Client: SemiTech Inc.

Project: NextGen Semiconductor Manufacturing Facility

Project Description:

SemiTech Inc. is investing $2.85 billion in a state-of-the-art semiconductor manufacturing facility designed to produce next-generation chips for Quantum Computing applications. With a Ground Internal Floor Area of 150,000m², it will be the largest factory of its kind in the world. The investment is 50% from the US tax payer and 50% private equity, hence the government accountability and strict commercial regulations surrounding the project.

Project Purpose:

• Expand production capacity for advanced semiconductor chips
• Implement cutting-edge manufacturing processes
• Reduce production costs through automation and efficiency
• Position the country competitively in the global high-performance computing market race

Current Project Status:

The project is currently approaching final budget authorization. The building design has reached an advanced stage (approx. 70% complete), while the semiconductor processing equipment design remains in critical developmental stages (TRL 5-6). This disparity in design maturity creates significant challenges for accurate cost estimation and risk management. For example, the special design is in flux as the process design is preliminary.

Project Delivery Model: Integrated Project Delivery (IPD) with risk shared with the client at this early stage

Key Project Partners:

1. Ernie & Wise - Prime Contractor/Managing Consultancy
   • Responsible for overall project management and integration
   • Holds the master contract with SemiTech Inc.
   • Manages commercial arrangements with subcontractors
   • Leading the cost estimation and risk management process
2. Faker Twix - Design Partner
   • Responsible for facility architectural and engineering design
   • Cleanroom design specialists
   • Building systems integration (HVAC, electrical, utilities)
   • Well-established track record with similar facilities
3. Nott McDonalds - Construction Partner
   • Responsible for building construction execution
   • Cleanroom construction specialists
   • Mechanical and electrical systems installation
   • Has completed three similar facilities in the past five years
4. ACME Corporation - Manufacturing Process and Equipment Partner
   • Specialized semiconductor equipment design and integration
   • Novel lithography systems development
   • Process workflow optimization
   • First major project implementing their pioneered 1nm process technology, first of its kind

Contract Structure:

The project is currently planned to be procured through a single turnkey Engineering, Procurement and Construction (EPC) Cost Plus contract with incentives for meeting cost and schedule targets. This contractual approach has been selected due to the complexity and scale of the project, despite differing maturity levels across project components, noting the risk in the investment sat with investors and the government.

The estimation team at Ernie & Wise has built a comprehensive bottom-up detailed estimate for the building and infrastructure components, with some top-down assessments for the process equipment. Monte Carlo Simulation was performed showing:

• Base cost: $2,850.1 million
• P50 value: $3,700 million
• Recommended contingency: $849.9 million (P50 - base)

According to traditional classification systems, the estimate would be classified as Class 2, with an expected accuracy range of -5% to -15% on the low side, and +5% to +20% on the high side. However, the actual results from the probabilistic risk analysis show a range of -8.2% to +68.5%, indicating the classification system may not be capturing the true uncertainty in the project, particularly for the less mature semiconductor process equipment.

This disparity has created tension with senior management, who are pressuring the estimation team to revise their estimate to fit the expected accuracy range of a Class 2 estimate due to affordability concerns. As an estimator/cost engineer, you would like to communicate the readiness of the project estimate given the state of the project's maturity. The estimation team is exploring Cost Readiness Levels as a complementary framework to better communicate the true state of estimate uncertainty.

Using the proposed CRL index framework and the information provided in the Basis of Estimate, assess the Cost Readiness Level for each major sub-project (Construction of Factory vs. Manufacturing Process & Equipment). Identify specific characteristics from the CRL definitions that justify your assessment.

Building and Infrastructure:

The building and infrastructure components comprise 39.3% of the total project cost ($1,120.0M) but contribute only 37.5% to the overall variance. The estimate is based on the following:

• Detailed civil and structural engineering designs with 90-95% completion
• Quantities extracted from 3D BIM models that have been independently verified
• Multiple contractor and vendor quotations for major elements
• Detailed site investigations including geotechnical surveys and soil analysis
• Historical cost data from three similar semiconductor facilities built in the last five years
• Building services at varying levels of design maturity (30-85% complete)
• MEP services sized based on preliminary process equipment requirements

The substructure and structural elements have high design maturity with validated quantities and firm price quotes. The architectural works are well advanced in design but have some dependencies on equipment layouts. Building services show the least maturity as they are highly dependent on finalized process equipment specifications.

Manufacturing Process & Equipment:

The manufacturing process and equipment elements account for 60.7% of the total project cost ($1,730.3M) and contribute 62.5% of the overall variance. The estimate is based on:

• Preliminary process flow diagrams and equipment layouts (40-60% complete)
• Budgetary quotes from equipment vendors with numerous qualification items
• Limited historical data for some specialized 1nm process technology systems
• Parametric cost models and scaling factors from previous generation technology
• High-level material requirements with significant uncertainty in quantities
• Benchmarking against less advanced facilities with significant factors applied
• Preliminary process utility requirements with significant contingency factors

The standard process systems have moderate design maturity with reasonable budgetary pricing. The novel lithography and process control systems have lower design maturity and significant pricing uncertainty. The integration and automation systems are at a conceptual level with high uncertainty in both scope and pricing.

CRL 1-3: Conceptual Estimate

CRL 4-6: Preliminary Estimate

CRL 7-9: Detailed Estimate

Apply the CRL criteria schema to evaluate each of the five assessment dimensions (Estimate Method, Quality, Uncertainty & Risk, Benchmarking, Contract Type Alignment) for the two major project components. Determine which dimensions are driving the CRL limitations and recommend targeted improvements.

Estimation Methods:

• Building Elements: Primarily detailed unit cost estimation with quantities from engineering drawings; some parametric estimates for MEP systems
• Process Equipment: Combination of equipment vendor budgetary quotes, factored parametric estimating, and benchmarking against similar (but less advanced) installations

Data Quality Factors:

• Building structural design is well advanced with 3D BIM models (70-95% complete)
• MEP systems specifications defined but undergoing optimisation
• Equipment data based on preliminary specifications for novel technology
• Limited historical data exists for 1nm process technology components
• Wafer processing systems are first-of-kind with minimal reference projects

Uncertainty Assessment Approach:

• Three-point estimates developed for all major cost elements
• Monte Carlo simulation applied with triangular distributions
• Correlation factors applied based on expert judgement
• Identified specific risk events with probability/impact matrices
• Sensitivity analysis performed on key cost drivers

Benchmarking Activities:

• Building costs benchmarked against three similar facilities (2-8 years old)
• Cleanroom construction costs indexed from previous projects
• Standard equipment costs compared to previous generation systems
• Novel equipment extrapolated from R&D prototypes with limited benchmarks
• Published industry metrics used for high-level validation

Contract Strategy Considerations:

• Building structure and substructure ready for lump-sum contracts
• MEP systems suitable for target-cost arrangements with shared risk/reward
• Standard process equipment appropriate for fixed-price with limited qualifications
• Novel equipment requiring cost-plus or time & materials arrangements
• Integration systems needing progressive elaboration contracts

Using the detailed BoQ provided and the Basis of Estimate below, evaluate how CRLs vary across different work and trade packages. Identify optimal contract strategies for each package based on their CRL assessment.

Each work package has a different level of design maturity, cost certainty, and readiness for procurement. Below is a qualitative assessment of the key work packages:

2.02 Substructure:

Nott McDonalds have completed detailed design for the substructure with 95% design documents. Three validated contractor quotations have been received, with minimal qualification items. Quantities have been extracted from BIM models and have been independently verified. Geotechnical reports have been completed with extensive bore sampling, and foundation design has been optimised. The team is ready to award contracts with fixed pricing for most elements.

2.03 Structure:

The structural design is 90% complete with detailed engineering drawings and specifications. Material quantities have been extracted from the structural model and independently verified. Steel fabricators and concrete suppliers have provided firm quotations with small contingencies for market fluctuations in raw materials. Seismic design has been validated by third-party engineering consultants. The package is ready for final tender.

2.04 Architectural Works:

Architectural designs are approximately 85% complete. The cleanroom envelope design has undergone two design iterations but final vendor selection is pending. External cladding systems have been specified with detailed drawings, and three vendor quotes have been received. Finishes schedules are developed but subject to final coordination with process equipment layout. Most elements have reasonable budgetary prices, with some items still at conceptual pricing.

2.05 Services and Equipment:

MEP designs are at varying stages (30-85% complete). HVAC system sizing is still being optimised based on evolving heat loads from process equipment. Electrical load calculations are based on preliminary equipment data with significant contingency. Major equipment has budgetary quotations, while distribution systems are estimated parametrically. Controls integration has significant design gaps and limited pricing information.

4.01 Wafer Processing Systems:

Standard processing equipment has firm vendor proposals with specified performance parameters. Novel elements have conceptual designs with budgetary pricing and significant qualification items. Integration between systems has moderate design maturity but significant interface uncertainty. Comparison with previous generation systems provides reasonable baseline data, but technological advances create estimating challenges.

4.02 Lithography Systems:

New 1nm lithography technology is still evolving from prototype to production systems. Equipment specifications are preliminary with significant refinement expected. Pricing is based on limited vendor data with large contingency factors. Historical cost trends provide some guidance but technological step-changes limit comparability. This package has the highest uncertainty in both scope and cost.

4.05 Metrology & Process-control Systems:

Advanced metrology systems have moderate design maturity with reasonable vendor budgetary quotes. Integration requirements are still evolving as process parameters are finalised. Software development costs have significant uncertainty due to custom requirements. Testing protocols are at conceptual stage with limited cost data available for validation.