10. Cost Estimating

Chapter

10

Cost Estimating
Laurent C. Deschamps and John Trumbule

10.1

NOMENCLATURE

Block A structural interim product made from assemblies, sub-assemblies and parts, which can be joined with other blocks to form a grand block or can be erected individually. CER A Cost Estimate Relationship is a formula relating the cost of an item to the item’s physical or functional characteristics or relating the item’s cost to t \he cost of another item or group of items. Examples: a. for steel block assembly, 25 man-hours/ton; b. for pipe material, $25/meter; and c. for shipyard support service, 10% production hours. Cost Driver A controllable system design characteristic or manufacturing process that has a predominant effect on the system’s cost. Cost Risk Cost Risk is the degree of cost uncertainty within an area of a project. It can be measured simply by relating the cost estimate against potential minimum and maximum cost values or by probabilistic distributions. Cost Risk can be impacted by schedule risk, technical risk, performance risk and economic risk. Direct Cost Any costs which are identified specifically with a particular final cost objective. Direct costs are not limited to items that are incorporated in an end product. For example, support services that can be specifically allocated toward a given project may be direct costs. Estimate Cost figure developed to anticipate the cost for executing proposed work. The estimate normally becomes the production budget less any management reserves withheld from the estimate.

G&A General administrative costs that can be isolated from general overhead. G&A (determined more typically for government contracts) identifies administrative costs supporting the given work facility, such as legal and accounting, cost of money, marketing, etc. Interim Product A level of the product structure that is the output of a work stage and is complete in and of itself. Indirect Cost Costs which are incurred for common or joint objectives and which are not readily subject to treatment as direct costs. Indirect costs include overhead, G&A, and any material burden. On-Unit Outfitting A method of installing outfit system components and equipment items into a “packaged machinery unit” prior to its installation on-block or onboard. On-Block Outfitting Installation of systems, fittings and equipment into structural blocks have been has been assembled. This work is often called pre-outfit. Pre-outfit often is performed in two distinct phases: Pre-outfit hot refers to work that must be performed on the unit before the unit can be painted (steel outfit items, seats, pipe, etc.); pre-outfit cold refers to work that can be performed after the structural unit has been painted (value fitting, HVAC, electrical cabling, equipment, etc.). On-Board Outfitting Installation of systems, fittings and equipment after the hull structure has been erected. The scheduling of on-board outfit activities normally should follow a work plan organized for Zone Sequence Scheduling. Overhead An indirect cost that is normally related to direct labor costs. Overhead includes such general costs

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as employee fringe benefits, plant maintenance and utilities, rents and leases, equipment depreciation, etc. PWBS Product-oriented Work Breakdown Structure: A combination of a number of breakdown structures that form a hierarchical representation of the products, stage and work type associated with the shipbuilding process. Stage The division of the shipbuilding process by sequence. SWBS Ship Work Breakdown Structure. There are many varieties of SWBS, the U.S. Navy’s SWBS or more recently ESWBS (Extended Ship Work Breakdown Structure) being the most familiar. This is a system-based WBS Unit The placement of equipment and its related systems together on a common foundation (seat) such as a packaged machinery unit. Work Center A company department or stage of construction that is assigned specific responsibility and resources needed to perform work. Work centers may also be assigned to subcontractors. Zone Physical areas of the ship: bow, stern, mid-body and superstructure. Zones can also identify structural blocks during hull construction: Bow blocks, mid-body bottom blocks, mid-body deck blocks, etc.

tionally has been a list of common ship systems (hull structure and outfit, equipment, piping, electrical, paint and furnishings), augmented by ancillary shipyard services needed to support production. A well-known WBS is the U.S. Navy’s Ship Work Breakdown Structure, or SWBS. Another is the Maritime Administration’s Classification of Merchant Ship Weights. Other WBS schemes have been developed over the years by different shipyards some more detailed than others have. Regardless of the specific WBS, each provides a format by which a shipyard can collect and organize costs that can be used to estimate pricing for new work. 10.2.2 Traditional Bid Estimating Bid estimates have usually evolved at three levels of detail. The highest level is to provide only a very rough-order-ofmagnitude (ROM) cost estimate before any details of the ship design and manufacturing processes are fully considered. Such high-level estimates have been made on the basis of ship weight, size and other general performance parameters. The next level is when a Preliminary Design has been prepared and system weights have been estimated, and often used to determine whether a project should be funded. A more detailed estimate typically follows the completion of the Contract Design with a pricing process that operates within the WBS format. Traditional bid estimating usually involves several different approaches to develop the pricing information: Hull structure is often priced on the basis of hull weight and type material (steel, aluminum, etc.). Some estimating procedures break down the hull structure into definable blocks or parts, such as double bottoms, decks, fore peak, aft section, etc. Each of these blocks has associated different degrees of production difficulty (for example, man-hours per ton) to build and therefore, different associated costs to produce. The more advanced estimating practices break down these basic hull block costs by stage of construction: preparation, fabrication, assembly and erection. Major equipment items, such as propulsion diesel engines, are usually priced by obtaining vendor quotations, then applying estimates for labor to install and test. For long-term contracts, price adjustments for inflation and other economic effects are added. Other outfit systems are estimated either from detail material take-off, which are rarely available for new designs, or by estimating labor or material costs on an average cost per parametric unit of issue basis. Historical costs collected by WBS can be compiled with appropriate material size parameters to provide such pricing factors if such historical data is readily available and compiled for use by the estimator. Shipyard support services, including engineering, project management and other production support efforts (ma-

10.2

INTRODUCTION

Shipyards, whether doing ship repair or new construction, typically have to deal with a highly variable product or service to perform. This high degree of variation means that bidding on contracts can be extremely difficult, especially in a very competitive market. With minimal profit margins and precious little time available to make bids, the pricing of new work can be hazardous unless there is a quick and accurate means for developing reasonable and reliable cost estimates. 10.2.1 Estimating Requirements Unique for Shipyards The civil construction industry typically bids on work after design has been completed and therefore can perform its estimating on the basis of a bill of material takeoff from drawings. Shipyard work, on the other hand, is not nearly so formalized and detailed in terms of work specifications. Ship repair contracts usually identify individual work items to be performed, but rarely with well-developed drawings available. Even new construction contracts begin without detailed production drawings. Such contracts usually include the work to develop such detailed technical information. What usually allows a shipyard to develop rational cost estimates is its ability to catalog historical costs by some consistent work breakdown structure, or WBS. The WBS tradi-

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terial handling, temporary services, etc.), are usually estimated as percentages of overall production man-hour costs, taking into consideration the impact of the expected duration of the contract, degree of technical difficulty, and other factors that might influence the cost for these efforts. To complete the basis for a bid pricing proposal, overhead is estimated based upon the shipyard’s production back log, which will dictate the distribution of indirect costs to the new contract. Profit depends upon anticipated aggressiveness of competing proposals for the contract and/or requirements of contract negotiations.

(preparation, fabrication, assembly, installation, testing, etc.). Cost estimating can be integrated with detail engineering trade off studies, that include not only alternatives in design, but alternatives in production engineering and manufacturing processes. The cost estimating at this stage can be used as a successful strategy for managing the detail design process and will help ensure that the final design stays within prescribed cost objectives. The costing information provides the fundamental basis for the Contract Price and for establishing production budgets. This level is used by shipyards bidding on a design rather than for design trade-off analysis.

10.3

TYPES OF COST ESTIMATES 10.4 DESIGN AND COSTING STRATEGIES
There is a number of different design and costing strategies that can impact a cost estimate. 10.4.1 Cost as an Independent Variable (CAIV) CAIV is a Department of Defense developed strategy for acquiring and supporting defense systems that entails setting aggressive, realistic cost objectives (and thresholds) for both new acquisitions and fielded systems and managing to those objectives. The costs objectives must balance mission needs with projected out year resources, taking into account anticipated process improvements in both DoD and defense industries. This concept means that once the system performance and objective are decided (on the basis of cost-performance trade-offs), the acquisition process will make cost more of a constraint, and less of a variable while obtaining the needed military performance (1,2). CAIV has brought attention to the government’s responsibilities for setting and adjusting life cycle cost objectives and for evaluating requirements in terms of overall cost consequences. This is a shift from the traditional Design-to-Cost analytical approach. CAIV and Design-to-Cost have the same ultimate goal of a proper balance among RDT&E, production and operating and support costs while meeting mission needs according to an established scheduled and within an affordable cost. However, CAIV approach has refocused Design-toCost to consider cost objectives for the total life cycle of the program and to view cost as an independent variable with an understanding it may be necessary to trade off performance to stay within cost objectives and constraints. 10.4.2 Design-To-Cost Design-To-Cost is a management concept wherein rigorous cost objectives (ceilings) are established (3). The control of

Cost estimating occurs at various phases of ship design development. The approach used to develop the cost estimate will largely depend upon the level of detail available for the cost estimating process. 10.3.1 Concept Design (ship type oriented) The cost estimating possible during concept design is at a very high level and makes rather broad assumptions about the ship design, its general mission, and its physical and operational characteristics. Concept design may also make broad assumptions about the general methods and organization of the design, engineering and construction processes. This level is used to decide the economic feasibility of the project. 10.3.2 Preliminary Design (ship systems oriented) The cost estimating during preliminary design remains at a relatively high level, but there is more detail information about the ship design with regard to the hull structure, the equipment and outfit systems. During preliminary design, cost estimating can be successfully integrated with the design-engineering process to produce high-level tradeoff studies useful for developing an appropriate direction for the ship design. These studies set the basic design parameters for meeting mission requirements within general cost and schedule constraints. Preliminary design cost estimating may begin to reflect the effects of alternate build strategies. This level is often used to evaluate and sanction projects. 10.3.3 Contract Design (interim product and manufacturing process oriented) Cost estimating at this phase of design describes costs on the basis of production interim products (hull blocks, outfit modules, and ship zones) and manufacturing processes

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costs to meet these objectives is achieved by practical tradeoffs involving mission capability, performance and other program objectives. Cost is the overriding criteria throughout the design development and production stages of the program. When imposed on a program with a total cost constraint, a process of cost estimating is carried out throughout the detail design development. Cost, as a key design parameter, is addressed on a continuing basis and is an inherent part of the design development. In the final analysis, each system, subsystem and component must be considered with respect to its cost and its effect on the cost of the program. Often times, the principles of lean design are applied to these systems and components as a means to reduce their cost by virtue of simplifying the design, reducing the number of parts and making them easier and less expensive to build. 10.4.3 Negotiated Production Rates Negotiated Production Rates is a development of time and materials type of contracting where the full scope of work is undefined. These contracts negotiate not only traditional labor rates, but also the production rates applicable to the contract being pursued. These production rates are based directly upon the shipyard’s CERs measured to perform a variety of different work types and manufacturing processes. Such cost and pricing methods are used for establishing cost management of change orders and other work that cannot be identified in detail and where fixed price contracting may carry too high a risk for either the shipyard or the shipowner, or both. 10.4.4 Life Cycle Costs Life Cycle Costs (LCC) include design and acquisition (production) costs as well as operations and supports costs throughout the life of the product. Life cycle costs have often been a major consideration for commercial shipowners who must look at the bottom line for profit and a return on their investment. If the cost of design and construction, including the cost of money, cannot be recouped within a reasonable amount of time, the ship will not be built. If the operating and maintenance costs (plus amortized construction costs) exceed operating revenues, again the ship will not be built. When viewing the life cycle cost breakdown, only about 25% of the costs may be directly related to acquisition (4). That means 75% of the total cost is operation and support and is made up of personnel, maintenance, and modernization. For naval ships, the largest of these (37%) is personnel cost, followed by maintenance (21%) and modernization (13%). Therefore, in order to obtain a more complete picture of

the overall cost of a ship, its life cycle costs may need to be estimated and evaluated. The life cycle of a ship or a piece of equipment is divided into essentially four stages: Conception stage: All activities necessary to develop and define a means for meeting a stated requirement. For ships and equipment, this normally includes research and development, design, contract specifications, identification of all support necessary for introduction into service, and identification of funding required and managerial structure for the acquisition. Acquisitions stage: All activities necessary to acquire the ship and provide support for the ship and equipment identified in the conception stage. In-Service stage: All activities necessary for operation, maintenance, support and modification of the ship or equipment throughout its operational life. The in-service stage is normally the longest stage. Disposal stage: All activities necessary to remove the ship or equipment and its supporting materials from service. In order to determine the overall life cycle cost for a ship, costs must be estimated for each of the above stages.

10.4.5 Total Ownership Costs An extension to LCC is the Navy’s Total Ownership Costs (TOC). TOC covers the same cost elements of life cycle costs, but also includes the added costs for the infrastructures required to support training facilities and other activities normally treated as indirect costs to the ship and its operations.

10.4.6 Return on Investment (ROI) ROI measures the estimated costs against estimated revenues. The balance or profit margin for the shipowner can make or break a design proposal. It also can form the basis for a design optimization strategy and tradeoff effort that seeks to maximize the shipowner’s return on investment. Another form of ROI measurement strategy is to determine required freight rates (RFR) for the ship design proposed for service. Minimizing the RFR also can form the basis for design optimization studies. Naval ships do not have a bottom line commercial profit consideration. These ships are put into service only to satisfy a national security commitment to its citizens. However, as limited government funds address an ever-widening array of government responsibilities, naval ships designs now must be developed with an increasing focus on getting the biggest bang for the buck. Design and engineering tradeoff studies can minimize costs without sacrificing mission

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capabilities. The objective for these studies is an increase in mission capabilities without an increase in cost.

basis for many of the cost estimating relationships (CERs) used by the cost estimator. The WBS is a means for summarizing the scope of work and should provide the format for identifying and cataloging the details of the cost estimate: • manufacturing and assembly operations that can be easily identified by task (discrete work production work orders), • production support activities (level of effort work such as shipyard services), • technical services (design and engineering), • subcontracted services, and • material and equipment. For new construction, the WBS defines the ship and its systems as designed for the owner: • • • • • hull structure, propulsion plant, major equipment items, distributed Systems (Electrical, Piping, HVAC), and cleaning and paint.

10.5

ORGANIZING THE COST ESTIMATE

Normally, the bid estimate must be organized according to a Work Breakdown Structure (WBS) defined within the request for proposal from the shipowner. For Navy bids, estimates typically must be provided according to the Navy’s Ship Work Breakdown Structure (SWBS), a breakdown of work and material by ship system categories. Commercial shipowners provide more latitude, but usually they too want to review the estimate to some practical summary levels of detail that identifies the basic ship components and systems, especially if there are various design options to be considered. But the estimate also needs to reflect the impact that the proposed shipyard’s build strategy has upon the pricing information. The concept of modular construction points the way for a need for modular cost estimating. The Productoriented Work Breakdown Structure (PWBS) (5) is another view of the work by ship systems (SWBS), but it also allows costs to be packaged in terms of the modular construction environment. An estimating approach that is organized around both a systems-based WBS and the modular construction concept allows different build strategies to be explored and the consequences these issues have upon the bid proposal pricing.

The additional efforts, including design and engineering services and shipyard support efforts, must also be identified and incorporated into the work breakdown structure for the estimate: • shipyard services, and • technical services. It is also sometimes required, especially for government projects, that the cost estimate be provided to the prospective customer (the shipowner) according to a work breakdown structure of the owner’s choice. Therefore, an estimating approach that supports multiple work breakdown structures can save a lot of time from the estimator’s point of view. The following describe the more prevalent WBS configurations in use today:

10.5.1 Formats of Cost Estimate The cost estimate must identify all direct costs (labor, material and subcontracted services) within the proposed scope of work. Direct costs should include technical, production and all supporting shipyard services that are not considered indirect by the shipyard (supervision, temporary ship services, quality control, planning, project management, etc.). Where applicable, miscellaneous expenses such as freight and transportation, insurance fees and taxes and duties attributable to direct costs also need to be considered. Separated from direct costs, indirect costs for overhead, material mark-ups, and general administrative efforts are necessary to complete the cost estimate. The estimate needs to be developed within a framework that summarizes the costs within prescribed categories that can be monitored as the estimate evolves. The shipyard typically has its own work breakdown structure that is the basis for the company’s operating systems that collect and manage return costs. These return costs provide the historical

10.5.2 Ship Work Breakdown Structure (SWBS) The U.S. Navy’s SWBS is the most familiar of the systemsbased work breakdown structures. However, when systemsbased structures were the standard for managing ship construction, every shipyard devised their own variation to suit their own needs and preferences. Today, ship design still largely follows a SWBS format, particularly for weight control and for systems design. The transition to product and process-based formats is not typically made until detail design is underway.

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10.5.3 Product-oriented Work Breakdown Structure (PWBS) Once any complex product such as a ship has been designed, planning and engineering efforts need to be applied toward maximizing production efficiencies. This effort entails organizing work and resources that promote productivity and minimize non-value added costs. The concept of group technology, for example, supports this objective and enables engineered ship systems to be broken down into definable interim products. These products can exploit significant cost and schedule savings because they enable the work to be performed under more convenient and more easily performed work conditions. Figure 10.1 illustrates a PWBS that identifies the basic areas of the ship (zones) and a progression of structural blocks assemblies, and outfit units that ultimately constitute the total ship product. It also shows where the PWBS elements change from a process focus to a product focus. The U.S. Navy’s PODAC program has developed a generic PWBS, and a user-training program on its formulation is available over the Internet (6). 10.5.4 Shipyard Chart of Accounts (COA) Each shipyard has its own internal work breakdown structure used to plan and manage its costs. The COA traditionally had been systems-oriented, although every yard had its own flavor and preference for identifying and categorizing ship systems. Over the years, shipyards have been replacing their systems-based work breakdown structures with formats that are more product and process-oriented. The importance of the COA to the cost engineer is that the COA is the basis with which the shipyard collects costs and with which the shipyard measures the cost performance of its work.

10.6

COST ESTIMATING RELATIONSHIPS

Cost Estimating Relationships (CERs) provide the basic means for estimating costs. CERs come in many different flavors and varieties. They allow cost estimates to be developed for various material products, parts and components and labor processes including support services. CERs come in many different levels of detail (Figure 10.2). Costs can be estimated at very high levels during concept stages of design or they can be estimated at very low levels from detail bills of material. In between these levels there are CERs that provide perhaps more accuracy possible from available design information but without the precision of what might be obtained after detail design and engineering has been completed. A Cost Estimate Relationship (CER) is a formula relating the cost of an item to the item’s physical or functional characteristics or relating the item’s cost to the cost of another item or group of items. Examples: • labor for steel block assembly at 25 man-hours/tonne, • material cost for pipe at $25/meter; and • labor for shipyard support service at 10% production hours. CERs are typically developed directly from a measurement of a single physical attribute (quantity and unit of measure) for a given shipbuilding activity, and the cost of performing the activity. If the shipyard uses the same attribute for the same activities for each ship it builds, it can compile a database of cost-per-unit of measure for each of

Cargo Hold

Mhrs/M3 Mhrs/Tonne Mhrs/EA Mhrs/LM Mhrs/SQM Mhrs/M Weld Mhrs/Tonne Mhrs/Tonne

Products and Process Sequence

Block Erection

Outfit Fittings Outfit Pipe

Block Paint Block Assembly Steel Fab Steel Prep

Figure 10.1 Product/Process Configuration & Cost Management

Figure 10.2 Possible Levels of Cost estimating Relationships

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its different activities. Some CERs may be developed for a number of physical attributes. CERs may be developed to determine a variety of costs and cost-related parameters, including labor hours, material costs, overhead, weight, numbers of items, etc. While most CERs are simple linear relationships. For example, 10 man-hours per pipe straight spool, others can be more complex formulations. High-level CERs, for example, more often exhibit non-linear relationships to accommodate the costs across a wide range of applications and variety of detail requirements, for example, Steel Cost = 0.00255∆0.99. Generally, five types of CERs are used and are defined separately, which will be described in the following subsections. 10.6.1 Manual CERS Manual CERs are determined from external information such as vendor or subcontractor quotations. 10.6.2 Calculated CERS Calculated CERs are determined from a single ship set of return cost data based on an actual cost expenditure and its associated measurable parameter, for example, labor hours per square feet of painted area. 10.6.3 Predictive CERs Predictive CERs are developed from return costs from multiple ship sets or from costs collected from a given manufacturing process where costs exhibit a pattern of change over time. The predictive CER is the trend value of unit cost expected to apply for the given contract application. 10.6.4 Empirical CERs Empirical CERs are developed by collecting a number of physical attributes (parameters) for a shipbuilding activity, such as ship type and size, part weight, part area, part perimeter, joint weld length, number of processes applied, number of parts involved, etc., as well as the cost of performing the activity. If this data is collected for a number of ships, in the same shipyard, a statistical analysis may determine the statistical significance of the parameters and the equations with coefficients and exponent values for the activity CER. The equation coefficients and exponent values are shipyard-dependent and will reflect its level of productivity for the activity. If facility parameters are included, the impact of facilities on productivity will also be evident.

10.6.5 Standard Interim Products CERs An interim product is any output of a production work stage that can be considered complete in and of iteself. It also can be presented as an element within any level of a product work breakdown structure (PWBS). As shipyards adopt standard interim products as the primary basis for building ships, the interim products themselves can form the means for developing high-quality cost estimates. The interim product cost estimate package consists of a set of cost items and/or cost item CERs each describing labor and/or material costs. The labor costs may be broken down into the product’s sequence of manufacturing and assembly stages. They may also include indirect cost efforts such as supervision and material handling, as well as related direct costs such as testing. The interim products can be defined at any level of the PWBS. The higher the level, the more ship type-specific they are likely to be. These interim products become, in effect, high level complex CERs because they may include any number of cost items and these cost items may be parametric to any number of different defining characteristics. The use of the standard interim product as a vehicle for cost estimating is sometimes referred to as a Re-use package that can operate with a variety of applications. The important aspect of the package used repeatedly as needed in developing a project cost estimate. At issue for the estimator is what kind of CER is appropriate at any given stage of the design process. Detail CERs are of little value when few details are known. Similarly, high-level CERs are not acceptable when their assumptions no longer fit the problem at hand. Furthermore, the CER must identify the cost driver for the scope of work being estimated. The cost driver is a controllable ship design characteristic or manufacturing process that has a predominate effect on cost. Finally, the real problem becomes this: where does one obtain the data necessary to develop realistic and appropriate CERs that can be meaningfully applied at any given time during the design evolution process?

10.7

USE OF HISTORICAL COSTS

A cost estimate is only as good as the information supporting the estimate. For shipyards, historical cost information is invaluable for developing cost estimates for new work. However, historical information needs to be both accurate and collected in ways meaningful to the estimating process. For example, if historical costs cannot be collected in ways that identify modular block costs, estimating by modular blocks

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can be difficult and will probably have a relatively high degree of risk in the accuracy and validity of the estimate. It is very important that the shipyard have in place a cost planning and data collection system that is capable of organizing costs in ways that can directly benefit the estimating process. 10.7.1 Cost Collection Methods Shipyards collect costs in the following manner: labor costs (labor hours) are collected from time charges to production work orders. Material costs are collected from purchase orders and from stock transactions when applicable. Shipyard work orders generally are organized around work type and stage of construction, while material often is cataloged (requisitioned) by ship system. The correlation of material to work orders can be obtained from issues of material to work orders or the requisitioning of bills of material to the PWBS. From a cost collection perspective needed for cost estimating, the work orders should identify scope or the physical. That is, material throughput quantity for which the work is being done. For example, a work order may prescribe a budget of x-hours to assemble y material items, generally of size z. The labor hours and material costs then can be summarized up through the PWBS. The units of measure at any given level of the PWBS will be the most meaningful unit of measure. That is, the cost driver for that level. For example, the unit of measure for steel fabrication might be based upon the number of parts, while ultimately the unit of measure for block erection would be best described by a weight or joint weld length unit of measure. Even though high-level CERs by ship systems are needed for concept and preliminary design estimating, modern ship production methods no longer allow costs to be collected directly by ship systems. The production management software systems implemented at many shipyards can develop CERs only by measuring actual costs against known work order throughput parameters (meter of weld, square meter of plate, number of pipe spools, etc.). Many of these shipyard systems have little means to transform these productand process-oriented CERs into the desired high level, ship systems and mission oriented CERs. 10.7.2 Transforming PWBS Costs to SWBS Costs Complex products, such as ships, are normally designed system by engineered system. However, manufacturing does not maximize its cost efficiency and schedule performance if the work is planned and executed system by system. Group technology and zone sequence scheduling are ex-

amples of executing work by interim product (units, blocks and modules) and by stage (fabrication, assembly and erection). These examples of work objectives transform SWBS into a parallel PWBS. This transformation occurs when the systems-oriented ship design information is processed for necessary work instructions by production engineering. In order to provide production cost data that is SWBSoriented, some reverse transformation is required. Some shipyard production management systems have the capability to transform product- and process-oriented work orders so that ship systems costs can be collected. Methods have been devised for allocating or distributing costs that are effective, although somewhat approximate. One approach is to allocate costs based upon a planned breakdown of budget by ship systems involved in the work order. Then, when time charges are entered, they are distributed automatically on a pro rated budget basis back to the applicable ship systems. Typically, such work orders are restricted to a single type work process, such as fabricating pipe spools across ship systems. Therefore, the allocation can be a fair and reasonable representation of the actual work performed on each system. Another approach is for the estimator to analyze and compile detailed production data and correlate these costs to some functional characteristic of the ship. For example, the electrical costs can be summarized and related to shipwide electrical load, such as kW. Such a CER may be directly useful for estimating at concept and preliminary stages of design. A third approach is to develop systems-based CERs from shipyard work standards applied to the ship system’s bill of material.

10.8

IMPACT OF BUILD STRATEGY

Cost estimates should directly reflect the shipyard’s relative level of productivity. The shipyard that desires to maintain its competitive advantage by reducing costs and contract schedules must find areas where savings can be achieved. Savings can be significant and can come from a variety of sources. The methods used to organize and execute work within the shipyard can affect work performance and this impacts costs to a very significant degree. One rule of thumb says that for every hour required to assemble material in the shop, it takes 3 hours to do it on-block and 5 hours to do it onboard. While this is an overly simplistic assessment, it does indicate that there are more optimum times during construction when work can be undertaken more productively. Another impact is the use of alternative manufacturing processes, including the use of out-sourced services.

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10.8.1 Modular Construction Methods In the past, shipyards used to build ships ship system by ship system. The collecting of costs by ship system was a relatively straightforward procedure. However, better methods for more productive organization of work have come into play. The packaging of work now focuses not on the specific ship systems, but upon the nature of the work to be performed. The objective is to do the work when the working conditions are most productive and to eliminate or minimize any efforts that do not add value to the activity. This means that work done in shops are typically more productive than if the work were scheduled for on board. To complement this concept, modular construction techniques, including on block construction (Figure 10.3) and advanced outfitting have become the preferred methods for maximizing production efficiencies. These methods, however, do require more advanced product engineering in order to gain the full potential of efficiencies and cost savings. What was once a ship systems-oriented way of organizing work and collecting costs has now given way to organizing work and collecting costs by interim products (sub-assemblies, assemblies, hull blocks, ship zones) and manufacturing processes (cutting, welding, assembling, etc.). As described earlier, the interim products can be standardized and identified within a PWBS. 10.8.2 Group Technology Manufacturing Significant cost savings are possible with the application of group technology to product development and production processes. Group Technology is a method for grouping like or similar work together in order to gain the benefits possible from batch manufacturing, including elimination of

multiple set-up process steps, etc. Group Technology can be applied to many different kinds of work. The more classical example is the fabrication of a large group of samesize pipe spools. However, the conceptevokes similar time and cost savings with zone sequencing of trade work (scheduling a given trade to work uninterrupted and unencumbered in specified ship spaces or zones or on a specific structural block’s advanced outfitting). Structural panels and sub-assemblies also can be scheduled in ways to maximize the productivity objectives of Group Technology. However, from a material management logistical and handling cost point of view, the group technology approach should not be an absolute objective and not necessarily employed across the entire ship’s structure in one single manufacturing run (assuming drawings and material are all available at this time). World-class shipyards often manufacture parts and sub-assemblies in separate batches corresponding generally to hull block requirements and their production assembly schedules. This limited application of group technology also can be seen with deliveries of outsourced manufactured parts, since the shipyards require delivery of these items in batches corresponding to the schedules of the hull block construction program. 10.8.3 Performance Measurement Systems In order to identify what changes will provide the most significant levels of benefit, a shipyard must be able to evaluate its operations in quantitative terms. This means that the shipyard must have implemented a reasonably accurate means for measuring cost and schedule performance at appropriate levels of detail. Performance measurement systems should provide the visibility of performance that will indicate whether or not changes are warranted and ultimately if the changes are proving to be effective. Return cost information from such systems form the information needed to develop high quality predictive CERs that reflect not only past cost performance, but also anticipated performance on new work.

10.9

COST ADJUSTMENTS AND FORECASTS

Figure 10.3 Advanced Outfitted hull Block Construction

CERs are based not only upon the type of material being fabricated or assembled, but also upon a prescribed set of shipyard performance characteristics. These characteristics may include the specific shipyard facilities, tools and equipment employed; the productivity and skill levels of the workers; the producibility of the design; the approach to organizing the work, etc. These characteristics for each shipyard will vary, and the expected costs to perform these activities will vary accordingly.

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The following sub-sections discusses various methods by which the estimator can make adjustments to CERs in order to refine a cost estimate with more accuracy to suit the given estimating circumstances. 10.9.1 Major Types of Cost Adjustments The estimator can obtain CERs from any number of different sources, including CERs developed from actual shipyard return costs as well as generic CERs that may be available outside the shipyard. The cataloged CERs immediately available to the estimator may not always accurately reflect the expected costs for the application being estimated. Therefore, the estimator can either modify the cataloged CER or define with the existing CER an appropriate adjustment factor to apply when computing costs. The latter approach may be desirable if: • The estimator wishes to preserve the original CER for control purposes, and/or • The estimator wishes to perform a trade-off study to test the impact of a revised CER. The following is an example of applying an adjustment factor to an existing cataloged CER: CERadjusted = FWCadj × CERcatalog where FCERadj is the shipyard’s CER adjustment factor and CERcatalog is the existing cataloged CER. The estimator needs to take into consideration CERs for the effects of the shipyard’s anticipated cost performance characteristics. These adjustments fall into the following categories: • • • • • • • • cataloged CER adjustments, work center productivity adjustments, stage of construction productivity adjustments, PWBS complexity adjustments, economic Escalation adjustments, learning Experience adjustments, high volume business material savings, and Material Waste adjustments.

estimator can make a comparison between the cataloged CER and comparable historical data from the shipyard or other sources known to be accurate. If there are cataloged CERs that are for similar work (for example, CERs for different size pipe) and they belong to a relatively consistent series of cost data, oftentimes the same adjustment factor can be used for all of them. 10.9.2 Work Center Productivity Factor The estimator may wish to review the effects of changes in the way the shipyard might want to execute the work. Then the estimator may use another adjustment factor that reflects certain gains or losses in productivity within specified shipyard work activities, such as, work centers, and evaluate the changes in the project’s total estimated costs. Doing this through an estimating process can provide valuable insight into a possible positive a return on investment. Example: If the cataloged CER identifies 2 man-hours per ton to paint a hull block, including extensive scaffolding costs, the shipyard that employs mobile lift wagons may be able to reduce the cost by 50%. Therefore, a productivity factor of 0.50 can be used to adjust the cataloged CER. CERadjusted = FWCadj × CERcatalog where FWCadj is the shipyard’s productivity factor for the painting operation and CERcatalog is the existing cataloged CER. It is important to note that when a specific shipyard’s performance factor has been defined for a specific work process, it should be applied to all cataloged CERs that are used to develop cost item estimates for work in that center. Additional information can be obtained on the relative increases in productivity that can be expected by implementing changes (modern process equipment) in the shipyard facilities and operating practices. 10.9.3 Stage of Construction Productivity Factor Generally speaking, the earlier stages of construction provide reduced cost opportunities to perform work, especially for material installations. The best working environment exists usually within workshops. Here, tools and equipment and other support facilities are nearby, material is readily available without undue handling costs, and the working conditions are unaffected by weather and location. In addition, work performed within workshops means that work is done only on relatively small components of the ship. Little effort is required to get access to these components and little time is lost moving men, equipment and material to the work site.

Example: An industry generic CER might be 12 labor hours per tonne to assemble flat steel panel sections, such as, deck assemblies. This production rate is based upon a facility using largely manual welding of stiffeners to the plate. The shipyard, however, might have an automated panel line where productivity is improved by a margin of 75%. Therefore, the CER adjustment factor for the shipyard would be 0.25 (100%–75%). When the factor is applied, the adjusted CER for the shipyard computes to be 3.0 labor hours per ton. How is the adjustment factor determined? Usually, the

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On Board Work is the least productive working area. Here more time is required to access the work, to provide workers, material, tools, and equipment and support services. Adverse climatic conditions also may have a negative impact upon costs. On Block Work typically represents an opportunity to perform work more conveniently and more productively than on board. The hull block is small relative to the entire ship’s structure, so accessing it to install various outfit items is relatively easy (Figure 10.4). The work sites for outfitting hull blocks are usually nearby workshops. Hence, the cost to supply material, workers, tools and equipment is much lower than what is needed to support comparable work on board. If hull block construction can be done under cover, added costs from weather-related problems can be essentially eliminated. On-Unit Work involves the assembly of outfit material into various forms of outfit units, pre-plumbed pumps and machinery, equipment consoles, pipe racks, furniture modules, etc. (Figure 10.5). Outfit units tend to be relatively small and can be done in workshops. Therefore, they can be assembled under the most favorable and productive working conditions. Since outfit units can be installed either on block or on board, there are cost savings if installed on block. Work Orientation also affects costs, whether done on unit, on block or on board. Down-hand welding and assembly is much easier and far more productive than overhead work (Figure 10.6). If over-head work requires staging, costs for these operations can increase significantly. Stage of construction productivity factors may be developed using one of the stages of construction as the baseline for the costs. The stage of construction productivity factors must be included in the work center productivity factor described above. The cost differentials due to stage of construction become critically important as shipyards try to implement changes in the way they do business and improve their competitive position in the market place. The build strategy elected by the shipyard will determine how much of the work can be done at the earlier, more productive stages of construction. 10.9.4 Design Complexity/Density Factor The stage of construction productivity factor helps determine cost differentials for work done at different stages of the construction cycle (in shop versus on block versus on board). However, an additional factor needs to be introduced for adjusting construction cost estimates for an increase or decrease in the relative complexities of the ship design or interim shipbuilding products. For example, on

Figure 10.4 On Block Outfit

Figure 10.5 On Unit Outfit

Over-Head Work

Down-Hand Work
Figure 10.6 Examples of More Productive Down Hand Work Orientation

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board work may generally require five times more labor hours than equivalent work done in the shop. But, if the ship zone is particularly crowded (denser), the work area may be much more difficult to access. The costs therefore may require even more labor hours to complete the work. Table 10.I, exhibits typical added cost margins used by ship repair estimators to account for added difficulties for where the work is performed on board ship. Similar problems exist in new construction where the working conditions vary from ship zone to ship zone, hull block by hull block. The complexity factor should be sensitive to the level of the PWBS hierarchy. For example, the manufacturing of parts for a particular ship zone may not be affected by the complexity of the zone, but the installation of those parts in the zone may be very much affected by the complexity or confinement of the space on board.

TABLE 10.I Typical Added Complexity Of Ship Zone Work Ship Zone
On Weather Deck Oil Tanks Engine Room Superstructure Pump Room Holds Double bottom

Added Cost Factor
0% 25% 50% 25% 50% 10% 25%

10.9.5 Economic Inflation Adjustment Factor The estimator applies the complexity adjustments in the following manner: CERadjusted = FPWBSadj × CERcatalog where FPWBSadj is the complexity factor and CERcatalog is the CER cataloged on the system database. Costs are influenced not only by various performance factors within the shipyard, but also by factors outside the shipyard. Costs can be influenced by inflation/deflation and these effects change over time. Various economic forces in the marketplace create pressures upon costs to either increase or decrease them over time. In a free market economy, increased costs are caused by inflation and usually occur when demand outstrips supply. Decreased costs are caused by the reverse, called deflation, and are caused by supply being greater than demand. Similar changes in costs can occur with changes in manufacturing processes, engineering technologies, etc. For cost estimating purposes, costs relevant during one period of time can be used as costs relevant to another period in time. However, these costs need to be adjusted to reflect the economic conditions of that other period of time. This process of adjusting costs from one period to another is called cost escalating. Although the term escalating normally infers an increasing of cost, a similar process of adjustments applies to costs that decrease over time. To escalate costs, the following elements of information are required: • the original time and cost known to apply at that original time, and • the anticipated time and change in cost from the original time to the anticipated time.

The increase or decrease change in cost is usually treated as a general percentage. For example, if inflation has increased by 3.5%, then on average, goods and services have increased in cost by the same amount. Complete tables of these changes over a range of years are available from various sources (for example, the Bureau of Labor Statistics and the Naval Center of Cost Analysis). The Consumers Price Index, published annually by the Government, compiles these percentages into an index so that costs from one year to any other year in the table can be adjusted (that is, escalated). These indexes are produced on a monthly basis and are available over the Internet. Table 10.II provides an example. Most escalation indexes are provided as historically tracked. Index tables will vary from source to source depending upon what is the basis for its valuation and what is the base year costs being used to compare other year costs in the table. In order to perform cost escalations for years beyond available index tables, the estimator can extend these indexes with estimates of what these indexes might be in the future. These indexes allow any CERs to be adjusted for inflation/deflation. CERs from different periods of time can be individually adjusted so that they all are applicable to the same year, that is, base year, for which an estimate is being developed. The estimator is cautioned against escalating costs more than several years or across periods where costs changes are significant. The indexes are provided only on an averaging basis and may not accurately reflect changes in costs for the specific cost item at hand. To use escalation index tables, the following definitions are required: • the known cost is called the cataloged cos. • the time period of the known cost is called the cataloged cost year. Typically, cost estimate data is comprised of known costs collected over a range of years. The esca-

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TABLE 10.II Sample Escalation Index Table Year
1995 1996 1997 1998 1999 2000 2001

Fescalation = Indexbase year / Indexcost year

Index
1.12710 1.1616 1.1964 1.2323 1.2693 1.3074 1.3466

where Indexbase year is the escalation index for the year corresponding to the year in which the project is planned to expend the cost item; Indexcost year is the escalation index corresponding to the year in which the CER costs have been recorded on the database. With this escalation factor, the cataloged CER can be escalated for the base year: CERadjusted = Finflation × CERcatalog, For the life saving devices example, the 1997 costs can be escalated, using data presented in the above table to the year 2000 as follows: Find the index values for the base year (1997), and for the projected year (2000). Indexcost year = Index 1997 = 1.1964 Indexbase year = Index 2000 = 1.3074 The escalation factor that adjusts the 1997 cost to the 2000 cost is a simple ratio as follows: Fescalation = Indexbase year / Indexcost year = 1.3074 / 1.1964 = 1.093 Escalation factors less than 1.0 indicate economic deflation. Factors greater than 1.0 indicate inflation. Therefore, in the year 2000, the life saving devices is estimated to cost 1.093 times the cost in 1997. If the projected project year is different than the current calendar year (base year), retrieve the cost items and replace their Base Year with the projected project year. If a project has costs cataloged for different projected years, this process will have to be done in yearly stages. 10.9.6 Composite Performance Factor From the above discussions, the estimator may use a variety of cost adjusting factors. A composite adjustment factor is simply a straight multiplication of individual adjustment factors: CERadjusted = Finflation × FCERadj × FWCadj × FSOCadj × FPWBSadj × CERcatalog

lation process must adjust these costs so that they all can apply to some common (baseline) period of time, • the cost index recorded for the cataloged cost year is called the cataloged cost year index, • the time period whereby all costs are to be developed for an estimate is called the base year for the estimate. The base year typically is the current year. Costs cataloged at years earlier than the base year need to be updated. One method for updating is to obtain new cost information applicable to this base year. Another method is to adjust earlier costs using escalation index tables so that these costs apply to the base year, • the cost index recorded for the base year is called the base year index. The process of escalating the cost from its cataloged cost year to the base year is: Base Year Cost = (base year index/cataloged cost year index) × cataloged cost • the time period projected in the future for the cost estimate is called the projected cost year. Projected costs are the base year costs advanced to some designated year in the future. These costs normally are advanced using the escalation tables, although some large equipment cost items may have projected costs quoted and guaranteed by vendors, and • the cost index recorded for the projected cost year is called the projected cost year index. The process of escalating the cost from the base year to the projected year is: Projected year cost = (projected year index/base year index) × base year cost Example: If the last price quotation for life saving devices was in 1997, then the CER that defines that cost must be cataloged with the year of 1997. The CER escalation adjustment factor can be computed in the following manner:

10.9.7 Learning Experience Adjustment Factor The cataloged CERs usually establish costs under a certain prescribed set of production circumstances. Traditionally, the CER relates to costs for a prototype or the first of a se-

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ries construction program. It is often, but not universally accepted that multiple products benefit from a learning curve (7). That is, it is anticipated that for a series of ships each ship labor cost should decrease from continued improvements introduced over time in the build strategy and manufacturing processes and refinements in production engineering. CERfollow ship = CERlead ship × Flearn Therefore, when the estimator has developed the cost estimate for the lead ship of the series and copies this estimate for each of the follow ships, the learning curve factors (Figure 10.7) can be applied to each of the follow ship estimates. The theory behind learning curves is that the percentage improvement is constant and occurs every time product quantity is doubled. That is 2, 4, 8, 16, etc. It has been found to apply more to products that are produced in large quantities (100s) and in relatively short times (hours). While production costs can decrease as from ship to ship, some shipyards often experience an increase in engineering costs for the second ship. This is recognition that the prototype engineering was less successful and that a second-wind effort is needed to get the series program on a more efficient footing. While the above learning curves indicate a gradual cost reduction per ship of the series, examining cost reductions for standard interim products and manufacturing processes across all ship types can realize the same experience. As shipyards introduce standard interim products as the primary means for designing and building ships, learning becomes a less important consideration. This is a good indication that

the cost reductions are gained not by an actual learning experience, but more by a diminishing of expensive rework that should not have occurred in the first place. 10.9.10 Multi-Ship Material Cost Advantages Besides the benefits of learning curve effects upon labor costs, multiple ship contracts also can have a positive effect upon material costs. It has been estimated that the promise of a larger order backlog can elicit as much as a 15-20% cost reductions from vendors and suppliers. Busy shipyards often can gain lower material costs simply because their suppliers can rely upon these shipyards with long-term business opportunities. 10.9.9 Multi-ship Engineering and Planning Advantages Obviously, for multi-ship contracts the engineering and planning only need to be prepared once, and the cost (nonrecurring) can be spread over each ship in the series. However, there is still a relatively small engineering and planning cost (recurring) for each ship and it must be included for the follow-on ships. 10.9.10 Material Waste Factor What material is required from an engineering point of view should be reconsidered from a procurement point of view. Production often cannot consume 100% of the purchased material without some measure of waste. Therefore, the estimator needs to account for waste in estimating the cost of material in the following manner: Total Costmaterial = Quantity × (1.0 + Fwaste) × CERmaterial where Fwaste is the estimated waste factor and CERmaterial is the material cost CER.

10.10

COST RISK

Figure 10.7 Typical Learning Curve Factors

When bidding on new contracts, shipyards look at production cost and schedule risk. To remain competitive, shipyards develop strategies to minimize their exposure without losing a good business opportunity. This means that the bid problem needs to be examined and understood to the best of one’s ability to do so. The bid process requires this examination to focus not only on the shipyard’s own internal performance abilities, but also that of the competition and that of the shipowner’s ultimate objectives and funding resources. Risk, or uncertainty, can be associated with any or all

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cost items included within a developing project cost estimate. The greater the cost risk, the less likely, or probably, that the cost estimate is realistic. The lower the risk, the greater is the probability that the cost estimate is valid. Uncertainty can be expressed, or represented, as a distribution of cost estimates between certain values. Outside this range of expected values one would expect that other values would have very low probability (high risk). A number of different cost probability models are possible. Two popular types of risk analysis methods include Monte Carlo Cost Risk and PERT (Project Evaluation Review Technique) Cost Risk. Both the methods summarize expected costs and levels of cost confidence at the project level of the work breakdown structure with little additional information required from the estimator. The risk can be applied at different levels and thus different approaches. For example it can be applied to a completed estimate. In this case the risk will either be based on historical performance of the shipyard against it’s estimates and used to determine the bid price to give a confidence level of 100% that it would achieve its profit goal. It could also be based on a predicted distribution of competitors bid prices and then used to determine a bid price for the shipyard that would give them say an 100% confidence level of winning the bid. It also could be applied at each item level in the estimate with actual equipment quotations allocated a probability of 1, whereas estimated quantities for both material and labor being assigned a probability distribution based on estimators confidence in the estimate. The completed estimate would be a price distribution, from which the shipyard could choose the price it would bid. Figure 10.8 illustrates a normal probability of cost distribution. The particular characteristic of this type of distribution is that there is an average or mean cost value that has the greatest probability of occurrence. Above and below this

mean cost value, the cost probabilities become less and less and the distribution of these probabilities is symmetrical about the mean. This model has characteristics similar to that of the triangular distribution model, but obviously requires a good deal more information about the relationship between probability of occurrence and actual cost values. This is not typically possible or practical for the estimator to determine. However, most cost risk analyses use approximate methods in order to provide a reasonable indication of just how risky a particular cost estimate is likely to be. In order to achieve maximum benefit, there needs to be a risk management strategy. It starts with collecting and analyzing known facts about the problem. This is called disaggregating the risk. The process involves breaking down a large and unwieldy risk problem into smaller, more manageable pieces. As the problem is broken down, the various elements of the problem can be risk-minimized by applying to them what is called familiarity advantages. This is the application of core competencies to better understand each piece of the problem and minimize the risk of the unknown. In other words, when you know what you are doing, you are less likely to make a mistake than when you are trying something for the first time.

10.11

COST ESTIMATING SYSTEMS

Figure 10.8 Normal Probability of Cost Distribution

There is a number of cost estimating systems available on the market. In addition to the ubiquitous spreadsheets, the systems prevalent in use for cost estimating Navy ships are the following: Advanced Surface Ship Evaluation Tool (ASSET) addresses all engineering disciplines required for total ship design. It is used for new ship design and conversion studies and produces Rough Order of Magnitude (ROM) design information for concept design and feasibility studies. ASSET has direct program links to the ACEIT cost estimating system. Automated Cost Estimating Integrated Tools (ACEIT) is a joint Army/Air Force program support by the Navy. Primarily SWBS-based, it accommodates indirect costs, escalation adjustments and learning curves. The system produces time-phased life cycle costs Unit Price Analysis (UPA) estimates time-phased nonrecurring and recurring costs, indirect, and cost of money. The system offers factors to adjust the SWBS-based CERs for specific design characteristics and producibility. PRICE Systems offer a parametric approach to estimating costs. A variety of adjustment (calibration) factors and empirical productivity values may be applied to standard CERs.

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The PRICE systems are primarily SWBS-based and include functions for estimating life cycle, post-construction costs. Product-oriented Design and Construction (PODAC) Cost Model is a relational database application that has libraries of CERs and expanded cost item packages that can be quickly applied to a cost estimate. The system allows costs to be generated by various work breakdown structures including ship systems SWBS, by product and manufacturing process (PWBS) and by the shipyard’s own internal chart of accounts (COA) as well as by contract line items (CLINs) and repair item or specification paragraph. The system uses escalation tables, learning curves, and a variety of cost adjustment factors to accommodate differences in process efficiency, design producibility, etc. The system provides a cost risk analysis. Shipyard return costs can be linked directly into the database. A statistical analysis capability enables the estimator to analyze a wide cross-section of labor and material cost data and develop new CERs at various levels of detail. There also are ship design systems that have cost estimating capabilities. Design synthesis tools employ design and cost estimating algorithms for specific ship types. These systems are useful for developing concept-level ship design characteristics and measuring the impact on cost from trade off studies. Examples of synthesis tools include the PODAC system empirical cost models, the USCG buoy tender, offshore cutter and patrol boat models. Synthesis models also are available from the University of New Orleans for container ships and tankers. While synthesis tools employ high-level, generalized design and costing algorithms, there are other ship design tools with cost estimating capabilities that operate at more detailed levels of analysis: • Parametric Flagship, a system developed under a Maritech ASE project, links various ship design and naval architecture analysis systems directly with the PODAC cost model (8), • Intergraph’s multiple discipline GSCAD system also linked with the PODAC cost model, and • as of the time of this writing (2001), the Navy’s ASSET design tool is being linked to the PODAC Cost Model. Work also has been done developing systems for simulation-based acquisition (SBA). These systems dynamically link applications of design, analysis and evaluation software and enable the designer to optimize a given product’s performance, cost and deployment schedule. The goal for these systems is not only to provide quantitative design, cost and schedule responses to a range of design and construction alternatives, but probabilistic responses of the inherent risk.

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REFERENCES

1. Bosworth & Hough, “Improvements In Ship Affordability,” SNAME Transactions, 1993 2. U.S. Department of Defense, “Mandatory Procedures for Major Defense Acquisition Programs and Major Automated Information Systems Acquisition Programs,” DoD Instruction 5000.2-R, 1996. 3. Leopold, Jons and Drewry, “Design To Cost Of Naval Ships,” SNAME Transactions, 1974 4. Duren, B.G. and Pollard, J.R., “Building Ship as a System: An Approach to Total Ship Integration,” ASNE Journal, September 1997 5. Chirillo, L. D. & Okayama, Y., “Product Work Breakdown Structure,” National Shipbuilding Research Program, Revised 1992 6. PODAC IPT & Lamb, T., “Generic Product-Oriented Work Breakdown Structure (GPWBS), A Programmed Learning Course,” U.S. Department of the Navy, Carderock Division, Naval Surface Warfare Center, 1996 7. Spicknall, M. H., “Past and Present Concepts of Learning: Implications for U.S. Shipbuilders,” Ship Production Symposium, 1995 8. Trumbule, J. C. & PODAC IPT, “Product Oriented Design and Construction (PODAC) Cost Model—An Update,” Ship Production Symposium, 1999

10.13

SUGGESTED READING

Boyington, J. A., “The Estimating And Administration Of Commercial Shipbuilding Contracts,” Marine Technology, July 1985 Boylston, J., “Toward Responsible Shipbuilding,” SNAME Transactions, 1975 Carreyette, J., “Preliminary Ship Cost Estimation,” RINA Transactions, 1977–78 Chirillo, L. D. & Johnson, C. S., “Outfit Planning,” National Shipbuilding Research Program, 1979 Chirillo, L. D., “Product Oriented Material Management,” National Shipbuilding Research Program, 1985 Department of Defense, “Parametric Cost Estimating Handbook,” Joint Government/Industry Initiative, Fall 1995 Fetchko, J. A., “Methods Of Estimating Investment Cost Of Ships,” University of Michigan, June 1968 Harrington, R. A., “Economic Considerations In Shipboard Design Trade-Off Studies,” Marine Technology, April 1969 Hutchinson, B., “Application Of Probabilistic Methods To Engineering Estimates Of Speed, Power, Weight And Cost,” Marine Technology, October 1985 Lamb, T. and A&P Appledore International Ltd, “Build Strategy Development,” National Shipbuilding Research Program, NSRP 0406, 1994. Landsburg, A. C., “Interactive Shipbuilding Cost Estimating And Other Cost Analysis Computer Applications,” ICCASS, 1982

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Mack-Florist, D. M. &. Goldbach, R., “A Bid Preparation In Shipbuilding,” SNAME Transactions, Vol. 104, 1976 Mansion, J. H., “A Manual on Planning and Production Control for Shipyard Use,” National Shipbuilding Research Program, 1978 Maritime Administration, “A Study Of Shipbuilding Cost Estimating Methodology,” MarAd Report, 1969 McNeal, “A Method For Comparing Cost Of Ships Due To Alternative Delivery Intervals And Multiple Quantities,” SNAME Transactions, 1969 PODAC IPT and SPAR Associates, Inc., “Risk Analysis In the PODAC Cost Mode,” U.S. Department of the Navy, Carderock Division, Naval Surface Warfare Center, 1999

Ramsden, “Estimating For A Changing Technology,” Marine Technology, January 1990 SPAR Associates, Inc., “Cost Savings Using Modular Construction Methods & Other Common Sense,”1998 “Guide for Estimating New Ship Construction,” 1998 “Guide for Identifying CERs,” 1998 “Guide For Life Cycle Cost Estimating,” 1999 “Planning New Construction & Major Ship Conversions,” 1999 Summers, “The Prediction Of Shipyard Costs,” Marine Technology, January 1973 Telfer, Alan J., Zone Outfitting in a Canadian Great Lakes Shipyard, Collingswood Shipyards, 1995