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.

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


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.  

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.


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.