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Cost Estimating

The cost estimating methodology used in this spreadsheet are based primarily on three MIT theses entitled;
  1. "An Approach for Developing a Preliminary Cost Estimating Methodology for USCG Vessels", by Mark James Gray dated 1987
  2. "Estimation of ship Construction Costs", by Aristides Miroyannis dated 2006
  3. "Updating MIT's Cost Estimation Model for Shipbuilding", by LTJG Matthew B. Smith (USCG) dated 2008
Here costs are broken into the two main categories;
  • Acquisition Costs
  • Life Cycle Costs

Acquisition Costs

In the methods described in these theses, used in this spreadsheet, Acquisition Costs can be further broken into the following segments;
  • Shipbuilder Costs
    • Total Construction Costs
    • Profit
    • Change Orders
  • Government Costs
    • Support Costs
    • Project Management (PM) Growth
    • Government Furnished Equipment (GFE) [including Small Boats, Internal Communications, Ordnance, Electronics]
    • Outfitting Costs
  • Post Delivery (PSA) Costs
Here;
  • Total Shipbuilder Costs + Total Government Costs is also sometimes referred to as Total End Cost
  • Total End Cost + PSA Costs is also sometimes referred to as Total Ship Acquisition Cost
Also, for all the above, there will typically be a difference for the 1st of class Lead Ship Costs  and those for Follow Ship Costs.
Further information on the methodology used to calculate Acquisition Costs in this spreadsheet can be found at the following link.

AcqCostMeth

Life Cycle Costs

Life Cycle Costs can be broken into several subgroups as follows;
  • Total Ship Research and Development Cost
    • Ship Design and Development Cost
    • Ship Test and Evaluation Cost
    • Payload Test and Evaluation Cost
  • Total Investment Cost
    • Ship Prime Equipment Cost
    • Payload Prime Equipment Cost
    • Ship Shore Based Support Equipment Costs
    • Payload Shore Based Equipment Costs
    • Ship Spares and Repair Equipment Costs (shore Supply)
    • Payload Spares and Repair Parts Costs (Sh
  • Total Costs of Personnel
    • Costs of Pay and Allowances
    • Costs of Temporary Assigned Duty (TAD)
  • Total Operating and Support Costs
    • Cost of Operations
    • Total Maintenance Cost
    • Total Fuel Cost
    • Replenishment Spares Cost
    • Cost of Major Support
  • Disposal/Residual Cost
Here, the Average Ship Cost is assumed to be equal to

( Ship Prime Equipment Cost + Payload Prime Equipment Cost ) / Total Number of Ships in Service

And Total Undiscounted Life Cycle Cost is equal to the sum of the above where Disposal/Residual Cost may either be positive or negative depending on whether there is a cost associated with disposing the vessel or whether the sale of the vessel at the end of its service life may net a positive return.

Further information on the methodology used to calculate Life Cycle Costs in this spreadsheet can be found at the following link.  

LCCostMeth

Cost Escalation

With respect tot he costs calulated in the spreadsheet, much of the calculations have been based on information from 1981 and an attempt has been made to allow this data to be 'escalated' or 'de-escalated' to other dates based on the following information, which I believe comes from the US Bureau of Labor Statistics (need to check this).

Year Material Labor  Total Material as a % of Total Increase Over Time Assumed 4.40%
Increase
1939 55 45 100 55% 1.00 1.04
1940 56 45 101 55% 1.01 1.09
1941 57 48 105 54% 1.05 1.14
1942 60 59 119 50% 1.19 1.19
1943 61 66 127 48% 1.27 1.24
1944 61 71 132 46% 1.32 1.29
1945 61 74 135 45% 1.35 1.35
1946 62 69 131 47% 1.31 1.41
1947 81 77 158 51% 1.58 1.47
1948 90 85 175 51% 1.75 1.54
1949 102 87 189 54% 1.89 1.61
1950 96 90 186 52% 1.86 1.68
1951 100 98 198 51% 1.98 1.75
1952 101 111 212 48% 2.12 1.83
1953 102 120 222 46% 2.22 1.91
1954 107 125 232 46% 2.32 1.99
1955 108 130 238 45% 2.38 2.08
1956 117 141 258 45% 2.58 2.17
1957 127 143 270 47% 2.70 2.27
1958 133 152 285 47% 2.85 2.37
1959 133 159 292 46% 2.92 2.47
1960 133 162 295 45% 2.95 2.58
1961 127 170 297 43% 2.97 2.69
1962 124 175 299 41% 2.99 2.81
1963 123 180 303 41% 3.03 2.93
1964 124 187 311 40% 3.11 3.06
1965 124 189 313 40% 3.13 3.20
1966 126 192 318 40% 3.18 3.34
1967 130 201 331 39% 3.31 3.49
1968 135 208 343 39% 3.43 3.64
1969 139 220 359 39% 3.59 3.80
1970 148 231 379 39% 3.79 3.97
1971 158 241 399 40% 3.99 4.14
1972 168 250 418 40% 4.18 4.32
1973 175 268 443 40% 4.43 4.51
1974 187 283 470 40% 4.70 4.71
1975 249 309 558 45% 5.58 4.92
1976 263 330 593 44% 5.93 5.14
1977 282 354 636 44% 6.36 5.36
1978 299 378 677 44% 6.77 5.60
1979 329 414 743 44% 7.43 5.84
1980 363 448 811 45% 8.11 6.10
1981 399 493 892 45% 8.92 6.37
1982 431 548 979 44% 9.79 6.65
1983 434 590 1024 42% 10.24 6.94
1984 447 621 1068 42% 10.68 7.25
1985 457 625 1082 42% 10.82 7.57
1986 458 645 1103 42% 11.03 7.90
1987 456 665 1121 41% 11.21 8.25
1988 478 660 1138 42% 11.38 8.61
1989 507 654 1161 44% 11.61 8.99
1990 515 673 1188 43% 11.88 9.38
1991 523 687 1210 43% 12.10 9.80
1992 535 707 1242 43% 12.42 10.23
1993 535 762 1297 41% 12.97 10.68
1994 563 794 1357 41% 13.57 11.15
1995 574 827 1401 41% 14.01 11.64
1996 574 835 1409 41% 14.09 12.15
1997 580 849 1429 41% 14.29 12.69
1998 566 860 1426 40% 14.26 13.24
1999 560 908 1468 38% 14.68 13.83
2000 559 976 1535 36% 15.35 14.44
2001 549 973 1522 36% 15.22 15.07
2002 574 1007 1581 36% 15.81 15.73
2003 584 1038 1622 36% 16.22 16.43
2004 671 1063 1734 39% 17.34 17.15
2005 703 1091 1794 39% 17.94 17.90
2006 747 1130 1877 40% 18.77 18.69

This data is also plotted below.

CostEsc

From a review of this data it appears that by assuming roughly a 4.40% escalation factor provides a fair representation of the total cost increases, and has been used for dates beyond the year 2006.

TotCostEsc

This document maintained by PFJN@mnvdet.com.