Task 1.33 - 5

Independent Cost Estimates For HST Trimaran Trailer Ship
May 30, 2009
For CSC - Advanced Marine Center & Center for the Commercial Deployment of Transportation Technologies (CCDoTT)
Based on a concept design and costing input from Herbert Engineering Corp.
PERCEPTION is a registered trademark of SPAR Associates, Inc. ESTI-MATE, MAT-PAC, WORK-PAC, and PERT-PAC are trademarks of SPAR.
PERCEPTION Trade Secrets and Proprietary Properties Of SPAR Associates, Inc. Annapolis, MD 21401
3 Table of Contents 1.0 Introduction ................................................................................................................... 5 2.0 The Cost Estimates ..................................................................................................... 15 2.1 Cost Estimate Work Breakdown Structure ............................................................. 15 2.1.1 Non-Recurring Costs ....................................................................................... 15 2.1.2 Recurring Costs ................................................................................................ 18 2.1.3 Program Schedule ............................................................................................ 25 2.1.4 Series Construction Programs .......................................................................... 29 2.1.5 Management Costs & Fees .............................................................................. 31 2.1.6 Cost Risk .......................................................................................................... 32 2.1.7 Labor Rates ...................................................................................................... 35 2.1.8 Material Costs .................................................................................................. 35 2.1.9 Profit ................................................................................................................ 36 2.1.10 Transport Factors ........................................................................................... 36 2.1.12 National Defense Funding (NDF) .................................................................. 37 2.1.13 Extended Modularization Build Strategy Cost Benefits ................................ 39 2.1.14 Required Freight Rate .................................................................................... 43 3.0 Basis for the Cost Estimate ......................................................................................... 52 3.1 Cost Estimating Methodology ................................................................................ 53 3.2 Impact of Build Strategy on Cost............................................................................ 55 3.2.1 Modern Shipbuilding Build Strategy ............................................................... 56 3.2.2 Modular Construction ...................................................................................... 57 3.2.3 Outfitted Hull Block Construction ................................................................... 58 3.2.4 Extended Shipbuilding Modules ...................................................................... 60 3.3 Generic Shipyard Costs........................................................................................... 63 3.4 Shipyard Productivity Factors................................................................................. 64 3.4.1 Extended Modularized Equipment & Outfit Option ........................................ 69 3.5 Generic Material Costs ........................................................................................... 71 3.5.1 Adjusting Generic Material Costs for Type Contract ...................................... 71 3.5.2 Material Cost Escalation/De-Escalation .......................................................... 72 3.6 Cost Risk ................................................................................................................. 73 3.6.1 Cost Risk of the Production Estimate Data.......................................................... 74 3.6.2 Predicting Production Overlap Rework Costs ..................................................... 76 3.6.3 Estimating Cost Risk of Overlap Rework ............................................................ 78 3.6.4 Estimating Cost Risk of Shipbuilder Inexperience .............................................. 80 3.6.5 Estimating Cost Risk of Engineering Quality ...................................................... 83 3.6.6 Estimating Cost Risk Due to Tight Production Schedule .................................... 86 3.6.7 Cost Risk on Follow Ship Programs .................................................................... 87 3.6.8 Cost Risk versus Contingency ............................................................................. 87 4.0 Non-Recurring Detail Production Engineering and Planning .................................... 88 4.1 U.S. Navy Ships Non-Recurring Costs ................................................................. 88 4.2 Commercial Non-Recurring Costs .......................................................................... 89 5.0 Manpower Requirements ............................................................................................ 91 6.0 Follow Ship Cost Estimates ........................................................................................ 94 6.1 Labor Cost Learning ............................................................................................... 94
4 6.2 Material Cost Learning (Discounts)........................................................................ 95 7.0 Commercial Prime Contractor Management Plan ...................................................... 96 Appendix A: OUTLINE SPECIFICATION FOR HST-160x53 TRAILER SHIP ........... 98 Principal Dimensions: ................................................................................................... 98 Propulsion: .................................................................................................................... 98 Electrical Power: ........................................................................................................... 98 General Arrangement: ................................................................................................... 99 Hull Structure: ............................................................................................................... 99 Lightship Weight Estimate (metric tonnes): ................................................................. 99 Capacities: ................................................................................................................... 100
1.0 Introduction
The High-Speed Trimaran (HST) Trailer Ship study has been conducted under a Center for the Commercial Deployment of Transportation Technologies (CCDoTT) funding and High Speed Ship technology development program. The Navy Strategic Mobility & Combat Logistics Office (OPNAV N42) is the primary stakeholder of CCDoTT, and CSC-AMC is the prime contractor. The HST design team, which is led by CSC/Advanced Marine Center and Herbert Engineering Corp., has designed the ship to be able to serve in the American Marine Highway system to carry domestic trailer traffic between ports along the U.S. coast lines. This is a Dual-Use design that also addresses the Navys need for a troop, equipment and other logistics support transport ship to combat theatres around the world on an as needed basis. SPAR Associates, Inc. produced this report to estimate the design and construction costs for two trailer ship designs: a Pure Commercial HST140-53 design and a Dual-Use HST160-53 (Figures 1.0-1 through 1.0-5). The Dual-Use design is somewhat larger in size than the pure commercial ship to accommodate greater fuel capacities for transoceanic military service and higher-than-commercial speeds. The Dual-Use design has larger 53 foot trailer capacity of 160 versus 139 for the Pure commercial Design. The reason for estimating these two designs is to determine the ship construction costs of the Dual-Use ship to meet National Defense Funding (NDF) features required to support the Dual-Use use in Sealift transportation missions. Section 2.1.12 offers estimates in this regard. The estimates were all developed using SPARs ESTI-MATE cost model modified for trimarans. The estimates assume that design and detailed engineering will be performed by an expert naval architecture and marine engineering company. The construction is assumed to be performed by a commercially competitive mid-tiered or big six yard U.S. shipbuilder using modern hull block construction methods. A third estimate of the Dual-Use design also has been provided in Section 2.1.13 to simulate additional construction cost savings possible from the application of extended modular construction approach to ship equipment and outfit components. This approach expands upon hull block construction by outsourcing selected major hull blocks for manufacturing, assembly and outfitting. In addition, design and construction of equipment and various outfit components are outsourced for modular fabrication and assembly so that these modules can be readily installed later at the assembly yard on unit, on block and/or on board. Such an approach requires a carefully planned and executed engineering process in order for the modules to be quickly, easily installed and integrated with other ship systems and infrastructures. Further discussions of these methods are provided in Section 3.2.4. While some may argue that extended modularization is not currently possible due to virtually no vendor infrastructure and too few other series ship programs needed to support the added engineering efforts. Nevertheless, U.S.
6 shipbuilders need to at least begin pursuing this approach. It is being aggressively exploited by European shipbuilders with sizeable cost savings benefits resulting.
Figure 1.0-1: Dual-Use HST160-53 General Arrangement: Profile & Cargo Decks
Figure 1.0-2: Dual-Use HST160-53 General Arrangement: Midship Section
Figure 1.0-3: Dual-Use HST160-53 Machinery Arrangement
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The cost model utilizes basic ship design characteristics of structures; propulsion systems; electrical generation and distribution systems; electronics and communications systems; auxiliary and outfit systems. Figure 1.0-6 presents principal characteristics of the Dual-Use HST160-53 used in the ESTI-MATE cost analysis. Final ship hull lengths and beams are slightly different based on the calculation refinements made in task 3. These refinements do not alter the cost estimates.
Main Hull: LOA, Length Overall LWL, Length Waterline Beam, Molded Depth, Molded Draft, Design Full Load, Molded Cubic Number (LWL x Beam x Depth) SVI, Ship Volume Indicator (LWL x Beam x Draft) Cb, Block Coefficient SDI, Ship Displacement Indicator (Cb x SVI) Total Full Load Displacement (Main Hull Only) Machinery Spaces: Volume of Machinery Space (Not incl. Uptakes) Super Structure: Super Structure Deck Area Volume of Super Structure (Incl. Storage Spaces Below) Cargo Areas: Number Decks Below Weather Deck Total Areas of Cargo Decks OMS Volume Cargo Decks OMS Average Deck Heights Side Hull: LOA, Length Overall LWL, Length Waterline Beam, Molded Depth, Molded Draft, Design Full Load, Molded Cubic Number (Depth) SVI, Ship Volume Indicator (LWL x Beam x Draft) Cb, Block Coefficient SDI, Ship Displacement Indicator (2 x Cb x SVI) Total Full Load Displacement (Both Side Hulls) M M M M M CUNO(M) CUM COEF CUM MTONs 101.00 92.92 5.30 21.00 7.50 10,342 3,694 0.486 3,588 3,944 SQM CUM M 2.00 8,550 29,925 5.00 SQM CUM 5,111 17,887 CUM 12,763 M M M M M CUNO(M) CUM COEF CUM MTONs 195.00 179.40 15.00 21.00 7.50 58,545 20,909 0.520 10,872 13,084
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Max Beam Overall at Deck: Equivalent Beam: Combined Total Cubic Number (Combined Total): Combined Cb, Block Coefficient: Combined Ship Displacement Indicator, SDI: ACCOMMODATIONS Ship's Crew Number (MSC) Commissioned Officers Non-Commissioned Officers Enlisted Troop Force Overnight Passengers PAX Daytrippers
M M CUNO(M) Cb
35.40 20.55 72,516 0.432 13,186
CREW PAX PAX PAX PAX PAX PAX Total
20 20
Figure 1.0-6: Dual-Use HST160-53-High-Speed Trimaran Trailer Ship Figure 1.0-7 presents weight and displacement characteristics of the Dual-Use HST16053.
Displacement: Total Displacement at Full Load Draft Total Displacement at Full Load Draft Light Ship Weight Light Ship Weight Fuel & Load Items Fuel & Load Items Total Payload Displacement Total Payload Displacement CARGO CAPACITY Designed Deck Space per MTON Cargo Designed Deck Space per MTON Cargo Required Cargo Deck Space Number of TEUs Number of Vehicles at Capacity Average Weight per Vehicle Average Deck Space per Vehicle Liquid Cargo Capacity SQFT/MTON SQM/MTON SQM TEU NO. MTON/EA SQM CUM 400 160 20.00 MTON CUM MTON CUM MTON CUM MTON CUM 17,011 16,593 10,599 10,338 3,520 3,433 2,892 2,821
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BBL -
Figure 1.0-7: Dual-Use HST160-53-High-Speed Trimaran Trailer Ship Weights & Displacements Figure 1.0-8 provides the Dual-Use HST160-53 light ship weights for each SWBS Group.
SWBS Group Weights 1 Hull 2 Propulsion 3 Electrical 4 Electronics & Navigation 5 Auxiliary Systems 6 Outfit & Furnishings 7 Armament MTONS MTONS MTONS MTONS MTONS MTONS MTONS Total: Computed 7,200 1508 493 35 698 334 10,,267 Includes all HVAC, piping, & deck machinery Includes all hull outfit items & paint Misc. armament foundations, small arms, etc. only Includes masts, foundations, stacks, ramps, etc. Includes all propulsions systems, shafting, gear boxes, thrusters, etc. Includes generators, transformers, batteries, panels, lighting, & distribution systems
Figure 1.0-8: Dual-Use HST160-53-High-Speed Trimaran Trailer Ship Light Ship Weights
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2.0 The Cost Estimates

The following describes the cost estimates for the two HST designs.
2.1 Cost Estimate Work Breakdown Structure

Two separate estimates were produced for the design and construction costs for two trailer ship designs: a Pure Commercial HT140-53 design and a Dual-Use HST160-53. The cost model uses as its basis cost data, (cost estimating relations or CERs) that is applicable to a generic mid-tier commercial U.S. shipyard. These costs are adjusted for productivity and pricing differences for shipbuilding companies expected to undertake construction of these vessels. To approximate costs at time of actual construction, all cost and pricing has been developed in 2009 U.S. dollars. The cost estimate is broken down into four (4) major cost categories: 1. 2. 3. 4. Non-Recurring Design, Production Engineering & Detail Planning Costs Recurring Construction Costs Management Fees (Option for managing a virtual shipbuilding approach) Cost Risk
2.1.1 Non-Recurring Costs

The non-recurring costs include design development, detail design, engineering and production planning. The cost model includes the following activities as non-recurring costs: 1. Preliminary Design & Design Validation 2. Detail Functional Engineering 3. Detail Transitional (Production) Engineering & Construction Drawings/Shipyard Instructions, Including Lofting 4. Detail Production Planning 5. Purchase Specifications & Support 6. Detail Engineering Management The cost model develops the non-recurring labor estimates based on a percentage of lead ship production hours. Section 4 describes this process in more detail. For the conventional hull block construction scenarios, the non-recurring labor hours were estimated at 30% of the production hours. 15
16 Figure 2.1-1 presents the non-recurring labor hours estimates.
400,000
252,617
336,453
Non-Recurring Labor Hours

350,000 300,000 250,000 200,000 150,000
25,863 34,446 9,774 13,018 12,029 16,022
Pure Comercial HST140-53 Convenional Dual-Use HST160-53 Conventional
100,000 50,000 1,504 2,003
23,683 31,543
6,015 8,011
Figure 2.1-1: Estimated Non-Recurring Labor Hours Figures 2.1-2 presents the non-recurring cost estimates for each of the HST designs.
3,007 4,005
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Estimated Non-Recurring Costs

Millions $80 $70 $70 $60 2009 US$ $50 $40 $30 $20 $10 $Pure Commercial HST140-53 Conventional Hull Block Construction Dual-Use HST160-53 Conventional Hull Block Construction $52
Figure 2.1-2: Estimated Non-Recurring Costs for Conventional Hull Block Construction Build Strategy The non-recurring cost estimates are based on the assumption that the HST designs are relatively simple and straight forward. Outfitting is not expected to be exotic or complex with the exception of the propulsion systems. The commercial shipbuilder is expected to have a lower non-recurring cost compared to a military design and should follow closely commercial design and engineering practices. The cost model places costs for producing jigs and templates, etc. also under this NonRecurring Production Engineering and Detail Planning. The non-recurring cost estimates further assume that production engineering will be focused on ways to simplify the manufacturing and building processes. This engineering effort can capitalize on engineering and production standards in order to exploit the cost saving benefits of repeatable interim production products. For example, the side hulls are almost identical.
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18 The estimates also assume that detail production planning is of a high level that effectively schedules work at the earliest, most productive stages of construction (i.e., pre-outfitted hull blocks) consistent with available facilities, material and quality technical and engineering information. The scheduling will effectively coordinate all of resource requirements throughout the various stages of construction.
2.1.2 Recurring Costs

Recurring costs include all basic construction costs for each ship. For series ship construction programs, costs are estimated for follow-on ships by applying estimated learning curve factors for labor and potential material cost savings. Refer to Chapter 6, Follow Ship Cost Estimates. The recurring cost estimate is broken down into cost categories similar to the Navys Ship Work Breakdown Structure (SWBS), Figure 2.1-3. Differences lie primarily in SWBS 200 which carries only propulsion machinery items and their installation (including electric drive components and systems). Piping systems for propulsion are cataloged under SWBS 500 for auxiliary systems along with all other piping systems for the ship.
100 200 300 400 500 600 700 800 900 1000 Hull Propulsion Electrical Electronics & Navigation Auxiliary Systems Outfit & Furnishings Armament Technical Support Shipyard Services Contingency Margin, Insurance & Extras
Figure 2.1-3: Recurring Cost Estimate Work Breakdown Structure SWBS 100: Normally, the cost model requires structural weights to be summarized by major structural components (i.e., production interim products): decks, double bottoms, side shells, frames, transverse and longitudinal bulkheads, superstructure, etc. Each of these components have different manufacturing and assembly characteristics (i.e., require different production processes), and therefore each can be assigned different cost estimating relationships (CERs). Material costs also will vary depending upon the materials used (mild steel, high strength steel aluminum, composites, etc.) As discussed in Section 3.4, Shipyard Productivity Factors, the structural CERs are modified with appropriate productivity factors developed for each type of ship builder. The CERs also will be modified for the overall size of the hull to account for the general
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19 tendency that larger hulls are less expensive to build on a structural weight basis (some measured economy of scale). The cost model places all structural work, including ramps, foundations, masts, and stacks under SWBS Group 100. Structural material costs are estimated on the basis of weight and type. The unit cost, however, is increased by 35% to account for material transportation (about 10%), scrap (typically 12%-16% to as much as 25% for structures with much shape and complexities), welding materials and gases (7%-8%), and classification society fees (about 1%). Figure 2.1-4 presents the steel prices and allowances used for the HST estimates.
Figure 2.1-4: Steel Prices & Allowances Used for HST Estimates SWBS 200: Somewhat divergent from the U.S. Navys SWBS, the cost model places all piping and ventilation systems under SWBS Group 500 (Auxiliary Systems). Therefore, Propulsion Support Systems (SWBS 250-259) & Fuel/Lube Support (SWBS 260-269) were moved to SWBS Group 500. SWBS 200 also includes primary costs for electric drive systems, if applicable, such as diesel generators, electric motors, pods, etc. In addition, costs for thrusters, if applicable, also are included under the cost models SWBS 200.
SWBS 300 carries all electric generation equipment for ship services (not for propulsion), as well as all electrical distributed systems, lighting, etc. The cost model estimates electrical costs based on the type of electrical generation system, including emergency generation, and the power output (kW). For combatant type ships, the cost model has options to reflect the assumption that the electrical distribution costs are considerably higher, by factors of about three-five times
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20 that for a commercial vessel. This assumption accommodates added costs for shock requirements and for power redundancy required for complex combatants.
SWBS 400: The cost model offers essentially two levels of electronics: standard electronics, communications and control systems for commercial ships and various elements of C4ISR for military ships.
SWBS 500: The cost model includes the following auxiliary systems plus others: Fans, duct work, & HVAC All piping systems, including piping support systems for main propulsion (lube oil, etc.) Anchor/mooring systems & deck machinery Cargo cranes
For combatant type ships, the cost model has options to reflect the assumption that piping systems costs are higher than for commercial vessels. This assumption accommodates added costs for shock requirements. SWBS 600: The cost model includes the following in SWBS Group 600, Outfit & Furnishings Systems plus other relevant outfit systems: Paint Hand rails, stanchions, & walkways Floors, ladders, grates Life boats, rafts Insulation Metal doors, sheathing & bulkheads Accommodations outfit & furnishings
The cost estimates do not include costs for load items, fuels, lubricating fluids, etc.
SWBS 700: CERs are available to a limited extent for weapons systems, mostly for their foundations. For the DUAL-USE HST160-53, the cost model has not estimated the costs for armaments.
SWBS 800: U.S. Navy contracts catalog both recurring and non-recurring technical costs together under SWBS 800. Therefore, the majority of engineering costs appear for the lead ship. The cost model, instead, catalogs only the recurring costs under SWBS 800
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21 and catalogs non-recurring costs under a separate project WBS. This separation allows the non-recurring costs to be easily allocated to all ships of a series program. Technical Services, includes only technical support for minor change orders and fine tuning of production engineering and planning after non-recurring activities are complete. For both HST160-53 designs, the assumed percentage of total production labor hours (SWBS Groups 100-700) for shipyard technical support services was set at 8%. SWBS 900: For shipyard production support services, a figure of 20% of production labor hours (SWBS Groups 100-700) was used for the estimate. This is a figure not atypical of North American commercial yard that employ reasonable control over this level of effort and follows a regimen that minimizes unnecessary costs. A major component of this cost lies in supervision and production control. For the conventional hull block construction scenario, no costs have been estimated for transportation of hull modules to a central erection site. However, for the extended modularization scenario, costs are estimated to load/barge/unload the side hulls and deckhouse structures at the final assembly yard. The estimates reflect a one-piece joining method for final hull block erection. Design and construction of special erection site equipment such as float barges, etc. are not included as it is assumed that the ship size is not so large as to present special erection and launching operations. For both scenarios, no costs are estimated for ultimate delivery to a location away from the shipyard. The cost model places costs for producing jigs and templates, etc. under the NonRecurring Detail Production Engineering and Planning described above. General support costs, a difficult source of cost to control because it is mostly level of effort, can be reduced. 1. Early stage outfitting (on unit and on block) eliminates considerable support costs required for on board outfit efforts. 2. Early stage outfitting minimizing or eliminating scaffolding and related support costs. 3. Improved material flow to work areas minimizes material transport costs. 4. Higher level of work skills and higher quality of production engineering reduces supervision and quality assurance costs. SWB 1000: The cost model uses an additional SWBS group outside normal U.S. Navy practice. The additional SWBS 1000 is used for costs outside those for production and technical/shipyard services (ABS, financing fees and MARAD title XI when applicable, etc.) and for various shipbuilding risk insurance costs, warranty bonds, etc. This SWBS group also includes a contingency cost item for change orders and for yet-undefined ship system requirements.
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22 Figures 2.1-5A and 2.1-5B summarize the lead ship cost estimates for the two HST designs.
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% Margin % Mark-Up % Change Orders % Program Costs % Contingencies
% % %
Trim aran Cost Model NON-RECURRING COSTS Ship Type: Dual-Use 160x53' HST Trailership Version: DUSE-1 Date: 20-May-09 Basic Research - Concept Design $ Prelim inary Design $ Functional Design $ Production Engineering & Constru $ Production Planning & Scheduling $ Purchase Specs & Support $ ILS, Spares & Load Item s $ Contract Engineering Managem ent $ Contingency Labor: $ Contract Detail Design Package $ Miscellaneous Material & Support:$ Jigs, Cradles, & Tem plates, Tools $ TOTAL NON-RECURRING COSTS: $ 287,934 4,400,815 40,855,760 3,029,464 769,388 384,694 1,335,889 1,906,845 4,465,059 5,273,483 62,760,741
% 10.00 %
Pricing: Technical Wage $/Mhr: $ 24.56 $ Production Wage $/Mhr: $ 20.47 $ % Overhead: 125.00 % % G&A Labor: % % G&A Material: 10.00 % % Profit: 12.00 % Navy C4ISR Jones Act Prem ium Material Factor: Current Year: Additional Material Escalation: Shipyard Material Cost Factor: Combi ned M ateri al Cost Factor: SWBS Group 1 2 3 4 5 6 7 8 9 10 No
55.26 w / overhead 46.05 w / overhead 312% 279% 209% 134% 258%
Non-Recurri ng Engineeri ng & Production Pl anni ng Standard Work Week: Labor Rates: Senior Professional/Manager $ Engineer $ Designer/Draftsperson/Planner $ Clerical $ Contingency (w eighted average) $
40.00 hours/w eek 143.77 128.35 96.04 61.62 119.02 per per per per per hour hour hour hour hour
No 1.00 2009 Shipyard Tech Support Labor Factor: 1.00 1.000 = none Steel Productivity Factor: 1.00 MILSPEC Prem .=1.21 Outfit Productivity Factor: 1.00 On-Block Paint Factor: $ Labor 10,526,233 1,608,453 1,568,427 90,056 6,099,622 3,852,375 2,279,536 4,749,033 $ 30,773,735 $ 53,022,199 $ Costs $ Costs $ Costs $ Costs $ 169,856,871
Structures Propulsion Electrical Electronics & Navigation Auxiliary Systems Outfit & Furnishings Armament Technical Support Shipyard Services Margin, Bonds & Insurance Lead Ship Totals: Non-Recurri ng Costs:
Production Hrs/LSW:
Weight M -Hrs M odul ar Production M Tons Per M ton M -Hrs M -Hrs 7,200 71.43 514,298 1,508 52.11 78,587 493 155.44 76,631 35 125.71 4,400 698 426.96 298,019 334 563.54 188,222 9.04 92,813 8.0% 22.60 232,031 20.0% 10,268 144.62 1,485,001 % Total Lead Shi p G1-7 M an-Hours: 445,500 30% Techni cal Support: 3.40% Producti on Shipyard Servi ces: 11.35% Producti on Fees & Insurance: 21.21% Producti on Non-Recurri ng Costs: 41.38% Producti on Production Costs (1-7): 144.62
Shipyard Esti mated Schedules 1.1000 No Ext.Modules 1.5000 1.000 Est. Detail Engineering Tim e: 24.0000 Months 1.1000 1.000 Est. Construction Tim e: 30.0000 Months 0.9500 40 % Hours On Bl ock 6.0000 Months Overlap: RMS Men/Month: 322 0.11 Months $ $ G&A 2009 $ G&A $ Profit $ Labor Only $ M aterial M aterial Only Labor + Material Overhead Total 13,157,792 10,577,759 1,057,776 4,238,347 39,557,907 2,010,567 46,450,695 4,645,069 6,565,774 61,280,559 1,960,534 9,942,150 994,215 1,735,839 16,201,166 112,570 1,238,319 123,832 187,773 1,752,550 7,624,527 11,697,610 1,169,761 3,190,982 29,782,502 4,815,468 9,394,646 939,465 2,280,234 21,282,188 2,849,420 25,000 2,500 618,775 5,775,231 5,936,292 5,927,689 592,769 2,064,694 19,270,476 29,240,185 2,924,019 3,859,704 36,023,908 $ 38,467,169 $ $ 124,494,053 $ 12,449,405 24,742,123 $ 230,926,486 $ $ $ 9,738,542 $ 7,531,289 $ 70,292,029 Estim ated Cost for Prim e Contractor Managem ent Team : $ Over-All Program M anagement Fee: 0.0% $ Total Price w ith Prim e Contractor Managem ent: $ 301,218,515 Estimated Construction Ri sk: $ 26,103,333 73.6% GR 1-10 Esti mated Rework Ri sk: $ 664,524 0.49 Shipyard Experience Rating (0-1): $ 49,200,575 Engi neering Performance (0-1): $ 0.45 97,504,825 Production Schedul e Cost Ri sk: $ 1,431,563 Total Price with Ri sk: $ 476,123,334
20.0% 0.4% $ Cum .Total
$ $
230,926,486 301,218,515
w/o w/o w/o w/o w/o w/o
Profi t Profi t Profi t Profi t Profi t Profi t
Figure 2.1-5A: Cost Estimate for Conventional Hull Block Construction, Dual-Use HST160-53
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% % %
Trim aran Cost Model NON-RECURRING COSTS Ship Type: Pure Com m ercial 140x53' HST Trailership Version: PCOMM-1 Date: 14-May-09 Basic Research - Concept Design $ Prelim inary Design $ Functional Design $ Production Engineering & Constru $ Production Planning & Scheduling $ Purchase Specs & Support $ ILS, Spares & Load Item s $ Contract Engineering Managem ent $ Contingency Labor: $ Contract Detail Design Package $ Miscellaneous Material & Support:$ Jigs, Cradles, & Tem plates, Tools $ TOTAL NON-RECURRING COSTS: $ 216,188 3,304,240 30,675,512 2,274,596 577,675 288,838 1,003,018 1,431,706 2,959,701 3,765,217 46,535,292
% 10.00 %
Pricing: Technical Wage $/Mhr: $ 24.56 $ Production Wage $/Mhr: $ 20.47 $ % Overhead: 125.00 % % G&A Labor: % % G&A Material: 10.00 % % Profit: 12.00 % Navy C4ISR Jones Act Prem ium Material Factor: Current Year: Additional Material Escalation: Shipyard Material Cost Factor: Combi ned M ateri al Cost Factor: SWBS Group 1 2 3 4 5 6 7 8 9 10 No
55.26 w / overhead 46.05 w / overhead 312% 279% 209% 134% 258%
Non-Recurri ng Engineeri ng & Production Pl anni ng Standard Work Week: Labor Rates: Senior Professional/Manager $ Engineer $ Designer/Draftsperson/Planner $ Clerical $ Contingency (w eighted average) $
40.00 hours/w eek 143.77 128.35 96.04 61.62 119.02 per per per per per hour hour hour hour hour
No 1.00 2009 Shipyard Tech Support Labor Factor: 1.00 1.000 = none Steel Productivity Factor: 1.00 MILSPEC Prem .=1.21 Outfit Productivity Factor: 1.00 On-Block Paint Factor: $ Labor 8,733,468 818,604 1,238,788 90,056 3,881,465 3,066,076 1,711,532 3,565,691 $ 23,105,679 $ 39,810,374 $ Costs $ Costs $ Costs $ Costs $ 117,854,739
Structures Propulsion Electrical Electronics & Navigation Auxiliary Systems Outfit & Furnishings Armament Technical Support Shipyard Services Margin, Bonds & Insurance Lead Ship Totals: Non-Recurri ng Costs:
Production Hrs/LSW:
Weight M -Hrs M odul ar Production M Tons Per M ton M -Hrs M -Hrs 5,232 81.56 426,706 820 48.78 39,996 270 224.17 60,526 35 125.71 4,400 495 383.12 189,643 297 504.39 149,804 9.75 69,686 8.0% 24.37 174,215 20.0% 7,149 155.96 1,114,975 % Total Lead Shi p G1-7 M an-Hours: 334,493 30% Techni cal Support: 3.69% Producti on Shipyard Servi ces: 12.31% Producti on Fees & Insurance: 21.74% Producti on Non-Recurri ng Costs: 44.22% Producti on Production Costs (1-7): 155.96
Shipyard Esti mated Schedules 1.1000 No Ext.Modules 1.1000 1.000 Est. Detail Engineering Tim e: 24.0000 Months 1.1000 1.000 Est. Construction Tim e: 30.0000 Months Overlap: 0.9500 40 % Hours On Bl ock 6.0000 Months RMS Men/Month: 243 0.11 Months $ $ G&A 2009 $ G&A $ Profit $ Overhead Labor Only $ M aterial M aterial Only Labor + Material Total 10,916,835 7,798,819 779,882 3,387,481 31,616,486 1,023,255 24,421,056 2,442,106 3,444,603 32,149,624 1,548,485 9,389,394 938,939 1,573,873 14,689,479 112,570 1,238,319 123,832 187,773 1,752,550 4,851,831 8,559,405 855,941 2,177,837 20,326,479 3,832,594 7,787,023 778,702 1,855,727 17,320,122 2,139,415 25,000 2,500 465,414 4,343,860 4,457,114 4,486,722 448,672 1,554,984 14,513,184 20,798,200 2,079,820 2,745,362 25,623,382 $ 28,882,099 $ $ 84,503,939 $ 8,450,394 17,393,053 $ 162,335,165 $ $ $ 6,724,918 $ 5,584,235 $ 52,119,527 Estim ated Cost for Prim e Contractor Managem ent Team : $ Over-All Program M anagement Fee: 0.0% $ Total Price w ith Prim e Contractor Managem ent: $ 214,454,692 Estimated Construction Ri sk: $ 18,099,049 72.6% GR 1-10 Esti mated Rework Ri sk: $ 484,922 0.49 Shipyard Experience Rating (0-1): $ 37,296,437 Engi neering Performance (0-1): $ 0.45 73,209,027 Production Schedul e Cost Ri sk: $ 612,746 Total Price with Ri sk: $ 344,156,873
20.0% 0.4% $ Cum .Total
$ $
162,335,165 214,454,692
w/o w/o w/o w/o w/o w/o
Profi t Profi t Profi t Profi t Profi t Profi t
Figure 2.1-5B: Cost Estimate for Conventional Hull Block Construction, Pure Commercial HST140-53
24
2.1.3 Program Schedule

For the conventional hull block construction estimate with moderate on block outfitting for the lead ship, the following schedules have been applied: Non-recurring design, engineering and detailed production planning: 18 months Lead ship construction: 24 months Overlap of engineering with production: 4 months
For the extended modularization build strategy option, more advanced and complete detailed engineering will be required. The following Figure 2.1-6 presents the construction schedule for the Dual-Use HST16053. This particular build strategy allows for the outsourcing of several major hull blocks: bottom sections of the side hulls (complete with installations of diesel generators, motors shafting and props; and the outfitted deckhouse in perhaps multiple sections). This schedule provides for the barging of these blocks to the assembly yard. It has been assumed that erecting and launching trimarans of these sizes is not a particularly big problem for several of the U.S. mid-tiered commercial shipyards.
25
2.1.-6: Dual-Use HST160-53-High-Speed Trimaran Trailer Ship Construction Schedule
26
A cross-check of whether or not this schedule is reasonable is reflected in the estimated manpower requirements (See Section 6). Figure 2.1-7a illustrates that these estimated manpower requirement figures are well within reasonable levels available for design and construction of a ship of this size. Figure 2.1-7b shows estimated production manpower requirements.
Figure 2.1-7a: Combined Non-Recurring and Lead Ship Recurring Manpower Requirements for Conventional Hull Block Construction of Dual-Use HST160-53
27
28
Figure 2.1-7b: Estimated Lead Ship Production Manpower Requirements for Conventional Hull Block Construction of Dual-Use HST160-53
28
2.1.4 Series Construction Programs

Follow ships of a series ship production program typically experience a progression of relative cost reductions as each ship unit is produced. Figure 2.1-8 presents construction costs for a series sp production program estimated for the Dual-Use HST60-53. An 85% learning curve has been applied for labor with the exception that the 2nd ship of the series has been restrained to leaning of only 97%. A 95% learning (discount) has been applied to material costs. All cost figures are provided in 2009 U.S. dollars. Effects of inflation/deflation have not been applied, and their effects upon ship costs are assumed to be included as an additional contact allowance. Details of the application of learning curves for series ship programs are provided in Section 7.
Figure 2.1-8: Construction Costs for Series Ship Production, Dual-Use HT60-53
29
30 Figure 2.1-9 provides averaged estimates that allocate non-recurring costs across the number of ships in a series. This chart shows both should costs and should cost plus estimated total risk cost. The should cost equates to the likely price bid by a skilled and experience engineering firm and a well organized shipbuilder experienced with successfully executing modern hull block construction methods. These are should prices applicable for what we should expect from U.S. companies. Should prices from foreign world class shipbuilders should be expected to be considerably lower due to their greater levels of productivity and their abilities to purchase equipment and materials at prices lower than what we typically expect here in the U.S. Another way of visualizing the should cost prices is to envision the price bid by a commercially competitive U.S. shipyard experienced in pre-outfitted hull block assembly design and construction methods. This bid price would consider a) The assumed need for the shipbuilding contract, b) Include allowances for controllable and carefully managed shipbuilding risks c) Assume a well managed yard building to a well engineered and comprehensive detail design. Section 2.1.6 describes in more detail a breakdown of cost risk. The primary elements of this total risk will depend upon the relative skills and experience of the engineering and of the shipbuilder. Recent examples of serious budget problems with both commercial and naval construction programs have, in large measure, been reflected in the estimates of the risk figures. The more skilled and experienced the contractor, the lower one would expect the actual risk to be. Each contractor will likely assess its own levels of risk and price its bid accordingly. Therefore, the illustrated range between should cost and what includes total risk is where bids are likely to fall.
30
31
Figure 2.1-9: Average Design & Build Costs for Conventional Hull Block Construction of Dual-Use HST160-53 Details of cost risk are provided in Sections 2.1.6 and 3.6.
2.1.5 Management Costs & Fees

For a successful virtual shipbuilding approach that promises significant cost savings, there will be a critical need for advanced planning of both engineering and production processes to ensure that subcontractors are well organized and their schedules closely synchronized and supervised. As an alternative to having the prime assembly shipyard being the over arching program manager, the extended modular construction approach has its estimate including an additional cost for a professional program management team. Section 7 describes a possible expert program management team.
31
32
2.1.6 Cost Risk

The estimates provide should costs as well as estimates of cost risk. Figures 2.1-10 and 2.1-11 present breakdowns of cost risk as estimated for the Dual-Use HST160-53. Recently, there have been a number of occasions whereby both engineering and shipbuilder cost and schedule performance has been less than desirable resulting in contracts significantly over budget and schedule. The high levels of estimated cost risk for these build strategies reflect current performance difficulties in the industry at large. However, the breakdowns of cost risk provide some clarity and focus into where improvements need to be made to reduce cost risk. Lead Ship Estimated Price & Cost Risk 2009US$
$600
$500
Est. Schedule Cost Risk
$2
Est. Engineering Performance Cost Risk
$98 $400 $49 $0 $30

Est. SY Experience Cost Risk Est. Overlap Rework Cost Risk Est. CER Cost Risk
$300
$200
$233
Est. Price of Construction Non-Recurring Design, Engineering & Planning
$100 $70 $TOTALS:
Figure 2.1-10: Estimated Lead Ship Total Price with Cost Risk for Conventional Hull Block Construction Build Strategy for Dual-Use HT160-53
32
33
Figure 2.1-11: Estimated Cost Risk for Conventional Hull Block Construction Build Strategy, Dual-Us HST160-53 With an estimated little overlap of engineering and production, the cost risk for rework due to an overlap should be relatively small. Also, the build schedule is not aggressive, so the cost risk due to cramped scheduling also should be minimal. Risk here defines a range of costs above the should cost to reflect what a shipbuilder may require in his bid to accommodate a number of adverse variables: Costs, such as those estimated for equipment and materials, may become greater due to economic uncertainties, currency fluctuations, etc. The shipbuilder may exact a high degree of rework due to having too much detail engineering not being complete in time to support an efficient production schedule The bidding yard may expect higher costs due to the fact that the yard may have little actual experience building a ship of this type. In addition, production may no longer enjoy having a highly skilled work force. A detail engineering effort that has not performed well often results in much higher production costs and schedule delays. If the production schedule is too short, requiring higher than normal levels of resources to manage can result in higher costs in production.
33
34
Details of the cost risk estimates are provided in Section 3.6. Figure 2.1-13 presents a range of potential lead ship costs (including non-recurring costs) for the Dual-Use HST160-53 design: Minimum costs that does not include any risk nor a 10% contingency for unknown ship systems, etc. Should costs that include the 10% contingency, but no risk. Estimated maximum cost that includes contingency plus 100% estimated risk. More likely maximum cost that included contingency plus 67% estimated risk.
The cost at 100% risk hopefully is not likely. According to generalized probability theory, 67% of the total risk can relate to an 80% probability. By identifying the major areas for cost risk, efforts should focus on working to eliminate them. Only then will a contract opportunity have more potential for success, and less potential for ultimate failure should the risks not be accommodated nor remediated.
Figure 2.1-13: Range of Potential Costs for Lead Ship, Dual-Use HST160-5
34
35
2.1.7 Labor Rates

The following labor & overhead rates (Figure 2.1-14) are used for the estimates. The average U.S. shipyard production 2009 wage rate is based on wage data obtained from the U.S. Bureau of Labor Statistics. Technical and detail engineering wages rates were estimated by applying the wage ratio (120.4%) of average U.S. technical to shipyard production wages as measured by the U.S. Department of Commerce1, December 1, 2003. The fully burdened wage rates are assumed to include fringe benefits Overhead is applied only to shipyard labor. Profit is not included in any labor rates, but applied separately (see Section 2.1.9 below).
Non-Recurring Engineering Labor Senior Professional/Manager Engineer Designer/Draftsperson/Planner Clerical Contingency (weighted average)
Commercial Ship Builder $ $ $ $ $ 143.77 128.35 96.04 61.62 119.02 Commercial Ship Builder $ $ 125% $ $ 55.26 46.05 24.56 20.47
Shipyard Recurring Labor Technical Wage/Hour Production Wage/Hour Overhead Technical Wage/Hour w/OH Production Wage/Hour w/OH
Figure 2.1-14: Applied 2009 US$ Labor & Overhead Rates The above labor rates do not include any profit which is added afterwards as described in Section 2.1.9.
2.1.8 Material Costs

All HST160-53 material has been assumed to be of commercial grade and have been estimated for the year 2009. Section 3.5 describes the processes within the cost model for escalating costs for a common year estimates.
U.S. DOC/BIS TSV Site Survey Data, dated December 1, 2003.
35
36 A 10% mark-up (general and administrative costs) was applied to the material cost estimates. This mark-up includes any burden rate applied by the shipyard, but does not include any profit which is added afterwards as described in Section 2.1.9.
2.1.9 Profit
From 1999-2000, U.S. shipbuilders reported profits of over 11%. For the HST estimates, a profit rate of 12% was used. Profit is applied to all costs: labor, material, subcontracted services, overhead and material G&A costs.
2.1.10 Transport Factors

Transport factors measure cargo crying capacity versus ship speed and propulsion power. The greater the factor, the greater the capacity to carry cargo t higher rates of speed without an adverse penalty for power, which is a measure of cost. The following formula is one of several that define a transport factor: Transport Factor = [Payload x Speed]/HP/550 Figure 2.1-15 presents transport factors for the two HST ship designs.
18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 -
Ship Design Transport Factors

12.79 10.37
15.78
Dual-Use HST160- Dual-Use HST160- Pure Commercial 53 Conventional 53 Conventional HST140-53 Hull Block Hull Block Conventional Hull Construction - 26 Construction - 30 Block Construction KTS KTS - 26 KTS Figure 2.1-15: HST Transport Factors Figure 2.1-16 shows the average ship cost per transport factor, which decreases for larger ship construction programs. 36
37
Millions
$35 $30 $25 $20 $15 $10 $5 $1 $14 $29
Average Cost/Transport Factor 2009$ Transport Factor = [Payload x Speed]/HP/550

Dual-Use HST160-53 Conventional Hull Block Construction - 30 KTS Dual-Use HST160-53 Conventional Hull Block Construction - 26 KTS
$25 $24 $20 $19 $23
Pure Commercial HST140-53 Conventional Hull Block Construction - 26 KTS
$22 $18
$21 $17
$21 $17
$20 $16
$20 $16
$12
$11
$10
$10
$10
$10
$9
Figure 2.1-16: Comparing Average Ship Cost per Transport Factor
2.1.12 National Defense Funding (NDF)

The estimated lead ship costs for the Dual-Use and for the Pure Commercial designs are compared in Figure 2.1-17. Figure 2.1-18 compares potential NDF for average series ship costs at different levels of cost risk.
37
38
Figure 2.1-17: Comparing Lead Ship Costs
Averaged NDF 2009$ HST Trimaran Trailer Ship

$140 $117 $120 $87 $100 $80 $60 $40 $20 $0 1 2 Ships Built3of a Series 4 5
NDF w/21 Extra Trailers Credit NDF
$100
NDF w/67% Risk
$89
$84
NDF w/100% Risk
$75
$64 $74
$59 $68
$56 $65
Figure 2.1-18: Potential NDF for Series Ship Production Programs
$54 $62
$80
38
39
2.1.13 Extended Modularization Build Strategy Cost Benefits

This section offers estimates for designing and building the Dual-Use HST160-53 for extended modularization of ship equipment and outfit components. These estimates carry the concept beyond what is now pre-outfitted hull block construction. Section 3.2.4 provides additional discussions of the potential benefits not only for reducing construction costs but also for reducing ship maintenance costs as well. For the extended modularized scenario, the percentage of production hours estimated for non-recurring design, engineering and production planning was expanded from 30% to 55% . This greater percentage accounts for not only the lower net production labor hours expected for this more productive build strategy, but for the fact that more engineering would be required to develop sufficient design details to ensure the modules would be easily installed within the ship body and integrated as necessary with related ship systems. Figure 2.1.19 compares the non-recurring costs for the extended modularization approach against non-recurring costs for the two HST deigns oriented for conventional hull block construction.
Figure 2.1-19: Comparing Non-Recurring Costs
39
40
Figure 2.1-20 provides the cost estimate for the modularized Dual-Use H60-53. Sizeable cost savings are very possible over conventional outfitting. The estimate assumes maximum modularization, which at present is not possible. However, benefits should be recognized even if only selected modules are developed. It should be expected that lower costs would be realized by outsourcing modules to vendors that specialize in manufacturing and assembling selected equipment and components. Some cost reductions should also be realizable if the modules were developed by the shipbuilder using internal resources.
40
% % %
Trimaran Cost Model NON-RECURRING COSTS Ship Type: 160x53' HST Trailership (Dual-Use) w/Extended Modularization Version: D-Mod Date: 9-Jun-09 Basic Research - Concept Design $ Preliminary Design $ 357,550 Functional Design $ 5,464,839 Production Engineering & Construction $ Drawings 50,733,822 Production Planning & Scheduling $ 3,761,925 Purchase Specs & Support $ 955,409 ILS, Spares & Load Items $ 477,705 Contract Engineering Management $ 1,658,879 Contingency Labor: $ 2,367,880 Contract Detail Design Package $ Miscellaneous Material & Support: $ 4,560,351 Jigs, Cradles, & Templates, Tools & Instruments $ 5,273,483 TOTAL NON-RECURRING COSTS: $ 75,675,684
% 10.00 %
Pricing: Technical Wage $/Mhr: $ 24.56 $ Production Wage $/Mhr: $ 20.47 $ % Overhead: 125.00 % % G&A Labor: % % G&A Material: 10.00 % % Profit: 12.00 % Navy C4ISR Jones Act Premium Material Factor: Current Year: Additional Material Escalation: Shipyard Material Cost Factor: Combined Material Cost Factor: SWBS Group Structures Propulsion Electrical Electronics & Navigation Auxiliary Systems Outfit & Furnishings Armament Technical Support Shipyard Services Margin, Bonds & Insurance Lead Ship Totals: Non-Recurring Costs: 1 2 3 4 5 6 7 8 9 10 No
55.26 w/ overhead 46.05 w/ overhead 312% 279% 209% 134% 258%
Non-Recurring Engineering & Production Planning Standard Work Week: Labor Rates: Senior Professional/Manager Engineer Designer/Draftsperson/Planner Clerical Contingency (weighted average)
40.00 hours/week $ $ $ $ $ 143.77 128.35 96.04 61.62 119.02 per hour per hour per hour per hour per hour
No 1.00 2009 Shipyard Tech Support Labor Factor: 1.00 1.000 = none Steel Productivity Factor: 1.00 MILSPEC Prem.=1.21 Outfit Productivity Factor: 1.00 On-Block Paint Factor: Weight MTons M-Hrs Per Mton Modular M-Hrs 7,902 45,009 23,256 1,020 82,441 30,451 Production M-Hrs $ Labor
6,942 69.68 1,152 6.82 726 15.54 16 41.56 841 53.14 921 96.69 8.0% 4.81 20.0% 12.03 10,599 76.97 % Total Lead Ship G1-7 Man-Hours: Technical Support: Shipyard Services: Fees & Insurance: Non-Recurring Costs: 94.90
483,761 9,901,229 7,859 160,845 11,289 231,055 660 13,508 44,703 914,943 89,043 1,822,469 50,985 1,252,229 127,463 2,608,810 190,079 815,763 $ 16,905,088 553,213 $ 65,841,850 55% 2.19% Production $ Costs 11.94% Production $ Costs 23.30% Production $ Costs 58.36% Production $ Costs Production Costs (1-7): $ 145,238,063
Production Hrs/LSW:
Shipyard Estimated Schedules 1.1000 1.5000 Est. Detail Engineering Time: 30.0000 Months 1.000 1.1000 1.000 Est. Construction Time: 30.0000 Months 0.9500 40 % Hours On Block Overlap: Months RMS Men/Month: 186 Months $ $ G&A 2009 $ G&A $ Profit $ Labor Only $ Material Material Only Overhead Labor + Material Total 12,376,537 10,577,759 1,057,776 4,069,596 37,982,897 201,057 46,814,559 4,681,456 6,222,950 58,080,867 288,818 11,353,567 1,135,357 1,561,056 14,569,853 16,885 1,238,319 123,832 167,105 1,559,651 1,143,679 11,758,200 1,175,820 1,799,117 16,791,759 2,278,086 9,464,623 946,462 1,741,397 16,253,037 1,565,286 25,000 2,500 341,402 3,186,416 3,261,012 8,743,352 874,335 1,858,501 17,346,011 27,467,563 2,746,756 3,625,718 33,840,038 $ 21,131,360 $ $ 127,442,943 $ 12,744,294 21,386,842 $ 199,610,528 $ $ $ 9,833,834 $ 9,081,082 $ 84,756,766 Estimated Cost for Prime Contractor Management Team: $ Over-All Program Management Fee: 0.0% $ 284,367,294 Total Price with Prime Contractor Management: $ Estimated Construction Risk: $ 20,309,115 72.8% GR 1-10 Estimated Rework Risk: $ Shipyard Experience Rating (0-1): $ 0.49 28,222,464 Engineering Performance (0-1): $ 0.45 82,842,943 Production Schedule Cost Risk: $ 263,379 Total Price with Risk: $ 416,005,195
0.0% 0.0% $ Cum.Total
$ $
199,610,528 284,367,294
w/o Profit w/o Profit w/o Profit w/o Profit w/o Profit w/o Profit
Figure 2.1-20: Cost Estimate for Extended Modularization Build Strategy for Dual-Use HST160-53
41
Figure 2.1-21 presents verged costs to build series ships of the Dual-Use design using the full extended modulizaion approach.
Average Cost Per Ship of Series 2009US$

$450 $400 $350
$294 Average Cost Design & Build $426
Millions
Includes Non-Recurring & Mgmt Fee, If Applicable
$361
Includes Total Cost Risk
$319
$297
$282
$271
$250
$230
$211
$205
$201
$250 $200 $150 $100 $50 $0 1 2
$219
$197
Number of Ships In Series
Figure 2.1-21: Averaged per Ship Costs for Dual-Use Design Using Maximum Extended Modularizing of Design and Construction
42
$257
$300
$264
43
2.1.14 Required Freight Rate
Approximate calculation of costs to determine a required freight rate has been produced for operating in domestic markets along the U.S. East Coast, between Fall River, Massachusetts and Port Canaveral, Florida (Figure 2.1.22). Cargo availability is based on a Reeve & Associates study for Massachusetts and Global Insight study for DoT/MarAd. The ships can serve alternative U.S. Northeastern Atlantic ports like New Haven, Connecticut and shorter route Mid-Atlantic and Southern ports like Wilmington, Delaware and Savannah, Georgia. The ships also can be operated effectively in the California to Pacific Northwest coastwise trade.
Figure 2.1.22: East Coast Trade Routes HST 160-53 schedule has been carefully evaluated to provide daily service with four (4) ships (Figure 2.1.23).
43
Voyage Segment Start Dock+Unload + Load+Undock at Fall River Fall River to Newport, RI Newport, RI to Sea Buoy Sea Buoy to Port Canaveral Port Canaveral sea buoy to terminal Dock+Unload + Load+Undock at Canaveral Port Canaveral terminal to sea buoy Port Canaveral to Newport, RI sea buoy Newport, RI to Sea Buoy Newport, RI to Fall River TOTALS
Distance in Nautical Miles Arrive at Fall River i.e. .5+3+3+.5 hrs = 16 5 905 16 i.e. .5+3+3+.5 hrs = 16 905 5 16
At Sea Speed
Time Interval
Time 8:00 AM
Day Monday
7.00 12.0 15.0 22.9 12.0 1.33 0.33 39.59 1.33 7.00 12.0 24.9 15.0 12.0 0.0 1.33 36.41 0.33 1.33 96.00
3:00 PM 4:20 PM 4:40 PM 8:15 AM 9:35 AM 4:35 PM 5:55 PM 6:20 AM 6:40 AM 8:00 AM Friday Wednesday Friday Monday Wednesday
Figure 2.1.23: U.S. East Coast Trade Route
44
The Required Freight Rate (RFR) was developed under the following assumption:
Number of Ships Built: Total Price per Ship: $ Difference Dual-Use less Pure Commercial Designs $ Credits for 21 extra trailer capacity $ Net Owner's Asset Value $ Total Cost of Money per Ship: $ Sub-Total: $ Anticipated Life of Ship: Salvage/Sale Value at Life End: Average Annualized Capital Cost: $ $ 4 231,805,011 64,671,836 (8,488,178) 175,621,353 95,889,259 271,510,612 25 2,433,057 10,763,102 Years 1.05% Total Acq. Price $ $ $ $ Total NDF 56,183,657 7,024,854 per year 3,835,570 per year 10,860,424 per year Maximum of 8 for this analysis
Laydays & Repair Days per Annum Total Days per Round Trip Total Round Trips per Annum: Payload MTONs per Annum: Vehicles per Annum:
9.00 4.00 89.00 512,640 25,632
Days Days Trips MTONs EA 20.00 MTON/EA Rounded
Figure 2.1-24: General Operating Scenario for Trade Route Financing arrangements have been developed under the following scenario:
MarAd required equity portion: Principle Equity Portion $ 21,952,669 175,621,353 % Interest 28.0% 5.2% 0.0% 0.0% 12.50% $ 21,952,669 Years 25 PMTS/Year 0 1 1 1 Tot. Int. $0 ($95,889,259) $0 $0 ($95,889,259)
Finance Plan A $ 153,668,684 Finance Plan B $ Finance Plan C $
Figure 2.1-25: Estimated Financing Arrangements Figures 2.1-26 and 2.1-27 summarize the estimated annual operating costs (90% round the clock servicing). Fuel cost applied is $485/mt.
45
46
Freight Cost per Vehicle Mile Annual Cost Breakdown: Capital Cost Return on Equity Fuel Cost Crew Cost Port & Handling Costs Door-to-Dock Drayage Tranport Costs Insurance Maintenance & Repairs Management Costs Lubes, Oils & Stores Other NOTE: Habor Maint. Tax not included Total Annualized Costs $ 70,221,104 100.0% 30.29% $ 2.470 $ $ $ $ $ $ $ $ $ $ $ 10,763,102 6,146,747 23,035,693 4,500,000 10,661,179 7,689,600 600,000 1,000,000 1,738,538 1,854,440 2,231,805 % Exp. 15.3% 8.8% 32.8% 6.4% 15.2% 11.0% 0.9% 1.4% 2.5% 2.6% 3.2% % Build Cost 4.64% $ 2.65% $ 9.94% $ 1.94% $ 4.60% $ 3.32% $ 0.26% $ 0.43% $ 0.75% $ 0.80% $ 0.96% $ 0.38 0.22 0.81 0.16 0.38 0.27 0.02 0.04 0.06 0.07 0.08
Freight Cost per Vehicle $ $ $ $ $ $ $ $ $ $ $ $ 419.91 239.81 898.71 175.56 415.93 300.00 23.41 39.01 67.83 72.35 87.07 2,739.59 $ $ $ $ $ $ $ $ $ $ $ $
Freight Cost per MTON 21.00 11.99 44.94 8.78 20.80 15.00 1.17 1.95 3.39 3.62 4.35 136.98
Freight Cost
Freight Cost
per MTON-Stat.Mile per MTON-KM $ $ $ $ $ $ $ $ $ $ $ $ 0.01893 0.01081 0.04052 0.00792 0.01875 0.01353 0.00106 0.00176 0.00306 0.00326 0.00393 0.124 $ $ $ $ $ $ $ $ $ $ $ $ 0.03047 0.01740 0.06521 0.01274 0.03018 0.02177 0.00170 0.00283 0.00492 0.00525 0.00632 0.199
Figure 2.1-26: Breakdown of Estimated Average Annual Operating Costs
Average Annual Operating Costs Fall River, MA - Port Canaveral, FL
Millions
$80
Other Lubes, Oils & Stores $2 $2 $8 $11 $5 Management Costs Maintenance & Repairs Insurance Door-to-Dock Drayage Tranport Costs Port & Handling Costs Crew Cost Fuel Cost Return on Equity Capital Cost
$70
$60
$50
2009 US$
$40
$30
$23
$20 $6 $10 $11 $1
Figure 2.1-27: Breakdown of Estimated Average Annual Operating Costs
46
47
Figure 2.1-28 breaks down the average required right rate per trailer for transit between Fall River, MA and Port Canaveral, FL.
Required Freight Rate Breakdown Cost Per Trailer

(Fall River, MA - Port Canaveral, FL)
$3,000
Other
$87.07 $67.83 $300.00
Required Freight Rate (Cost Per Trailer/Vehicle Transported)
Lubes, Oils & Stores Management Costs Maintenance & Repairs
$2,500
$2,000
$415.93
Insurance
$175.56 $1,500
Door-to-Dock Drayage Tranport Costs Port & Handling Costs

$898.71
$1,000
Crew Cost
$239.81 $419.91
$500
$1
Figure 2.1-28: Required Freight Rate per Trailer Figures 2.1-29 and 2.1-30 break down the required freight rate on a basis of an equivalent cost per statute mile.
47
48
Required Freight Rate Per Trailer /Statute Mile

$3.00
$2.50
$0.08 $0.06 $0.27 $0.38
Other Lubes, Oils & Stores Management Costs Maintenance & Repairs Insurance Door-to-Dock Drayage Tranport Costs Port & Handling Costs Crew Cost
$2.00
$1.50
$0.16
$1.00
$0.81
Fuel Cost Return on Equity Capital Cost
$0.50
$0.22 $0.38
$1
Figure 2.1-29: Required Freight Rate per Statute Mile
48
49
Required Freight Rate Per Trailer /Statute Mile
Capital Cost
1% 1% 11% 15% 33% 3% 3% 3% 15% 9%
Return on Equity Fuel Cost Crew Cost Port & Handling Costs Door-to-Dock Drayage Tranport Costs
6%
Insurance Maintenance & Repairs Management Costs Lubes, Oils & Stores Other
Figure 2.1-30: Required Freight Rate per Statute Mile The figures above all are based on 100% full load of 160 trailers and a fuel cost of $400 per metric ton. Figures 2.1-31 and 2.1-32 illustrate the effect of fuel cost and percentage of full load on required freight rates.
49
50
Required Freight Rate versus Fuel Cost

$3,600
$3,400
$3,200
Estimated 2009 US$/Trailer Haul
$3,000
$2,800 y = 2.085x + 2,033.167 R = 1.000 y = 1.855x + 1,839.833 R = 1.000 y = 1.665x + 1,688.167 R = 1.000
$2,600
$2,400
$2,200
$2,000 $300 $350 $400 $450 $500 $550 $600 $650 $700 $750
Average Fuel Cost 2009 US$/Metric Tonne
Figure 2.1-31: Fuel Cost versus Required Freight Rate per Trailer Haul
Required Freight Rate versus Fuel Cost

$3.50
$3.00
$2.50
Estimated 2009 US$/Statute Mile
$2.00
y = 0.002x + 1.836 R = 1.000 y = 0.002x + 1.660 R = 1.000 y = 0.001x + 1.523 R = 1.000
$1.50
$1.00
$0.50
$0.00 $300 $350 $400 $450 $500 $550 $600 $650 $700 $750
Average Fuel Cost 2009 US$/Metric Tonne
Figure 2.1-32: Fuel Cost versus Required Freight Rate per Statute Mile
50
51
Figure 2.1-33 presents the worksheet used to determine port costs. It is based on published rates from Port of Canaveral, FL. Costs to load and unload trailers were estimated at a labor rate of $48/hour and applied to the number of trailers loaded/unloaded over the seven hour time period. This figure is probably on the high side as not all trucks would be required to wait the full amount of time to load/unload. These same costs were applied to the Fall River, MA port, for which rates were not imminently available.
Metric TEU
Trailers
US 0 144 3,175 640 0 24.6063 1,111 89.00 7 trailers stons ft stons ft trips/annum Hours
Trailers Wt Ship LOA Take-On Water Ship's Draft Est. GRT = payload m3/2.83m3 No. Trips to Port Port Time
0 144 2,880 195 0 7.5 3143
Port Canaveral, FL
Mooring Fee Harbor Master Cargo Warfage - Trailers Cago Warfage - TEUs Dockage Loading/Unloading Costs - Trailers Loading/Unloading Costs - TEUs Tolls Pilotage based on LOA Pilotage based on GRT Tugs Agency Fees Homeland Security Fees Outside Storage Trailers (2 days) Outside Storage TEUs (2 days) Sanitary Waste Removal Oil Waste Removal Stevedoing Services Fresh Water Fresh Water Hookup Other Port Expenses Total Port Costs: $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ -
Port Rates $ 186 $ 7,873 $ 4,875 4,875 $ 48,384 $ 48,384 $ 186 7,873 308
Port Rate $ 185.66 $ 2.48 $ 23.20 $ 4,874.54 vessels > 2000 GRT ston minimum $ 28.98 per ft LOA 450 LOA ft per 24 hrs see eqn graph $48 per hour x trailers x port time
$ $ 23 $
70
308 $ 12.50 per ft draft minimum 70 $ 0.0280 per GRT minimum 23 $ 2,025 Annual fee
12 ft 2500 GRT
885 -
$ $ 13 $ 13 $ 19 $ $ $ -
885 13 13 19 -
$ $ $ $ $ $ $
2.09 1.85 1,125 1,125 1,700 1,125 50.66
per 15 days full Annual fee apportioned per port visit Annual fee apportioned per port visit Annual fee apportioned per port visit ston
62,647
$ 435.05 per trailer
Figure 2.1-33: Estimated Port Costs Drayage costs to truck trailers to/from the port to local destination (assumed 50 miles each way) was based on a trucking freight rate of $3.00 per mile.
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3.0 Basis for the Cost Estimate

SPARs cost estimates are generated from developed cost models. Each cost model is tailored to a specific hull form (mono-hull, catamaran, trimaran, etc.) and usually to a specific performance category (slow, medium and high speed). Models also can vary for accommodating special equipment and mission requirements. The cost models approach for an estimate is based first upon the composition of the hulls structural components (decks, bulkheads, shell, double bottoms, etc.), and then upon the ship systems (mechanical, piping, electrical, HVAC, etc.) in the design and upon other ship characteristics. Factors considered and applied if relevant are the general build strategy for on-unit, on-block and on-board construction; the type of shipyard and its established product line, its facilities and production capabilities; and the expected competence of the shipyard to plan and manage its resources, costs and schedules. The methods used for modeling the ship design costs are described in SPARs publication entitled Shipyard Cost Estimating. Each cost model employs a comprehensive set of Cost Estimating Relationship, or CERs. They reside on SPARs estimating system called PERCEPTION ESTI-MATE and represent a wide cross-section of current and historical shipyard construction costs at many levels of detail. Adjustments can be made as necessary to reflect differing shipyard productivity factors, construction methods and material costs. These CERs, while parametric in nature, focus on a specific area of cost (labor and material) and each reflects the specific material and the manufacturing and assembly processes required. Specialized CERs focus on structural component fabrication, assembly and erection, for installation of propulsion systems, and for various support activities, etc. The CERs are based on a many different metrics, such as weld length, deck area, compartment volumes, number of crew (by type crew), kW of propulsion (by type), etc. Hull structural component costs are based upon component weight by type of structure and material. The cost estimates, applicable to a lead ship, are believed to be fair representations of anticipated true costs based upon the design information provided. Material costs all have been adjusted to reflect a common year value. This assumes that for a multi-year program, appropriate contract escalation clauses have been defined to index actual costs relative to the base year. Variations due to specific materials, equipment models and configurations, and vendor pricing methods should be expected. The cost estimates assume ship delivery at the final assembly construction yard and do not include any subsequent transportation costs to another site or other ancillary item costs as discussed above. Also, for the commercial shipbuilder, the cost estimate includes typical builders risk insurance and added costs for warranty bonds as are typical 52
53 of commercial shipbuilding contracts (these costs are not included in the estimates for the Dual-Use and combatant shipbuilders. Finally, the estimates are based upon typical contract cost and schedule performance for the three types of shipbuilders for both non-recurring engineering and production.
3.1 Cost Estimating Methodology

The SPAR method of cost estimating differs significantly from the way that the U.S. Navy does its estimating. The U.S. Navy largely develops its estimates based on similar hull forms and design specifications. Then, for similar hull forms, system costs are estimated based on weight and weight alone, although some adjustment factors are often applied. The primary problems with this weight-based method of estimating are the following: It cannot easily estimate cost differentials below gross levels of the work breakdown structure (WBS). This precludes the method from being useful for trade-off studies of designs, materials, and manufacturing Processes. It cannot estimate cost differentials of outfit work performed at different stages of construction: on unit, on block and on board. Various established rules of thumb indicate that these cost differentials can vary from 300% to 500% or more. It cannot estimate cost differentials due to configuration complexity, such as compartment density or location on board the ship (par. ex., confining engine room installation versus easily accessible weather deck installation). It cannot estimate cost differentials due to orientation of work (par. ex., less productive over head work versus more productive down hand work). It cannot estimate cost differentials due to changes in build strategy, including outsourcing the manufacturing of selected components to more productive, less costly vendors and suppliers. Since it operates mostly at high levels of the WBS, it cannot easily translate or segment costs from one type of ship to another, particularly ship types and hull forms not yet developed and built.
SPARs cost models, on the other hand, are based mostly on ship characteristics and various system components that make up the ship design. There are components that are equally applicable for almost any ship type but will vary for size and capacity. Examples are major equipment modules (propulsion, electric generation, etc.). Other examples of common components can be seen in certain functional areas like berthing, galley and mess. Some of SPARs Cost Estimating Relationships (CERs) are based on weight, such as the ships structural components. For most estimating applications, the hull and superstructure weight is broken down by type hull block such as decks, transverse and longitudinal bulkheads, superstructure, double bottoms, side shells, bulwarks, etc., Each 53
54 block type carries a different CER, mostly for labor, since each requires a different set of manufacturing and assembly Processes; therefore each type has its own cost on a per ton basis. However, structural materials also can vary from component to component, such as high strength steel for high stress areas or armor protection, light aluminum or composite materials for superstructures, etc. and the CERs address these differing requirements. For estimating applications where the structural definition is less detailed, the cost models use more global CERs based mostly on similar hull forms, such as typical monohulls, high-speed catamarans, etc. However, SPAR cost estimators also can apply their own judgment factors to these CERs in order to address non-typical differences that might be apparent in the specific design at hand. The structural CERs that SPAR has developed over the years were derived from data collected and analyzed by SPARs shipyard planning and resource management system called PERCEPTION2. PERCEPTION enables the shipyard to catalog each structural component by block type and the CERs are generated automatically. The system reports accommodate not only steel structures, but other materials as well. Other CERs are based not on equipment specifications or weight, but other design characteristics, for example: Deck Area: paint, deck covering, fire main, etc. Compartment Volume: cable, hangers, lighting in accommodations areas Cubic Number (LOA x Breadth x Depth): general electrical cable, general paint, non-accommodations lighting, selected engine room pumps & equipment, anchor & mooring gear, etc. Power Requirements (kW): fuel, lube oil, seawater cooling, engine room ventilation, etc. Crew size & Type: berthing, galley & mess, accommodations metal sheathing, doors, etc. Other Number Counts: life rafts, vehicle tie-downs, TEU cell-guides, etc. Production Labor Hours: production support services, technical support, etc.
When used during the shipbuilding Process, PERCEPTION provides return cost details and summaries for these other CERs. The CERs have been sanitized as best that can be done so that they are not contaminated by added costs of rework and change orders. SPARs production system, PERCEPTION, breaks out all rework and change order costs from costs regarded as normal for the assigned budget. PERCEPTION also manages purchase orders and material control functions, with reports at all levels of detail.
PERCEPTION has been installed at a number of different shipyards, all commercial, in the U.S. and Canada since the late 1970s through to today.
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PERCEPTION, however, is not the exclusive source of cost model CERs, among them are direct price quotations from vendors. SPARs cost libraries are maintained (expanded and updated) on a regular basis.
3.2 Impact of Build Strategy on Cost

The cost estimates assume that the shipyard performs the majority of work in-house. However, some trade-offs should be expected between shipyard labor and out-sourced subcontracting (make or buy) when the ship construction is actually planned and executed. These options are likely to include the manufacturing of outfit systems, but could include outfitted hull modules as well. Such trade-offs would likely be reflected in shipyard accounting systems as lower shipyard labor hours (and costs), but higher material and subcontract costs. Only detail knowledge of the shipyards specific build strategy would permit a cost estimate to reflect changes in costs due to these considerations. However, in SPARs experience, such trade-offs often do not significantly impact the relative quality or accuracy of our cost estimates, unless the outsourced component manufacturing and assembly can be performed by competitive, commercially-oriented vendors that can distinguish their cost benefits over equivalent internal shipyard production costs including the added costs for transporting components from the vendor site to the shipyard. A specific exception to this is the cost estimate for non-recurring design and engineering, which can be estimated as though it was out-sourced by smaller shipbuilders. For such circumstances these costs may be higher, but they also may well result in lower production costs. The cost models provided options for alternative engineering solutions. The cost estimates assume that the construction will be performed using hull block construction techniques. The estimate for the first hull assumes adequate design, planning and production engineering has been provided for some outfitting of hull blocks prior to erection, particularly with regard to major piping systems. Other equipment and multi-systems outfit modules may be included in the lead ship building plan, but it is assumed to be not extensive for the lead ship; therefore, any cost benefits potential from these construction methods have minimal impact upon the cost estimates. Some shipyards have a high pre-outfitting goal for the first ship, but this is a real challenge and is not always achieved. Variations from this build strategy can be reflected by modifying the cost model productivity factors. For follow ships of a series, more extensive applications of outfitted hull blocks and equipment/systems modules are assumed to be included in the build strategy. Cost savings from such improving production methods are reflected in the application of learning curves as discussed in Section 6.0, Follow Ship Cost Estimate. Finally, how a contract is structured for cash flow is very relevant to ship building cost. Contract payment schedules that do not support modern manufacturing cost savings
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56 methods can lead to less productive build strategies. For example, requiring a milestone payment based upon completion of hull blocks erected may force the shipyard to minimize cost savings from on-block outfit as a sacrifice to expedite the schedule for erection work and ensuring an earlier milestone payment.
3.2.1 Modern Shipbuilding Build Strategy

Shipyards around the world generally fall into several categories from world class to not so world class. World-class shipyards can be characterized as technologically progressive, not only in the ship types they build, but more in the way they build ships, both commercial and naval (combatants & auxiliaries). Other yards not so characterized more typically build ships like they always have using legacy methods that by todays standards are much less efficient. Unless they have established a niche market that features relatively low tech ship products, their operations are less competitive in both cost and time to build the more complex ship designs. World-class shipyards have been exploiting build strategies that have enabled them to dramatically lower their costs, improve construction quality and extend ship design features and capabilities. These strategies fall into the following general categories: 1. Improved manufacturing & assembly methods a. Pre-outfitted hull block construction b. Outfitted equipment & systems modules c. Group technology manufacturing methods d. Improved assembly technologies e. Cross-trade work agreements f. Outsourcing specialty work g. Reduced non-value added labor costs h. Minimized/elimination of expensive staging i. Minimized worker walking time j. Increased under-cover assembly operations 2. Improved procurement & material control a. Near-in-time procurement scheduling b. Improved vendor relations & pricing agreements c. Material work order kitting d. Standardized material parts & components e. Material buffer storage nearer to worksites 3. Improved business processes a. Streamlined & integrated departmental business process management b. Improved labor/material/subcontractor planning & scheduling c. Timely & accurate progress, cost & earned value reporting d. Improved cost estimating & faster RFP responses e. Improved progress & cost management metrics
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57 f. Automated data collection systems g. Contract payments supporting advanced building methods & efficiencies h. Streamlined government contract oversight requirements i. Streamlined contract change management j. 4. Improved ship designs & engineering a. Integrated design & engineering systems b. Standardized (repeatable) components & interim products c. Simplified ship & ship systems designs These are the hot issues that shipyards around the world have been focusing on as an industry, some shipyards more than others. While there are distinct differences in the business processes for building naval3 vessels versus commercial ships, there are very similar issues that can benefit military programs.
3.2.2 Modular Construction

The efficient shipyard pursues strategies that maximize productivity of the assembly processes: Maximize under-cover work Maximize down-hand work Maximize assurance that correct material is available on time to support production Minimize material handling and storage requirements Eliminate all instances of non-value labor costs Maximize access to work for not only the worker, but also the supply of material for the worker Minimize number and complexity of parts Maximize opportunities for repeatable standardized parts and assemblies Maximize responsibility and problem solving down to the worker level One of the single-most important strategies is to perform work during the most productive periods of the overall construction process. This means, maximizing the amount of work performed in the controlled environments of the shops and minimizing the work aboard the ship. Shop work can be done undercover and offers much easier access to work areas with men, materials and equipment. Shop work also can be performed without the need for expensive staging.
Ship construction is categorized as being either commercial or naval. This distinction is made not necessarily because of inherent differences in manufacturing and assembly processes, but more because of major differences in the way these building programs are managed and executed that impact these processes. As a generalization, commercial shipbuilding is much less subjected to rules and regulations and ship owner interferences than what is the norm with naval ship construction programs, and these effects apply to both combatants and naval auxiliary programs. While naval auxiliaries programs may be more comparable to commercial ship programs, they still exhibit many of the contractual burdens imposed on combatant programs.
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This build strategy culminates in exploiting the cost-savings benefits of modular construction techniques. Modules can be developed in a wide variety of ways: outfit and equipment modules, hull assembly blocks, and outfitted hull blocks. Outfit and equipment systems can be designed and assembled as a complete module that then can be installed either on hull blocks prior to erection or installed later on-board. Such modules are called outfit-on-units. Hull block assembly is the process of building the hull structure in modular form of building blocks. This assembly method replaces older methods that built structures on the building ways from the inside out (traditional stick building). Hull block construction saves time because it can be performed much more easily and with less expensive material handling and worker access costs. By outfitting hull block assemblies, productivity can be enhanced even further. On-block work can be 30%-50% less expensive in labor costs than equivalent work done on-board ship.
3.2.3 Outfitted Hull Block Construction

Hull block construction is the method of building the ship structure by erectable fabricated and assembled structural components (blocks). Pre-outfitted hull block construction is the process of adding outfit materials (equipment and/or ship systems) to the hull blocks prior to erection. Pre-outfitting hull blocks can significantly reduce assembly costs when compared to performing the same assembly work on-board the ship.
Figure 3.2-1: Sample Hull Equipment Block 58
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A successful hull block construction program can be made even more successful with the application of group technology manufacturing, zone outfit work organization, and the principles of lean design. Group technology manufacturing is the organizing of similar work so that it can be processed together to gain the cost savings potential of batch manufacturing. Group technology manufacturing can be applied not only to parts fabrication, but also to assembly and installation processes. Zone outfitting, a variation of group technology manufacturing, is the method of organizing work within specific physical spaces by work type to achieve the cost and time savings potential. An example of zone outfit work organization is the installation of piping systems in a specified area prior to the installation of other outfit systems (such as electrical trays, HVAC duct, etc.) that might conflict or interfere with overall work progress. Hull block construction is typically planned and managed not only by individual blocks, but also by the manufacturing processes of the interim stages of construction: steel preparation (wheelabrate, prime, trim), fabrication (NC parts, end cuts, bending, rolling, etc.), sub-assembly, assembly, erection, and on-ship weld-out. Obviously different blocks will have a different costs depending upon the manufacturing processes required for its fabrication and construction. Blocks generally can be categorized by block type. This means blocks that go through the same set of manufacturing and assembly processes can be identified as belonging to the same block type. Each block type will have a different unit cost compared to other block types. Flat panels, for example, can be processed on automated panel lines and are less expensive ton for ton than 3D curved blocks that require more time and effort and cannot be manufactured using the same degree of automation. A ship is composed of a variety of blocks and block types, depending upon the size and type of ship being built. A ship having little hull shape should be expected to cost less per ton than a ship of the same size with considerable hull shape. Flat-sided parallel mid-bodies are easier to build than ships with finer hull forms and shape. Lean Ship Design is a design philosophy that focuses on making the ship design as simple and as easy to build without compromising upon design function and possibly enhancing design performance. Lean design, as espoused by many other industries, attempts to eliminate as many different components, parts, and complexities as can be done. Lean design also attempts to capitalize on the use of repeatable interim products, within any ship design, and reduce costs accordingly.
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3.2.4 Extended Shipbuilding Modules

Shipbuilding modules may take on almost any number of types and extents. Hull blocks are modules that, as described above, benefit from reduced costs compared to older stickbuilt methods of assembly at the building ways. Outfitting these hull blocks offers further cost savings by allowing outfitting to occur at earlier stages of construction where work can be focused on a platen rather than occurring later on board. Other types of modules carry the concept of early stage construction cost savings even further. On unit outfit may be as small as a single piece of equipment mounted on its foundation and ready to install on block or on board. Or, on unit outfit can be a complex assembly of equipment, piping, electrical and other systems all pre-mounted on a support structure. The following are good candidates for modular construction: 1. Propulsion plant & auxiliary systems modules 2. Electric generator modules 3. Accommodations modules 4. Masts & stacks 5. Deck & cargo system modules 6. Hull blocks Modules can cover a very wide spectrum of applications, sizes, and systems. Modules can include one or more pieces of equipment and machinery with foundations and other support structures; they may include sections of multiple ship systems such as piping, ventilation duct, local electrical systems, etc. Modules may be installed on other modules, on hull blocks and on-board. However, modularizing an engine room by simply cutting it into modules is not the right solution. This approach typically generates additional pipe, structures and equipment, plus additional weight, which at least partially offsets the benefits gained by modularizing.4 The following figures illustrate examples where equipment and system modules have been successfully developed by various European shipbuilders (for example, Schelde Naval Shipbuilding, Blohm & Voss Gmbh, Abeking & Rasmussen). These samples were obtained from the Ship Design and Research Centre S.A., Gdansk, Poland, Modularization in Ship Equipment, Intermodul s/03/G, http://www.cto.gda.pl/index.php?id=232&L=1 Modularization is being applied almost universally throughout the European shipbuilding industry. Thyssen Nordseewrke Shipyard, for example, has made it possible to produce
Markku Kanerva, Modern Competitive Ship Construction, Deltamarin LTD, SOBENA 2004, Rio de Janeiro, Brazil
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61 an almost entirely equipped engine room in the assembly halls and then transport and install it in the ship hull. It is co common mmon practice that modules are made by specialized producers outside the shipyard. Some modules, like fuel booster blocks for the engine room, are purchased ready-made made for installation at the shipyard. This expands the level of cooperation between the shipyard and the cooperating firms as the latter make more and more ship parts. These relationships no doubt benefit the shipbuilder with reduced costs and reduced product delivery schedules. By outsourcing to specialized module manufacturers, the supply chain obtains more opportunities for business and is more likely to invest in improving their own levels of productivity, lower their costs and advance their technologies for better product quality and capability.
Figure 3.2 3.2-2: Sample Equipment & Outfit Modules
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Figure 3.2-3: Sample Machinery Equipment Modules
New Construction Benefits from Extended Modularization: 1. Shorten ship construction time with modules built in parallel. 2. Shortened time saves cost with lower overhead, less impact of inflati inflation on 3. Mass production of modules saves cost from learning effects. Additional efficiencies gained if modules are standardized and applicable to multiple ship types and classes. 4. Modules can be built by a competitive industry that does not rely on the fully integrated tegrated shipyard that is less productive more opportunities for smaller business. This can lead to greater participation of supplier base that can assume more development responsibilities to improve quality and reduce costs further. 5. Lead ship costs should ld be lower because modular approach is less inter-dependent inter of other systems subject to change orders. 6. Lower cost means more products can be built for available funds. 7. Eventually, standardized modules can lead to lower costs for non non-recurring recurring design and engineering.
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Ship Maintenance Benefits from Extended Modularization 1. 2. 3. 4. 5. 6. Modules can be easily removed from onboard and repaired in shop Maintenance of modules on-shore less costly than on-board Faster turn-around time to repair/replace modules Even faster turn-around with Swap-out/Swap-in scenario of selected modules Increase fleet operation time Decrease time in shipyard for repairs and overahauls
Other industries have long exploited the benefits of modular construction: 1. Aircraft F4 began modularization; F35 extensive use of modules 2. Cars parts and components, often interchangeable between different models 3. Home appliances parts and components There are precautions that must be taken in order to minimize failures in applying modular construction techniques: 1. Requires better than normal engineering 2. Requires better than normal quality assurance 3. Requires higher level of design standards to minimize interferences and disconnects.
3.3 Generic Shipyard Costs

The underlying cost estimating relationships (CERs) used in the Cost Model apply to a generic mid-size commercial U.S. shipyard having reasonably productive manufacturing and assembly facilities, and technical and management competence. The CERs are based upon a comprehensive analysis of U.S. shipbuilding costs gathered from SPARs working experience with a variety of shipyards, large and small, commercial and naval contractors. As noted earlier, the cost model outputs were adjusted as necessary to reflect current shipbuilding practices and costs. It is assumed that the generic commercial U.S. yard extensively employs modern methods of work organization and has competent worker and management skills comparable with internationally competitive shipyards. The approach to ship design and construction is partially based on insights obtained in a comprehensive evaluation of northern European shipyards. The generic shipyard is assumed to have the following general operating characteristics: Current technology CAD and resource planning and management systems. Moderate levels of pre-outfitted hull block and modular construction N/C plasma plate cutting Automated panel line Covered hull block assembly hall
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64 Hull block shot blast and painting facilities Steel manufacturing capacity of approximately 20,000 MTONs (steel or equivalent) per annum.
These characteristics apply generally to mid-tiered U.S. commercial shipbuilders. The cost estimates assume that the construction will be performed using hull block construction techniques. Some outfitting of hull blocks prior to erection is expected, particularly with regard to major piping systems. The cost estimate assumes cost savings are obtained by painting hull blocks prior to erection, after which remaining painting (60% of the total) is performed on board. Other equipment and multi-systems outfit modules may be included in the building plan, but they are not expected to be exploited extensively for the lead ship. Learning curves are used for follow ship estimates and assume that additional engineering will result in increasingly more outfitting of hull blocks prior to erection and more applications of outfit modules.
3.4 Shipyard Productivity Factors

When estimating cost, there are a number of issues that need to be considered. While there is a concept of a standard cost for performing a specific element of work, the actual cost will always vary depending who, when and where the work is to be performed. A shipyard that has the right equipment and facilities, a skilled work force, a competent plan and management team will almost always perform the work more quickly and less expensively than the shipyard that is compromised in one or more of these areas. In addition, a standard cost may identify expected costs for work under normal circumstances, but the actual cost will likely be higher if the work area is congested, confined and/or difficult to reach. There are other technical issues that need to be considered. Working to a poorly engineered design will always be more costly than working to one that is well done and easier to build. An extension to this is whether or not technical information is readily available when the work is scheduled to begin. For example, if technical information is not available at early stages of construction, when work can be performed more efficiently, the work will need to be scheduled later in time when efficiency is less likely, often by cost factors of 3-5 times. Such savings from early stage construction is the objective for on-unit and on-block outfitting versus on-board outfitting when work carries a much higher burden of lost productivity. Therefore, for a cost estimate to be realistic the following issues need to be considered and their effects included:
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1. 2. 3. 4. 5. 6. 7.
Available & capable facilities Experienced & skillful work force Good planning & early stage outfit scheduling Experienced and competent management Efficient business practices Quality design and engineering Minimum change orders
It is assumed that rework is not included in a cost estimate except as a consideration for cost risk. Owner changes can impact costs too, but they should be covered with a set aside budget or decided later as a subsequent renegotiation of the scope of work. All of the above issues influence the relative level of productivity for the shipbuilder working on a given contract. The cost models provide for several types of productivity factors. 1. 2. 3. 4. For technical support For structural manufacturing and assembly work For outfit manufacturing and assembly work For material costs
Therefore, the acquisition costs will be influenced by where the ship is to be built and to specific contractual requirements. The cost model provides indications of cost differences between shipyards of various sizes and the impact upon higher costs expected from shipyards building naval ships. For the notional shipyard, each of the above productivity factors equal 1.00. For a less productive shipyard, the factors increase greater than 1.00. For more productive shipyards, the factors are less than 1.00. As prime contractor for the U.S. Navys Product Oriented Design and Construction (PODAC) Cost Model in the late 1990s, SPAR researched relative productivities of a number of U.S. shipyards. Its findings are summarized in Figures 3.4-1 and 3.4-2. The study also compared data SPAR had obtained from various commercial shipyards (SPAR shipyard clients) and from data collected from several projects involving Northern European shipyards. Additional productivity factors were compiled and reported by P.C. Koenig, H. Narita, and K. Baba for East Asia5.
Shipbuilding Productivity Rates of Change in East Asia, SNAME Journal of Ship Production, February 2003.
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Structural Work Labor Hour Factor (By Type Shipyard)

6.0
5.00 5.0
Labor Cost Factor
4.0
3.0 2.50 1.90 1.70
2.0
1.0
0.90
1.00 0.76 0.71
Combatants (Very Large) Combatants (Large) Dual-Use Noncombatants (Large) Dual-Use Noncombatants (Mid-Size) US Modern Commercial (Large) US Modern Commercial (Mid-Size) Northern European (Large) Korean (Large)
Figure 3.4-1: Relative Productivity for Steel Fabrication & Assembly

Outfit Work Labor Hour Factor (By Type Shipyard)
1.8 1.6 1.4 1.24 1.2 1.00 1.0 0.8 0.6 0.4 0.2 US Commercial Shipyard General Productivity US Dual-Use US Naval Shipyard Combatant General Yard General Productivity Productivity Northern European (Large) 2002 Japan 2002 China 2002 South Korean (Large) 2002 0.33 0.20 0.99 1.56
Labor Cost Factor
0.28
Figure 3.4-2: Relative Productivity for Typical Outfit Work
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Other organizations have attempted to measure relative shipbuilding productivity using an approach called compensated gross tons, or CGT. Adopted in the 1960s by the Organization for Economic Cooperation and Development (OECD), CGT is a normalized measure that allows the work content (per unit of volume) of different types of ships to be compared on the same basis. CGT-based calculations can be used to make high-level cost estimates, to compare shipyard performance (even though they may be building different types and sizes of ships, and to set targets for shipyard performance. NOTE: CGT is not an exact science, and its ability to compare cost performance across different sizes and types of ships must be regarded as very approximate. The approach considers all costs, labor and material lumped together. It should be recognized that productivity of U.S. shipyards building Navy ships has proved to be much more than a 37% premium over equivalent commercial practices. The methods for developing CGT for warships is still not fully understood, while the PODAC results are based on more in-depth analysis of actual shipyard return costs. Figure 3.4-3 provides a spectrum of productivity factors from various studies using the CGT approach.
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SPAR Productivity Factor - Relative to U.S. Mid-Size Commercial (Lower the Factor, the Greater the Productivity) 0.20 0.2042 0.3960 0.1573 0.3583 0.2427 0.3831 0.3563 0.2672 0.3678 0.4344 0.2986 0.4431 Productivity Factors 0.9564 0.4259 1.1294 0.4431 0.8449 0.4104 0.4290 0.3013 0.5315 0.6020 1.6465 1.5664 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80 -
Figure 3.4-3: Approximate Worldwide Shipbuilding Productivity Factors
0.9992 1.3755
SPARs cost model also takes into account the overall size of the ship, as larger ships are typically less expensive due to economies of scale to build on a structural cost per ton basis than smaller ships of the same hull form and relative complexity.
3.4.1 Extended Modularized Equipment & Outfit Option

As discussed earlier in Section 3.3, the cost models standard CERs are based on a notional U.S. commercial shipyard (productivity factors for structural and outfit work = 1.0). The notional U.S. commercial shipyard is assumed to build using conventional, but limited pre-outfitted hull blocks and few on-unit modules. The user can adjust these productivity factors for a specific type yard and/or for a specific anticipated build strategy. Section 3.2 describes the concept of extended modularization in ship design and construction to equipment and outfit components promises a number of cost savings benefits. SPAR cost models provide the option for estimating cost savings from implementing extended modularization. The cost model breaks down the standard CER costs into two categories: 1. Labor hours that can be allocated to manufacturing and assembling modules; and 2. Labor hours required to integrate the module with other ship systems and interfaces. While these cost models use the shipbuilders labor rates for the manufacturing and assembly of modules, the user most likely will specify that the production hours for this work be of a higher level of productivity than what the shipyard normally can be expected to produce. For example, if the notional U.S. commercial shipbuilder has a productivity factor of 1.0, the productivity factor for module manufacturing and assembly work should be expected to be something less than 1.0. The cost models assume that productivity factors applied to the labor hours estimated for installing the modules are what is defined for the shipbuilder. The process by which the cost model separates the labor hours is based from studies made by a Canadian yard in the mid-1980s that experimented with various modular construction techniques and proved conclusively that cost saving benefits are very real. Depending on the type of module, its equipment and systems, the cost model estimates the number of hours for the module fabrication and assembly work as a percentage of the total conventional standard hours (% Total Modularized in Figure 3.4-56), from 20% to 100%. The actual labor hours spent doing the modular fabrication and assembly work is simply the percent of the standard CER hours allocated for modules times the improved
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The factors presented in Figure 3.4-5 are stored in the cost model Module Factors worksheet and can be modified to suit the users own preferences.
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70 productivity factor for modular work. The estimates assume that on-unit factors apply for manufacturing most modules.
Work Type Piping - OMS HVAC - Rectangual Duct HVAC - Spiral Duct HVAC - Fans HVAC - Air Handlers HVAC - Spools HVAC - Fire Dampers Electric Cable (Local) Auxiliaries - IMS Piping - IMS Cable Trays - IMS Staging - IMS Exhaust Casing - IMS Casing Vent Trunk Foundations Seats - IMS Paint - Excluding Block Paint Paint - Block Paint Paint - Unit Paint Propulsion Machinery Outfit Machinery Electronics Outfit Equipment Armament Structures Cable, Machinery Spaces Cable, Accommodations Spaces Cable, Superstructure Cable, Exterior Decks % Total Modularized 85.00% 85.00% 85.00% 85.00% 85.00% 85.00% 85.00% 85.00% 85.00% 85.00% 85.00% 85.00% 95.00% 95.00% 100.00% 100.00% 85.00% 40.00% 20.00% 90.0% 90.0% 85.00% 85.00% 85.00% 85.00% 80.00% 80.00% 80.00% 50.00% Onboard Factor 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 On Block Factor 0.530 0.800 0.650 0.650 0.800 0.650 0.750 0.500 0.650 0.800 0.800 0.800 0.500 0.500 0.830 0.750 0.690 0.800 0.700 0.500 On Unit Factor 0.280 0.400 0.325 0.325 0.400 0.325 0.375 0.200 0.325 0.400 0.400 0.400 0.500 0.500 0.390 0.375 0.170 0.500 0.250 0.300 0.300 0.300
variable
variable 0.50 0.50 0.50 0.85
Figure 3.4-5: Selected Productivity Factors Used for On-Block and On-Unit Work % Total Modularization = Estimated Maximum Percentage of Work that can be Modularized beyond conventional methods. Onboard Factor = Maximum Labor Cost at Onboard Stage of Construction On Block Factor = Percentage Labor Cost for On-Block Work Relative to Onboard Cost On Unit Factor = Percentage Labor Cost for On-Unit Work Relative to Onboard Cost
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3.5 Generic Material Costs

Underlying generic material costs of the cost model assume commercial-grade shipbuilding materials and management methods. Variations due to specific materials, equipment models and configurations, and vendor pricing methods should be expected. Foreign acquired equipment is subject to changes in exchange rates, which are often different from general price changes of domestic goods. Special Note: Some of the material costs within the cost model include turn-key installations. Hence, these cost elements indicate no labor hours for the estimate.
3.5.1 Adjusting Generic Material Costs for Type Contract

Material costs also can vary, depending on the type of contract (Figure 3.5-1). Mil-Spec materials are generally regarded as being of higher standards, such as for added shock protection. More significantly, vendors and suppliers will increase their prices to cover their added costs to provide the usually required military MIL-SPEC documentation on their products.
Figure 3.5-1: Examples of Differences in Material Costs between Shipyard Types
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3.5.2 Material Cost Escalation/De-Escalation

The cost model summarizes material costs and escalates them to a common year value. It is assumed that the construction contract will provide an escalation clause that reimburses the shipbuilder for cost increases expected for years beyond the common year. Figure 3.5-2 tracks average U.S. shipbuilding material costs by major commodity index category, and estimate their changes for the foreseeable future. These indexes have been compiled from recognized sources, both U.S. Government and commercial experts, and are utilized directly within the cost model. These factors are used to escalate/de-escalate material cost for those specific commodities instead of using a generic escalation/de-escalation factor for all commodities.
Material Commodity Cost Escalation Factors

4.0000
Standard Steel Aluminum
3.5000
SS304 SS316 Titanium Plastics
3.0000
Copper Electronics Paint Fuel Oil (MDO NY Harbor)
2.5000
Lube Oil Crude Oil (Domestic) Nickel Machinery & Equipment
Cost Factor
Nuclear Fuel (UF6)
2.0000
US$/Euro
1.5000
1.0000
0.5000
1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030
Figure 3.5-2: Sample of Material Cost Escalation Factors
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3.6 Cost Risk

The estimate developed by the cost model is expected to be realistic for the circumstances and environment under which the construction program would be expected to be executed. However, the cost model provides functions for identifying various categories of cost risk. These estimates of cost risk may be what the shipyard views as potential areas where it may expect its costs to be higher than normally anticipated. The shipyard will likely increase its prices to accommodate some measure of its perceived cost risk. From the ship owners point of view, cost risk may represent additional cost exposures beyond what the ship builder may include in its bid price. For example, if the shipbuilder takes a position that increased construction costs are largely due to poor third party design and engineering or due to faulty contract specifications, the ship owner often faces a higher tab to pay in the long run. Similarly, other increased costs beyond control of the shipbuilder, such as economic inflation of its material costs, may result in the ship owner having to negotiate higher costs to reimburse the ship owner. How much of the cost risk the ship builder includes in its bid will be determined by how much of the risk is placed on the ship builder by the owners contract terms and conditions and by how much the shipbuilder cost risk the shipbuilder is willing to undertake in order to get the business. Risk factors can be applied at any level of detail and can represent either potential cost benefits or penalties. Various levels of risk can be assessed depending upon any number of issues such as the following: Inadequate development of new technology Lack of worker skills Lack of experience with new production facilities Limited sources of materials and specialized expertise Political factors restricting free market pricing or interfering with the most productive shipbuilding approach Escalating vendor prices Escalating exchange rates of foreign purchased goods and services Ineffective planning, budgeting, scheduling & coordinating Ineffective design and engineering (not oriented towards simplifying production) Inadequate development of technical information suitable for efficient production performance. High degree of internal or external design changes & rework Ineffective integration of changes into plans and schedules Ineffective purchasing, material deliveries and material control
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One area of risk that always must be addressed is whether or not the shipyard will be able to fully exploit the cost savings potential of performing work at the most efficient stages of construction. If quality and complete technical information or necessary outfit materials cannot be made available at the time of pre-outfitting on unit or on block, there will always be a cost penalty paid to perform the work later on board. The cost models break out cost risk into five primary categories: 1. The production cost risk for labor and material. While all material costs have been escalated to a common base year, there is room for error in these cost adjustments. Also, there may be discrepancies in the labor hour estimates. These potential errors and discrepancies are covered in this particular cost risk category. 2. Cost risk of rework due to immature engineering. Working with incomplete and/or erroneous technical information significantly increases the potential for rework. Rework can consume both labor and material resources as well as set back planned schedules. 3. The inexperience cost risk that may be associated with a shipyard that has not built this type of ship before. This cost risk is assumed to end after the lead ship under the assumption that there is on board a good management team that learns quickly and takes the right steps to minimize cost risks for the remaining ships. 4. There is an inherent cost risk when detail design, engineering and planning cannot complete quality work in time to meet production schedules. There are ample examples where technical requirements fail to meet their own budgets and schedules and greatly impact the cost and schedule of production. 5. When production schedules are so short that excessive manpower must be applied to meet a planned delivery, the risk of cost increases has been readily proven time and again.
3.6.1 Cost Risk of the Production Estimate Data

The cost risk analysis sets the maximum risk value at 100% of the estimated cost at project completion. When expected cost increases rise above 100% of the estimate, it is assumed that the project most likely will be cancelled. For additional discussion on this subject, refer to A Project Risk Metric by Robert W. Ferguson, Software Engineering Institute, as published by CrossTalk, The Journal of Defense Software Engineering, April 2004, Volume 17 No.4. A similar, more detailed discussion of this approach to assessing risk is presented in Managing Risk in a Program Office Environment, by Bill 74
75 Shepherd, PMP, Acquisition Review, Spring 2003, The Journal of the Defense Acquisition University. Intermediate risk levels are categories of risk that the user may identify with the estimated cost. Where there is considerable cost history behind the estimate, one would expect that there would be little risk that the estimate will result in a higher actual cost. However, where there is little cost history to support the estimate, the risk of higher actual cost may be expected to be higher. Factors that may influence higher risk are the following: New technology that has no direct cost history External economic factors, such as inflation & currency fluctuations as they may affect the estimated costs Processes that may be performed by organizations without sufficient prior experience. Changes in organizations that have not yet proven an ability to perform to the standards assumed by the cost estimate.
The cost model allows the estimator to provide risk values at each of the SWBS Group levels, one for labor and one for material costs. However, if these values are not provided, the cost model will use those values provided in more detail in each of the SWBS Group worksheets. The values for risk can be categorized as described in the following Figure 3.6-1.
Description
In your career, you have never seen this before It has happened on occasion Sometimes it happens & sometimes not Most of the time, this event will occur It has happened on many projects, and you think it almost always will, but there is a chance it will not.
Value
5% Range 1-9%
Risk
95% 75% 50% 25% 5%
25% Range 10-29% 50% Range 30-69% 75% Range 70-89% 95% Range 90-99%
Figure 3.6-1: Cost Risk Value Ranges The level of cost risk, however, is not evenly applied across the construction program. Figures 3.6-2 and 3.6-3 provide breakdowns of the levels of cost risk, based on SPARs experience, used in the cost model. The user, however, may modify these levels of risk within the cost model.
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Calculated Labor Hour Risk % Calculated Material Risk %
SWBS Group
Structures - Steel & Aluminum Propulsion Electrical Electronics & Navigation Auxiliary Systems Outfit & Furnishings Armament Technical Support Shipyard Services Contingencies, Fees & Insurance
1 2 3 4 5 6 7 8 9 10
10.0% 10.0% 10.0% 20.0% 10.0% 10.0% 10.0% 10.0% 10.0% 0.0%
10.0% 10.0% 10.0% 20.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Figure 3.6-2: Risk Factors Applied to a Sample Steel or Aluminum Hull Structure
SWBS Group
Calculated Labor Hour Risk %
Calculated Material Risk %
Structures - Composite Propulsion Electrical Electronics & Navigation Auxiliary Systems Outfit & Furnishings Armament Technical Support Shipyard Services Contingencies, Fees & Insurance
1 2 3 4 5 6 7 8 9 10
50.0% 10.0% 10.0% 20.0% 10.0% 10.0% 10.0% 10.0% 10.0% 0.0%
20.0% 10.0% 10.0% 20.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Figure 3.6-3: Risk Factors Applied to a Sample Composite Hull Structure
3.6.2 Predicting Production Overlap Rework Costs

Some rework due to production errors and problems even with a relatively complete and mature detail design are inevitable. These are included in historical return costs and are already included in the basic estimating CERs. There is another source of rework risk caused by immature engineering and design where production tries to field work its efforts to meet schedule, but risks having to back track and redo prior work when the engineers catch up and the right technical details are available. The causes for rework in production are serious issues to be eliminated as they can result in significant added costs far above typical budgets. Moyst and Das (2002)7 describe
Factors Affecting Ship Design and Construction Lead Time and Cost, Journal of Ship Production, Vol. 21, No. 3, August 2005, pp. 186-194.
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77 failures in detail engineering that caused North American shipbuilders to be seriously uncompetitive compared with foreign world class shipbuilders. They document that Bunch (1987) identified that design-engineering-planning-mold loft was the poorest performer when compared to its Japanese counterpart. This difference was attributed to the Japanese yards having developed concepts of standardization and modularization that permit a large portion of the design and engineering activities to be essentially retrieval of the documentation from files. Moyst and Das discuss various factors affecting design and construction from the perspective of the overlapping strategy many shipbuilders use to reduce lead time. What are likely to result are considerable added costs due to rework caused by poor integration of detailed engineering with the production processes. In addition to large cost increases, production schedules also suffer seriously. At the heart of these issues are design changes, which may involve additional work, elimination of work, demolition and rework, changes in specification requirements, or some combination of these. The timing of these changes directly influence the impact of the changes to overall costs and schedules. The most serious impacts occur when such changes are made as production processes are underway. As construction programs compress schedules by overlapping engineering with production (concurrent engineering), the risk of added production costs and schedule delays increases. As documented by Moyst and Das, the Canadian Maritime Coastal Defence Vessel Program suffered enormously from such a schedule compression decision. The strategy was to overlap engineering with production 100% for the lead ship. This lead ship overran its budget by 40%. Ships 2, 3, and 4 also overlapped engineering, but in lesser degrees. Ship number 4 overlapped by 30%. These follow ships also overran their budgets, approximately 25%, 20%, and 10% respectively. The actual production schedule of the lead ship was 1.54 times longer than the actual schedule for ship number 4. The labor hours for the lead ship were 1.49 times greater than for ship number 4. Ship number 5 had no overlap with engineering and its labor hours were 67% of the lead ship. The U.S. General Accounting Office (GAO) report, GAO-05-183, entitled "Defense Acquisitions: Improved Management Practices Could Help Minimize Cost Growth in Navy Shipbuilding Programs," was released on March 10, 2005. The following quotes from this report and its appendix provides details of the cost growth assessments across several major Navy acquisition programs. The lack of design and technology maturity led to rework, increasing the number of labor hours for most of the case study ships. For example, the design of LPD 17 continued to evolve even as construction proceeded. When construction began on DDG 91 and DDG 92--the first ships to incorporate the remote mine hunting system--the technology was still being developed. As a result, workers were required to rebuild completed areas of the ship to accommodate design changes. Most of the shipbuilders cited a lack of skilled workers as a driver behind labor
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78 hour cost growth. According to the shipbuilders we interviewed, many of the tasks needed to build ships are complex and require experienced journeymen to efficiently carry them out. Yet, the majority of the shipbuilders noted that the shipyards have lost a significant portion of their highly skilled and experienced workers. Delays in delivery of materials also resulted in increased labor hours. The following table, Figure 3.6-4, presents the GAOs cost growth for the most recent large U.S. Navy acquisition programs. These cost increases can be accounted for largely from lack of design maturity and many change orders that resulted therein.
Contract DDG91 DDG92 CVN76 CVN 77 LPD17 LPD18 SSN774 SSN775 % Increased Labor Cost 105% 66% 35% 42% 33% 48% 55% 42% % Increased Material Cost 13% 20% 43% 13% 103% 39% 43% 56% % Increased Target Cost 10% 20% 14% 13% 139% 95% 27% 37%
Figure 3.6-4: Cost Growth for Recent U.S. Navy Acquisition Programs This provides some idea of the overall effect that overlapping of engineering has upon the cost of rework. Breaking this down by SWBS Group (Figure 3.6-5) requires some subjective assessments of where rework is mostly likely to be incurred (these are indeed the rework risk factors used in the cost models). If there is considerable overlapping, then structural work being the first work effort in the build sequence is likely to suffer in a major way from change orders and/or lack of quality technical information. Too early production of electrical systems can suffer from high degrees of rework, with auxiliary systems following not far behind. Technical services and shipyard support, being directly linked more or less to production costs, will likely reflect an increase in their costs as well.
3.6.3 Estimating Cost Risk of Overlap Rework

SPARs estimating cost model produces estimates of cost and schedule risk as part of the cost estimating process. One element of the risk assessment focuses on the amount of design and engineering overlap with the planned production schedule. While risk assessment is never an exact science, the cost model provides valuable insight during the pre-planning stages of a construction program. The cost model develops estimates of cost risk directly from information that the estimator provides from a planned schedule strategy for engineering and production. The cost model assumes that the risk of rework is essentially nil when all engineering can be
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79 completed prior to the start of production. It also assumes that maximum rework will occur when there is a 100% overlap of engineering and production. The cost model allows the estimator to define the maximum percentage potential for rework across each major grouping of the Ship Work Breakdown Structure (SWBS). Figure 3.6-5 illustrates such a breakdown.
Maximum % Rework 50% 30% 65% 7.5% 45% 35% 10% 75% 90%
SWBS 100 200 300 400 500 600 700 800 900
Structural Work Propulsion Systems Electrical Generation & Distributed Systems Electronics & Navigation Systems Auxiliary Systems Outfit Systems Armament Systems Technical Services Shipyard Support Services
Figure 3.6-5: Allocating Maximum Rework The cost model does not exclude from any applied rework risk allocation the direct costs of primary machinery: propulsion and electric generation. The model assumes that even at very early stages of design, these elements often may not be adequately developed and therefore can impact the cost of a premature production schedule. Figure 3.6-6 provides rework cost risk allocation relationships between various degrees of a maximum rework potential and a percentage of schedule overlap of engineering to production. NOTE: The rework cost risk described above assumes that the risk is due only to insufficient schedule for technical information to be properly developed to meet planned production schedules. This particular rework does not include rework due to inexperience of the shipbuilder nor due to poor engineering. The cost risk for these two additional cases is described in the following Sections 3.6.4 and 3.6.3.6.
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Rework Cost Risk

100% 90% Percent Rework Cost Risk 80% 70% 60% 50% 40% 30% 20% 10% 0% 0% 20% 40% 60% 80% 100% 120% Percentage Engineering/Production Schedule Overlap
SWBS 100 SWBS 200 SWBS 300 SWBS 400 SWBS 500 SWBS 600 SWBS 700 SWBS 800 SWBS 900
Figure 3.6-6: Modeling Rework Cost Risk with Degree of Engineering/Production Overlapping Schedules
3.6.4 Estimating Cost Risk of Shipbuilder Inexperience

A third component of cost risk is what could be referred to as the shipbuilders experience risk. The cost model develops this cost risk especially where the shipbuilder has little historical experience building the ship type. The cost model assumes that cost risk due to inexperience does not apply to required material costs, only to estimated labor cost. The experience cost risk is computed based on an estimated experience rating measured from zero (no experience) to 1.0 (fully experienced). Figure 3.6-7 presents the cost models formula for relating experience rating and the percentage of total labor cost at risk8.
SPAR has worked with a wide variety of shipyards since 1972. There have been a number of occasions where start-up companies have done poorly on their initial shipbuilding efforts. Similar cost problems also have been recorded for shipbuilders that have been awarded contracts to build ship types that are dissimilar to their more traditional product line. While the cost over-runs from these efforts range widely, a figure of 100% is perhaps as good an average as one might expect to measure the effect of inexperience.
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Shipbuilding Experience Labor Cost Risk 120% Percent Total Labor Cost Risk 100% 80% 60% 40% 20% 0% -20% 0.20 0.40 0.60 0.80 1.00
Experience Rating (0 - 1)
Figure 3.6-7: Estimating Percentage of Labor Cost at Risk from Shipbuilders Inexperience The cost model applies the experience labor cost risk in different degrees down through the SWBS work breakdown structure. NOTE: The cost risk due to the shipbuilders inexperience is independent of the productivity factors used in the cost model and as described above in Section 3.4. If the shipbuilder is expected to exhibit generally good levels of productivity, the cost risk due to inexperience will apply only to the lead ship of a series. What results can be a more aggressive learning curve for the follow ships as discussed in Section 6. In order to help develop an experience rating, the cost model provides a means to develop a performance raring by evaluating the following five (5) basic. These five categories can be weighted equally for a composite measure of cost risk: Prior Experience Emphasis on whether the contractor has sufficient experience to easily address work requirements and execute the work successfully. Technical Performance Quality and accuracy of deliverables as well as services provided. Ability to provide services commensurate with the work requirements.
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82 Cost Control Emphasis will be placed on the contractors ability to estimate correctly the first time and maintain initial budgets. Ability to control cost and avoid unnecessary cost increases. Ability to make cost effective decisions with respect to technical requirements, schedule and quality control. Early identification of cost and schedule problems. The timely and accurate submission of cost performance data. Schedule Performance Ability to perform or adhere to the scheduled delivery dates and technical instructions. Ability to make decisions with respect to required schedule adjustments without effecting cost or quality. Early identification of schedule problems to include self-correcting. Timeliness of deliverables and provided services. Management Performance Ability to manage contractor and subcontractor efforts efficiently and effectively with transparent performance within the team. Emphasis will be placed on the contractor's ability to staff positions with appropriate personnel who have the necessary skills and requisite technical capability and experience to effectively perform the work. For each of these cost risk categories, levels of risk can be assigned: For each of these performance categories, the estimator can assigned an anticipated evaluation: Unsatisfactory Does not meet minimum acceptable standards in one or more areas; Reportable deficiencies with remedial action required in one or more areas which adversely affect overall performance. Satisfactory Meets the minimum acceptable standards; Adequate results; Reportable weaknesses with identifiable, but not substantial effects on overall performance. No deficiencies in any area. Good Effective performance; Fully responsive to contract requirements; Reportable weaknesses, but with little identifiable effect on overall performance.
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No deficiencies in any area.
Excellent Very effective performance, fully responsive to contract; Contract requirements accomplished in a timely, efficient and economical manner for the most part; Only minor weaknesses. No deficiencies in any area. Outstanding Of exceptional merit; Exemplary performance in a timely, efficient and economical manner; Very minor (if any) weaknesses with no adverse effect on overall performance. No deficiencies in any area. Each of the levels of risk has been assigned a numeric value as shown in the following figure.
Figure 3.6-8: Measuring Level of Performance for Potential Cost Risk
3.6.5 Estimating Cost Risk of Engineering Quality

The cost estimate for the non-recurring costs is based upon an assumed percentage of production labor hours. This percentage is adjusted depending on the complexity of the ship design and upon the type of engineering organization tasked to do the work. As discussed in Section 4, the percentage is lower for commercial-grade non-recurring costs than for combatants. Cost (and schedule) risk is exacerbated significantly when the design and engineering are less than at a level of professional excellence. Not only does poor design and engineering
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84 result in much greater non-recurring costs, but it directly impacts production costs too. Despite the advent of advanced computer design and engineering systems, non-recurring costs have been escalating, both for commercial and for government ship designs. American engineering has taken many steps backwards in its ability to deliver wellengineered ships within a reasonable period of time and cost. The industry is rife with many examples of large-scale added costs and schedule delays due to many late, incomplete, and unavailable drawings as well as countless revisions that directly impact production costs and schedules. As discussed in Sections 3.6.2 and 3.6.3, the relative extent of schedule overlap of engineering with production increases the cost risk of production with rework due to unavailable technical data when production gets under way. That means fewer opportunities for exploiting cost savings from early stage construction methods. However, in addition to this is the relative quality of the engineering effort that needs to be considered as further influencing cost risk. Poor engineering leads to other rework from engineering mistakes, unintended system interferences, etc. A badly layout design usually means higher production costs as there may be insufficient rhyme or reason to what and where systems need to be installed. This can result in effectively making certain ship space effectively denser than it should and that carries a higher production price. A poorly engineered ship also can impact both operational and maintenance costs. The cost model estimates cost risk due to potential engineering problems which do not lend themselves for design to production engineering objectives. Figure 3.6-9 illustrates a relationship between a defined engineering performance rating index (from zero to 1.0). The higher the index, the better the engineering organization manages its quality, costs and schedules and the lower is the expected cost risk to both non-recurring and recurring labor costs.
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Shipbuilding Engineering Cost Risk 120% Percent Total Labor Cost Risk 100% 80% 60% 40% 20% 0% -20% 0.20 0.40 0.60 0.80 1.00
Expected Performance Rating (0 - 1)
Figure 3.6-9: Engineering Performance Rating Affecting Cost Risk A performance rating of 1 would equate the engineering quality and schedule performance one would expect from a world class engineering organization. Such an organization would have only a very limited number of drawing revisions; they would be expected to do it right the first time. Further, the detail engineering would be characterized as production friendly, focusing on simplicity and ease of manufacturing and assembly. In addition, the engineering would ensure that the ship systems support concepts of minimum maintenance access and repair. Finally, the engineering schedule management would be carefully linked to production schedules to ensure that the required production work would have all the technical information needed to do the work at the earliest stage of construction, when there is much more likelihood that the work can be performed most efficiently. A performance rating of less than 1 bears significant cost problems, both for the engineering effort and for production. For example, an engineering performance rating of 0.8, or 20% less than world class, would be expected to cause an increase in engineering and production labor costs of 36%. Making evaluations of engineering performance can follow the same process as described above in Section 3.6.4 for the shipbuilder.
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3.6.6 Estimating Cost Risk Due to Tight Production Schedule

It is no secret that production schedules that are contracted too short will likely be more expensive and probably require more time. For any given work scope, defined in terms of labor hours, the project duration will, on average, dictate the number of man-days or labor resources. The shorter the duration, the higher the number of labor resources will be required to accomplish the scope of work by the end of the project schedule. Figure 3.6-10 illustrates the impact of the production schedule on cost risk. This relationship is based on the premise that as more manpower is applied to the project, the more difficult it can be to control costs. SPARs cost models use CERs that are relative to the productivities and management capabilities of mid-size commercial shipyards. While larger projects can benefit from economies of scale, usually from potential increased efficiencies of batch manufacturing methods, cost risk also can increase exponentially as the number of resources to be managed increases. For shipbuilding, a project requiring more than 1,000 men historically have tended to create cost problems. This effect can be minimized with outsourcing of major construction blocks and equipment modules.
Production Schedule Cost Risk

120% Percent Schedule Cost Risk 100% 80% 60% 40% 20% 0% 500 1,000 1,500 2,000 2,500 3,000 Average Men/Month
Figure 3.6-10: Estimating Impact of Production Schedule on Cost Risk
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3.6.7 Cost Risk on Follow Ship Programs

The cost models estimate cost risk of the cost risk categories (Figure 3.6-11) for each follow ship of a multi-ship construction program. Typically, follow ship cost risk is factored by the amount of learning described in Section 6. However, the cost risk due to engineering quality problems is assumed to dissipate after the second ship of the series.
Cost Risk Category Estimated Cost Data Used Engineering/Production Schedule Overlap Rework Shipyard Inexperience Engineering Quality Impact on Production Tight Production Schedule Impact Lead Ship 100% 100% 100% 100% 100% 2nd Ship Learning % Learning % Learning % 1/2 Lead Ship's Learning % 3rd Ship Learning % Learning % Learning % None Learning % 4th Ship Learning % Learning % Learning % None Learning % ETC. Learning % Learning % Learning % None Learning %
Figure 3.6-11: Cost Risk for Follow Ships
3.6.8 Cost Risk versus Contingency

SPAR's definition of contingency (included in SWBS Group 1000) is a cost margin for systems not yet defined or left out of the available details; for a limited scope of owner changes; and for any design margin traditionally allocated for a preliminary design. The cost model separates costs for design margin from the construction estimate, since combining them only clouds the budgeting process later when there is a contract award. The estimate, in our view, should be "doable" in its own right for the scope of work that is defined. Risk, on the other hand, is not driven by what may be left out of a design or what changes are normally anticipated by the owner. Instead, risk is potential added costs due to as-yet undeveloped technologies expected to be used (such as new propulsion systems, new materials, etc.); changes in economics that could affect price (inflation, currency exchange, etc.) within the applicable time period; and perhaps more importantly today here in the U.S. potential performance problems due to limited capabilities/competence of the design firm and/or the shipbuilder.
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4.0 Non-Recurring Detail Production Engineering and Planning

Non-Recurring costs include research, preliminary and contract design, detail production engineering and production planning (Figure 4-0).
Basic Research - Concept Design Contract Design Validation Functional Design Production Engineering & Construction Drawings Production Planning & Scheduling Purchase Specs & Support ILS for Spares & Load Items Contract Engineering Management Contingency Labor: Contract Detail Design Package Miscellaneous Material & Support: Jigs, Cradles, & Templates, Tools & Instruments
Figure 4-0: Breakdown of Non-Recurring Efforts
4.1 U.S. Navy Ships Non-Recurring Costs

U.S. Navy ship non-recurring costs are generally higher than for commercial ship programs. The following are examples expressed as percentages of production hours (not including shipyard support services): 1. 2. 3. 4. Navy auxiliaries AO program 60%, and TAO 54% Amphibious LHD program 65% and the LSD program 60%. Research and Surveillance AGOR 20% and TAGOS 60% Combatants incur even higher non-recurring costs on the order of 100% to 200%, depending on the complexity of the ship design and the number of ships being built that necessitates more engineering efforts to improve down-stream construction costs and delivery schedules. No doubt the DDX design carries a much higher price tag than what has historically been expected for non-recurring costs.
Typically, U.S. Navy contracts catalog both recurring and non-recurring technical costs together under SWBS 800. Therefore, the majority of engineering costs appear for the lead ship. The cost model, instead, catalogs only the recurring technical costs under SWBS 800 and catalogs non-recurring costs under a separate project WBS. This separation allows the non-recurring costs to be easily allocated to all ships of a series program.
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4.2 Commercial Non-Recurring Costs

From actual return costs from commercial shipbuilders that have good experience building relatively simple transport ships (tankers, container ships, car carriers, etc.), nonrecurring costs generally run 15% - 25% of the total production labor hours (not including production services). When commercial shipbuilders work on more complex ships, the non-recurring costs generally increase to a range between 25% - 35%. A well managed commercial shipyard should do detail design for a relatively uncomplicated design for 16% to 20% with another 7% to 10% for the production planning, scheduling and other non-recurring tasks, for a total of 25% to 30%. A big issue, which properly is of major concern, is the lack of qualified commercial ship engineers and organizations in this country. One solution is to develop an engineering plan to use selected international ship engineers as individuals and retain carefully chosen international design organizations as subcontractors to do portions of the detail design. This is a management challenge, but it can be done. By using a well founded and successful construction management company to oversee these efforts, there should be no legacy issues to resolve as might be expected using an established shipyard engineering organization. Another issue that needs to be addressed is the level of technology expected to be applied to the design and engineering efforts. Historically in the U.S., there has been a hodgepodge of software products for these purposes, some good, some not so good. Few software systems have offered a well integrated solution to developing a sound, sensible integration of ship systems. The U.S. Navy, over the past 30 years or more has promoted new CAD/CAM systems promising to provide such capabilities, but they all were not fully developed and proved to be technical disasters. However, there are other well proven ship design and engineering software products on the international market that continue to perform well for world class shipbuilders and their engineering organizations. U.S national security concerns may prevent design work being done in China and other parts of the world, but countries in northern and Eastern Europe and some Asian countries should be secure locations for designing the commercial aspects of a ship. It would have to be a condition of the shipbuilding contract to allow this distribution of design and engineering work. Detail design will be done in these software modeling products at many shipbuilding centers around the world and instantly updated in all the design locations as well as at the assembly shipyard. There is another reason a commercial shipbuilder case would be more efficient and have fewer false starts than a traditional design process. This is due to having an overall program management organization with a strong technical capability. Section 8 discusses use of an expert technical and management team. An important job of this team is the proper overall development, planning and monitoring/QA checking of the ship engineering effort, something traditional yards do not do.
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90 The lack of U.S. engineers and designers with modern commercial ship design experience can be addressed by carefully selecting both individuals and well managed ship design organizations to be subcontractors which should provide the close management oversight of these engineering efforts. The use of such an expert team could be a great opportunity to move off in a new and better direction. Ultimately, that would be good for the industry, for the Navy and for the U.S. taxpayer.
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5.0 Manpower Requirements

The cost model provides a cross-check on the rationality of the labor hours expended over the planned time period. To do this, the cost model translates labor hours to manpower using a standard 40-hours per man work week. The cost model uses different manpower profiles (Figure 5-1) depending on the type of work involved. Some work is performed mostly early in the time period, other later. These profiles identify how much of a specific work effort can be completed by a point in time defined as 50% of the overall time duration.
Manpower Distribution Profiles
14% 12% 10% 8% 6% 4% 2% 0% -2% 0%
LEVEL S10/90 S20/80 S30/70 S40/60 S50/50 S60/40 S70/30
Percent Overall Labor Effort
20%
40%
60%
80%
100%
S80/20 S90/10
Percent Overall Work Duration
Figure 5-1: Modeled Manpower Distribution Profiles For example, profile number 10/90 accomplishes only 10% of its work at the 50% schedule point in time, with 90% of the remaining work performed in the last 50% of the time period. Based on actual shipyard construction experience, the cost model distributes the various work efforts according to the following manpower loading profiles (Figure 5-2):
Schedule Distribution 80/20 20/80 30/70 10/90 40/60 50/50 70/30 Level 60/40 Construction Structures Machinery Electrical Electronics Auxiliary Systems Outfit Systems Recurring Technical Services Shipyard Production Support Services Non-Recurring Detail Design, Engineering & Production Planning
Figure 5-2: Cost Model Manpower Distribution Profiles
91
92 Figures 5-3 provides a sample estimated total shipyard production manpower requirements for lead ship construction.
Production Manpower Distribution Over Construction Period (Not Including Non-Recurring Costs) 1,600
1,400
1,200 Manpower Requirements Services 1,000 Technical Outfit 800 Aux.Syst. Electronics Electrical 600 Machinery Structures 400
200
10 6 11 5 18 2 10 86 96 16 3 17 3 77 19 29 38 48 58 67 19 2 12 5 13 4 14 4 15 4
Construction Weeks
Figure 5-3: Commercial Shipbuilder Total Estimated Lead Ship Manpower over Construction Schedule Figure 5-4 presents a sample estimated lead ship production manpower requirements.
92
93
Production Manpower Requirements Over Construction Period (Not Including non-Recurring Costs) 700
600
500 Manpower Requirements Aux.Syst. Electrical 400 Structures Services Machinery 300 Electronics Outfit Technical 200
100
10 6 14 4 16 3 17 3 11 5 12 5 15 4 18 2 10 19 29 38 48 58 13 4 67 77 19 2 86 96 -
Construction Weeks
Figure 5-4: Commercial Shipbuilder - Estimated Lead Ship Manpower over Construction Schedule
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6.0 Follow Ship Cost Estimates

Follow ships of a series ship production program typically experience a progression of relative cost reductions as each ship unit is produced. A simplistic formula for learning is provided in the following equation9: Follow Ship Cost = [Lead Ship Cost] x [Ship Number]^ B Where the coefficient B equals Log(Z)/Log(2) and where Z is the percent cost reduction of the second ship relative to the first ship. Since it is often the case that the second ship of a series can cost almost as much as the cost of the lead ship (due to re-engineering for more productive follow ships), the cost model offers a provision to manually re-state the second ship learning different from the above learning curve formula. Cost for ships that follow the second ship then are reduced according to the selected learning curve formula.
6.1 Labor Cost Learning

Learning depends greatly on the quality and completeness of the engineering and production planning. Large learning typically can be experienced when the lead ship suffers many problems in this regard, only to see the follow ships benefit from efforts to correct these problems. The degree of learning also will be less if the shipyard employs standard engineered interim products and manufacturing processes. Getting it right the first time means that the learning process was essentially done at an earlier period of time. There is a lot of ifs involved in trying to estimate learning as it involves a lot of how well everyone performs, how innovative is the shipyard in maximizing productivity, and how many changes are required from ship to ship both from within the shipyard and from without. If two ships are built each year and the engineering is poor, little learning will likely be demonstrated for the second ship. Overlapping ships also may delay the potential impact of full learning for the follow ships. However, there are additional cost savings effects that can be obtained when production of ships reaches something close to the essence of mass production. Interim product modules and assemblies that can be manufactured across multiple ships, without constraining real estate and overwhelming material control has significant cost savings potential.
Reference "Past and Present Concepts of Learning: Implications for U.S. Shipbuilders", Mark Spicknall, UMTRI, presented to SNAME Ship Production Symposium, January 1995
94
95 The better the technical data and the organizing of production, the quicker the costs can be reduced. A well organized start-up for the lead ship production often results in a flatter learning curve. On the other hand, a poorly executed lead ship program can give the impression that significant learning has been achieved, when, in fact, most of the cost reductions can be attributed to simply overcoming cost over-runs and poor budget performance. The cost model assumes that the shipbuilder is competent and reasonably well organized in both technical and production capabilities. The cost estimate reflects what would be expected to be a realistic appraisal of its performance for the lead ship.
6.2 Material Cost Learning (Discounts)

A learning curve of 95.0% may be used for material costs (the second ship material costs are 95% of the material costs for the first ship). This also assumes that multiple ship discounts from vendors and suppliers play a lesser effect for a military ship than would be expected for a series of commercial ships.
95
96
7.0 Commercial Prime Contractor Management Plan

For shipyards that have limited technical capabilities to develop a ship design and provide quality functional engineering, the cost models have a worksheet (Expert Technical Team, Figure 7-1) to develop a cost estimate for the shipyard to outsource the management of this effort. The Expert Technical Team may be described as a world class design and engineering group, but with limited responsibilities:
What this technicl team does not provide: 1
2 3 4 5 6 7
No overall program reponibility; that is in the yard's bid No outsourcing/subcontracting responsibilities No overall ship planning No engineering considerations for shipyard facilities/capacities, etc. No production oversight No overall production QA No financial/contract administraion responsibilities
The final cost estimate figure developed for the Expert Technical Team is linked to the option for Use of Program Manager offered on the Rates & Factors worksheet. The Expert Technical Team worksheet provides for input of labor rates and other multiplier factors affecting anticipated scope of work.
96
2009
Factor
2009 US$/Year $ 360,000 $ 280,000 $ 250,000 $ 250,000 $ 250,000 $ 180,000 $ 220,000 $ 180,000 $ 220,000 $ 220,000 $ 180,000 $ 250,000 $ 120,000
Expert Design Group US$/Hour Hrs/Year Duration

1 2 3 4 5 6 7 8 9 10 11 12 13 Program Manager Technical Director Hull Engineer Machinery & Electrical Group Engineering QA Ship Specifications Outfiting Engineering Tests PMO Chief of Staff Materials Director Procurement Specifications Planning Director Clerical $ $ $ $ $ $ $ $ $ $ $ $ $ 180.00 140.00 125.00 125.00 125.00 90.00 110.00 90.00 110.00 110.00 90.00 125.00 60.00 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 1.00 1.00 0.75 0.75 0.75 0.25 1.00 0.50 1.00 1.00 0.75 1.00 1.00
Com m ercial Qty ManYear Basis 1.00 2.00 3.00 3.00 3.00 4.00 5.00 4.00 1.00 1.00 4.00 1.00 5.00
Military
Total
2009 Total US$ 1,440,000 2,240,000 2,250,000 2,250,000 2,250,000 720,000 4,400,000 1,440,000 880,000 880,000 2,160,000 1,000,000 2,400,000 24,310,000 4,862,000 29,172,000 13.60%
Follow Ship Factor 0.50 0.50 0.15 0.15 0.15 0.50 0.15 0.15 0.15
Follow Ship US$ 720,000 1,120,000 337,500 660,000 216,000 440,000 132,000 150,000 360,000 4,135,500 4,135,500
Factor Man-Years 4.00 1.00 8.00 1.00 9.00 1.00 9.00 1.00 9.00 1.00 4.00 1.00 20.00 1.00 8.00 1.00 4.00 1.00 4.00 1.00 12.00 1.00 4.00 1.00 20.00 1.00 115.00 ODC:
$ $ $ $ $ $ $ $ $ $ $ $ $
$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $
Duration Total Engineering + Lead Ship:
4.00 Years
$ 20% $
TOTAL COST: $ % Non-Recurring$ + Lead Ship$
Figure 7-1: Cost Model Worksheet: Expert Technical Team
97
OUTLINE SPECIFICATION FOR HST 160-53 Foot Trailer

High-Speed Trimaran Trailership
By CSC/HEC for CCDOTT
30 April 2009
Outline Specification For HST 160-53 Foot Trailer Trailership

Principal Dimensions:
LOA LBP Beam Draft 195 m Depth 21.0 181 m DWT 6600 35.4 m Speed 26 7.5 m 30 Max Shaft Power 54 MW m MT Kts Service Speed Kts Boost Speed
The above depth is to the Strength Deck. The Weather Deck (2nd Deck) is 16.000m ABL and the Freeboard (Bulkhead) Deck (3rd Deck) is 13.000m ABL. Center hull maximum beam is 15m. Each side hull has a maximum waterline beam of 3.75m, a maximum beam of 5.3m, and a LOA of about 101m.
Propulsion:
Power is provided through 4 Fixed-Pitch NiAlBrz propellers: 1. A 4.8m diameter propeller developing 19MW at 140 RPM, driven through a horizontallyoffset reduction gear by a MAN 16V48/60CR diesel engine rated 19.2MW at 514 or 500 RPM. 2. A 14MW AziPod. 3. A 3m diameter propeller in each side hull, each developing 12MW at 160 RPM, driven through a planetary reduction gear by a 14MW electric motor operating at about 500 RPM, similar to ABB model AMZ 1250WV12LSB.
Electric Power:
Electrical power is provided by 7 Diesel-Generator Sets (including one spare), MAN type 14V32/44CR or equal, rated 7.84MW engine MCR at 720RPM. One DG set is located next to the main engine, while the other 6 are in 3 separate engine rooms separated by NT bulkheads above the engine (workshop and Control Room level) and by WT bulkheads below the Freeboard Deck. A 200KW Emergency Generator will be located at the aft end on one accommodation deck. The spare DG set may be reduced to about 500 KW for use while moored or anchored, subject to further load analysis. For estimating purposes, these two items are considered to balance out, and should NOT be included in any cost estimates.
Outline Specification HST 160 53-Foot Trailer Trailership
30 April 2009
General Arrangement:
General Arrangement, Typical Sections, Typical Transverse Web Frame and Machinery Arrangement are shown on the attached Drawings. These Drawings are still under development and may show conflicting information reflecting more than one possible structural configuration. The ship is constructed of a mix of mild steel (ABS Grade A) and higher strength (AH-36) steel, and will be classed with ABS. Up to 4% of the total steel weight may be thick enough to require grade DH-36 plate, all located in the lower shell and innerbottom. The amount of this steel required will be determined when the longitudinal strength analysis is completed. For commercial operation on the US East Coast, crew size is 20 persons, including 8 officers (2 senior & 6 junior) and 8 crew in single cabins, and one stateroom for a 4-man maintenance crew. No passenger accommodations are included. As an NDF feature, space and weight is provided for plug-in support services (water, sewage and electricity) for portable troop/passenger accommodation modules at the forward end of the upper deck vehicle space (not defined or included in base price).
Lightship Weight Estimate (metric tones):

SWBS Group Weights 1 Hull Steel 2 Propulsion 3 Electrical 4 Electronics & Navigation 5 Auxiliary Systems * 6 Outfit & Furnishings 7 Armament Sub Total 8% Margin TOTAL Weight,t 6,700 1,508 493 35 495 290 0 9,520 762 10,282 VCG 12.0 7.1 15.5 26.1 9.9 22.1 11.6 12.6 11.7 LCG 81.0 70.9 82.3 30.0 101.1 125.8 81.7 81.7 81.8
*Group 5 Includes an allowance for enlarged water & sewage plugins for Troops as a National Defense Feature. The capacity required has not yet been determined. Total molded displacement in Salt Water is 17033t at a molded draft of 7.5m.
Outline Specification HST 160 53-Foot Trailer Trailership
30 April 2009
Capacities:
Vehicles Area, m2 Main Deck 4,360m2 Second Deck 4,195m2 Total 8,555m2
Machinery Space Volumes Space Fwd D.G. Mid D.G. Aft D.G. MnEngRm Void ERDB SideHullMR Aux Mchy AziPod Uptakes & Vents
Hdrm,m 5.00m 4.20m 4.20m
Vol,m3 21,800m3 17,619m3 39,419m3
Frs 0-46 0-46
Lane-m 1,422 1,286 2,708
Frames 33-39 27-33 21-27 15-21 15-21 15-21 9-15 0-9 18-27 Total
Frames 39-42 39-42 33-39 33-39 27-34 27-33 24-34 9-24 9-15 9-15 Total
Frames 53-67 46-53 39-46 33-39 33-43 27-33 27-33 21-27 21-27 9-15 9-15 0-9 Total
Capacity m3 ea 1,824 1,831 1,831 3,404 603 806 1,047 1,214 2,446
Total Capacity Number m3 1 1,824 1 1,831 1 1,831 1 3,404 1 603 2 1,612 1 1,047 1 1,214 1 2,446 15,812
LCG m-AP 101.985F 83.999F 66.000F 48.002F 48.050F 48.139F 30.035F 7.256F 61.500F
VCG m-BL 12.467 12.463 12.463 9.485 1.69 7.228 11.003 11.055 14.5
Fuel Tank Volumes Space F.O. Tk 1P F.O. Tk 1S F.O. Tk 2P F.O. Tk 2S F.O. Tk 3P F.O. Tk 3S F.O. Tk 4P F.O. Tk 4S F.O. Tk 5P F.O. Tk 5S
Capacity m3 ea 282 282 558 558 579 579 285 285 527 527
Total Capacity Number m3 1 282 1 282 1 558 1 558 1 579 1 579 1 285 1 285 1 527 1 527 4,462
Total Capacity Number 1 1 1 1 2 1 2 1 2 1 2 1 m3 988 1,421 1,598 937 1,212 946 1,890 1,573 1,938 828 1,058 1,015 15,404
LCG m-AP 115.472F 115.472F 101.865F 101.865F 83.979F 83.979F 70.615F 70.615F 30.000F 30.000F 3,743t
LCG m-AP 162.473F 141.351F 123.045F 101.945F 100.770F 83.991F 83.842F 64.251F 65.999F 31.269F 32.424F 12.493F
VCG SlackF.S. m-BL m4 5.962 118 5.962 118 5.783 275 5.783 275 5.78 301 5.78 301 5.83 151 5.83 151 6.131 291 6.131 291 at S.G.= 0.8389
VCG m-BL 7.64 5.247 4.674 3.449 6.251 3.325 6.219 4.351 6.211 4.123 6.453 6.828 SlackF.S. m4 329 1877 3649 3337 75 3672 216 4073 231 3276 71 3454
98%Full m4 94 94 227 227 246 246 122 122 208 208
Ballast Tank Volumes Space FP Tk SWB 1C SWB 2C SWB 3P+S SWB 3WS SWB 4P+S SWB 4WS SWB 5P+S SWB 5WS SWB 6P+S SWB 6WS AftPkTk
Capacity m3 ea 988 1,421 1,598 937 606 946 945 1,573 969 828 529 1,015
98%Full m4 314 1103 1862 1447 26 1484 83 1994 89 1282 28 1146

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Independent Cost Estimates For HST Trimaran Trailer Ship

May 30, 2009

Figure 1.0-2: Dual-Use HST160-53 General Arrangement: Midship Section

Figure 1.0-3: Dual-Use HST160-53 Machinery Arrangement

Figure 1.0-4: Dual-Use HST160-53 Machinery Arrangement

Figure 1.0-5: Dual-Use HST160-53 Machinery Arrangement

35.40 20.55 72,516 0.432 13,186

CREW PAX PAX PAX PAX PAX PAX Total

2.0 The Cost Estimates

2.1 Cost Estimate Work Breakdown Structure

2.1.1 Non-Recurring Costs

16 Figure 2.1-1 presents the non-recurring labor hours estimates.

Non-Recurring Labor Hours

Pure Comercial HST140-53 Convenional Dual-Use HST160-53 Conventional

100,000 50,000 1,504 2,003

Estimated Non-Recurring Costs

2.1.2 Recurring Costs

% Margin % Mark-Up % Change Orders % Program Costs % Contingencies

55.26 w / overhead 46.05 w / overhead 312% 279% 209% 134% 258%

20.0% 0.4% $ Cum .Total

w/o w/o w/o w/o w/o w/o

Profi t Profi t Profi t Profi t Profi t Profi t

% Margin % Mark-Up % Change Orders % Program Costs % Contingencies

55.26 w / overhead 46.05 w / overhead 312% 279% 209% 134% 258%

20.0% 0.4% $ Cum .Total

w/o w/o w/o w/o w/o w/o

Profi t Profi t Profi t Profi t Profi t Profi t

2.1.3 Program Schedule

2.1.-6: Dual-Use HST160-53-High-Speed Trimaran Trailer Ship Construction Schedule

2.1.4 Series Construction Programs

2.1.5 Management Costs & Fees

2.1.6 Cost Risk

Est. Schedule Cost Risk

$98 $400 $49 $0 $30

Est. Price of Construction Non-Recurring Design, Engineering & Planning

$100 $70 $TOTALS:

2.1.7 Labor Rates

2.1.8 Material Costs

U.S. DOC/BIS TSV Site Survey Data, dated December 1, 2003.

2.1.10 Transport Factors

18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 -

Ship Design Transport Factors

$35 $30 $25 $20 $15 $10 $5 $1 $14 $29

Average Cost/Transport Factor 2009$ Transport Factor = [Payload x Speed]/HP/550

$25 $24 $20 $19 $23

Pure Commercial HST140-53 Conventional Hull Block Construction - 26 KTS

Figure 2.1-16: Comparing Average Ship Cost per Transport Factor

2.1.12 National Defense Funding (NDF)

Figure 2.1-17: Comparing Lead Ship Costs

Averaged NDF 2009$ HST Trimaran Trailer Ship

NDF w/67% Risk

NDF w/100% Risk

Figure 2.1-18: Potential NDF for Series Ship Production Programs

2.1.13 Extended Modularization Build Strategy Cost Benefits

Figure 2.1-19: Comparing Non-Recurring Costs

% Margin % Mark-Up % Change Orders % Program Costs % Contingencies

55.26 w/ overhead 46.05 w/ overhead 312% 279% 209% 134% 258%

0.0% 0.0% $ Cum.Total

Average Cost Per Ship of Series 2009US$

Includes Non-Recurring & Mgmt Fee, If Applicable

Includes Total Cost Risk

$250 $200 $150 $100 $50 $0 1 2