T-802-G Early State Design Cost Estimating Methodology

Transcription

1 T-802-G Early State Design Cost Estimating Methodology Mark Oaks Alion Science and Technology Russell Peters Alion Canada Biography Mark Oakes is the Chief Technical Officer for the Engineering and Integration Solutions Sector (EISS) of Alion Science and Technology. EISS was formed from Alion s acquisition of John J. McMullen Associates (JJMA) in 2005 and acquisition of Anteon s Engineering Technology Center in Mark joined JJMA in Prior to joining JJMA, Mark worked for Newport News Shipbuilding in the Main Propulsion and Deck Machinery Section of the Engineering Technical Department. Prior to becoming the Chief Technical Officer for Alion EISS he was responsible for all ship design engineering at JJMA. He was responsible for creating Alion s Alion Canada operation in the National Capital Region. He has over 35 years experience in all areas of ship design including surface combatants, auxiliary and UNREP ships, oceanographic and survey ships, surface effect ships and high speed catamarans. He has managed several major design programs including the Saar 5 corvette, T-AGS 45 oceanographic survey ship, Littoral Combat Ship preliminary design, and Joint Support Ship project definition design. Mark has been involved in many international ship projects including Canada (JSS and CPF), Israel (Saar 5, Multipurpose Corvette and Alligator), and Korea (ULSAN Class, KDX II, KDX III, LPX and KFX). He spent several months on-site at Hyundai Heavy Industries providing early stage design assistance for surface combatants. And Russell Peters is the Manager of Canadian Maritime Programs at Alion Canada and is responsible for all operations for Alion Canada and was recently the Project Manager for CCG s OFSV design. He retired from the Royal Canadian Navy in 2009 after serving for 20 years as a Naval Architect. Significant posts held were the Naval Architecture Officer in FMF Cape Breton, the Project Naval Architect in JSS, and the DPM for CSC. He also did an exchange tour with the USN at the Naval Surface Warfare Centre Carderock Division. Description One of the biggest challenges facing government procurement is that the budget is often fixed prior to the cost of the requirements being estimated. Ship owner s need cost estimates early in the design process to understand if they can afford their requirements. This paper discusses a ship cost estimating method compatible with early stage ship design when limited information is available. The methodology uses a weight based methodology combined with other key attributes of the design. The paper recommends that the Crown collect return cost and labour hour data from the NSPS projects so that it can develop a robust early stage cost estimating capability. Mari-Tech 2012 Exhibition and Conference Re-birth of the Marine Technical Community

2 T-802 Early State Design Cost Estimating Methodology

3 Early Stage Design Cost Estimating Methodology Russell Peters Alion Canada Mark Oakes - Alion

4 OUTLINE Challenge of estimating cost with limited information Available Cost estimating methods Weight Based models Example use of a Weight Based model Need for returned cost data from ship construction programs Recommendations

5 Challenge of Estimating Cost With Limited Information How do you respond when an owner calls and asks for the price of a new ship? For example, government SOWs have been known to have words similar to the following regarding cost estimates: The cost estimate is fundamental to the evolution of the design and could result in reconsideration of the vessel s capabilities. As a result, there may be a requirement for more than one costing iteration or a partial costing iteration (to assess a specific change to the design) during the Concept Design Phase.

6 Challenge of Estimating Cost With Limited Information Very early in the design phase you would likely have the following based on the owner s defined requirements: Notional size: length, displacement Mission: what does it do/carry? Operational Profile: How fast/far does it go? What do you do when the answers don t provide much to go on and they want it tomorrow for decision making purposes?

7 Challenges in Early Stage Design Early Stage Design provides additional estimating challenges even if you can answer the Owner s initial question Requirements change/or what if questions (particularly in a design to cost exercise) Increase/decrease speed Increase/decrease mission payload or carrying capacity

8 Challenges in Early Stage Design This is prior to having completed the first design cycle Requires variations in weight, machinery ratings, equipment costs, etc. For example, a maximum speed change will impact main machinery and possibly hull form, and thus the weight, maybe the length and beam of the vessel as well how much does that cost??

9 Available Cost Estimating Methods Analogous Estimating Approach Look up award prices from public data Doesn t necessarily provide the whole cost Example: June 2011, France sells Russia two Mistral, built in France, outfitted in Russia, for 1.12B ($750M CAD each) What we don t know though: GFE (particularly relevant for combat systems) PMO costs Other agreements (an option for 2 more may be a factor), offsets, NRE Production schedule and learning curves

10 Available Cost Estimating Methods With a number of assumptions, you can then estimate the cost of a very similar ship What do you do though, when the owner wants this vessel, only 10% smaller, or 5% faster, etc?

11 Available Cost Estimating Methods Ask the owner for data on previous ship buys In a similar manner, the owner may be able to provide data for previous buys, that give some frame of reference But as soon as the requirements change, it is difficult to draw conclusions

12 Available Cost Estimating Methods Create your own cost estimating tool Typically this is based on your previous knowledge and experience, and works well for a well established type of vessel Use a commercial cost estimating tool There are several on the market Typically spreadsheet/data base type tools Require ship data (weights, equipment data, etc.) These tools are often going to be weight based for early stage design, but can also be hardware based (bottoms up based on known components of the ship)

13 Weight Based Cost Models Weight Based models have evolved because that is almost all that you know early: Develop Cost Estimating Relationships (CERs) Cost/Lightship weight = $$/tonne In it s simplest form, you could look again at the Mistral sale: $750M CAD for ship construction costs for a 21,000 tonne vessel, or the CER is $35,000 per tonne If you thought your new design would be 15,000 tonnes, you could make an assumption that the vessel would be $525M for ship construction costs all other things being equal which they aren t If you wanted to build that ship in Canada, then it gets more complicated

14 Weight Based Cost Models Develop Cost Estimating Relationships (CERs) Typically, you try to get more fidelity and use specific weight groups, and use 4 different variables: Wgt = the weight of any weight group of the ship $$/tonne = based on material/equipment prices Hrs/tonne = hours to install it or build it (the CER) $$/hr = an average shipyard labor rate Then You can often estimate major equipment (prime movers) using market data at this stage too given an estimate of power required

15 Weight Based Cost Models Example: If you thought that : Group 100 (hull) would weigh 5,000 tonnes on your design Steel is $1000/tonne It takes 100 hrs/tonne to fabricate and install it Shipyard labour rate was $50/hr Then Note that typically you would include a wastage factor the shipyard buys more material than goes into the ship

16 Weight Based Cost Models Obviously the more information you have, the better your estimate will be The CER s (hrs/tonne) usually come from experience, and will vary depending on construction location (shipyard labour force skills, efficiency, overhead, etc. are part of this) The labour rates ($$/hr) come from what you know about where it will be built and should be agreed to up front with the owner The weights come from wherever you are in the design cycle, in the first iteration likely from a parent design

17 Improving the Cost Estimate As you start to receive vendor data, this process changes and becomes more accurate, as you replace material cost weight based estimates with actual estimates However, you are still applying a weight based estimate to the labour cost associate with it

18 Improving the Cost Estimate In addition, as the early stage design progresses and more data becomes known, $$/kw data can replace $$/tonne for machinery

19 Improving the Cost Estimate An example of how early stage cost estimates can improve over the early stage design process: Indication of where the cost estimating information originated

20 What If Scenarios Typically, a customer does not have more money than they need, and they usually ask many questions such as what if I go 2 knots slower, how much will I save This is hard to do without a complete design cycle, but estimates can be made to changes in propulsion power, and resulting weight groups This type of what if scenario is best done as a relative measure, and describing it as a percentage change up or down from the baseline

21 Use of a Weight Based Model Alion uses a weight based cost model for early stage design For smaller vessels, design projects, we would typically use a spreadsheet For larger projects we would use a commercial tool called ACEIT Developed by DOD and used for 21 years Mandated by DOD other US Government organizations Very powerful for what-ifs including escalation changes

22 Spreadsheet Model COST MODEL INPUTS - OPERATOR Rounding Value Ship Particulars Design & Build Margin Learning Curve, Labour Learning Curve, Material Overhead Rate Supplementary Labour Income Contractor's Profit Contractor's Contingency Owner's Contingency for Change Escalation Rate (%) Labour Escalation Rate (%) Financial Security Escalation (%) Shipyard Material Negotiation Discount Base Labour Rates Basic Work Year [manhours] Default Values Unburdened Burdened Waterfront Blended Length OA [m] LWL [m] LBP [m] B [m] T [m] D [m] Cb Materials Data 100 Hull Structure Steel [$/t] Wheel Abrading and Priming [$/t] Steel Grinding & Abrading Scrap Rate

23 Spreadsheet Model 4.0% Design & Build Margin Current Steel Cost ($/t) Carryette Algorithm(Not Used) 15.0% Scrap Rate Wheel Abrading and Priming ($/t) $ - 1 Hull Structures 12.0% AH36 Premium Wt of AH36 G&A (%) % % AH36 Effective Steel Cost/t Material CER Group Totals = #DIV/0! $ $ - General Weight and Cost Information Labour Estimate Unit Net Weight Net Weight Quoted Unit Net Cost Labour Labour Labour Group Weight w/o Margins w/margins LCG VCG TCG Country Cost Cost Incl: Scrap CER Estimate Cost Code Description Qty [tonnes] [tonnes] [tonnes] [m] [m] [m] of Origin [Original Currency] [CDN$] [CDN$] [Hours] [Manhours] [$] Equations 10 Hull Structure, General 1000 Hull Structure - General 11 Shell and Supporting Structure 1110 Shell Plating, Surface Ship And Submarine Pressure Hull 1130 Inner Bottom 1140 Shell Appendages 1150 Stanchions 1160 Longit. Framing, Surface Ship And Submarine Pressure Hull 1170 Transv. Framing, Surface Ship And Submarine Pressure Hull 12 Hull Structural Bulkheads 1210 Longitudinal Structural Bulkheads 1220 Transverse Structural Bulkheads 1230 Trunks and Enclosures 13 Hull Decks 1310 Main Deck nd Deck Hull Deck (Forecastle And Poop Decks) 14 Hull Platforms and Flats 1490 Flats 15 Deck House Structure 1510 Deckhouse Structure To First Level st Deckhouse Level nd Deckhouse Level rd Deckhouse Level th Deckhouse Level th Deckhouse Level (Gallows 12m ABL) 16 Special Structures 1610 Structural Castings, Forgings, And Equiv. Weldments 1620 Stacks and Macks 1630 Sea Chests 1650 Sonar Domes 1670 Hull Structural Closures 1680 Deckhouse Structural Closures 1690 Special Purpose Closures And Structures 17 Masts, Kingposts, and Service Platforms 1710 Masts, Towers, Tetrapods 18 Foundations 1820 Propulsion Plant Foundations 1830 Electric Plant Foundations 1840 Command And Surveillance Foundations 1850 Auxiliary Systems Foundations 1860 Outfit And Furnishings Foundations 1870 Armament Foundations 19 Special Purpose Systems 1980 Free Flooding Liquids Weight CER

24 Commercial Model

25 Commercial Model

26 Use of a Weight Based Model Initial weight estimates The level of detail in the early stages depends on the weight information/equipment information of the parent compared to the new notional design We will take whatever level of information from the parent, and use an Alion tool called RATS (uses algorithms to ratio weights (or powers) in specific weight groups) to create new weight estimates for each weight group/sub-group

27 Use of a Weight Based Model Initial cost estimates These weights are then input into the cost formula using established CER s Steel CER s are quite low (hrs/tonne) Comms and electronics CER s are very high (e.g., the equipment is light but takes a significant amount of labour to install and set to work)

28 Use of a Weight Based Model Initial cost estimates Of course, to that you need to apply all the other costs: Shipyard profit Shipyard risk Insurance Contingencies Escalation Engineering Etc.

29 Use of a Weight Based Model Ideally, you can validate your model against a known price For a recent design, we were fortunate that we could create our model and validate it against a known contract price released for a similar size and type of vessel This allows you to validate your CER s and weight estimates

30 Escalation Other Factors to Consider This can be a big ship cost driver, particularly if the build is a number of years away (note a slow production rate increases the cost of escalation) Some vendors include escalation, but most won t Escalation rate needs to be agreed to owner s tend to minimize the rate, which can hurt in the long run Cost estimates can be very sensitive to escalation, and timing assumptions often are inaccurate

31 Other Factors to Consider BRI, Bonding, Borrowing, Profit This is easier when working with a shipyard If not working with a shipyard, ensure that the owner agrees to these estimates up front These need to be to added to ship construction cost Currency fluctuation As this is an always changing cost item, it is best to agree to a process with the customer up front

32 Other Factors to Consider Integrated Logistics Support The owner needs to understand what they expect Initial spares, training, manuals, drawings, etc. Again it is best to agree with the owner up front Learning Curve on Labour This can have a big positive impact on price, but has to be based on realistic assumptions Quick delivery schedule and same workers Agree with the owner/yard up front

33 Other Factors to Consider Shipyard Savings It is likely that the shipyard can negotiate savings that are difficult to estimate in the early stage This would come via negotiations and multiple ship buys Classification Costs and Detail Design These are one time expenses and need to be included as well

34 Need for Returned Data from Construction Programs In house or commercial cost models become more valuable if they are based on returned data from construction programs to permit more accurate estimates for each ship in a class: Construction hours by functional group (hrs/tonne) Material costs by functional group ($$/tonne) Final weight estimates by functional group Other shipyard factors applied to construction hours and material costs to get to total cost before profit Permits derivation of CERs and learning curves

35 Recommendations Under NSPS establish a permanent ship cost estimating capability Develop one group that does this all the time, for all ships, in all departments Always use the same factors and parameters Develop a cost estimating model for use by program offices designing and procuring ships Would recommend use of a commercial tool such as ACEIT that prevents development of individual spreadsheets, and allows for numerous what-ifs

36 Recommendations Under NSPS establish a permanent ship cost estimating capability Collect returned cost data and metrics from each new construction program for each ship Typically shipyards do not like to give up this data Need to establish a relationship that allows the shipyards to protect themselves while also contributing to the development of more effective cost models Derive CERs for each functional area for each ship type

37 Recommendations Under NSPS establish a permanent ship cost estimating capability Develop a standardized input data set for new programs as the starting point for estimating costs Everybody uses the same rates for the non-ship construction cost estimates Everybody uses the same labour rates

38 QUESTIONS?