate with final project documents.4

model estimate: The mathematical, computational algorithms, and parametric equations used to estimate the
cost for a product or a project.

parametric detailed estimate: An estimate that uses a unit cost or rate for each specific type of material or
activity, and multiplies by the quantity or duration required for the project or activity.

project comparison estimate: A historical cost associated with past results applied to a scalable model for the
same or similar type of task or project.

unit-based estimate: The comprised elements of labor, components, and activity to establish the cost basis of
an indivisible entity.

NOTE—This establishes the standard unit of accommodation multiplied by cost per unit. The estimate is prepared by
multiplying the number of accommodation with the cost per unit of accommodation.

3.2 Abbreviations and acronyms

IRR internal rate of return

MEP mechanical/electrical/plumbing
NPV net present value
VFD variable frequency drive
WBS work breakdown structure

4. Estimating, a critical process to project success

4.1 Introduction
An important stage in planning to meet a plant’s power requirements is the preparation of a cost estimate. A cost
estimate is required for determination of necessary funding, and to help decide if the project is economically
feasible. Proper estimates also entail an economic comparison of alternate system arrangements to meet
the plant power requirements for the most economical investment in the electrical system. Cost estimating
should be part of system design from the preliminary stage through final design, since cost-effective design
improvements are made most easily at these stages. Failing this, any such design enhancements, if made at the
construction stage, are at greater cost and with less latitude. This recommended practice presents a method for
making a capital cost estimate for a typical plant power distribution system.

System cost, while important, is one of several factors to be considered in planning the most suitable
distribution system. Consideration should be given to the concept of total cost, or true cost. This requires
weighing the first cost of the equipment plus other costs for improved reliability, ease of maintenance, safety,
replacement parts, and performance. Useful information concerning cost versus reliability analysis can be
found in IEEE Std 493™-2007 [B4]. Additional factors, such as tax considerations, utility rates, operational
economies, and provision for future improvements in the manufacturing process, are critical in the evaluation
of competing systems. For a given installation, the engineer should prepare alternate power distribution
schemes that can be reviewed with the company’s financial planning group to develop true cost.

4
Notes in text, tables, and figures of a standard are given for information only and do not contain requirements needed to implement this
standard.

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 IEEE Std 3001.4-2020
IEEE Recommended Practice for Estimating the Costs of Industrial and Commercial Power Systems

This recommended practice, though restricted to the development of the relative capital cost of power
distribution systems, can serve as a guide to development of actual cost of installations, thereby providing vital
information for budgeting, funding, and evaluation of proposals and bids. While this document briefly points
out some technical considerations, other publications, as listed in Annex B and Annex C, should be referred to
for a thorough analysis of the technical aspects of power distribution systems.

The fundamental information in this recommended practice is applicable globally that the user exercises
discretion when adapting it to local conditions. The fundamentals apply to every application; however, it is
incumbent upon the user to employ the guidelines in a manner that recognizes local conditions.

The cost estimate will be prepared for a specific entity or entities with a focus on the viewpoints and
requirements of the recipients. For example, an owner may place prime importance on reliability and
operating cost; a lessor may be more interested in initial capital cost; a contractor may look at profit margin; a
governmental agency may have different requirements altogether; an engineer might favor an elegant design
that is state of the art. Address these viewpoints directly at the start of the initial design, with options and cost
for the several requirements clearly presented. The entities who use the cost estimate then can compare and
evaluate the options and can resolve conflicting viewpoints.

After the basic cost estimate is completed, the economic value of the project for the specific entity will be
determined using a variety of approaches. Various owners, lessors, contractors, and others use many different
approaches. Consult with the ultimate decision maker to determine the governing basis for economic
judgment. A partial list of evaluation methods are shown below. The broad field of evaluating economic value
is beyond the scope of this document.

Estimates can be classified by their attributes as follows:

a) Detailed estimate
b) Unit-based estimate
c) Model-based estimate
d) Parametric detailed estimate
e) Project comparison

Detailed estimates: Preparation of a detailed estimate consists of detailing the commodity quantity, length,
size, tasks etc., to achieve the drawing and specification requirements. Then a determination of the cost of each
item is documented. This level of detailed quantification is extracted from a final set of engineered drawing
plans that can enable accuracy in developing the estimate. Construction equipment, tools, and labor resources
are developed pertaining to the activities of the project that can include demolition, excavation, followed by
construction and installation of equipment and materials according to the plans. The time associated for the
activities is typically assembled in a work breakdown format that is established in a construction schedule.
The work is sequenced by discipline in single and parallel activities and involves inspection hold points,
milestones, and substantial completion dates. A detailed estimate is a definitive cost estimate and regarded
for the thorough detail of all areas of work. It is in contrast to a conceptual estimate, although the process can
begin with a conceptual and progress as the details are solidified by the engineer on the final drawings and
specifications, and can become very detailed.

Unit-based estimate: Unit-based estimating is consolidating the required elements and associated costs for a
standardized unit of accommodation. The standard unit of accommodation is multiplied by the cost per unit to
equate a unit estimate. The unit-based estimate is useful for design estimates or bidding of projects where unit
costs can comprise the overall project. The methods can be considered unit quantity or total quantity:

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a) Unit quantity estimating divides the work into the number of activities/tasks and the number of items.
The unit of measurement is selected and the cost per unit quantity of each is derived. The item cost can
be calculated by multiplying the cost per unit quantity by the number of units. This is a way to quantify
the total cost which includes the material, labor, plant, overhead and profit costs. This method allows
comparison to other projects with variations in quantities.
b) Total quantity method has subdivisions for:
1) Materials
2) Labor
3) Plant
4) Overhead
5) Profit

Each of the subdivisions are costed out per the work and then summed to the total estimated cost of each item
of work. An example for a panelboard installation within a new building is shown in Table 1.

Table 1—Example of a total quantity estimate

Item Component Cost
no.
1 (i) Cost of materials at the source $
Breakers and fixed lock hasps $
Enclosure with dead front and swinging panel door $
Bus. insulators and mounting hardware $
Equipment ID, Panel schedule and arc-flash labels $
(ii) Cost of handling, shipping, assembly, and delivery $
2 Cost of labor (skilled and unskilled) $
3 Cost of plant (tools, e.g., torque wrench, ladder, etc.) $
4 Overhead (typical = % x (#1+#2+#3)) $
5 Profit (typical = % × #4) $
Total cost of panelboard installed ( = #1+#2+#3+#4+#5) $
NOTE—Cost values are for illustrative purposes only and should not be applied to any actual
estimates.

Model estimate: The model method has both direct and variable costs that function with the input of parameters,
including resource requirements. The amount of resources that contribute to the project or product have impact
to the model outputs in cost and time. The accuracy of the inputs to model formulas can provide estimates with
variables in resources and fixed costs with ranges when quantity, conditions, scaling, etc., are factored in. The
model can be used to obtain approvals from management and incorporated into business plans for purposes
of budgets, financial plans and tracking costs. Modeling for estimates has additional features that show in
2D-3D where locations, size of space requirements, interference with other utilities and equipment that can
cause unforeseen conditions. As the model progresses in maturity, so can the estimate. Software that supports
this approach have grids for estimating lengths, routing, and sizing for a more effective takeoff on materials.
This approach provides sharing of details through a visualization of the proposed product with enhancements
through color rendering and views/directions. The model can support construction phase, including turnover,
to the client upon completion.

Parametric detailed estimate: The parametric estimate uses the unit-based cost and quantity of units to install
or construct for the project. The level of accuracy is improved since the factors are in the unit-base costs
and then duration is estimated on multiples of the base cost. This method involves the relationship between

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variables to calculate the cost or time. The parameters or conditions that foster the development are analyzing
past events and trends. The formulas, equations, or mathematical relationships applied are based on experience
per project performance (cost, resources) characteristics utilizing a range of historical projects to provide cost
proposals where risk analyses were executed to manage the work efficiently and overcome barriers effectively.
The parametric method incorporates lessons learned, best practices, and economic analysis data related to
technical, programmatic, cost, and resource characteristics consumed to provide the end item.

Project comparison: Comparison estimating requires some similar, historical projects to make an analogy
to the present. The accuracy of this method can increase where the same project management is used and the
projects past and present are very similar. This can also be realized with experienced craft/construction crews
and subcontractors where past involvement create efficiencies in activities, material and equipment orders,
and safety. Comparison of past projects, including simple paybacks or internal rates of return, may be more
meaningful to the management tasked with approval, but also for expedited decisions without knowing the
details. This approach is relying on expert judgment with an understanding of resource availability, economic
trends, and the risks involved.

4.2 Cost estimating users and uses

Financing. Financial sources need to know precisely how much money is required, and when it is needed.
Financing may come from financial reserves, capital investments, grants, borrowing, or from other sources.
If the estimate is low, there may not be enough money available to complete the job properly; if the estimate
is high, the project may be cancelled, or the cost of financing becomes higher than it should be or competing
projects may be shelved. For a project that will extend over a long period or that will start at some time
in the future, projecting the need for money versus time can be a consideration. Delayed expenditures may
involve factors such as estimating inflation rates, forecasting prospective value of the currency used, and other
considerations that should be resolved with the financial experts on the project. Financial managers want to
rest assured that they obtain the right amount of funding for the project, not too much and not too little.

Project budgeting. The cost estimate tells how much money will be needed to complete the scope of the
project. After the budget is approved, the budget restricts how much money can be spent to complete the job. A
common tendency is to estimate on the high side so the project will not run out of money before it is finished,
however, this tendency should be avoided because an estimate that is too high may cause a good project to be
rejected, or the cost of financing may be excessive, or other projects may be shelved. Hence the importance of
a realistic estimate.

Bidding. Bidding typically means competitive bidding, with the lowest bid usually winning the contract.
That leads to the realization that the bid estimate should include all actual costs so the bidder does not lose
money and remain below other bidders or the contract will be lost. Bidders characteristically have their own
confidential refinements for preparing a bid. A correct estimate is crucial. The National Electrical Contractors
Association (NECA), for example, offers its members extensive information and training about estimating.

Construction. Economic constraints require that the total work of the project shall be accomplished within
the limits of the budget. Construction managers use the budget together with the cost estimate to track and
manage progress throughout the construction period. The cost estimate should be structured in such a way that
it accommodates use of the cost breakdowns for construction management. Consider engaging the help of the
prospective construction manager to be certain that all relevant factors have been taken into account.

Contracts, litigation, ethics. Cost estimates lead to contracts involving money (and other things). Money
problems or conflicts can lead to litigation. The estimating engineer must meet ethical standards throughout
the entire process. The problem is not so much the question of estimating but the question of how to deal
ethically with other people, governmental agencies and with corporate entities. Remember who engaged you;
support his interests honestly. Maintain confidentiality, even if it is not spelled out explicitly. Maintain your
professional position as an engineer. At all times, ensure that all understandings, agreements and negotiations
are recorded in writing and when possible signed or documented in such a manner that it is clear what all

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parties agreed to. Understand your responsibilities by becoming familiar with IEEE guidelines on Ethics and
Member Conduct [B4] and National Society of Professional Engineer (NSPE) Code of Ethics for Engineers
[B17]. Also be aware of ethical requirements of the licensing entities in the applicable jurisdictions (i.e., State
Board of Engineers, Canadian provincial engineering licensing bodies).

Risk analysis. The risk associated with an event is a function of the probability of the event and the
consequences of the event. A convenient way to calculate risk, especially when the consequences can be
expressed in monetary terms, is to multiply probability by consequence.

The calculation of risk is a joint responsibility of the engineer and the client. The engineer is generally adept
at using mathematics and should take the lead in the determining the probabilities of events; the client is
generally very familiar with the financial consequences of things that go wrong. Working together, engineer
and client should identify which possible events are to be considered and then proceed with the calculations.

The mathematics of probability is covered in IEEE Std 3006.5™ [B6]. Tools for applying probability, such
as Reliability Block Diagrams, Fault Tree Analysis, and Failure Modes, Effects, and Criticality Analysis
(FMECA), are discussed in IEEE Std 3006.7™ [B7]. There are many textbooks on the subject of risk. An
especially useful one is by Kumamoto, Hiromitsu and Henley [B12].

Approvals. Find out which approvals, inspections, authorizations, and similar requirements apply. Check to
see if similar requirements for other disciplines will affect your project. Allow for the cost of these items.

Information for future projects. Keep a permanent copy of the estimate for reference for future projects. If
possible, include a copy of actual costs for comparison, with the objective of becoming more accurate and
faster when preparing another estimate.

4.3 Capital costs (company practices, accounting practices)

The compilation of an estimate’s units are normally expressed in a form of currency based on the project locale,
e.g., within the same state, continent, or global. Inherent with cost estimates are economic cycles, monetary, and
company policy or financial requirements. The company policies are more familiar as Terms and Conditions
that manifest within the accounting processes for establishing fiscal year budgets, expenditures and capital
projects as well the practice of closing the books with annual accruals. Industrial as well commercial projects
conducted in combination with private, public works, or government/federal agencies in the United States of
America can be subject to wage rate and hour determination, as well state and or local bargained wage/hour
determination including where subject to burdens. [B18]

4.4 Commissioning and training costs

There are costs for the quality assurance and quality control to assure the owner’s project requirements specific
to performance are met and the transition to operations and maintenance to ensure the full life cycle of the of the
project deliverable. The term commissioning involves costs associated with equipment 3rd part test services,
manufacturer’s representatives, Mechanical Electrical Plumbing (MEP) coordinator(s), commissioning
authority, test equipment, focused to change from the static state to the dynamic state for a fully functional and
operational system. This starts at the component instrumentation calibration and controls point to point checks
followed by equipment and then system functional tests. Commissioning can be extended to optimize under
full seasonal conditions with trending referred to as enhanced commissioning. Commissioning of different
systems, e.g., fire detection and notification, substations, standby/emergency generators, etc. may have
prescriptive requirements per associated code and standard(s); ASHRAE, NFPA, IEEE. (ASHRAE: American
Society of Heating, Refrigerating and Air-Conditioning Engineers).

The transition to operations and maintenance includes receipt of Operations and Maintenance Manuals
(O&Ms) after equipment purchases to support commissioning and training content. Training per an agenda

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may include classroom, site visit and demonstration and may require video recording of each. Training
should include the various modes of operation; normal, emergency, standby and maintenance. Operations and
maintenance personnel typically attend the training and can be tailored to enhance knowledge for successful
project transition.

4.5 Operating costs, installed cost plus variables, inflation

Indirect and direct cost sources provide for the foundation of construction and management up through
the commissioning and transfer of operation with turnover document phase(s). The installed costs may be
spread over several months/years and have exposure to inflation of labor, material, and equipment costs. Raw
material production can also be a variable to the final product pending manufacturing and commodity cost
inflation. The transition to beneficial occupancy or final acceptance concludes with the initial installed costs to
operation and begins the useful service and return on investment.

4.6 Total cost (return on investment, net present value, operating life)
Totaling the full estimated costs of indirect, direct and associated influential variables per the sources provide
for a final sum and or range with percent accuracy applied. This may be accompanied with assumptions and
excluded costs to maintain a realistic cost for execution. The delivery will be linked with a project schedule
combined with a construction schedule that could be cost and resource loaded per the work break structure.
Following this method of determining costs allows the financial analysis to conduct the rate of return, return
on investment, and at what cost of money over the project and operating life; life cycle costs. The net present
value (NPV) or worth consists of cash flow spread over several to many years. (For definitions of such terms
as time value, discount, discount yield, compound interest, efficient market, market value and opportunity cost,
refer to Downes and Goodman, [B3].)

An earned value management approach provides milestone payment structures to be developed and tracked
to activity accomplishments, substantial completion and beginning of production or placement into operation.
The costs associated of money due to inflation, escalation and operational costs, cost of borrowed monies with
incremental interest tied to the number of years will establish the level of funding overall and annually. The
cost of money can be developed with a simple payback, compounded with multiple year paybacks. Paybacks
can be augmented with offsets for production, and maintenance and sustainability costs.

Once each cash inflow/outflow is discounted back to its present value (PV) (1), then all are summed together
(2). Therefore, NPV is the sum of all terms as shown in Equation (1):

t
PV = Rt / (1 + i ) (1)

where

t time of the cash flow

i discount rate, i.e., the return that could be earned per unit of time on an investment with similar risk
Rt net cash flow i.e., cash inflow minus cash outflow, at time t . For educational purposes initial
investment R0 is commonly placed to the left of the sum to emphasize its role as (minus) the investment

The result of (1) is multiplied with the annual net cash inflow and reduced by initial cash outlay. In cases where
the cash flows are not equal in amount, then the previous formula will be used to determine the present value of
each cash flow separately. Any cash flow within 12 mo will not be discounted for NPV purposes; nevertheless,
the usual initial investments during the first year R0 are summed up as negative cash flow (see Khan, [B11]).

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 IEEE Std 3001.4-2020
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Given the (period, cash flow) pairs ( t , Rt ) where N is the total number of periods, the net present value NPV
is given by Equation (2):

N
Rt
NPV (i, N ) = ∑ t
(2)
t =0 (1 + i )
NPV calculations are useful for demonstrating the worth of investments or for the benefits of projects that are
expected to create energy savings over time.

Investment Analysis example: A $5000 initial investment is expended (cash outlay; negative for cash out-
flow). During the next four years three yearly payments of $125 each are received followed by a $5500 final
payment at year four (positive for cash inflow). A performance criterion of at least 5% interest is assumed.
Verify the investment is an opportunity where the return out performs the risk:

Calculation steps are as follows:

Initial PV = -$5, 000

1
Year 1 PV = $125 / (1 + 0.05) = $119.05

2
Year 2 PV = $125 / (1 + 0.05) = $113.38

3
Year 3 PV = $125 / (1 + 0.05) = $107.98

4
Year 4 (final Payment) PV = $5, 500 / (1 + 0.05) = $4524.86

NPV = − $5000 + $119.05 + $113.38 + $107.98 + $4524.86 = − $134.73 . The NPV is negative,
which indicates that the risk is higher than the performance criteria and is not an acceptable investment
opportunity. It may be acceptable using a lower level risk, i.e., a lower interest rate:

Recalculate using 4%: interest rate is as follows:

Initial PV = -$5, 000

1
Year 1 PV = $125 / (1 + 0.04) = $120.19

2
Year 2 PV = $125 / (1 + 0.04) = $115.57

3
Year 3 PV = $125 / (1 + 0.04) = $111.12

4
Year 4 (final Payment): PV = $5, 500 / (1 + 0.04) = $4701.14

NPV = − $5000 + $120.19 + $115.57 + $111.12 + $4701.14 = $488.02 . The NPV is a positive
number that indicates the investment opportunity may be acceptable.

An interest rate that makes the NPV zero, is called the Internal Rate of Return (IRR). The IRR should be higher
than the cost of funds.

Energy Project Example: Energy savings are realized through electrical upgrades such as integrating a variable
frequency drive (VFD) into an existing constant speed motor application running utilization loads such as
pumps, fans, etc., to reduce power consumption:

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Example: The VFD costs $5000 and is installed during a scheduled outage. The assumed payback rate in
energy is $0.11 per kWh, considering 24 h per day, 365 d per year at 30% energy savings—assume 100 kW
(100 hp) and results in 876 000 kWh per year. The 30% savings reduces normal annual energy consumption to
613 200 kWh and provides $2890.80 savings. Due to weather and cyclic manufacturing, actual runtime is 50%,
which reduces savings to $1445.40 annually. Given the company’s four year payback return on investment,
calculate the NPV with 5% inflation over four years.

Rate at 5%: Initial PV = -$5, 000

1
Year 1 PV = $1445.40 / (1 + 0.05) = $1376.57

2
Year 2 PV = $1445.40 / (1 + 0.05) = $1311.02

3
Year 3 PV = $1445.40 / (1 + 0.05) = $1248.59

4
Year 4 PV = $1445.40 / (1 + 0.05) = $1189.13

NPV = −$5000 + $1376.57 + $1311.02 + $1248.59 + $1189.13 = $125.31

The net present value is a positive number indicating that the energy project will meet the company’s four year
payback criterion. It should be noted that, if there are no other negative cashflows associated with the VFD, the
energy savings will continue and make NPV more positive as operation continues.

4.7 Required information

Before the engineer can begin to estimate the cost of primary and alternate power-distribution systems, certain
information is required:

— A load survey should be prepared. The kVA or kW load, in-rush current, nature of the operation, degree
of reliability required, and requirements for future expansion should be considered.
— Availability of utility power should be determined. What is the available distribution voltage, the
capacity, and the projected reliability of that source to meet the plant’s need? Is a second utility source
available to provide added reliability?

4.7.1 Single line, layout/plan

Begin with an accurate, complete single-line diagram and a layout. The layout or plan will show where
equipment will be located, the access to these locations for installation (including activities of other trades),
maintenance, potential restrictions driven by traffic, environmental, and other concerns. It may be necessary
to use good judgment if certain constraints are not evident; however, both the single-line and the layout should
be essentially complete and correct.

4.7.2 Initial and prospective loads

Obviously, the initial loads should be known, and usually these loads become defined more and more accurately
as the design and estimating project progresses. One basic consideration is: how long will the power system be
used, short term or long term? Determining prospective loads frequently requires a high degree of judgment
that may require close cooperation with the designer and project manager. Here, the basic purpose of the
installation comes into play with questions such as: will production changes affect power distribution? How
far into the future need we look? What are the levels of probability for changes in loads?

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4.7.3 Availability, sources of power

Utility rates are associated with loading efficiencies and losses, demand charges, scheduled rates. Demand
structures can include curtailment, load shedding opportunity costs per the operation/process. Annual inflation
per economic and market conditions will vary and contribute to overall project and operating costs. Generation
and availability can be from several to multiple sources that have operational characteristics, transmission,
distribution, hours of service, and production schedules to balance with consideration of environmental
conditions that pose consumption and backup to be accounted for in the design for operation.

4.7.4 Labor: rates, performance, premium time, availability

Direct costs include labor costs where law may require workers employed to be compensated at no less than
prevailing wage. Unit labor costs are to include base costs plus all fringes and burdens applicable to each
trade. Other items to include are health and welfare, pension, vacation, travel time, etc. Labor rates may be
bargained and incremental increases may be mid-year to annual over a several year time period for apprentice,
journeyman and lead based on shift, overtime, compensated non-work days per month, guaranteed paid hours
per day, potential inefficiencies due to work without time off, and implementation of safe work practices
to reduce hazards. Prime contractor’s markup on subcontractor’s work can be fixed at various percentage
of cost plus attributable to additional work, change orders, expedited schedule completions, etc. Prime and
contractor’s bond and insurance are calculated as percent of total cost of all direct costs and may include other
type bonds or incentives at owner’s request such as guarantee performance, and payment guarantee, safety
bonus award plan, and state/local permits.

5. Factors to consider
After the above information is known, there are several other factors to be considered, which vary in
importance depending on the size and type of plant.

Confidentiality: Confidentiality and ethics go together. The estimating engineer cannot, in good conscience,
disclose bids or other confidential information without the clear and precise permission of the other party.
Further, breaking an implied or stated understanding of confidentiality can bring grave consequences to the
engineer and employer.

Commitments and local practices: Be aware of, and allow for, the impact of any commitments made to
purchase from a particular vendor, to award the contract to a particular contractor, or any similar action that
affects cost. In some situations, it may be prudent to enquire about such details. Local practices can affect
costs, so attempt to learn if there are any labor practices, requirements governing restricted access, limitations
concerning handling of equipment, or other local practices that affect cost.

Urgency: Know if the project is urgent to the point where the estimate needs to include overtime in the
supplier’s factory or in the field, expedited delivery of materials, temporary facilities needed until permanent
equipment is available; the list of possibilities is large. Work closely with the construction team to learn any
details that affect the power system cost estimate.

Schedule: Project duration follow schedules comprised of dates to reflect milestone activity, ranges of
activity durations, critical path and float. The construction schedule involves more details for conveying
delivery of equipment, installation durations, testing and inspection, startup and commissioning, turnover of
documents etc. Conditions that impact daily, weekly, monthly that can delay progress may manifest as a result
of environmental conditions of rain, wind, poor air quality, freezing or exceptional high heat temperatures,
or other types like labor negotiations, disputes/strikes, road closures, walkouts, turnover, and equipment
delivery delays, etc. Where these are more detrimental to execution of the planned work, scope creep can
increase completion dates for additional time to be added to the schedule or to be expedited within the original
completion date. All these may have impacts that have constant influence on meeting schedule objectives.

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Integrating to existing facilities:

a) Utility rate structures may exist that are conditional to the amount of load, and new loads may result in
new negotiated rates.
b) Modes of operation which can include maintenance, testing, and tapping into existing equipment
requires shutdowns, and possibly loss of production or use.
c) New equipment may contain devices whose servicing and operation are unfamiliar to existing facility
operators and maintenance personnel.
d) Safety is the responsibility of the facility owner. Contractors and subcontractors should coordinate
their safety practices with those of the owner.

References to consider include IEEE Std 3007.1™ [B8], IEEE Std 3007.2™ [B9], and IEEE Std 3007.3™
[B10].

6. Preparing the estimate

6.1 General
The capital cost of a power system is the sum of the equipment and material costs, cost of installation,
commissioning, testing, and start up, plus miscellaneous other costs incurred to provide a complete and ready-
to-operate system. Include the entire system when making economic comparisons as each part is economically
related to the whole.

The cost estimate will be used by many people. Therefore, the estimate should clearly identify items that are
included and the source or basis for estimating figures. Also, closely related items that affect the ultimate cost
but are not identified as “not included” in the estimate should be identified so they are not overlooked.

A cost estimate involves the quantitative assessment of typical resource costs required to complete the activity,
e.g., project. Costs for developing an estimate are compiled through an iterative process. At the beginning,
assumptions may outnumber hard facts and associated figures. This process refines itself from one phase of
the project to another, and will improve as specifics are known and included. This will allow the accuracy
of an estimate to be improved from a rough order of magnitude to a refined estimate with a much higher
level of accuracy while accounting for all the resource costs. Resources may include, but are not limited to,
materials, equipment, labor, services, existing facilities integration, plus special categories such as inflation,
costs of quality, contingency, etc. Refer to PMBOK Guide 4th edition. [B1]. When developing relative costs,
the time to complete the estimate and available information may be limited; therefore, it may be necessary to
make assumptions. Assumptions should be clearly documented and included as part of the estimate. Typical
items to cover are design engineering, premium time allowance, field engineering, taxes, permits, shipping,
foundations, contingencies, unusual scheduling, construction conditions, spare parts, and start-up assistance.

Many estimating programs are available on the market and, some companies have developed their own
programs for use in-house. The National Electrical Contractors Association (NECA) provides a variety of
estimating programs with related training programs for their members. Estimating programs usually contain a
database of current costs for many items and are useful in estimating costs for installation of equipment and for
standard items such as conduit and wire, supporting materials, and grounding. However, major items, such as
substation transformers, usually are custom-engineered. A quotation from the manufacturer may be desirable
for these items.

Recognize that the estimate will include prices that are not fully accurate, labor estimates that are subject to
field variations, factors that impact basic assumptions, and many other things. There is no merit in spending
an inordinate length of time trying to get the estimate accurate to the last dollar because it cannot be done. Use
judgment based on the class of estimate that is required.

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6.2 Company practice

Each company has its own method for economic analyses and cost analyses. The estimating engineer should
structure the estimate so the costs that occur beyond the fundamental labor and material costs are addressed in
the way that is desired by the company. An early discussion with the financial or accounting department can
be fruitful. The company may have developed proprietary forms, spreadsheets, processes, and costs or cost
models for construction based on cost or resource loaded schedules, unit cost application and activity driven.

Companies can establish and implement estimating standards that follow, for example, the estimate
classifications established by AACE International, for levels 5 to 1 (order of magnitude, study, preliminary,
definitive and detailed) based on information known and application of a range of percent accuracy from High
to Low of –30% to +100%, down to –5% to +15% respectively. Practices of professional cost estimators may
establish a format to provide a systematic approach in estimate development. One example of 12 key steps in
formulating the estimate for high quality are as follows:

1) Define the purpose of the estimate

2) Develop an estimating plan
3) Identify the project (or program) characteristics
4) Develop the estimating format [e.g., Work Breakdown Structure (WBS)]
5) Define the ground rules and document the assumptions
6) Gather data
7) Compare estimate with an independent cost estimate
8) Analyze the sensitivity
9) Develop the risks and uncertainty analysis
10) Document the estimate
11) Obtain management (stakeholder/owner) approval of the estimate
12) Provide updates to the estimate to reflect actual costs and changes

Determining the estimating structure includes the need to develop a “product-oriented” WBS that reflects the
requirements and basis for identifying resources and tasks necessary to accomplish the project’s objectives.
AACE International5 and DOE 413.3–21A [B2].

6.3 Third party tools and programs (commercial software)

New technology in hardware and software allow estimating to be conducted more efficiently than in the past.
This applies to estimating with off-the-shelf licensed software. These software packages may include annual
fees and offer modules with enhanced features and tools. The software may have supplementary forms and
spreadsheets. The types of estimating software may include or be selected with common types of estimates
such as detailed, unit based, model, project comparison, and parametric. There are software inputs required for
interactive quantity inputs and or units, labor and burden rates.

6.4 Project feedback, comparison with estimate, update procedures

Lessons learned can be useful for improvement of future estimates using knowledge of where the estimate was
over, under, and missed. This helps with estimates for accuracy and details for future, similar type construction
and application of estimating methods for producing appropriate cost ranges and classes of estimates. It is also

5
AACE International publications are available online at https://​web​.aacei​.org/​.

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 IEEE Std 3001.4-2020
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helpful to be involved during construction as well post-construction for awareness of construction methods
followed, schedule/equipment delay causes or where expediting could affect the budget that was based on
the project estimate. Communication with project/construction management may allow an exchange of
installation or construction procedures that results in efficiencies in labor consumption in certain conditions
and prove cost effective. Estimators are stakeholders and part of the communication plan. They can contribute
by pricing change orders, scope creep and equipment changes to follow budget and maximize return on
investment.

6.5 Classes of estimates

6.5.1 General application

The three basic types of estimates are the preliminary estimate, the engineering estimate, and the detailed or
final estimate. The three types vary in accuracy as well as in time and effort required for preparation, with
each successive estimate containing more detail and requiring more time. It is important to include sufficient
money in the engineering budget to cover costs for the estimating activity.

These correspond with the classes defined by the AACE International as Class 4, Class 3, and Class 1,
respectively. Refer to AACE 18R for additional information.

6.5.2 Preliminary estimate

The foundation of a sound preliminary estimate is good judgment. One approach is to use the known cost of
a similar installation and scale that cost to the size of the system under study, allowing for any differences in
conditions associated with the new system, such as location, new technology, new design concepts, unusual
labor productivity, and changes in costs of equipment and labor. Typically, the project cost will range from
15% below to 40% above the preliminary estimate.

This level of estimate is typically based from project design deliverables at a 1% to 15% level, for instance an
early schematic design, and would be considered a Class 4 estimate usually used for feasibility.

6.5.3 Engineering estimate

A typical engineering estimate requires a one-line diagram, a good understanding of what the final installation
will include, layouts, and a comprehensive list of equipment. Prices of major items should be obtained from
vendors or from previous purchases, and judicious use should be made of updated data from past jobs, other
materials, and installation costs. An example is included at the end of this chapter. Typically, the actual cost
will range from 10% below to 20% above the estimate.

Design deliverables would typically be at a 10% to 40% level in order to support a Class 3 estimate and may be
use for budget authorization.

6.6 Detailed estimate

In most cases, detailed estimates are done by experienced professional estimators using established procedures.
Often firm quotations are obtained from vendors. These estimates include quotations for detailed material
requirements that consider bidding and construction specifications taken from completed drawings. This level
of accuracy applies for contractors submitting fixed price bids and should apply to engineers who prepare an
“engineer’s estimated cost” that will be used in evaluation of bids. Detailed estimates should be ±5% to 10%
of final cost.

Design deliverables are complete, and this level of estimate is used for comparison of bids received from
prospective vendors and/or contractors.

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 IEEE Std 3001.4-2020
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6.7 Cost categories

Equipment and material costs: Changing markets preclude publishing a list of typical costs for equipment and
material in this guide. Up-to-date costs may be obtained from recent purchases or quotations for the specific
project under study, manufacturers’ and distributors’ published prices (include all increases and discounts
in the price), and from published estimating guides. The accuracy of the estimate will depend upon major
items being priced accurately. Minor items may be covered by an allowance based on judgment or established
percentages. Do not miss any line items. If the cost of a line item is not known, say so in the estimate and
provide an explanation for the number that is used.

Beyond basic equipment sizing, costs may vary based on the material of construction (e.g., aluminum versus.
copper bussing), enclosure requirements and protection/controls complexity, such as metering and relaying
requirements.

Installation costs: Since installation costs are significantly impacted by labor productivity and wage rates,
refer to previous experiences, to local contractors, and to current estimating guides for information. These
costs also vary with time, particularly based on availability of labor in a particular market at a particular
moment.

Consider the fact that no task goes as easily as anticipated and, therefore, some contingencies should be
added to time estimates. The estimate should include the cost of one or more trips to the warehouse to pick
up materials, time to get the tools, coffee breaks, and other overhead considerations, in addition to the actual
work. Also included should be an allowance for premium time or overtime and consideration of crew size
and, on small jobs, the non-working supervisor. Costs that vary with location, season, and time should be
adjusted to reflect anticipated actual costs. Costs vary from country to country and from region to region. Cost
of work performed during extremes of cold or hot weather usually varies from that performed during more
moderate weather. Cost escalators might be appropriate for work to be done at a future date. Most accounting
and estimating departments have established procedures for coping with the time element.

Other costs: Other costs to be considered include a contingency item to cover miscellaneous costs beyond
those defined in the estimate. Contingencies adjust for estimating errors, unforeseen complications, and
miscellaneous small tasks, but not for omission of significant items nor for changes in scope. Environmental
remediation could have latent costs associated with contingency. There are ways to associate the value of
risks with mitigation. They can involve tasks or activities, and may differ for equipment, material, and labor.
Contingency values are a judgment decision.

An adjustment reflecting inflation modifies costs at the time the estimate is made to anticipate costs at the
time expenditures are made. Usually the estimating or accounting department has established procedures for
addressing this problem, but the estimating engineer should adjust the estimate for any known factors, such as
manufacturers’ and distributors’ escalation clauses, expediting charges, or extended warranties.

If salvage values for equipment, cable, etc., are known, they should be recognized. Although they may not be
credited to a project, they can be important contributors to the overall financial health of the company.

Engineering costs for a project should include engineering studies, preliminary plans, estimates, preparation
of construction drawings and specifications, equipment specifications, review of equipment and construction
bids, etc. Engineering costs should be assigned whether the work is done by the owner or by consultants.

A complete estimate will also include the costs of:

— Construction supervision
— Construction mobilization and demobilization
— Field engineering

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 IEEE Std 3001.4-2020
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— Services of manufacturers’ representatives

— Testing, training, commissioning
— Other requirements that may apply

If these are not made part of the estimate, make clear what is included and what is omitted.

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 IEEE Std 3001.4-2020
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Annex A
(informative)
Example

A.1 General
The following example shows one technique for developing an engineering cost estimate. The reader
should not use the dollar figures because undoubtedly, they will be out-of-date and probably not directly
applicable to the specific project.

Note that costs are segregated to show major items purchased by the owner, equipment, and material
provided by the contractor, and labor provided by the contractor.

The labor portion of the estimate is developed on a man-hour basis and then multiplied by the labor rate to
obtain dollar amounts. This technique facilitates revising the estimate as labor rates change. Also, the man-
hour information provides a ready means to check the estimate by comparing time actually spent on the job
with time as estimated. For reference on subsequent jobs, the man-hour estimate without the effect of labor
rates will prove more useful than dollar amounts.

A.2 Design data

Typical power distribution system projects have been depicted in Figure A.1, Figure A.2, and Figure A.3,
and enhanced with a site plan in Figure A.4. Figure A.5 illustrates a typical blank estimate sheet. Table A.2
through Table A.5 show the actual estimate for the system described.

A.3 Supporting data

A file of quotations and other information that substantiates the cost data should be maintained (not
included in the example in this subclause, however). An allowance in the contractor’s material for the
overhead expenses and profit should be included.

Direct labor costs may be used for each line item with overhead, profit, etc., added in the summary.
Alternatively, total costs and profit can be added in the cost per man-hour. In this example, all costs are
included in the cost per man-hour.

Cost/man-hour for estimate: For the example in Table A.1, assume one superintendent with three crews,
each with four working journeymen and one working foreman. The total crew is 16, with 15 electricians
working with the tools. Assume the average work week is 40 h at straight time and 4 h at premium time.

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Table A.1—Example of a schedule for estimating man-hour cost

Payroll cost/week:
Journeyman (12) × (40) @ ($____/hr) = $
(12) × (4) @ ($____/hr) = $
Foreman (3) × (40) @ ($____/hr) = $
(3) × (40) @ ($____/hr) = $
Superintendent (40) @ ($____/hr) = $
(4) @ ($____/hr) = $___________
Subtotal #1, payroll. Cost/wk $

Add to the payroll cost:

Direct labor charges _______% = $
Indirect labor charges ______% = $___________
Subtotal #2, payroll, direct and indirect = $

Add to Subtotal #2:

Contractor's profit ________% = $___________
Subtotal #3, costs and profit = $

Divide subtotal #3 by 15 to obtain the average cost per man-hour for this estimate.
For purposes of this example, the average cost is assumed to be $120.00/man-hour.

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 IEEE Std 3001.4-2020
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Figure A.1—Single line diagram

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 IEEE Std 3001.4-2020
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Figure A.2—5 MVA, 4.16 kV substation and motor control center

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Figure A.3—Substation C: 1.5 MVA, 480Y/277 V

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 IEEE Std 3001.4-2020
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Figure A.4—Site plan

Figure A.5—Cost estimate calculation sheet

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 IEEE Std 3001.4-2020
IEEE Recommended Practice for Estimating the Costs of Industrial and Commercial Power Systems

Table A.2—Sample cost estimation calculation: Summary

Description Material cost by Material cost by Labor cost ($)r Total cost
owner ($) contractor ($) ($)
By item Total By item Total By item Total
Primary power 13.8 kV
Outdoor substation 852,976 12,416 139,800 1,005,192
Incoming feeder 44,856 20,132 77,520 142,508
Primary switchgear 569,600 13,617 62,400 645,617
Generator—included in mechanical
Generator bus 25,810 2,047 36,000 63,857
Feeders 37,594 17,781 104,280 159,655
Grounding 11,214 26,400 37,614

Subtotal primary power 1,530,836 77,206 1,311,792 2,054,442

Substation A, 4.16 kV
Unit substation 319,510 8,811 37,200 348,611
Feeders 9,644 21,264 30,908
Capacitor 10,680 3,000 13,680

Subtotal substation A 319,510 29,135 61,464 393,199

Substation C, 480 V
Unit substation 167,320 4,005 23,640 194,965
Feeders 14,158 31,008 45,166
Capacitor 8,010 2,400 10,410

Subtotal substation C 167,320 26,173 57,048 250,541

Power system total 2,352,306 184,861 1,544,400 3,199,264

Values to use 2,353,000 185,000 1,545,000 3,200,000

NOTE—Not included in estimate: freight, spares, training, contingency, escalation, sales tax, permits and fees,
bond, foundations, lighting, commissioning.

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 IEEE Std 3001.4-2020
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Table A.3—Sample cost estimate calculation sheet: Primary power

Item Description Qty Per Material Material Labor Labor Labor Total cost
no. unit cost by cost by hours per hours cost @ ($)
cost owner contractor unit $120/hr
($) ($) ($) ($)
1 Incoming line structure 1 240,300 500 60,000 300,300
2 SF6 circuit breaker 121 kV 1 89,000 100 12,000 101,000
3 Transformer, 15 MVA, 115-13.8 kV (see quote) 1 514,420 514,420
Foundation included in structural estimate
Handling, rigging, installation 2,492 400 48,000 50,492
Primary connections 4,628 100 12,000 16,628
Testing (subcontract quote + 15% 2,359 2,359
4 Grounding resistor, 100 A, with CT 1 9,256 9,256
Supporting structure 2,492 15 1,800 4,292
Install, connect, test 445 50 6,000 6,445
Subtotal outdoor substation 852,976 12,416 139,800 1,005,192
5 15 kV incoming feeder
Trench and backfill 457 mm x 1067 mm 65 97.9 6,364 0.15 10 1,170 7,534
(18 in x 42 in);
7.6 cubic meter (10 cubic yd) fill
Concrete-encased duct; (3) = 4 in; (1) = 2 in 65 115.7 7,521 2 130 15,600 23,121
Conduit risers 4 in aluminum, including 210 21.36 4,486 0.6 126 15,120 19,606
Fittings, hangers
Cable, 1/C 750 kcmil, 15 kV EPR 1575 28.48 44,856 0.15 236 28,350 73,206
Terminations 18 97.9 1,762 8 144 17,280 19,042
Subtotal incoming feeder 44,856 20,132 77,520 142,508
6 Primary switchgear
A. Indoor metalclad, 15 kV, 750 MVA, 910 364,900 364,900
including breakers and aux, (4) feeder breakers,
(1) motor starter breaker (see switchgear quote)
B. Add for generator, breaker, and auxiliary 204,700 204,700
neutral, breaker, relaying, sync, battery (see
generator quote)
C. Handling, rigging 2,047 100 12,000 14,047
D. Align, connect, checkout 1,335 420 50,400 51,735
E. Testing (subcontract quote + 15%) 10,235 10,235
Subtotal primary switchgear 569,600 13,617 62,400 645,617

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Table A.3—Sample cost estimate calculation sheet: Primary power (continued)

Item Description Qty Per unit Material Material Labor Labor Labor Total cost
no. cost cost by cost by hours per hours cost @ ($)
($) owner contractor unit $120/hr
($) ($) ($)
7 Generator and auxiliaries, except for item 6b included in 89,000 100 12,000 101,000
turbine-generator estimate; see mechanical estimate,
including erection
8 Generator bus; 2000 A, 15 kV Lot 25,810 2,047 300 36,000 63,857

15 kV feeders

9 Substation feeders from breakers #1, 4 (#5, 6 not 630 16.02 10,093 0.5 315 37,800 47,893
included) 3 in aluminum conduit fittings, hangers
Cable CC 250 kcmil, 15 kV, EPR [204 m (670 ft) run] 2010 8.9 17,889 0.8 161 19,296 37,185
Terminations 24 960 6 144 17,280 18,240

10 Motor feeder, 3/C 250 kcmil, 15 kV interlocked armor 540 36.49 19,705 0.28 151 18,144 37,849
Supports, bracket, [1524 mm (5 ft) centers] 50 74.76 3,738 1 50 6,000 9,738
Terminations 4 213.6 854 12 48 5,760 6,614

11 Hi-pot test, including incoming and generator bus 2,136 0 — 2,136

Subtotal feeders 37,594 17,781 104,280 159,655

12 Grounding (includes ground loop for two buildings 2000 3.827 7,654 0.06 120 14,400 22,054
connections to all 15 kV and 5 kV class equipment: 4/0
AWG bare copper
Connectors, rods 3,560 100 12,000 15,560

Subtotal grounding - 11,214 26,400 37,614

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 IEEE Std 3001.4-2020
IEEE Recommended Practice for Estimating the Costs of Industrial and Commercial Power Systems

Table A.4—Sample cost estimate calculation sheet: Substation A (Figure A.2)

Item Description Qty Per Material Material Labor Labor Labor Total cost
no. unit cost by cost by hours per hours cost @ ($)
cost owner contractor unit $120/hr
($) ($) ($) ($)
13 A Unit substation—Primary switch 1 302,600 302,600
Transformer 5 MVA, 13.8 - 4.16 kV:
Switchgear section with (4) 2000 A vacuum circuit breakers,
Metering, relaying, total cost (see quotes)
B Handling, rigging 979 80 9,600 10,579
C Align, connect, checkout 979 180 21,600 22,579
D Testing (subcontract + 15%) 2,759 2,759
E Foundation and room in structural estimate,
Lighting in building estimate
1 16,910 — —
14 Grounding resistor 400 A, with CT 3,560 15 1,800 5,360
Supporting structure 534 35 4,200 4,734
Install, connect test

Subtotal indoor substation 319,510 8,811 37,200 348,611

5 kV feeders (feeder #2 not included)

15 3 in aluminum conduit, fittings, hangers 100 16.198 1,620 0.5 50 6,000 7,620
Cable, 1/C, 500 kcmil, 5 kV, EPR 330 12.104 3,994 0.11 36.3 4,356 8,350
2-1/2 in aluminum conduit, fittings, hangers 50 14.774 739 0.45 22.5 2,700 3,439
Cable, 1/C, 250 kcmil, 5 kV, EPR 180 8.544 1,538 0.08 14.4 1,728 3,266
Terminations 18 64.08 1,153 3 54 6,480 7,633

16 Testing (subcontract) 600 0 — 600

Subtotal feeders 9,644 21,264 30,908

17 Capacitors, 4.16 kV, 600 kVAR, including installation 10,680 25 3,000 13,680

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 IEEE Std 3001.4-2020
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Table A.5—Sample cost estimate calculation sheet: Substation C (Figure A.3)

Item Description Qty Per Material Material Labor Labor Labor Total cost
no. unit cost by cost by hours per hours cost @ ($)
cost owner contractor unit $120/hr
($) ($) ($) ($)
Indoor substation
18 A Unit substation—fused primary switch 1 167,320 167,320
Transformer 1.5 MVA, 13.8-4.16 kV,
Switchgear section with (4) 2500 A main, (4) 1200 A feeder
breakers, metering,
(use actual cost from project 80-107 + 12.5%)
B Handling, rigging 979 77 9,240 10,219
C Align, connect, checkout 979 120 14,400 15,379
D Testing 2,047 2,047
E Foundation and room in structural estimate:
Lighting in building estimate

Subtotal substation 167,320 4,005 23,640 194,965

480 V feeders
19 2-1/2 in alum conduit, fittings, hangers 100 14.774 1,477 0.45 45 5,400 6,877
3 in alum conduit, fittings, hangers 140 16.198 2,268 0.5 70 8,400 10,668
4 in alum conduit, fittings, hangers 70 19.58 1,371 0.62 43 5,208 6,579
1/C, 250 kcmil, XHHW 80 4.094 328 0.08 6 768 1,096
1/C, 350 kcmil, XHHW 360 6.052 2,179 0.08 29 3,456 5,635
1/C, 500 kcmil, XHHW 720 9.078 6,536 0.09 65 7,776 14,312

Subtotal feeders 14,158 31,008 45,166

20 Capacitors, 480 V, 300 Kvar, including installation 8,010 20 2,400 10,410

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 IEEE Std 3001.4-2020
IEEE Recommended Practice for Estimating the Costs of Industrial and Commercial Power Systems

Annex B
(informative)

Selected sources for estimating information

This is an abbreviated list of references for cost-estimating information. Omission of other current sources is
not meant in any way to be judgmental. Inclusion on this list implies no endorsement by IEEE. The reader is
urged to consider all available references.
ConEst
592 Harvey Road
Manchester NH 03103 USA

NECA Manual of Labor Units, National Electrical Contractors Association, Inc.

Three Bethesda Metro Center, Suite 1100
Bethesda, MD 20814

Mechanical and Electrical Cost Data

R. S. Means Company, Inc.
1099 Hingham St, Suite 201
Rockland, MA 02370

McCormick Systems, Inc.

149 West Boston Street
Chandler, AZ 85225

NOTE—NECA information is proprietary. Nonmembers of NECA may contact the national office (address above) or
the local NECA office for further information.

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 IEEE Std 3001.4-2020
IEEE Recommended Practice for Estimating the Costs of Industrial and Commercial Power Systems

Annex C
(informative)

Bibliography
Bibliographical references are resources that provide additional or helpful material but do not need to be
understood or used to implement this standard. Reference to these resources is made for informational use
only.

[B1] A Guide to the Project Management Body of Knowledge: PMBOK Guide, Project Management Institute,
2004.

[B2] DOE G 413.3–21A, Cost Estimating Guide, 2018.

[B3] Downes, J. and J. Goodman, Dictionary of Finance and Investment Terms, Barron’s Educational Series
Inc., 2014.

[B4] IEEE Policies, Section 7—Professional Activities (Part A—IEEE Policies), 7.8 IEEE Code of Ethics.

[B5] IEEE Std 493™, IEEE Recommended Practice for the Design of Reliable Industrial and Commercial
Power Systems, (IEEE Gold Book™).6,7

[B6] IEEE Std 3006.5™, IEEE Recommended Practice for the Use of Probability Methods for Conducting a
Reliability Analysis of Industrial and Commercial Power Systems.

[B7] IEEE Std 3006.7™, IEEE Recommended Practice for Determining the Reliability of 7x24 Continuous
Power Systems in Industrial and Commercial Facilities.

[B8] IEEE Std 3007.1™, IEEE Recommended Practice for the Operation and Management of Industrial and
Commercial Power Systems.

[B9] IEEE Std 3007.2™, IEEE Recommended Practice for the Maintenance of Industrial and Commercial
Power Systems.

[B10] IEEE Std 3007.3™, IEEE Recommended Practice for Electrical Safety in Industrial and Commercial
Power Systems.

[B11] Khan, M. Y. and P. K. Kain, Theory & Problems in Financial Management, Second Edition. Tata: The
McGraw Hill Companies, New Delhi, 1993. ISBN 978-0-07-463683–1.

[B12] Kumamoto, H. and E. Henley, Probabilistic Risk Assessment and Management for Engineers and
Scientists, 2nd Ed. New York: Wiley-IEEE Press, 2000, http://​dx​.doi​.org/​10​.1109/​9780470546277.

[B13] NETA ATS, Acceptance Testing Specifications for Electrical Power Distribution Equipment and
Systems.

[B14] NETA MTS, Maintenance Testing Specifications for Electrical Power Distribution Equipment and
Systems.

6
The IEEE standards or products referred to in Annex C are trademarks owned by The Institute of Electrical and Electronics Engineers,
Incorporated.
7
IEEE publications are available from The Institute of Electrical and Electronics Engineers (http://standards.ieee.org/).

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 IEEE Std 3001.4-2020
IEEE Recommended Practice for Estimating the Costs of Industrial and Commercial Power Systems

[B15] NFPA 70E, Standard for Electrical Safety in the Workplace.8

[B16] NFPA 70, National Electrical Code.

[B17] NSPE #1102, Code of Ethics for Engineers.

[B18] U.S. Department of Labor, Davis Bacon Act, Title 29 CFR parts 1, 3, 5, 6, 7, United States Code.

8
NFPA publications are published by the National Fire Protection Association (http://​www​.nfpa​.org/​).

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