© 1977 The Royal Institution of Naval Architects Preliminary Ship Cost Estimation by J.Carreyette,* C.Eng., F.R.IN-A., Ful. Mar, E., F.8.8 Originally Published for Written Discussion SUMMARY: The paper suggests a method for assessing the approximate capital cost of merchant ships in the very early stages of design. Tt is intended as a guide to ship designers, students and others concerned at the beginning of a new project ‘who may wish to know the ship cost, and how it changes with alterations to principal design variables such as dimensions, ‘weights, powering or earrying capacity. The method does not supplant more refined techniques used by professional cost’ ‘estimators at later stages in the design, but it may be useful in circumstances where cost estimating expertise or actual Shipyard costs are not immediately to hand, Simple worked examples are included to demonstrate the application of the method. 1, INTRODUCTION ‘The cost of any ship is a function of different kinds of variables~techntcal, physical, managerial, financial, political fand temporal, Its complete estimation calls for professional guidance from a range of disciplines, some of whieh are quite remaved from that of naval architecture—economics, Cost accountancy, planning and production control, trade union agreements, shipyard management, insurance and many others: It is not proposed to elaborate on these factors, since here we are aiming at nothing more than first approximations which ‘can be obtained fairly quicldy, but which are nevertheless associated to some extent with the physical features of the ships under consideration. Accordingly, our attention will be directed to relating a few of the design variables to the total ship cost and trying to ‘understand their interaction, 2. COST AND PRICE Cost is concerned with how much money the shipbuilder will pay for shipyard labour to build the ship, subcontractors to Assist, all materials and equipment contained in the com- pleted’vessel, miscellaneous services and establishment charges. Price is another matter. Tt is strongly Influenced by market conditions, competition, supply and demand of the ship type, international exchange rates, cargo freight rates, interest rates on capital loans, the Owner's chartering /operating intentions and a host of factors not necessarily related to the hardware comprising the ship. ‘Since prices appear to be alfected by 80 many imponderables, they ave not been considered here, and this paper deals. solely with costs. 3. PRELIMINARY DESIGN DATA From the Owner's statement of requirements regarding the type of ship, amount of eargo to be carried, speed, and any Limitations to draught or beam that may apply, one of the first tasks is to size the vessel and obtain provisional values for L,B,D,T and Cy. From these and V, the designer can ‘estimate service propulsive power, P, and very soon get his first estimate of light displacement, consisting of separate * Y-ARD Ltd, Consulting Engineers, Glasgow values of Steel, Outfit and Machinery weights. This stage is eached in the normal course of early design procedure. At this point, given an indication of current labour and ‘material costs, a preliminary costing ean be made, a8 will be shown later on. ‘The reasons for costing at this early stage are to get an idea of the capital investment involved and to see how the cost ‘might be affected by altering any of the principal variables— while the design is still sufficiently flexible. It sometimes happens that consideration of the cost of a bbasie design, and cost differences of variants about that design, are left too late for the most attractive technical and ‘economic combination to be produced, 4, TERMS AND DEFINITIONS ‘These are summarised in Appendix I. The terms themselves are fairly standard in shipbuilding elreles, but the particular Stems occurring under any main heading will be found to vary Irom shipyard to shipyard—mainly to suit different account- fancy practices. "This variation is not important in any one shipyard, provided everyone concerned knows precisely what fs ineladed in and excluded from each heading. What 1s important is that, however constituted, the sum of Steel, Outfit and Machinery weights (with a distributed design ‘mangin i any) must equal the light ship displacement. Any thing that has weight costs money, so the sum must be com= plete if all costs are to be accounted for. Appendix I is included mainly to give meaning to the headings referred to in this paper, but it is not in any way intended to suggest how the various items ought to be grouped in any particular shipyard. BASES OF ESTIMATES 5.1 Labour Costs ‘Man-hours are the basis of all direct labour costs, and once estimated, itis only necessary to apply wage rates, over~ heads and'profit to arrive at the total labour costs. With regard to man-hours, in labour-intensive activities such a shipbuilding, it seems to be a natural law that as the size, or numberof nits being produced increases, the rate Ry ‘of man-hours required per unit, per tonne, or per metre, ete, decreases. The decrease is not linear but asymptotic to some fairly constant rate. Many observers have noted this pheno- ‘menon, some of whom are referred to in Rels.1,2, 3,4 and 5, ‘The general form is shown in Fig.1. 235PRELIMINARY SHIP COST ESTIMATION S ASYMPTOTE.__ fh = MAN -HOURS /UNIT x ‘SIZE OR QUANTITY Fig 1. 3 ? Zz z z SIZE OR QUANTITY Fig.2. 1 therefore follows that an estimate of total man-hours, obtained by multiplying Ry by x, gives a curve of H against x such that the curve falls off at the higher values of x, as in Fig.2, implying that H may be expressed either as poly nomial functions of x oF a8 exponential equations, For present purposes it will be found that curves of the general form,H ~ ax, will be satisfactory, where H = man- hours, x is the size variable,a is constant andn = 1. Now, if studies are made in shipyards of the actual man-hours ooked by tradesmen in completing, say, the steelwork, the couifit, or the machinery installation, it can be quickly con~ firmed that the general relationship holds for all three (with discrete values of a and n), although the accuracy of the estimate of H may not be aeceptable for cost estimating pur- poses until other and significant variables are brought in, In the case of steelwork, the author's investigations into many records of man-hours drawn from a variety of sources gave the following relationship: RyCy (We /L)¥9 = K a) where Rj, = actual man-hours per tonne of nett steel Cy = block coefficient at laden summer draught Wy nett steelweight, tonnes L = LBP, metres K = sensibly constant in a given shipyard, I anyone having access to shipyard man-hour records ‘would care to repeat the author's experiment, he would be able to evaluate K for that shipyard over the period to which the records referred. 2236 K would be found to vary between different shipyards, depend- ing on such factors as the suitability of the steelworking facilities, the range of ship sizes and types building together, the state of the order book, the number of ships building simultaneously, the size of yard in relation to numbers ‘employed, ete. But for a given yard during a generally stable period, K should remain fairly constant, with a remarkably Small Standard deviation. In this paper the author is using a value of 227 for K, which he feots is high, but this is due to the very mixed nature of, his sample, including as it did many types ranging from tags to lange bulk carriers. Perhaps a yard specialising in only ‘one or two types of ships could get K down to about 180, or, leven lower, and it would be of considerable value to analyse ‘man-hours from such a yard, Using K = 227, and re-arranging equation (1) 227 Cy W/L) R man-hours tonne @ ‘whence, total steelworking man-hours wed Lvs 27 H= Ris man-hours @ & Looking at equation (2) in the light of what was said earlier, We and L are two size variables, each of which is raised to 4 power less than unity, thereby conforming to the shape of Fig.2. The block coefficient is used as a shape factor which affects the work content of the steel comprising the bull shaped steel costing more to produce. Accordingly, we would ‘expect a small hull of shaped form, such as a tug, to require much more work per tonne than a lange hull of full form, Such as a tanker, and this of course is what we experience in practice, It is expressed numerieally by equation (2) ‘To convert steelwork man-hours to total steelwork labour costs, it becomes necessary to apply an average wage rate, overheads and profit. The average wage rate can be obtained from officially published statistics, Refs. 6 and 7, or from personal shipyard intelligence For example, if the direct labour average rate wore £1°6/he., overheads 100%, and profit 10%, the K value of 227 would be ‘multiplied by 1°6 x 2-00 x 1-10 to give 800 in round figures, ‘i.e, the value of the factor A’ discussed later and tabled in Appendix Tl, With 800 replacing 227, equation (3) would then give total steelwork labour cost in the circumstances stated. ‘The outfit labour costs analysed by the author followed the general form of Fig.2 satisfactorily, but there was some Gifficulty in their comparison because in all the cases con sidered, subcontracting of outfit work was carried out extensively, but rarely to the same degree. Moreover. it 1s, accountaney practice to charge subcontracting labour to ‘Materials, that is, a5 something "bought in’ and therefore not chargeable to the shipyard labour account. Consequently, the shipyard labour hours booked against outfit were always ‘much fewer than the true number of hours required to com~ plete the work, Faced with this situation, the author decided to work in money for total outfit cost rather than in man hours, and to employ a cost factor, C’, whose value would embrace levels of productivity, wage rates, overheads and profit. Those may be varied to suit different circumstances ‘as shown in Appendix Tl ‘This approach produced the following expression: ZCI... (CD “) where Coy = total cost of outfit labour, assuming no subeontracting C’ = factor referred to in Appendix 1 Wo = outfit weight, tonnesTt will be noted again that the cost depends on a quantity or ‘size variable, in this case outfit weight, raised to a power jess than unity. Regression analysis gave the index as approximately %,, the same as for Wy in the steelwork ‘equation. ‘This may not be coincidental ‘The recorded man-hours for machinery installation suffered the same drawbacks as those for the outfit. Some of the work. ‘was subcontracted, again in varying degrees and, although the ‘general level of subcontracting was less than that with outfit, it was enough to render the shipyard hours unsuitable for analysis purposes. Also, better correlation coefficients were obtained by using Service power, P, as the independent variable than by using the machinery weight, Wy. In view of these considerations, the author used the following expres~ Prose... (2) 3 total cost of machinery installation labour, assuming no subcontracting F’ = factor referred to in Appendix 1 P= service propulsive horsepower. ‘The size variable in this ease is power, the index being again below unity. As a matter of interest, if the equation had been expressed in terms of machinery weight, then, with a different factor, the index would have been very close to ¥, once again. In the author's sample the actual value was 0-876. 5.2 Material Costs ‘An examination of material costs en bloc, under Steel, Outfit ‘and Machinery, shows that similar but nol so pronounced characteristics obtain as those exhibited by labour costs. ‘That is, as the quantity and general size increase, the costs rates, per tonne, per square metre, per horsepower, etc., reduce, but not so markedly. ‘Thus, it is found that if we adhere to the general form of cost = ax! for materials, the values of n will be nearer to unity than they are for the labour costs under the same headings. Indeed, for steel materials, very little error results from using n = 1-0. For material costs, the indices found to be satisfactory are “0 for steelweight,n = 0-95 for outfit weight and 0°82 for machinery service power (the same as for machinery labour costing). The corresponding cost factors are represented by B’, D’, and G’, respectively, compiled from manufacturers’ quotations for materials ‘and equipment. Approximate values of these factors are given in Appendix Il It should be emphasised that for preliminary costing pur~ poses we have to be content with approximations to values of the factors A’, B',’, ete, Their accurate enumeration could only result {rom detailed analyses of updated Information reflecting productivity levels achieved by all the trades and skills involved in the building, and by examination of wage rates, allowances, overhead definitions, material costs over an extremely wide range, and profit margins. To do this, exhaustively, the services of personnel and production management, cost estimators, buyers, accountants and others ‘would need to be co-ordinated systematically over a period, and the effects of cost escalation understood and applied faring that period, AIL this is clearly not possible for most of us and, in the early design stage, hardly necessary for ‘rst approximations to the total ship cost. 5.3 Total Costs For the present purpos as follows: the total cost of the ship is defined ‘Total Cost = Total Labour Cost + Total Materials Cost PRELIMINARY SHIP COST ESTIMATION where ‘Total Labour Cost = Direct Labour Cost + Over= heads + Profit and ‘Total Materials Cost = Suppliers’ Cost + Handling and Wastage + Profit 6. APPROXIMATE COST-CHECK EQUATION From studies of detailed man-hours and material costs that ‘make up actual ship costs, it would be possible to produce reliable formulae or tabulated data that would give costs ‘against many of the individual items appearing in Appendix T. ‘Such studies, however, are nat easy to make because the raw data are difficult to obtain, except confidentially within a particular shipyard. Also, if they are to be for general application, the analyses themsetves become complex tech- nically and statistically, and call for expensive and lengthy treatment that can rarely be justified in commercial ship yards. For these reasons, we are denied the synthetic approach to assembling the cost of a ship, and must have recourse to ‘otal! or ‘overall’ methods. One such method is furnished by the following cost-check equation, whieh brings together the terms previously referred to under the main headings of Steel, Outtit and Machinery, tis called a cost-check equation rather than a cost equation because the author originally devised it simply to cross- chock ship cost estimates that had been compiled from dotailed calculations. However, having used it for some years, and having noted it gave total ship costs usually within 45%,,and rarely outside #10%, of those from more detailed estimates, he has no hesitation in recommending it for first approximations: We2/9 14/3 Watt | BW + CW g?/3., D'Wo0'99 + B/PO-R? % «) = Cy +0g, Hy, Hg, +Cq Labour Matls Labour Matls Labour Matls rors, ———_-/s/- \——__-/§ —___ COsT= STEBLWORK + OUTFIT + MACHINERY where Cy = total cost of ship, © We = nett steelweight, tonnes L = LBP, metres Cp = block coefficient at laden summer draught Wo P= service power of main engines outfit weight, tonnes ABYC’, D’ and "= factors embracing updated wage rates, allowances, overall productivity levels, assumed overheads and profit, material costs, ‘wastage and allowance, delivery and handling charges and distributed allocation of Service and Miscellaneous Costs in Appendix I. Approxi- ‘mate values of these factors are given in Appendix It. In using this equation, it will be noted that the indices are all < 1°0, ranging from ¥% upwards to unity. This is ‘encouraging from the accuracy standpoint, because est mating errors in the cost will be less than those attaching to the ship variables themselves. For instance, ifthe steel- 27PRELIMINARY SHIP COST ESTIMATION weight estimate were wrong by 9%, that part of the steelwork labour cost estimate would only be wrong by 6% and while the steet materials cost would still be 9°. wrong, the nett error would be less than 9",. The outfit and machinery costs would be unaffected by a stoclweight error, thus the Steelweight error of 97, would have an overall effect of only 2%, to 47, on the total cost of the ship, depending on the steel content Similarly, if the powering estimate were wrong by 10%, the resulting 8% on machinery cost could represent less than 8% of the total cost, depending on the machinery content ‘A worked example, showing the procedure for estimating the cost of a simple cargo ship, is given in Appendix IIT. Using a log-log slide rule, the computation can be done in about twenty minutes. 1. SHIP FEATURES Having produced an approximate method for early costing, itis necessary to consider what special equipment or facilities are included in the cost, and to have some idea of hhow to adjust it for any Items of particular interest. Such features relate to the grades of steel used in the hull, ‘whether propellers are fixed or controllable pitch, the inclusion or not of bow thrusters, stabilisers, or heavy cargo-handling gear, and to the type of propulsion machinery, standard of accommodation, ete., allowed for. Each of these becomes important in itself as the design progresses, and in the preliminary stage we ought to know the degree of cost change associated with them, Exact costs of this sort could be calculated only from detailed specifications, but exact costs are too much to hope for in the beginning, and approximations must satisfy ur initial queries. 7.1 Steel Grades Equation (6) applies to ships in which 75%, to 85%, of the hull steel is to Lloyd's Register Specification Grade 'A', with the remainder in Grades B, E, AH, DH or EH. Grades B to EH cost from 8%, to 26%, more than Grade A, so where it is thought that certain grades might occur in greater proportions, an adjustment to the factor B’ in equation (6) Should be made. Factor A’ might also be affected, but not appreciably. However, if stainless steels, or HY-80, are contemplated, their material costs are about five times those of Grade A, and an adjustment becomes more necessary. Also with these steels, the welding times will bee longer-as much as double in some instances—so i, for example, 10% of the steel is stainless, and taking ‘welders’ time as being 50%, of the total steel trades’ time, the factor A’ would need to be increased by 57. In the same hull, B’ would be increased by 40%. ‘The equation makes no allowance for reduction to produe- tion times arising from using panel-bay facilities, but where these exist and are likely to be used—in the larger Ships of full form—reductions of up to 20%, to the factor ‘A’ could apply. This can only be a guess, because the utilisation of a panel-bay is affected very much by how ‘much total steel is going through the steel shops for all the contracts being handled simultaneously. 7.2 Shafts and Propellers ‘The equation applies to single serew ships with fixed pitch propellers, For twin-serew fixed pitch Installations the machinery cost, Cy, might be increased by from 10%, to 15%,,although such an adjustment should be reviewed at the next stage of design. Controllable pitch propellers are more expensive, th material costs being from five to six times those of fixed pitch propellers having the same torque and thrust. For controllable pitch installations, therefore, cost addition 238 ‘must be made to equation (6) and this is given approxi mately by: Cp = £31, 700 gt? a where Cp = cost difference between FP and CP propeller installations, at mid '77 rates, © Q,_ = overall torque = 0°728 P/N tonne-metres P = service hp,N = propeller rpm, ‘The approximation applies best where torque is above 40 tomne-metres, 1.3 Thrusters ‘Equation (6) does not include the cost of transverse thrusters, and If requlred, the additional cost for a thruster, steelwork Inway, power source, controls and installation amounts approximately to Cy = £48, 000 + £35, 000 7, ® cost at mid "77 rates, € = thrust, tonnes 1.4 Stabilisers Stabilisers are not included in equation (6) and such data as GM, fin areas, weights and powers of the actuating gear, etc.,are unlikely to be available in the early stages of the design. Consequently, only a rough appraximation to cost cean be made. Cop = 8881 a9" ) where gy = cost at mid "77 rates, € A = displacement, tonnes 11. Propulsion Machinery ‘Most of the ships analysed in the derivation of equation (6) were fitted with diesel main engines, but one or two steam turbine Installations were included. There were no gus- turbine or nuclear-powered versions available with sultable costs. While there are cost differences between steam and iesel, and between geared diesel and direct drive, it 1s a subject requiring careful detailed analysis of alternatives, As it stands, equation (8) is not sensitive enough to show ‘such differences. Suggestions would be weleomed~always provided they could be expressed solely in terms of the preliminary design variables of the ship. 7.6 Weight Coverage Features such as extensive accommodation, or heavy and elaborate cargo-handling gear are to a large extent covered by the estimates of outfit weight, Wo, which would be made by the designer in the preliminary stages as a matter of course. Consequently, if that estimate is fairly ‘reasonable for all the equipment, services and systems it is proposed to build into the ship, equation (6) should respond accordingly. Generally speaking, the costs of features such as those referred to do not form a very substantial proportion of the total ship cost, if considered singly. But if several features are to be incorporated, the cost additions could bbe considerable. So it is perhaps better to have some ‘means of accounting for them than to ignore them com= pletely, even in the preliminary stages of design. ‘Accordingly, itis felt that the rough-cut nature of equations (7), (@) and (@) ean be tolerated for such guidance as they ‘may provide at the time they are intended to be used.In making sundry additions for features, the designer will of course be aware that exch addition will add to the weight as well as to the cost, and he will be keeping an eye on deadweight, trim, stability, draught, ete. Designers will appreciate this but it may not be s0 obvious to others. 8. COST AND DATE ‘Equation ()gIves the estimated cost of the ship at a certain date, as implied by the values of the factors 4’,B',C’,ete., selected from Appendix I!. While this is satisfactory for many purposes, its somewhat artifical because, of course, the ship cannot be built in a day. Ifa ship takes two years to build, for example, the wage rales and material costs at the beginning and end of that period are likely to bbe noticeably different. Consequently, should running expenditures such as wage payments, instalments (0 the builder, or temporary Investments during the building period require to be examined, it would be necessary to perform an economic exercise accounting for variations ia ‘wages, materials, and interest rates. Itis hardly a subject appropriate for expansion here, but very useful information fon procedure and data can be found in Refs.5,6 and 7. For example, the last two references provide indices for labour and material costs which enable equations (1), (8) and (8) to be adjusted to dates other than mid-"77 9, VARIANTS A.useful aspect of equation (6) is that it expresses the cost of the ship in terms of some of the principal design variables whose values will be known fairly accurately at the beginning. Moreover, since the terms are arranged ‘under the familiar headings of steelwork, outfit and machinery, itis helpful to those of us who are in the habit of thinking’in these terms for purposes other than cost. Consequently, if we wish to consider some variation about the basie design, that is, to consider a variant, It is necessary only to alter the values of the appropriate variables in equation (6) to see very quickly the probable effect on cost of making such alterations. As a simple example, if the somewhat austere cargo ship in Appendix IIT were improved in various ways, such as by having better accommodation, a heavier derrick, or an enlarged refrigerated space, and the estimated weight penalty for the alterations amounted to 100 tonnes above the outfit weight used in the basic design, the new outfit ‘cost would be obtained by substituting the higher outfit ‘weight in equation (6). Having first satisfied ourselves that in fact the changes ‘occurred only in the outfit, and that the steelwork and ‘machinery would be hardly affected, the new outfit weight of 1, 200 tonnes in equation (6) gives the following cost: Co = CW 2/2 + DIWy0-98 where cS D 10,738 1,868 1, 212, 000 + 1, 587, 000 £2, 799, 000 or £2°80 m. ‘This is £0-20 m more than the £2°60 m for the outfit in the basic design, or 2%q%; on the cost of the basie ship- see Appendix Ill. Should the prinelpal dimensions of the hull be altered, the ‘designer can Fun out new estimates of steelweight, outfit ‘weight and power quite quickly-usually by means of first order differential coefficients, or similarly based approxi- rmations~and the new values ean be put in equation (8) to give the revised estimate of cost. } a8 noone PRELIMINARY SHIP COST ESTIMATION ‘This really takes very little time. AUl the basic design data and particulars of any variants that are proposed will be available for considering the purely technical aspects, and the same information can be used for examining the costs. 9.1. Speed Change Variants ‘An important variant is that involving a small speed change to the basie ship. How much does it cost to put up the design speed by, say, one knot, and what else would change? 11 for instance, the speed were increased but the principal dimensions, L, B,D and T were to remain the same, the higher speed would increase V/V and thereby reduce Cy. Also, the power and weight of the machinery would be Ingreased, At the same time, the displacement would be reduced due to the lower Gand the deadweight would be Feduced on two counts, (a) lower displacement and (b) higher machinery weight. For so small a speed change it {s doubtful ifthe weight or cost of the outfit would be affected. By differentiating the steelwork and machinery terme in ‘equation (6) and using Katsoulis's formula, Ref. 8, for block coefficient, itis a simple matter to derive expressions for deadweight and cost changes brought about by slightly altering the speed, see Appendix IV for derivations. ‘Thus, change in deadweight is given by equation (18) in Appendis 1 © tan) =~ [osissa + asoim) «1 std) = change in dade tonnes f= daplacement of bast sip, ones v= eal peed change, noe Vs erviceaped ot bste sip knots [Note that the sign of the deadweight change in the eireum- stances of leaving L, B,D and T fixed is opposite to that of the speed change. ‘The change in cost of the ship is given by equation (28) in Appendix IV. cay = (052048 Cy — 08198 Coy, + 242864) (1 where 0Cg, = change in ship cost, &, due to design speed change OV = small change to design speed, knots V__ = speed of basic ship, knots Cy,_ = steelwork labour cost of baste ship, from eqn. (6) Coq, = Steel material cost of basic ship, trom eqn. (6) Cy. = machinery cost of basic ship, from eqn. (6). Appendix IV is purposely detailed, firstly to enable the student to follow the argument step by step, and secondly to enable the more experienced investigator to see what assumptions have been made, and to substitute his own where he feels they may be more appropriate to his parti- cular field of enquiry 9.2 Capacity Change Variants Once a preliminary design and cost for a ship have been produced, it is sometimes useful to know how small changes in carrying capacity affect the cost. If the ship is of such 1 type that the carrying capacity can be represented by a quantity, Q, such as deadweight for tankers, bulk carriers 239PRELIMINARY SHIP COST ESTIMATION and cargo ships, or TEU, cuble metres, gross tonnage for container ships, ferries, ete, the cost change can be expressed by the following, when the speed is fixed: 82 0. +04 + 0° + 805, = 52 [0-622 Cy, + 0-908 Cy,, + O°444 Co, 0°634 Co, + 0°546 Cy) aay where Cg, = change in ship cost due to capacity change, © 6Q = small change in eapacity,+ dwt/TEU/m3, ete. Q — =capacity of basic ship, dwt/TEU/m9, ete. Cq,_= steelwork labour cost of basic ship, from (can. (8) Cejq = steel material cost of basic ship, from ean. (6) Co, = outfit labour cost of basic ship, from ean. (6) Com = oulfit material cost of basic ship, from eqn. (6) Cy" = machinery cost of basic ship, from eqn. (6) ‘The derivation of equation (12) is given in Appendix V. {75000 det_SUUR CAME tain sre tw cOST VARs eo 7 ensic sotto 16 Fig.3. 125,000 dwt Bulk Carrier. Speed, Deadweight and Cost Variants 240 9.3 Combined Speed and Capacity Change Variants By combining the changes expressed above, it is now a fairly straightforward matter to draw a graphical envelope with the basie ship In the centre, showing how speed, feapacity and cost vary together. ‘This is illustrated by the example in Fig. which is for a bulk carrier of 125,000 dwt.,15 knots, with no special ship features, and having the following preliminary design characteristics: L =272metres —-V_= 15 knots 45 metres P= 21,100 bhp D = 19'5metres Ws = 18,400 tonnes T = 1-2metres Wo = 2,200 tonnes p= 0°83 Wy = 1,800 tonnes Assuming £1-8/hr for direct labour, €175/ tonne for average steel price, 7%4%, wastage, 100% overheads and Fofit, equation (6) gives the cost as £18+153 m. Working out the deadweight and cost changes resulting from speed changes on fixed dimensions, and eapacity cchanges for fixed speed, equations (10), (11) and (12) provide the figures for Table I. TABLE I Dimensions V Cost/Dwt 131, 340t Basic 14 knots e17-510m —€139°7/tonne Basic 18 knots 125,000 18"153m —£145°2/tonne Basic 16 knots 118,660 18-786m 158-0/tonne Larger 15 knots 130, 000t £18°619m —_£143+2/tonne Smaller 15 knots 120,000 €17-687m —€¢147°5/tonne In the construction of Fig.3, the first three rows of the table give the 'line of basic dimensions", or L-B-D, showing how ost varies with design speed if the dimensions L,B,D and TT remain fixed. Equations (10, (11) and (12) applied to these points enable the lines of consiant deadweight to be com- puted and superimposed, Finally, dotted lines above and below the L-B-D can be caleulaied from new displacements in equation (10), to pass through the constant deadweight curves at the basic speed. If marked with their appropriate dimensions, obtained from Q¥/9 ratios, these dotted lines indicate the changes in size for geometrically similar ships. ‘The whole envelope then shows how speed, capacity, dimen- sions and cost vary together about the basie design point. 10. SUMMARY AND COMMENTS ‘The principal objectives of this paper have now been reached. Equation (6) gives the cost of the basie ship, expressed in terms of the design variables which are evaluated at the beginning of the design, and cost factors ‘which can be selected from Appondix Il. Section 7, Ship Features, gives approximate costs of adjustments for special steels or equipment that may be ealled for, and Section 8 on Variants explains how an envelope may be constructed for providing a base for technical/economie comparisons to be drawn. These will be concerned with the initial capital outlay and the subsequent items of ex- penditure and income occurring during the life of the ‘Ship—eapltal charges, fuel consumption, number of voyages per annum, freight earnings, ete In conclusion, the following comments may be helpful: (2) Equation (6) has been found to be suitable for a wide range of merchant ship types, large or small, fast orSlow. As stated, the dimensions and weights largely determine the steelwork and outfit costs, and the powering, the machinery cost. (iy) In the cases of LNG or LPG carriers, the costs of the cryogenic or gas-handling plant would need to be obtained from specialist manufacturers, many of whom act as subcontractors for the supply, installation and ‘commissioning of their equipment. (lit) The factors ih Appendix If apply, principally, to current UK labour and material rates. In order to cost a ship building overseas, it would first be necessary to obtain average wage rates, steel prices and costs of large items such as main engines in the country concerned. This is not so difficult as it may at first appear, and published statistics such as Ref. 6, occasional reports quoted in the maritime press, oF general market Intelligence are useful Sources of information which ‘enable the factors A’, B’,C’, ete. to be numerically adjusted. When performing this exercise, of course, the appropriate curreney exchange rates must also be applied. Gv) ‘The method deseribed has been tuned to merchant ships, but it ean be expanded or adjusted to suit naval ships, or any large marine structure that is built in a shipyard, Naval ships, for example, require two more rain headings to be added to equation (6), namely Electrical and Weapons. As it stands, for merchant ships, the electrical work is included in Outfit and Machinery, according to the definitions of Appendix 1. But in a naval ship the electrical work is large enough to have its own heading. Also, the factors in Appendix 1 would all need to be adjusted to account for the higher Levels of planning, quality control, inspection and rectification, and general administration demanded {or naval ships. (¥) Anyone applying these methods has a chance to ‘exercise his own judgment and experience to 2 large ‘extent and, since they will vary considerably from one person to another, the paper has been written with this in mind, The arguments used have been laid out (0 ‘expose the assumptions made, so that anyone with ‘speelal knowledge or experience of some part can alter that part without affecting the remainder. Specialists, however, should be warned against introducing variables whieh eannot be evalvated at the very beginning of design, and neweomers to costing would be well advised fo work out practical examples and discover for themselves how sensitive, or insensitive, the total cost is to different assumptions they make about over- heads, wastage or any other factor whose selection requires some judgment. ‘The method only applies to costs. It should never be used in connection with prices, particularly published prices. i ACKNOWLEDGEMENTS ‘The author is indebted to his friends in the Department of Naval Architecture in the University of Strathelyde for the opportunity of addressing students on this subject, as a Girect result of which this paper was first thought of, and to his colleagues in Y-ARD Ltd, for general encouragement, guidance and assistance with the diagrams and typography. He is also grateful to the directors of Y-ARD Ltd. for permission to publish the paper. REFERENCES 1, Thompson, A.G.: ‘Work Measurement and Productivity Comparison in Heavy Are Welded Construction’. Engineering, 20th Feb., 1959. PRELIMINARY SHIP COST ESTIMATION 2. Johnson, R.P. and Rumble, H.P.: "Determination of Weight, Voiumes and Cost for Tankers and Dry Cargo Ships'.’ Clearinghouse ADG69 566, April, 1968. 3. Carreyette, J.: 'Shiprepair Steel Renewal Rates’. ‘Trans, RINA, Vol. 107, 1965. 4. Summers, L.S.: "The Prediction of Shipyard Costs’. Marine Technology, Jan, 1973, 5. Buxton, 1. La: ‘Engineering Economies and Ship Design’. BSRA, (Second Ealtion), 1976. 6. Department of Employment Gazette. HMSO. 1. ‘Trade and Industry. HMSO. 8, Katsoulis, P.S.: ‘Optimising Block Coefficient by an Exponential Formula’. Shipping World & Shipbuilder, Feb., 1975. APPENDIX I, TYPICAL SHIP COST DEFINITIONS Note ‘The contents of any heading vary in different shipyards according to accountaney procedures and general manage- ‘ment policies. Production and Technical Steelwork Stee] in main hull and superstructure including minor bulleheads, bulwarks and machinery seats but excluding, structural forgings, castings and deck fittings. Outtit Structural forgings, castings, smithwork, sheet iron work, carpenter, ship piping systems (outside ER), ship electrics (outside ER), painting, deck coverings, casing insulation, accommodation, sidelights and windows, watertight and fire-resisting doors, firefighting, galley, refrigeration, ventilation, alr~ conditioning, steering gear, anchors and cables, deck machinery, derricks and cranes, hatch covers, lifesaving appliances, nautical instruments, bridge consoles, stores and sundries, Machinery ‘Main and auxiliary machinery, generator sets, switchboards and electries (inside ER), pumps and piping systems (inside ER), compressors, auxiliary boilers, and all equipment within ‘machinery spaces, plus funnel, shafting, propellers, bow stern ‘thrusters and stabilisers. Services and Miscellaneous Iron and steel sorters, general labourers, crane slingers, drivers, storekeopers, safety first, temporary lighting, palrolmen, firemen, watchmen, cleaners, launching and ocking, towing, trials, fees and disbursements. Ship ‘model tank-testing. Financial Labour Shipyard labour booking time direct to contract, including chargehands, tradesmen, trainees, helpers and apprentices. Overheads Full company establishment charges, fixed and variable, {including supervision by foremen and above, design and drawing offices, purchasing, planning, production control, autlity control and company administration related to ontract, Materials Al bought in materials, equipment, plant and subcontractors related to contract, including delivery and handling charges. 2aPRELIMINARY SHIP COST ESTIMATION APPENDIX Il. APPROXIMATE FACTORS Note: Profit margin of 107, assumed throughout. ‘TABLE I, Values of A’ Average Wage Rate ‘Overheads of direct labour nr 15% 100% 125% 1-60 Ln 2-00 e758 1,000 1,125, 240 1,080 1,200 1,950 ‘TABLE Ul, Values of BY Average Price of Shipbuilding Steel Wastage + Welding Rods S/tomne Tye 10% 124% 150 17812186 200 raz 250 296 = «30310 TABLE IV. Values of C’ ‘Average Wage Rate ‘Overheads of direct labour /hr 18% 1004 125% 160 8,350 9,550 10, 750 2-00 30,425 11,925 13,425 2-40 12,500 14,300 16, 100 TABLE V. Values of D? Date D 6/75 1,500 6/16 4,725 6/7 2,011 ‘Values of B’ are obtained by adding F” and G’ together from the following tables: TABLE VI. Values of F” Average Wage Rate Overheads of direct labour 75% 100% 125% £/hr F FP Pe 1-60 32388, 2-00 4oi get 19 4855832 2-40 ‘TABLE VI. Values of G’ Date c 6/75 135 6/76 845 ett 980 242 Note: Profit margin of 10% assumed throughout. For any other profit margin of say x% multiply all factors by (st) 10 APPENDIX IIl, WORKED EXAMPLE Estimate the building cost of a 15-knot 18, 000 dwt cargo ship having the following provisional particulars: LBP L 1280 m Breadth B 229m Depth to UCD D stm Draught t 100m Nett stoclweight Ws_———4, 900 tonnes. Outrit weight Wo 1,100 tonnes Machy weight Wy 860 tomes Block coettt. core Service speed v 15 knots Service power P 10,500 bhp. Assume the vessel will be built in a medium sized shipyard ‘carrying 1007, overheads using 1/77 rates, Allow €1°8/hr for direct labour, price of steot at €175/tomne, and a profit margin of 107. Evaluate Factors from Appendix Tl: A’ = 900 — from €1°8/hr and 100%, overheads. Bi = 212 — from £175/t and 10% wastage. © = 10,788 — from £1°8/nr and 100%, overheads. D’ = 1,868 — by interpolating for 1/77 Ba PF+@ 415 — from £1°8/hr and 100%, overheads 918 — by interpolating for 1/77 1,828 hee Design Variables: Ws = 4,901, hence W2/° 269 L 198 m, hence 14/3 sar Wo = 1,100t, hence w2’3 = 107 and wos = 715 P =10,500, hence PO-#2 = 1, 975 Substitute in equation (6) Cy, Steelwork 2/3 11/3 _ 900x280%5-17 1-73 m labour O77 Cy, steelwork "materials BW =212e4,900 = 1-04 ovttt fabour—C’Wa2/8 = 10,798107 = 1-15 outfit matls. — D'Wo"95 = 1,8684775 = 1-45 Machinery labour Prpoe2 = alsxs,979 = O82 Cy, Machinery = materials G/PO-8? 913K1,975 = 1°80 ‘Total Cost £799 mAPPENDIX IV. COST EFFECTS OF SMALL SPEED (CHANGES WITH FIXED L, B,D AND T If the principal dimensions remain fixed, and the speed is changed, the form, power, displacement and deadweight will be affected. If the speed were to be inereased slightly, V/VL Would increase, C, would be reduced, and the power and ‘weight of the machinery would increase. The displacement would be reduced due to the lower Cy,,and the deadweight would be reduced on two counts, (a) lower displacement, and (b) higher machinery weight. A reduetion in speed would have opposite effects For small speed changes it is doubtful ifthe weight oF cost of the outfit would be affected and outfit changes are ignored In the following argument. ‘The cost effects of these changes can be deduced in stages bby making one or two simplifying assumptions which will become apparent en passent. Displacement Change Since L.,B,D and T are to remain constant, only Cp will alter in the displacement equation, and from Katsoulis's formula, Ref.8 cy = v-orerss ‘Therefore w Wp =—o-s195.c, as) where Cy = change to Cp in basie ship w v small speed change = speed of basic ship, Similarly, with L, B,D and T fixed, and produet pLBT = N, A= NCy where & = displacement of basic ship Therefore 6a = Ney Substituting in equation (13) oa =-0-6135 0 Y ro) v where 64 = change in displacement Machinery Weight Change ‘Since the speed change is small, assume () power « v9 424 is) weight « power te op=ap 8 42 ph as) vig where P_ = service power in baste ship OP = change in power 54 = change in displacement. Also, Wy © P, therefore OWy = Wy SP as) PRELIMINARY SHIP COST BSTIMATION where Wy =machinery weight in basi ship Ay = change in machinery welgkt. Substituting equation 18) for 6 In equation (16) by = Wy (9 04 B28 vite ba ov — 0°6135 © trom equation (14) 0-615 Y trom equation (14) og =m (280400 bF v v an Nett Deadweight Change ‘This is given by combining the effects of changed displace- ment and machinery weight, from equations (14) and (17) ota) (1s) [o-6135 a +2591 Wy] ea Note that the deadweight change takes the opposite sign to that of the speed change when the prineipal dimensions remain fixed Cost Changes “These can now be estimated in one of two ways, ether (@)_by estimating changes in steelweight and powering, and entering the new values in equation (6) (1) by making further simplifying assumptions and then adjusting the basic ship cost by the speed change, BV. By the first approach, from equation (8), steelwork Labour cost we Li cost of steelwork labour, & Wa. = nett steelweight in basic ship, tonnes L) = LBP, metres Cp = block coefficient at laden summer draught. For fixed L,B,D and 7, the only variables are Ws and Cy, Hence, or @ small change in steelweight, OW, the cost change 18, Alao,for a small change in block coettictent, Cy 8p oy Wp, = Cs, ‘Therefore Ps) as) 243PRELIMINARY SHIP COST ESTIMATION Similarly, for material cost, from equation (6) Ce, «Wy where Ca, = steel material cost, £ We = nett steetweight in baste ship, tonnes Therefore ows 5, = Ca, (20) oa Hence, from equations (19) and (20),nett change in steelwork cost sean] S82 25 oy, Ws en From equation (6), machinery cost Cy = BIO? where Cy = cost of machinery and installation, & BY = factor from Appendix IL Pr = service horsepower fa P, = service horsepower of basic design P, = service horsepower of variant C= machinery cost of variant ‘Then yen cy = cy (22 Py and WCy = Ch -—Cy then eo (Q)"4 " ‘The nett cost change to the ship using this approach will be given by adding equations (21) and (22), oft] Ws Ch cay Ws, [ (Re)? (2a) sen Waseda where Cy = cost change in ship, © dW, = estimated change to steelweight,tonnes We =nett steclweight in baste ship, tonnes Cy, = change in block coefficient Cp = block coefficient of baste ship P, = service horsepower of variant os P, service horsepower of basic ship 2a Cg, = steelwork labour eost in baste ship, © Cg, = steelwork material cost in basic ship, © Cy” = machinery cost in basie ship, & ‘The above result would depend on the prior evaluation of the new steclweight, block coefficient and service horsepower, and is of more academic than practical interest. Obviously if the new values had been obtained, it would only be neces sary to put them Into equation (6) t6 obtain the new cost. Nevertheless, equation (23) is useful in showing which terms ‘would need to be substituted by functions of the speed change, BV, if the new cost were required before performing the ‘design calculations for the variant ‘These terms are: Ws SC, Pr We" Gp “Py and by making further simplifying assumptions they can be liminated and replaced by 6V and V, which leads to the Second approach referred to earlier under (ii) of this section of Appendix IV on cost changes. Firstly, consider the steelweight. If it be assumed that for ‘small proportional changes in displacement, similar pro- portional changes oceur in the steelweight, then Ws 58. We 8 But, from equation (14) 8 =—o-e1s5. 2 v Therefore 2 ows 2 cg, + Cy,|- "8 trom equation (21) becomes [Fen een} etn — 06135 [2 cg, + ¢5, ] ey ities: al v Similarly, from equation (18) a 2b __ overs © G v ‘Therefore 2Cb eee BY: ay GP trom ensation (21) becomes +0°6195 57 Cyy b (8) ] 7 OC =change in steelwork cost, £ DV = small speed change,lenots V_ = speed of baste ship, knots Cy, = steelwork tabour cost in basie ship, & Hence equation (21) becomes i Wile Cy__ = steelwork material cost in basic ship, ©. Note that in all but small ships or those of excessively fine form, the stect material cost, Cyq, 15 usually greater than a third of the steelwork labour cost, My Cay. Consequently. for ‘a small speed increase (or + 6V), the atdelwork cost will usually decrease (\.c.6C will be negative). For a small speed ‘reduction, on the other hand, the steelwork will usually cost‘more than in the basic ship. L,B,D and T remain fixed, as postulated Secondly, to eliminate the term P,/P, from equation (23), it ‘can be replaced by vitsv\s /a+sa\% v 2 which conforms to the assumption previously made that P « Vi.a2/3, and if raised to the power 0°82, and second order terms are ignored, reduces to tey/ BH 1 4246 +o en Bat since trom equation (18), 42 = ~0°6188 SY, the aterm ct equation (2) canbe writen as 098 £Y, hereby enaing wv the last term of equation (29) to be expressed as 21125 Cy ‘V.. With these alterations to equation (23), the nett change in ship cost resulting from changing the speed by a small amount but ‘maintaining the original principal dimensions is given by adding equations (26) and (27), ts, = WY (o-2045 cy, - o-6195Cy, + 21250,] 28) where Cp, = change in ship cost, +8, due to design speed h change OV = small change to design speed, «knots V-=apecd of basic ship, knots Cy, = steelwork labour cost of basic ship, £ Gg, = steelwork material cost of basic ship, £ Cy" = machinery cost of basic ship, € ‘The costs Cy,,Cg, and Cy are those obtained from equation (6) for the baste ship. APPENDIX V. COST EFFECTS OF SMALL CAPACITY CHANGES WITH FIXED SPEED For small changes in cargo carrying capacity it is assumed that all principal linear dimensions will be proportional to QU, where Q is a quantity representing the weight or volume of the total eargo carried in the basic design. Also, service horsepower, P, is assumed to be proportional to 49/3, where 4 is the displacement of the basic ship. Speed 18 fixed From Katsoulis's formula, Ref.8, yo-ae pout for fixed V poaoe cy and since L,T and B are each = Q¥/9 then Cy = Q°°095. (29) ‘Steelweight, Wa, s assumed to be proportional to L(B + DI, where L'= LBBB = breadth, D = depth and t = average plate thickness. "While L and (B +) are each © Q4/3,t is, hot & L, but is nearer to being © L°"725, according to the author's records. PRELIMINARY SHIP COST ESTIMATION Hence Wg 127725 « Qo-808 en Consider now two similar ships of slighty different capacities, Q, and Q;,and examine the first term of equation (6), wnich states that a We? Cs ey where Cay = cost of steelwork labour From equations (28) and (30) aa @ ‘The socond term of equation (6) gives the cost ratio of the steel materials. c, st, c, SI, (1) From equation (80) Cou, Woy oe Sacaqeial *, ¥, \a, ‘The third term involves the outfit labour cost, Co,,and on the assumption that Wy © LB © L2, then Wa & Q2/3 (2) ‘The fourth term of equation (6), for outfit materials, bas the ‘index 0°95, 50 the cost ratio term will have % = 0°95, or 0-634, @,\"" a, Finally, the machinery term of equation (6), having regard to P being = 2/3, gives the following: Green = Bringing all these terms together ,and remembering that only ‘small changes to Q are contemplated, it is easy to show that the difference In cost, 6Cg_, brought about by a/small dif ference in capacity, 0, cah be expressed as: (a2) Hence (33) ow = Cu, sg = 28 x [0°22 Cy, + 0°908 Cg, + 0-444 Coy + 0°634 Co, +0°546 Cy] (38) 45PRELIMINARY SHIP COST ESTIMATION where Cg, = change in ship cost due to capacity change, + £ 6Q © =small change in capacity, + dwt/TEU/m®, ete @ —=capacity of basic ship, + dwt/'TEU/m®, ete. Cq,_ = steelwork labour cost of basie ship, from equation (8) Cy, = steel material cost of baste ship, from '® equation (6) Co, = outfit labour cost of basic ship, rom equation (6) Co, = outfit material cost of basic ship, from equation (6) Cy, = machinery cost of basie ship, fram equation (6), WRITTEN DISCUSSION Professor H.B. Benford, B.S.E, (Fellow): I find this an Interesting paper and plan to assimilate Mr Carreyelte's proposals into my leeture notes and cost data bank. In ex- change, can contribute the following suggestions () Although Mr Carreyette states near the start that his paper deals only in shipbuilding costs, the details show that he really means cost plus 10% profit (G8) We ave found good correlation between hull structure man-hours and the net steel welght raised to a power ranging between 0°85 and 0-00, (Git) Outtitting costs, whether material or labour, do not al- ways correlate well with weight. This is because of the Wide variations that exist between various owners! Selections of components, Making the correlation even worse, of late, is the Increasing quantities of electronic items that weigh relatively little but cost dearly. Fetchko(®) demonstrates a more sophisticated approach using a breakdown into a dozen or s0 subdivisions of futfitting, each with its own estimating technique, Tre~ ‘commend his method, or something Ike i, (Gv) We have found that steam turbine and diesel costs follow different curves with respect to horsepower. AS powers increase, steam costs da not rise as steeply as iesel costs. We find good correlation between costs of steam plants (either material or Iabour, or both) and horsepower raised to the 0-6 power (¥) Thave not had time to analyse Mr Carreyette's proposals for handling variations in speed and volume, 1 should like to point out, however, tat changes in speed-length ratio seldom make any appreciable difference in the ‘optimal block eoetficient for a tanker or bulk carrier. Even in limited-eargo ships, the trade-offs between machinery cost and hull cost are such that the relation- ‘ship between speed-length ratio and block coefficient Is characterised by an excess of fat laxity; which is & faney way of saying it should be painted with a broad brush, (vi) My only serious complaint is that Mr Carreyette has overlooked several useful references in compiling his data and methods of analysis. I list some,as follows: REFERENCES. 8. Fetehko,J.A.: "Methods of Estimating Initial Investment Cost of Ships.’ University of Michigan, Department of Naval Architecture and Marine Engineering, Report No. 079, June, 1968, 10. Frankel, Ernst G.and Marcus, Henry S.: 'Ovean Trans- portation." The MIT Press, Cambridge, MA, 1973. 11, Swift, Peter Michael: ‘An Approach to the Rational Selee~ ton of the Power Service Margin.’ University of Michigan, Department of Naval Architecture and Marine Engineering thesis, 1974. 248 12, Erichsen, Stian: ‘Optimum Capacity of Ships and Port Terminals." University of Michigan, Department of Naval Architecture and Marine Engineering thesis, 1971 13, Elste, Volker H.,Swift, Peter M.and Swigart, James E, "Transport AnaiysesSeaway and Overseas Trade." University of Michigan, Department of Naval Architec- ture and Marine Engineering, Report No, 160, 1974 14, Benford, Harry: "The Practical Application of Economics to Merchant Ship Design,’ Marine Technology (SNAME), Vol.4,No. 1, January 1967, 15. Fomenia, Jose: "Economie Comparison of Various Marine Bower Plants.’ Trans, SNAME, 1915. Mr A.Steel (Member): ‘There are lies, damned lies and statistics!" ‘This quotation along with the cliché ‘statistics ean be used to prove anything’, have been thrown up as defences by most of us at one time or another to mask our lack of appreciation of the capabilities, as well as the limitations, of statistical methods, How fortunate the Institution is that the present author is fone who marries his naval architectural/shipbutlding know- ledge with his understanding of and affinity for statistics and should give us an insight, however brief and broadly treated, to the possibilities for meaningful analysis in shipbuilding How disceraing too, of the Department of Naval Architecture at Strathelyde University in that they recognised the worth ff the subject maiter from a single lecture and encouraged the author to further develop his ideas, leading to the present paper. Congratulations are due to both. Having said this, there soem to be endless critical comments ‘and questions one would like to direct to the author. In the first place, products of shipyards are very varied and are time taking in execution so thal a significant sample from one shipyard for statistical purposes requires con~ sistent, dependable production records covering several years. ‘The author will no doubt recall one such sample of 21 ships spanning a period of 8 years! Not only that but, the diversity of types was enormous and included tugs, ear ferries, cable ships, naval auxiliary vessels, cargo ships, bulkers, reefers and tankers. Again over such a period of time other factors ean and do ‘change: attitudes to work, incentive schemes can come and 1g, new plant ean come into operation, industrial relations ccan fluctuate and an economy can move from so-called full employment conditions to something much less favourable, ‘The latter condition is no doubt in the author's mind when he lists "state of the order book’ among factors influencing, A shipyard characteristie factor "K", All the matters listed above seem to militate against the Satisfactory use of statistics in shipbuilding. Analysis at the time of the sample referred to with regard to steelwork production manhours ylelded distinet trends but with a standard error of +12°86%,, Thus a very broad band of manhour/tonne values some 25%, wide resulted from any pro- jected use of the derived formula. Perhaps the most useful outcome is the establishment of trends, Il is interesting to comment on the author's apparent insis! ence after some years that steelwork manhours can be re~ lated to only two main parameters. Fineness expressed by block eoelficient seems reasonable as one but that everything else should be covered by weight per unit length seems a proposal less easy to accept. ‘The author rightly comments that manhours per tonne of steelwork reduce with weight per unit (and number off) but What about the effeet of complexity of structure?‘A VLCC with its heavy scantlings and comparatively simple Structure has a high W/L value and can be expected to show a low value of manhours per tonne. On the othor hand, say a chemical eartier with double skin ‘nd centre division, will have more complex steelwork with difficulty of aecess and, below certain void widths, require ‘ments for double manning. The steelwork manhour returns fan thus be expected to be markedly higher than for a single hull vessel having the same W/L value. Factors arising {rom curvature of form also seem worth considering further, although block coeffieient variation can bbe expected to reflect some inverse indication of the effect, Perhaps the author would care to amplify his views on these matters, It was most interesting to see the author's treatment of out= fit costs with variations given for such things as bow thrusters, controllable pitch propel {In total, it is difficult to see professional estimators using the methods shown; the results are too broad brush. But now ‘that we may expect to have a centrally co-ordinated Industry with individual profit centres the processes described seem to suggest a basis for means to be developed whereby the laggards and leaders may be Ideatified, with the need and possibly the required direction of remedial action being Indicated, ‘As mentioned carlier the queries and comments on the sub- ject are endless but time and space must set bounds, Mr K.J. MacCallum, B.8e., Ph.D. (Member): The Department (of Shipbuilding and Naval Architecture at the University of Strathclyde was delighted to have Mr Carreyette present @ Seminar on the subject of this paper to its students. Tt is Indeed right that this material should be given a wider audience through the Transaetions of this Institution, ‘The author is therefore to be congratulated for presenting this relevant paper because of its intrinsic value to designers as well as teachers of design. Equation (6) represents the principal result of the work and this equation would appear to have considerable merit in the early stages of ship design, 11s perhaps unfortunate that the author has not given us some of the benefit of his store of information by presenting in graphieal form the relation ships from actual ships compared to the terms of equation (6). Of particular interest in this context is the apparent Independence of cost with ship type. Perhaps the author could comment on this, ‘The author gives some very useful information on the values fof the coefficients in equation (6). However, the reader ‘Wonders how mueh worth ean be placed on these in any practical design situation. Surely any designer will need to Gevelop his own coefficients based on a basis ship or parti- cular shipyard practice? Of course, it is also valuable to have the figures for comparison, and to understand how the cooificients vary With changing labour rates, ete While the large part of the paper is beyond criticism, the reader finds himself very concerned with the material pre- Sented in the section on Variants and related Appendices. Perhaps a minor point in this section is the ‘simple example’ given by the author. An equation such as (6) assumes that the various components refer to items which are homogene- ‘ous. This is patently untrue for something like outfit materials and there could therefore be considerable in- accuracy in adding special oulfit items at the same rate. More disturbing however, is the variational treatment of ‘empirical equations, It has been mentioned in previous papers (Ref, 16) the caution which is Pequired when dilferes ating empirical relationships. I is felt by the reader that this practice can be positively misleading and dangerous. Tt has to be remembered that many of the relationships in use are purely statistical. Ag such no funetional relationship 18 Gemonstrated. The relationships indicate only a mapping between one parameter and another (perhaps independent) Fs, stabilisers and 80 on. PRELIMINARY SHIP COST ESTIMATION and say nothing aboat the rate of change of these parameters. A particular example of this is the use by the author of the Katsoulis relationship for Cp. Taking the derivative with respect to V, the author obtains 8Cy = -0-8195 Cy &Y However, this should not suggest that a change of velocity on 4 particular design can be obtained by this corresponding ‘change in Cy, Using the Alexander relationship for Cp for ‘example the corresponding constant value is closer to —O-4 instead of ~0-6185, ‘On the other hand for the type of ship given in the author's Appendix [Ila plot ean be made of the tehange in block coefficient required by a change in VL. for a given value of residuary resistance (based on Gsld- hammer and Harvald charts), This would show a rate of change closer to 1-05, It should be clear from these dif- fering slope values that this differentiation followed by an integration can result in two errors: (2) am incorreet derivative for a particular design (i) neglect of second and higher derivative terms, A Ginal argument in this context is that a relationship which may have a well defined and accepted range of applicability {in its usual form loses this when presented in the derivative form 1 feel sure that the author is aware of at least some of these points since he refers to ‘small changes’. However, surely, Any use of the derivative method should be accompanied by strong warnings. ‘The use of equations such as given by (11) and (12) ean be acceptable only if the equation is derived by the user and the assumptions and limits involved are well understood, Indeod it comes as some surprise to the weiter that it is felt important to try to express the cost equation in terms of variants, Equation (6) 1s very straightforward and it should not present great difficulties to use it in its explicit form for any variations in design being tried. ‘The arguments above apply even more strongly if such relationships are to be used correctly in a computer-aided design system. It is, here that there Lies considerable potential for the develop- ment of design systems; but they will be successful only if ‘we are aware of the dangers and pitfalls REFERENCE 16, Fisher, K,W.: "The Relative Cost of Ship Design Para~ meters’, Trans, RINA, Vol. 116, 1974. Mr H.M, Close (Associate): In thanking Mr Carreyette for his most interesting and very valuable paper I feel sure that Twill be joining with many other mombers of the Institetion expressing similar sentiments, I think it was Dr Buxton who once deseribed the process of ship cost estimation as some- thing of a "black art’, with many inlerested parties who were not directly involved in costing work finding acceptable in- formation very difficult to eame by. I feel that Mr Carrey- clle's paper has excorcised many of the devils associated with the process, and in reducing the prime determinants of cost to easily Identifiable prinespal dimensions, has develop~ fed.a method whereby a vessel's cost may be calculated with ssuficient accuracy for a great number of purposes, IC Lhave read the paper correctly, however, it would appear that the author has based his work on an analysis of non specialised general eargo vessels and tankers individually designed and built in conventionally organised yards, 1 ‘should therefore be Interested In his comments on the rele- vvance of his methods when considering the construction of more specialised tonnage under different management re fpimes. ‘The point I wish (o make may best be illustrated by reference to two examples. 27PRELIMINARY SHIP COST ESTIMATION In the first instance, if one considers passenger ships, or their close relatives, roll-on/roll-off ferries, the hull weight and propulsive machinery power are likely to be essentially the same as those of a general cargo vessel of equivalent size and speed, 80 the suggested expressions for hull and ‘machinery costs for this class of ship will be acceptably accurate. ‘These ships, however, attract very high outfitting costs, resulting from the labour ‘eontent invalved the pro- vision of accommodation and services for passengers. When fone considers the many specialised trades which are neces ary, the fact that passenger accommodation is essentially enclosed space with very litle density and the wide variety of services on which these vessels can be employed, one wonders if an outfitting cost term based on the weight of ‘materials alone is suffleient. From a study of a range of 130 ferries carried out last year, J feel that where this type of ship is concerned one musi introduce a term including the vessel's passenger capacity and the nature of her proposed employment. By so doing, one takes account of the facts that the style of accommodation and space per passenger which must be provided vary with time spent on passage. It should also reflect the fact that ‘some ships built for this type of trade are required to carry a large number of passengers, often in excess of 1,000 persons, and will incorporate the additional hotel power costs, LSA costs etc., involved in providing for the carriage of large numbers of people, Other ships,on the other hand, are designed to carry solely vehicular cargo, and of course there are many variations between the two extremes. Thus, addi- tional factors may be involved when one considers special ised ships. One class of vessel only has been considered, but T do not doubt that were other specialised designs to be examined, similar such factors could be identilied. As Mr Carreyette points out, however, to be of use seh factors must be those which ean be identified at the preliminary design stage. Secondly,1 would be interested to know whether the range of factors Used in calculating the overheads involved in the cost of the ship extends to include the case where a series Of ships is built, either for one owner, or as a standard de- ‘sign to be offered to any prospective bayer. I know that there is dissension between the economist and the accountant on the nature and allocation of fixed costs, oF overheads, since ‘costs which may be fixed in some senses may nat be fixed {in others. It would seem, however, that when one ship of particular design only is built, to ensure that the full cost of the vessel to the builder is calculated the cost of develop- ment work associated with the vessel, together with some clement of the general yard costs, rents, rates, etc.,.which have beon incurred during the period the ship was building must be added to the direct labour and materials cast in~ volved in the actual construction, ‘When a series of ships is built, however, savings to the builder are effected by the spreading of the development costs over # number of units. ‘The east of the pre-construc- tional design work should therefore be divided by the ex- pected length of the series to assess the drawing office ‘overheads, but of course the constructional overheads in- curred on the ways or in the building dock will remain the fame, sinee each ship of a series is built separately, re- quiring individual supervision, though in some yards, where prodvetion-line techniques are being introduced, even this may not be altogether true. Ideally, of course, the builder's cost calculation should in clude Some assessment of the opportunity cost of rejecting fone order in preference to another. For a particular yard, this will depend upon its position within the industry, and the prevailing conditions in the shipbuilding industry as a whole, nationally and internationally. It is likely to be a posi- live cost under some circumstances, when suitable capacity is under-utilised, but may be a negative cost, or henelit, when full eapacity is approached. Factors governing opportunity, cost are likely to be external to the yard, 60 they may be difficult to evaluate. However, the cost of foregoing one order in preference to another is likely to be the true cost 248 to the builder of some classes of work, so some attempt at assessing them should be made. In conclusion, should like to thank Mr Carreyette once gain for a very stimulating paper. Ifthe various factors he has evaluated can be periodically updated, itis likely that his suggestions should prove a valuable asset lo all associ ‘ated with ship design and operations for some considerable time to come. Mr R.M, Cameron, B.Se., Ph.D. (Member|: The author is to bbe thanked for a logical and simple presentation of ship cost estimation, It is hard to find other numerical papers on this tople. Of coarse much is left to individual judgement but ‘when the method was applied to a typical Ro-Ro design for ‘which cost Information was available, very good overall agreement was obtained, although group by group agreement ‘was less good, ilustrating the problem of maintaining identi- cal demareation, For many years the annual information on ship costs in "The Motor Ship" was a valuable guide generally available. If this paper Is compared {0 that source It Is not clear where the hem of shipyard overhead and establishment charges exists. ‘They are mentioned in Appendix Iand it is presumed spread over the six terms of equation (6) but perhaps they justify a term in their own right, ‘The section on the effects of small changes is very interest Ing, Perhaps it is sometimes useful to use changes in the main dimensions directly, which ean be done as follows: Equation (6) states Cy = Cy, + Cg, + Co, 4 Co, 4 Cy ‘The sum of small changes can be expressed com Wp, 4 Wp, + Wo, + Co, + Cy an Rel. 17 gives expressions for the steel and outfit weights ‘which can be approximately expressed as: Steelweight = K{ L(B+ 0-85D+0-15T)} "35 + 14C,") Where Cp” represents the difference at O-AD between the actual Cp and 0°70, Outfit weight = K LB Also, Power = K2°V2 when K is a constant, Substituting these expressions in equation (6) when the terms are written “’Ws/"b"'* and similarly, taking logs and “ey differentiating, with the omission of intermediate stages _8Cy_ res (248 + ogy 8B: 85D* Os 8Cs = Cy. 1 (B+0-88D +0457) 0(B + 0-85+ 0-157) OL — 800) 4c, 36+ 18 Goiceveorecr sey sa 4cy") * oL 0B av, +0880 (2 aan SY, (38) B v ‘Equation (38) represents the effect on cost of small changes In'L,B,D,,Cp and V, The change in Cy as a function of Frotide Namber can be taken {rom Fig, 8(a) of Ref. 11, ‘Numerical values obtained from equation ($8) when compared With those shown in Fig. 3 are not in close agreement but differences are inevitable with different treatment of 6C\, as ‘a funetion of change in Froude Number. It docs not follow ‘that equation (38) Is more suitable to use than to evaluate such new combination of main parameters by the original‘method of Appendix II but it represents another expression of the effect of changes In the design, REFERENCE 17, Watson, D.G. Mand Giifitlan, A. W.: ‘Some Ship Design Methods", Trans, RINA, Vol. 119, 1977, p. 279, Professor J.P-Kundu, B.E., B.Tech. (Member):In equation (1) Cy has been used as a ‘shape factor’. It is felt that it is, that takes better account of the work-conlent of steel eBmprising the hull, Let us consider two ships of the same main dimensions and C, but of different values of Cp (and. ‘consequently of new valles of Cjq,80 that Cy X Cy, Remains Cp). I ship 2 has an appreciably smaller'Cp than that of Ship'T (with of course proportionately higher €,q),her Sections forward and afl of midship are to be made much finer. This obviously results in more work-content for the hhull, On the other hand the work-eontent for Ship 1 (with higher C,) will be comparatively less because of fuller for- ward and after bodies. ‘Thus it appears that in two ships having the same C}, but with different values of C,, the man- hours required would be different. This ambiguit may possibly be eliminated if Cy, is substituted for Cy. In the building up of total costs, Section 5, 3, Profit has been included twice-once with Iabour cost and again with material cost, Profit Is ‘earned! and perhaps should not be "imposed, 28 it sounds when included in the total labour cost or total ‘material cost. May I suggest that Profit may possibly be rmentioned once as shown below? ‘Total Labour Cost + Total Material Cost + Protit or = (Total Labour Cost + Total Material Cost)(1 +x) where x is the percentage of profit margin expected, In Ship Features, Section 7, the author might perhaps elabor~ ate on the effect on costs if twin rudders (in place of a single rudder) or an activated rudder (in place of an ordinary one) are used, ‘Total Cost In Section 7, 4, relating the cost of stabilisers with 4 only may not be a fair consideration, Two ships of same length and S may have different values of B and T such that B, > By and T, <7, but BT; = BT, {tis expected that Ship 2 (having smaller B) would require more stabilisers to produce the same degree of comfort. ‘Thus stabiliser cost may be different for ships with same A. Under Section 7. 5, the author plans to examine the cost elfects on gas turbine or nuclear propulsion systems, he might perhaps also consider such effects when the propulsion engine is an electric motor, Referring to item (tii) of Section 10, to make an accurate estimate of the cost of a ship overseas, besides obtaining ‘wage rates, steel price and cost of main engine ete (as ‘suggested by the author) perhaps man-hours needed per tonne of net steet (Rin that country has also to be deter- mined. If is quite possible that Ry of a country, say C may be ‘considerably different from that of the UK for Various reasons like differences in equipment, material handling facilities, planning ete In Section 2, should not the cost of a ship also include "profit" {for the shipbuilder? In Appendix under the subheading ‘Outfit the author has listed the names of almost all items. It is, however, suggested that the following items might also be included: ‘masts, embarkation ladders, spare propeller and anchor (if any). Is it implied that the rudder is included in ‘steering gear"? Let me congratulate the author on his exeellent paper. Tam sure it will be well read by any student of Naval Architecture PRELIMINARY SHIP COST ESTIMATION (UG or PG), The paper will serve as a very valuable and dependable guide to any Naval Architect for the estimation of cost of a ship in the early stages of its design, Mr A. Cook, R.C.N.C. (Fellow): Mr Carreyette has provided for ug a useful paper to assist in dealing with the very ins portant topic of costing ship designs in their early stages. Such costings will be used to determine whether a particular design is cost-effective and hence whether design changes should be made. Confidence in these costings is therefore of great importance. His method and the factors he uses usually give him total ship costs within 9% and rarely out~ side 10%, of more detailed estimates. Whilst this is very en- ‘couraging, it would be of interest to know how they compare with actual costs at the same price levels, since estimates are often at variance with actual costs for many reasons in- Cluding one shipbuilder’s costs relative to anothers, Would he advocate the addition of a contingeney to allow for such variations? In Section 2 the paper deseribes the differences between ‘cost and price-the former is basically what the shipouilder hhas to pay and one factor in the latter is competition, Tam surprised that profit is subsequently considered as part of cost in the numerical examples, ‘The point is made that all weight costs money and itis usually clear which trades deal directly with the hardware parts of the ship, Within the trade groups however is one which can be regarded as ‘time related labour'—the patrolmen, firemen, watchmen and possibly cleaners, plant electricians and s0 on Have these men been proportioned on perhaps a pro-rata basis to the ‘productive’ labour in arriving at the manhour factors? Is there not a case for treating these as a separate group assessed against a tinme-to-build parameter which it~ Self might be related to light ship displacement and type of ship? Tam not very clear how the various equations and factors, hhave been derived—they do not seem to be justifiable non- ‘dimensionally, whilst regression analysis has been mentioned. How extensive were the samples of historie data and what methods were used to deduce the equations and factors? Several of the factors have been given to three significant figures for what is stated to be an approximate method— would the author indicate what bands might reasonably be applied to the individual factors? The two comments on the costs of machinery labour are of interest, namely that it has been found to be proportional to (power) 8°82 and also to (weight)°"®7®, The inference is that welght varies as (power)!"2" which seems an unusval rela~ tionship. Perhaps the author would comment on this ‘The figures given for wastage and welding rods on steel prices are interesting. If 2% net weight is allowed for weld- {ng rods and wastage on this taken as 50%, and the cost of Welding rods as three times the cost of steel, then the allow ance for wastage of steel is minimal. Shipbuilders have never suggested a figure of less than 10%, for steel wastage alone to me. Within the Ministry of Defence (Navy), even the early design procedure examines the ship under eight major weight groups, viz Hull Structure, Hull incidentals, Hull outfit, Main Machinery and systems, Auxiliary Machinery and Systems, Electrical communications and control systems, Armament and Variable Load. Exeept for the variable load group which includes liguids, stores, provisions, ammunition and s0 on, these weight groups are used as the basic parameters for assessing the cost of design studies. The cost equations and factors used for each group include appropriate elements for planning, quality assurance, inspection, ete, as well as ship- yard ‘activities’ such as launching, docking, ete, and for ‘time elated labour’, These elements are however considered Separately when tho design has been developed in greater etal. At each stage, it Is usual to assess a cost contingency to cover such aspects as future design development, rectifi- cation of design faults and various pricing factors, since the total Liability is of Importance. 249PRELIMINARY SHIP COST ESTIMATION Mr B.E. Henry (Associate-Member): Before giving my comments I would like to congratulate and thank the author for this excellent paper, Tt will provide designers and estimators alike with a very useful, up-to-date reference document when preparing ship costs, Talso think it will be an admirable partner for the Watson and Gilfillan design paper ('7) presented to the Institution very recently. ‘The author quite rightly rejects an assessment of the price of a ship since too many variables apply in this ease. The ccosts calculated in this paper are based on typical values Jor UK yards and relate to the British Shipbuilding industry. However, it is frequently useful to be able to estimate costs on a worldwide basis, and a list of relevant cost factors for the major leading shipbuilding countries would be a most beneficial addition to this paper. ‘The author has understandably used Sterling throughout his paper but a problem in estimating worldwide costs Is relating the currencies used. For the present international market US Dollars may be more appropriate, Prices and costs are of course not one and the sate and, most sensibly, the author has chosen to restrict his paper to ‘costs, However, the price of a ship is, generally, the addition ‘of material, labour, overhead costs and profits. ‘The over- head element is clearly eapable of being split into direct and Indirect overheads. Direct overheads are those coats applic able solely to a particular project or ship while indirect overheads caver rents, local taxes, maintenance, security, fete, The latter is spread over all of the yard's construction activity and 1s not attributable to a speeifie project, Since ‘the "bare bones" price frequently quoted today covers only ‘material, labour and direct overheads and effectively little or no profit, it would be useful if the factors A’,C’, F’ could indicate the likely split of overheads into direct and indirect. ‘Turning to the costs of specific ship features the author has done great service in providing additional costs for these factors, One feature he does not cover and one I believe is, quite important is the additional costs of the cargo contain- ment system of a liquefied gas carrier. Preparing the costs for a normal oil tanker and adding an overall percentage is, ‘one practice which is acceptable if the correct percentage an be found, Does Mr Carreyette have any views on this item Oil tankers can be grouped into two categories, crude carri- fers and product carriers. If two are the same ‘size, the ‘main cost difference is for the painted or non-painted tank Interiors, Tassume that since the author's formulae relate to most kinds of ships then they would equally apply to a fully painted product carrier, If 60, is the author able to five an indication of the reduction of eosts for not painting the Interior of the cargo tank spaces? In equation (6) the author has given the service power as the criterion for the machinery cost. This must surely be wrong. Since the engine builder will charge for the horsepower in- stalled and not the power the shipowner will use. Use of the ‘service power will imply that a ship which will slow steam ‘will have a lower capital cost than a ship which will operate at full speed. Since the author has used only one or two steam turbine Installations in the data for the machinery costs, then these ‘eosts should be relevant for diesel installations only and none other. 1 suggest that for steam turbines the author could use, as a bage only, a slightly out-of-date formula which for 1073 Us $ is: "713000 x (imo) _ 1000 taken from a study by Swift() based on the work of Erichsen). This formula includes 70%, of overheads since the machinery cost is generally a subcontracted cost and is not adjusted by the shipyard, Finally, T would like to draw the author's attention to the paper on relative costs by Fisher in 1974(26), 250 ‘Mr J.W. Patterson (Momber): As a member in the industry engaged on the development of estimating procedures, this paper is weleome for two reasons. ‘The first is for the con~ tribution it makes to the problems of economic ship design; the second is for the breakthrough into print of the 'art” of ‘estimating In the industry. In a research of published work on the subject of cost esti imating in shipbuilding I find there is litle from the UK industry, number of European papers and a reasonable umber of American papers, of Which the work of Fetchko(®) is the most constructive, Compared to the work in the Chemical Engineering and Construction Industries in the UK where the learned Institutions and University Departments promote such developments, the shipbuilding industry has Tong way to go. From the published developments in these industries, Mr Carreyette's method of computing costs would be classified 48 an ‘order of magnitude’ estimate and that phrase appears to summarise the context in which the formulae should be used. The tolerance of accuracy claimed for ‘order of ‘magnitude’ estimates is + 30%, (Ref. 18) and Lam surprised by the claim of accuracy given by the author. Tt would be enlightening to see more data on this aspect of the Cost Check Equation. T suspect that the author is underrating the use of his judgement and experience in the application of his work, It is this asset of the professional estimator that makes any method of estimating provide the required results, 1k would be interesting to have the author's comments on the accuracy of the more detailed estimates, against which he made his comparison. Some preliminary work suggests that present day methods provide material estimates with +5", accuracy and labour estimates of the order of + 15%, accuracy. ‘The construction of the formula in the Cost Cheek Equation Is similar fo that adopted by Buxton, Benford and Chapman ‘where they have produced formulae for specific ship types, i.e, bulk carriers and tankers; dry cargo; container ships respectively. ‘The author has found a method to cover for wide range of ships and this simplification is welcome. Is it possible to provide examples of the data, demonstrating ow the relationships ean apply to a range of ship types? At BSRA a small computer program, Cost Estimating Routines (COSTER), has been developed for demonstration purposes which uses similar technical parameters to those [provided in Appendix I, Putting the ship example through the program produced the following COSTER results: © Steelwork labour cost 243m Steclwork materials cost 1-18 Ouitit labour cost 248 Outfit Materials cost 200 Machinery labour cost os Machinery materials cost 1-66 Total cost i048 Using rogression analysis techniques, the results are accept ed as being within a tolerance of accuracy of +15", overall, but some of the divisions of the Total Cost are outside that tolerance. The difference in the result in no way invalidates the author's results, but emphasises the need for judgement in using any estimating method, also demonstrating that order of magnitude estimates should be used for measuring varlations, rather than the absolute value calculated, ‘The difference also demonstrates that the fundamental of cost estimating is basic data, and in the comparison betweenthe two methods, it is obvious that the basic data are derived from different shipyard sources. ‘The response to this paper will act as an indication of the potential in the industry for further developments to achieve the same levels of progress as that in similar industries, ‘The author 1s to be congratulated for providing us with the opportunity. REFERENCE 18. Liddto, C.J.and Gerrard, A. M.: ‘The Application of Computers to Capital Cost Estimation’. The Institution of Chemical Engineers, Mr C.L. Davey, B.Sc. (Junior Member): May I congratulate the author on this most welcome and enjoyable paper on a subject long overdue. I am of the opinion that engineers should be more involved in costs than at present and would Venture to predict that this paper will become a key-stone in this subject to the naval architect, ‘May Task the author how he determined and updates the Factors A to G in Appendix Il and the numeric constants for CP Propellers, Thrusters and Stabilisers? Mr I. L. Buxton, B.Se., Ph.D. (Fellow): Mr Carreyette's paper is.a very welcome addition (o the rather scarce literature on cost estimating. ‘The professional engineer is concerned both with technical and economic factors, so that cost esti- rating methods applicable at the early stages of design are ‘most valuable, when a large number of alternatives may be under Investigation. ‘The author's methods are also valuable {or researchers and students who rarely have access to real Life cost data. OF course the professional cost estimator uses more detailed methods, but these are essentially for use ‘when tendering for contracts, when more data (if not time) are likely to be available, Methods such as the author's must be based on parameters that are known at the early design stage. For steelwork and machinery costs, the main parameters are,as the author points out, steelmass and power respectively. For outfit costs, there is no equivalent parameter. Outfit mass suffers from the drawback that methods for its estimation are weak, as well as implying that one tonne of an item like anchors oF hateh covers has the same cost as one tonne of electrical or electronic equipment. It might be worth trying to break outfit ost down into a few more categories, so that different cost rates could be applied to each according (o the type of ship, and based on simple parameters, for example: () accommodation block, as a function of crew number (Gi) equipment and deck machinery, as a function of equip- ‘ment numeral Git) cargo handling equipment, as a function of type and capacity instalied (av) eargo access equipment (hatch covers, ramps, doors fete) ag a function of type and area (¥) special items where fitted, e.g. refrigerating machinery And insulation as a function of insulated capacity (vi) other hull outfit, e.¢. piping systems, paint, as a function fof hull dimensions. Although specification standards are important, it might be possible to pick appropriate coefficients for each category, high, medium, low, was interested to see the author's relationships for machin- ery costs, particularly the exponent 0°82. This is 2 little higher than I found for diesel machinery when reviewing a wide range of data. This suggested a figure of about 0°75 for Slow speed diesels and about 0°70 for medium speed, when faken over a very large power range. It 1s possible that a different figure may fit better if much of the data fall into a PRELIMINARY SHIP COST ESTIMATION ‘smaller range of power. Steam turbine and gas turbine ‘machinery, although much less often fitted, produced ex- ponents of about 0°50 and 0°85 respectively. Gan the author give any indication as to the statistical validity of any of his formutze, for example confidence limits? I have often felt that an explicit recognition of probabilities attach- ing to a range of predicted costs would be more useful to ‘management, when weighing alternatives and determining prices, than presenting a single figure. This also applies to other elements of estimating, e.g. man-hours, but the ap- proach is not,as far as Tam aware, widely used in the marine Industries, AUTHOR'S REPLY ‘The questions contained in the digcussion of this paper have bbeen most encouraging and it gives me pleasure to make my reply. Profit First of all, several readers have questioned the inclusion of fa profit term in the working of costs and consider It tobe inappropriate. ‘That is a fair comment up to a polat, But the reason for its inclusion was to ensure that those who may be concerned with the operating costs after the delivery of the ship make Some allowance, not necessarily 10%, of course, ‘when estimating the capital charge account. As far as the (Owner is concerned, the shipbuilder's profit is a cost Professor H, Benford 1am both gratified and highly complimented that so distin- guished an authority on ship design and economics as, Professor Benford sees fit to assimilate my proposals into his lecture notes, The factors A’ B’ C’ ete. will all need to be adjusted to US practice, of course, but that can be simply arranged, given the information, Professor Benford quite justifiably complains of my over~ looking several important references, This was a regret- table oversight on my part for which I can only make a late apology. The literature search preceding my paper quite ‘anwitungly did not embrace several US publications, thereby excluding one of the most rewarding sources of information fon the whole subject, viz, the University of Michigan, Depart ‘ment of Naval Architecture, with the Professor himself as, mentor, On the subject of correlating steelworking man-hours with We °® of We 0° 80,Tdo not know if that approach is inten~ ded to be restricted to tankers /bulkers and cargo ships, and to ships whose steelweights lie within a certain range, or whether itis intended for a more general application. How- ever, taking the index as 0°875,a brief experiment using my original data would give the results shown in Table VII ‘TABLE Vit Standard Error We range @ (e079) Equation 8) 1,000-15,0008 2 74%, 269% 100- 15000 36°5% a8 100-15, 000 ¢ wre 261% It willbe seen that for ships whose steelweights lie between 41,000 and 15, 000 tonnes (covering a very large number of ‘actual ships) there is very little to choose between the two ‘methods, but if small ships are being investigated, equation (3) is more accurate, It should be pointed out, however, that (Wg © 875) is not a straight Line, but one taking the form of Fig. 2. In order to straighten the line, so that man-hours can bbe expressed as: Ha (wa) with K* constant, 281PRELIMINARY SHLP COST ESTIMATION 1 became 0° 664 in the experiment, and this is very close to 3, once again, as In equation (3). K” was 1, 854 so that, by tiiat method: = 1,885 Wy *2 where W, > 1,000 tonnes (39) ‘On the subject of outfitting costs, 1 agree wholeheartedly with Professor Benford, Dr MacCallum and Dr Buxton. Splitting the items into worl-type related groups, or those connected with areas, equipment numerals, total complement ete.8 not ifficult. What is difficult is getting actwal costs returned under the headings we select. It is an accountancy matter calling for job-costing, booking control and a facility for analysing the costs under the headings. With one or to refreshing exceptions accountants and shipyard management ‘are not enthusiastic about the introduction of such systems, Consequently, our logieal breakdowns of outfit, or any other part of ship, usually come to naught and we are Left with totals only. "For these reasons I have been restricted to using totals, but there is one compensating factor in that proportion fal errors in an estimated total are invariably less than those fof the constituent stems, an important aspect that I will be covering more fully in later replies. Perhaps at this point wwe should remember that this paper started out quite humbly as a suggested method for getting at approximate total ship costs in the early stages. Lam most grateful to Professor Benford for his advice on steam plant costs being related to P 0 © and will examine this suggestion with interest when lime permits I take Professor Benford's point about changes in speed- length ratio having litte effect on optimal block coefficient In tankers and bulk carriers, but having so mixed a sample of ships in my investigation, some of which were quite fast fr quite small, thought it advisable fo include as many principal variables as possible in the arguments of Appendix IV and Appendix V. In particular cases, of course, ‘when their inclusion may be considered unnecessary, oF they exhibit ‘an excess of flai laxity’, they might be ignored with only a minimal penalty on the generality of the approach. Mr Steel's remarks about the use of statistical methods are Doth welcome and apt. He obviously sees the dangers as well as the benefits, I referred to disciplines removed from naval architecture in my introductory remarks, and statistics might be regarded as one of them. It is of course a tool, and a very powerful one, provided the investigator knows when {o pplek i¢ up and when {0 lay it down, Without it, as naval arehi~ tects or engineers, we would be at a serious disadvantage in investigating phenomena which we may fondly imagine should be explained within our own disciplines. But with statisties 8 a tool and the discriminatory judgement alluded to, one is ‘much better equipped to attack problems containing some elements that may not even be expressible in the fundamental physical units of mass, length and time, M, L and T. In cost Ing for instanee, how does one express men, or money, in terms of M, Lor T? For these reasons I question Mr Steel's suggestion that the many temporal, Incentive, and even psychological factors he refers to as affecting ship costs mililate against the satisfac~ tory use of statisties in shipbuilding. Surely, itis the very présence of such imponderables which leaves technology and Selence so far behind that other alds must be sought. Uncer~ tainty 1s the happy hunting ground of statisticians and as Moroney has sald, Ref. 19,”... if your workeealls for the interpretation of data, you may be able to do without statis~ ties, but you won't do so well’, Mr Steel has mentioned a sample of ships that was examined some 12 years ago, and I certainly take his point about how Tong it took to put those data together. On looking back at them, however, it should be noted that the standard error of ‘that sample was not 12°86, a8 Mr Steel states, but 12°86 fnan-hours per ton, which is a very different thing. The per- centage error was not calculated but, had it been, hope Mr Steol will agree that it would have been much nearer to 252 the 47°17, which I have mentioned in replying to Professor Benford, 4 is not so much that I have insisted on confining preliminary steelworking man-hours to two varlables (actually three— We, Land C) but that for preliminary purposes I have been unable to improve the accuracy by introducing other variables. (Of course, there are several ways of estimating steelworking man-hours, a5 Mr Steel knows, and sometimes I wish we ould get away from tonnes, Weld lengths, numbers of plates, areas and thicknesses of steel members, and other such vital data could be analysed from the working drawings of com pleted ships, and methods so derived give surprisingly high Correlation with man-hours. But such investigations, even if approval could be obtained for carrying them out, fall in the omain of the production and steel design departments of the shipyard with a feedback to the cost estimators, and such data are simply not available at the preliminary design stage, ‘The same applies to the complexity factors mentioned by Mr Steel; there is usually insufficient information to calculate them at the time, Lam therefore grateful to Mr Steel for pointing out that the methods in the paper are too broad brush for cost estimators, ‘This point needs emphasising because the methods do not presume to improve upon or in any way supplement estima~ tors’ techniques. As stated in the Summary, the methods have been developed mainly for designers, students, and others involved at the beginning. The aim'has been to get fan early appraisal of the cost benefits or penalties associated witha central design concept and its variants. Some form of Fig.3 is what is needed, I share Mr Steel's sentiments in looking forward to a period of cost enlightenment in a centrally co-ordinated industry ‘because hitherto our record in this respect has been far from satisfactory. Dr MacCallum understandably would like to see graphs or tabulations of the actual ships on which the main arguments land conclusions have been based, T agree, because to present the raw data would demonstrate their authenticity and the validity of the results. But the subject is costs, and shipyard executives are hypersensitive about their publication. All the data were revealed to me on a confidential basis and quite a high proportion were left at source after I had examined them. Indeed, there might well be more than a few pairs of eagle eyes {rom different shipyards scrutinising this paper to make sure none of their performance indicators appears Jn print, Actual costs of this sort are almost unobtainable in published form, and even the few I have seen since writing this paper I would like to have questioned. On the subject of accuracy, or reliability of coeffictents ete, this has also been mentioned by Mr Cook, Mr Patterson and Dr Buxton each of whom will no doubt be interested in the following remarks, Firstly, labour costs are based on man-hours, and although ‘wage rites, allowances and the like vary with time, the man- hour content has been found to have only ‘normal’ variation, with no very significant trend in time, either above or below the central values inherent in the labour cost terms of ‘equation (6). ‘That is, when the recorded steelworking man~ hours were plotted against (We 2/9 L 1/8/Cp) the least squares deviation Line was straight, passed through the origin, had a slope of 227, giving rise to equation (2), and had a standard error of 27°1%,.. Applying the same technique to plots of outfit man-hours against Wp 2/3, and machinery man- hours against P 0° 82, the standard errors were 310°5%, for ‘ultfit and #9°2% for machinery man-hours. The terms for these are not so reliable as thal for steelwork because as explained in Section 5 there was difficulty in separating out sub-contractors! labour costs, booked as ‘materials’ by the accountants. Now it seems not to be very widely appreciated that the effect of adding independently estimated and uncorrelated elementstogether in a sum is simultaneously to increase the absolute standard error and to reduce the proportional standard error in the estimate of that sum, ‘This is very important, The total man-hours for whole ships ‘vary so enormously from small to large or complex ships that itis found convenient to express the error of an estima~ ting method as a proportion or percentage of the quantity being estimated rather than in Its absolute units, Hence, in view of the statistical principle stated above, it often ‘happens that the overall proportional standard error for & sum of man-hours is less than that of any of its constituent items. The lowest proportional standard error mentioned above Is 47°14, for steelwork, but the overall proportional standard error for the sum 1s only 251%, in the case of the cargo ship in Appendix II. It will vary slightly with different ships according to their make-up of steel, outfit and machin~ ery work content in their totals So much for the man-hour estimating errors. The accuracy of the final labour costs will, as Dr MacCallum has implied, bbe dependent on the monetary intelligence available to the user of equation (6). If he knows the wage rate and over~ heads no further error should be incurred, but if he does not the factors in Appendix Il are there to help him, One thing is certain, practice quickly brings improvement, If never perfection, Secondly, the accuracy of the material cost factors cannot be treated in the same way as the labour cost factors because ‘material costs are changing all the time, Standard errors would have short lives and not be worth their computation. ‘The better approach is to update aetual costs from quotations, officially published data and steel price lists. I suggest that any designer looking at costs should keep records of steel prices at least. These are easily obtained, and his own esti~ mates of steel material costs should soon tend to values having a ‘standard error’ as low as +8%,, Outtit and machin- ery material costs are not so easily obtained, except for specific building orders, but any arising should be examined as they become available, and values of D’ and G should be ‘computed and recorded against the date. Tt should be em~ Dhasised that this is not difficult or time-consuming, and it was by this means the factors D’ and G” were produced in Appendix Il. For the record, since this paper was first eir- culated, the outfit and machinery costs for two ships have come to hand, with prices quoted by the relevant suppliers. Comparing the totals with what would have been predicted by equation (6) gives the check result shown in Table IX. TABLE 1X Ship ‘Term Quoted Equation (6) (% 6)? (2) Cargo Cog, £1"608m 1° 690 26°0 Cargo Cy, 1-202 1°80 195-0 @Tanker Co, 1723 1° 609 20 Tanker Cy 1°35 1312 350 Variance = 645 ‘Therefore o = 16°03%, (0) = square of % difference betweon equation (6) cost and Quoted cost, relative to Quoted cost. ‘This small sample suggests that if it were feasible to ex- press the accuracy of material cost factors as an ‘updated Standard error’ it would be about +10% for outfit and ‘machinery materials Ifthe six standard errors indicated above are now applied to the cargo ship example in Appendix If, the standard error of PRELIMINARY SHIP COST ESTIMATION the sum becomes +£298, 700 in the total cost of £7°99 m, or 23-75%,, Taking this example to demonstrate the con~ fidence levels associated with the method, we recall that on a Normal Error or Gaussian curve the percentages of the results lying within +0 (the one-sigma band), +20 and +30 Limits are respectively 68°3',, 95°4°, and 99°77. ‘Translated into the cost of the ship this may be summarised as in Table X. TABLE X. Central Cost €7-99m Cost Range Probability of estimate Error Range (€ million) lying within range ao= 23-75; 089-8-29 0689 420 = 27502 789-859 0° 954 380 = 21125% 09-889 0°997 ‘The figures in Table X quantify the statement made in Section 6 that the method has given total ship costs usually within 25%, and rarely outside 10%, Dr MacCallum objects to the differentiation of empirical equations and stresses the importance of making the neces~ sary cautionary warnings, He says that relationships be~ tween the variables are purely statistical and that they demonstrate no fundamental relationship, Further on, he refers to differentiation followed by an integration, which I {do not quite understand since no integrations have been made. However, am grateful for the opportunity to discuss some of the fundamental principles that Dr MacCallum has raised, although it would be presumptuous of me to claim that I completely understand their full physical significance, T submit that we cannot expect the applied sciences with ‘which we are familiar in naval architecture to be eapable of explaining phenomena that occur outside them. Indeed, dis tinguished opinions differ over explanations of some pheno mmiena within them, speed length ratio and Cp, for instance, Even if we added a profound knowledge of physics to our investigating resources, we would be sadly deficient in our understanding of numerically expressed quantities such as ‘men or money, bath of which are central to the subject of costs. 1 think we must recognise the Limitations of whatever disciplines we may have mastered in the applied sciences, and be prepared to use judgement, or even to take risks, when confronted with problems outside those disciplines. In this spirit, and on the subject of differentiating, I am com= forted to see on re-reading Fisher's paper 0) that Professor Conn in the discussion remarks that despite his own warn ings about differential methods, such methods ean hardly be avoided by the practical designer. The differential treatment employed in Appendices 1V and V include first order dif~ ference approximations, and these are perfectly valid for ‘small differences, provided the equations from which they are derived are correct. It is here that Dr MacCallum rightly objects, and in one instance shows that between Alexander, Katsoulis and data based on Guldhammer and Harvald charts, the slope of the Cp derivatives with respect to V could vary between 0-4 to “1°05. Quite £0, and this 15, ‘an example of where a particular practitioner mast either ‘abandon the exereise or draw on his own experience and judgement, and use whatever information is available at the time. But itis of interest to note that whichever value of- slope were used in the application for which itis intended, namely {in equation (28) leading to the construction of Fig. 1t makes no great difference to the vertical distance apart of the Tines in thae diagram. ‘The user of Fig. is likely to be the potential shipowner, possibly in close collaboration with his economist and naval architect, and fine accuraey is not expected or required at ‘that stage in a project. Fig.$ is supposed to give a very quick, if not very accurate, guide to whether a proposed vessel should be bigger, smaller, faster or slower for the 253PRELIMINARY SHIP COST ESTIMATION cost penalties or benefits that are indicated by such variants. ‘That is its purpose but if Dr MacCallum does not like the visual presentation or the arguments leading up to it, he can either substitute his own intermediate equations or use equation (6) explicithy, as he suggests. Dimensionally, I do not think that the relationships are purely statistical or totally devoid of physical significance, Ihave shown that the labour cast terms of equation (6) can all be directly related to weight raised (o the 3 power. It we shunt the appropriate average densities of steel, outlit equip- ‘ment and machinery into the coefficients as modified con stants, we are Left with volumes of steel, outit equipment and machinery. But volumes to the % power imply areas, ‘50 what the labour cost terms are strongly suggesting 1s, that the man-hours required to work or install the steel, jutfit equipment and machinery are proportional to areas associated with them. This may not be a very scientific explanation, but at Teast it seems (0 make sense in ship- building practice. Dr MacCallum has asked me to comment on the apparent independence of cost with ship type that equation (6) exhibits, ‘which is gratifying because generality has been one of the ims. My own somewhat subjective opinion is that the type 4s probably subconsciously dealt with by the designer when he is first thinking about the proposed vessel. Having studied the Owner's requirements for, say, an 1800 TEU container ship at 26 knots, his first estimates of dimensions, form, power and weights will be centred around that particular type of ship, to the exelusion of others. Accordingly, when hhe comes to equation (6) he is telling it to respond in a way that will be appropriate not only to the type of vessel but to the particular ship he has in mind, Equation (6) was intended to be insensitive to type, and to be concerned only with dimensions, weights and power. In other words, in the pre- Lminary stages the designer will have gone a long way to- wards costing the ship whether he realises it or not Equation (6) simply introduces 2 few monetary factors and, adds it all together. ‘Mr H.M. Close ‘The ships on which the paper was based are listed in Table 2Xd,a mixed bag containing 110 in all, including large and small ferries, 18 of which were Ro-Ro. Consequently, the ‘central values' of cost furnished by the various elements of equation (6) will have accounted for those vessels, Several other readers have stated that outfit weight on its own 4s not ‘wholly suitable as a base for cost, but for preliminary esti- ‘mating it is often all we have. At worst, however, if we ‘wrongly estimated the outfit cost by as much as 25%,,and the Outfit cost were as high as 367, of the total ship cost, this ‘would stil only be about 9%, nett error in the total, disregard- ing errors from other sources, some of which would very probably cancel out. But with practice such overall errors would become less than this. It Mr Close has a study of 190 ferries, and their costs, that is a rich and rare sample indeed. His suggestion of quantify- ing the earrying capacities of those ships would be well worth doing. For ferries it is possible to derive separately weighted numerals for their cargo, passengers and crew whose aggregates correlate well with cost, Such numerals ‘can be representative of numbers of crew, berthed passen~ gers, unberthed passengers, numbers of cars, lorries or 20 ft ‘containers and rail wagons if carried, ‘The weighting factors for each of these can be readily obtained from the geometry and general layout of the ships being studied, and when sum ‘mated they will be found to be very clasely associated with grt and hence cost, I carried out an exercise of this nature fon ferries some time ago and the results were very en- couraging, although I could not enjoy the luxury that must attend a sample as large as 130, ‘On Mr Close's second point, the overhead factors were not 0 much calculated as postulated. ‘They were written in ‘Appendix Il for the user to select according to his knowledge of the shipyard where the building might take place, or t0 254 his particular inclination at the time. If he has no informa tion of this nature, then the figures corresponding to 75%,, 100% and 125%, are intended to represent small, medium or large establishments, respectively, purely as a guide. This first guess can usually be corrected later in the programme when better information is available. ‘The overheads are intended for one-off building costs and have not been adjusted for series building. (On the subjects of overheads and series building, Mr Close ‘may find Refs, 20 and 21 to be of interest. ‘The concept of opportunity cost involving the possible rejec~ tion of certain orders in favour of others is intriguing. In a seller's market no doubt this is practised to some extent, Dut with present conditions in the industry, it 1s unlikely fo {ind favour. While itis true that the facilities in a given ship- yard influence the numbers and sizes of ships that ean be Duilt with reasonable efficiency, the types of ships that can ’be built within those constraints should not, in my opinion, be too narrowly defined, In lean times, as at present, the more flexible yard might be more likely to survive, even If ithas to lower its prices. A highly specialised yard, on the other hand, able to produce one or two types very efficiently, fn time, and to the right price, would be in serious trouble if the demand for those types were to be suddenly diminished, or perhaps cease to exist, as we have seen with VLCCs, for instance, TABLE x0 No.in sample Act. Bat. ‘Tugs 8 ieeaeeaal ‘Small ferries 6 seat) ‘Trawlers 18 5 Dredgers 2 oeteeeal Fishory protection, 4 ea naval auxiliaries, ete. Coaster & sludge vessels 4 4 0 Cable ships 2 seal Pass. /Car ferries 20 2 General cargo a 7 Refrig, cargo 5 44 ‘Tankers 6 6 oo Bulk carriers 6 6 oo Container ships 1 aeea6l no 68 ships with actual costs ships with independent detailed estimates Dr R.M, Cameron It is gratifying to note that Dr Cameron's trial run with Ro-Ro types showed equation (6) to be very good in total, if not 80 good by groups. Strict adherence to the group definitions in Appendix I would doubtless improve the group ‘estimates, but as Dr Cameron points out, identical demarea- ton is difficult to achieve when data come from different ‘As stated in the definitions of A’, B’, C’ ete. following equation (6), the Overheads and Services and Miscelianeous costs defined in Appendix I have been deliberately distributed over the six terms in equation (6), a8 Dr Cameron supposes. This ‘was done to enable ship costs to be quickly obtained at the Start of the design,TABLE XI Estimate No _ ‘Type of Vesset _ Particulars Date Prepared 6/77 _ Steetwork Outnit PRELIMINARY SHIP COST ESTIMATION 16, 000 dwt General Cargo L=138m B 29m D=1Tm T=10m Cy V=15 kts P = 10, 500 bhp (service) Machinery eee ones ie Sy Ske oi iu RC oa ae ee gana a = = ie Prot oh) «Tt omc aieae Escalation : - Fs a Perhaps a clearer presentation of the cargo ship cost of Appendix II Is afforded by Table XIT which shows what wage rates, overheads, profit, ete. have been assumed, and how they affect the various columns and rows. Any of these could easily be altered by the recipient if he so wished, the re~ cipient very often having his own, confidential financial figures. A particular merit of the format is that one can see at a glance how the main blocks of cost are distributed two- imensionally; that Js, either as Financial groups horizontally, or as Technieal and Production groups vertically. ‘The ‘weights and man-hours assume important significance when 2 collection of such summaries accumulates for different ships and such a collection becomes quite valuable as time passes. Dr Cameron is to be thanked for going to the trouble of developing cost difference equations (37) and (38) based on dimensions alone, and I hope to make similar studies when time permits. It is just that sort of approach, repeated for different formula substitutions in equation (6) that is needed for improving the reliability of Fig. 3. Dr Cameron states that numerical values from equation (38) are not in close agreement with those from Fig. 3, but this is not really surprising at this stage. The assumptions stated Jn Appendices IV and V were thought to be appropriate for a ‘simple, possibly (00 simple, general treatment in arriving at Fig. 3, whereas equation (88) depends on different assump tons Connecting ship dimensions with steelweight, outfit, weight and powering. More study needs to be made but, in ‘the meantime, I think Dr Cameron will not disagree when T suggest that we should not let present imperfections dis Suade us altogether from attempting to draw Fig. 8, or some thing like it, ‘The shipping economist is concerned with very long-term benefits or penalties of a new ship proposal and eel he should be given a choice of ships centred around a basic design well before any single design has progressed too far. Professor ‘anda Its a very logical suggestion that Cp might replace Cin the steelwork Iqbour term. Both are'asily obtained af the start of a design and Cy gives a better indication of eurva~ ture distribution along the hull and therefore of work content. A detailed comparison has not yet been made but a rough check indicates that such an adjustment will probably give a better fit, also agree with Professor Kundu's preferred layout of the ‘Total Cost definition. In the original it could be Interpreted that total profit on the contraet should be added to both labour and materials, when in fact the intended meaning was that profit appropriate to each should be added to each. Professor Kundu's layout is clearer, Even 50, would not be very sad if shipbuilder today actually achieved a double profit due to some ill-defined sentence in the contract, Professor Kundu's query about twin rudder costs versus single 1s not easy to answer, Data at present to band are not sufficiently detailed, But in general terms, due to rudder coefficients often being some $0", higher in twin installations, And the need for duplicated sternframes, rudders, stocks and ‘coupling gear in the steering flat, the oulfit weight Is likely to be higher in the twin rudder ease, At risk of being eriti~ cised by cost estimators, perhaps the best approach would be to estimate the weight difference in a particular case, split to structural forgings/castings and steering gear, and to put the material costs for the former in at £1, 800/¢ to £2, 000/¢ And the latter at £4, 000/t to £6, 000/', or at whatever figures apply in the country concerned. Labour costs would need to be added, and these could vary from 25% to 40% of the ‘material costs, But this 1s exceedingly rough and, like much ‘of Section 7, would probably be better dealt with by experi- fenced cost estimators, Professor Kundu's remarks about stabiliser costs being associated with BT rather than 4 are most reasonable and tis hoped later to re-examine the data along those lines, With regard to overseas bullding costs, it would be very useful if such operating Indicators a8 man-hours per tonne Of steel could be oblained simply for the asking. But who ‘would be willing to supply such information amd write those same rates In their next contract? Thave seen many 80 called official returns, prepared for purposes other than tendering, and have been struck by their consistently opti- mistie piteh. But if we followed what T understand to be 255PRELIMINARY SHIP COST ESTIMATION civil engineering practice, namely make lists of quantities with rates for each openly declared and written into the contract before work commences, shipbuilding cost control ‘could become infinitely more simple than it is at present. ‘As the job progresses the quantities are measured and agreed between the builder's and customer's quantity sur- veyors. There is little or no room for argument about money because the rates Were settled in the first place, If and when such simple and logical systems cauld be applied ‘in shipbuilding, Professor Kunda's suggestion could be followed up, with benefit to all concerned, Certain readers have criticised my inclusion of profit in cost and Professor Kundu has criticised my omission of it from Section 2. The professor is right ‘The outfit definition in Appendix I was intended to include the rudder and the other items mentioned by Professor Kundu, Mr A. Coole ‘The confidence levels have been discussed in earlier remarks to Dr Cameron, Mr Patterson and Dr Buxton, and the sample of historical data is summarised in Table XI, from which it will be seen that over 60", of the ships yielded actual costs. ‘The remainder were represented by independently prepared cost estimates for previous ships. These estimates could not have been made at the preliminary design stage due to the amount of detail necessary to their compilation, Thus they furnished a very good yardstick against which the efficacy of the cost-check equation (8) could be measured. ‘Mr Cook has noted that different shipyards sometimes bid different prices for the same ship at the tender stage. This 15 not uncommon but I do not see where a contingency for ‘such variation would be applied. If one shipyard consistently bid higher than its competitors, the fact would be noted as a matter of course and, if the habit persisted, that yard would be avoided by most Owners, ‘With regard to 'time-related labour" this is covered under Services and Miscellaneous costs as defined in Appendix T for purposes of this paper. They are distributed over the ‘productive’ labour as Mr Cook supposed, and they are more clearly shown in Table XIL_ The amount allocated under this heading varies greatly irom yard to yard depending on accountancy policy, but usually if the costs are not put to the ship directly, they are put under overheads. In either ease the Owner pays. An allowance of 7, of the sum of ‘produc~ tive’ labour has been used in Table XII, but this could be 20%, ‘or more in some yards, wtih an appropriately lower level of overheads. ‘The material costs under Service and Miscel- Taneous are allowed for at 10% of direct labour in this paper, a purely notional figure for a small sum, ‘To explain at all fully how the equations were derived would take up considerable space and I hope to be excused for the brevity of a more general description, Actual costs or man~ hours were first plotted against any likely ship variables With which they might be connected, taking one variable at a time. The variables had to be restricted to those that could be evaluated at the start of the design—dimensions, speed, power, displacement, etc, Plots with the least scatter wore put through formal regression analysis and the rest dis- carded, Standard errors were calculated for variables passing the significance tests and the more encouraging variables combined (by division or multiplication) to form new abseissae against which Were plotted the original actual costs or man-hours. Most of these were exponential fune- tions, The process was repeated many times, always dis~ carding the "Worst" and retaining the "best" combinations of variables, the eriteria of variance ratio, standard error sig- nificance, null hypothesis, ete,, deciding what was "best", Finally, examination for dimensional significance was made, and during that stage it was noted that when the odaly figured Indices were rounded off to their nearest fractions, % kept occurring as a power of weight, And as Ihave said else- Where, the data seem strongly to be suggesting that the work required for installation Is proportional to the area occupied by oF associated in some way with what is being installed, 256 at least in aggregate. This is not an unreasonable hypothesis ‘when related to shipbailding practice, and perhaps Mr Cook may agree that, after all, the equations are not quite so un~ justifiable dimensionally as they appear. Lam very grateful to Mr Cook for pointing out an anomaly in the powering indices, His remark that machinery weight being proportional to P22 ig an unusual relationship, is, putting i€ mildly. Tt is not only unusual but incorrect.’ plot of W, against P over the range 500 hp to 45,000 hp shows the Index to be nearer 0°9, in which ease W2/3 would be pro- portional to POS which is more reasonable. The effect of this 1s that sf labour and material costs are to be separated in the machinery cost, the index for labour would be lower than the 0-82 used and the index for materials would be higher than 0-82, This is consistent with the pattern shown by the steelwork and outfit terms in equation (6). But if labour and materials are not to be so separated, equation (6) cean be used a8 it is. Thope to adjust the machinery terms in ‘due course, and at the same time derive separate terms for steam and diesel machinery, using the information kindly re ferred to by Professor Benford and Mr Henry, The wastage and welding rod percentages in Table Mare guides only, the Tow values applying to ships such as VLCCs having a very high proportion of rectangular plates and to shipyards using nesting techniques, white the high values. apply fo smaller, more curvaceous hulls, But T question Mr ‘Cook's 50°, wastage on rods, which seems rather high. 1, however, the higher unit cost of welding rods depletes the wastage percentage too severely,1 suggest tho welding rod cost should be used to elevate the average price of steel by whieh entey 1s made into Table TH, ‘The MOD(N) breakdown of ships into eight major weight {groups in the early design procedure is most interesting and, presumably, the historical costs available would enable ‘2 Navy version of equation (6) to be set up for use at the Conception stage. 1 recall how on nuclear submarines the vessel was split into nine zones and job-easting introduced, controlled and analysed, This powerful combination of management aids produced accurate forecasting, methods and fone would like to think that such techniques are stil en- couraged, Mr B.E. Henry ‘To estimate ship costs on a worldwide basis would be a very ambitious undertaking Which might fake years to achieve and progressively keep up to date, World marketing and carreney conditions are for ever changing. Indeed, some years ago T ‘would have agreed with Mr Henry's suggestion that US dollars might better have been used in such a paper as this, but now Tam not so sure because of general world currency Auctuations. In any case, the paper is mainly about British shipbuilding and sterling is nat inappropriate, feel. But if Mr Henry seriously prefers dollars, he has only to convert the sterling figures appearing in the paper by the appropri~ ale exchange rate. ‘The question of direct and indirect overheads is also a com- plex one, mainly beeause accountants themselves adopt di erent practices in different shipyards, Steward, Ref, 20,has explained some of the difficulties, However, by making certain assumptions, it would be fairly simple to split the cost {actors into elements of direct and indirect overheads as Mr Henry suggests, and they might be useful in a particu lar case. But those assumptions would not apply to all ship yards by any means, and the more general usefulness that ‘was almed at in equation (6) would be reduced, The "bare bones! figure mentioned is nol a cost but a price if quoted outwards. Tt does not reflect all the costs incurred by the shipyard if sizeable portions of the overheads have been | deliberately omitted Gas carriers were excluded from Section 1,Ship Features, because large and expensive parts of them are not so much ‘ship' as "chemical works’, and as stated in Section 10, paragraph (id), the costs of’ such specialised materials and ‘equipment need to be obtained from the appropriate suppliersin every case. Apart trom basic differences botween LNG and LPG carriers, there are 50 many different kinds of containment systems involving large sections of the primary land secondary hull structure in gas carriers that T ould not recommend trying to get at their cost by simply adding a ereentage to a tanker cost, Direct liaison with the material Suppliers 1s probably the best way to get a cast, but even those experts would be unable to provide a budget figure without first having the answers to a fair number of questions about the design and operation of the ship concerned, With regard to the painting of product earrier ofl compart ‘ments, equation (6) has not allowed for this, so the adjustment would need to be an addition, not a subtraction. Based on recent quotations, rates varying from £12/m? to £16/n? of area treated seem to be appropriate, depending on the quality of paint specified. These rates would apply for a complete job, including scaffolding, blasting, grinding, cleaning, painting and paint materials. For example, in a 30, 000 dwt vessel ‘with 45, 000 m? of internal area in 7 x 3 cargo tanks plus a slop tank the cost would probably be between £540, 000 and £720, 000, ‘The areas in other sizes of similar ships would be approximately proportional to (dwt)2/", This 18 an ex pensive ‘feature’ and I'am grateful to Mr Henry for men- toning it. ‘Mr Henry is right to query service power having been used instead of installed power and, in fat, Installed power was used in the earlier formulae. But remembering that at the start of a design we usually estimate service power first, it was ebanged, the factors F’ and G" having been increased, of course, to allow for an average reserve margin. But,as with all the other assumptions In this paper, they can be adjusted or replaced by the user of the methods, according to his own experience and Judgement, Mr Henry has made the point that the machinery term should bbe restricted to diesel propulsion and no other, but it should ’be mentioned that the few steam turbine ships in the sample were not "rogues! by any means. Their scatter fitted inside the range of errors exhibited by the majority, which is why they were left in, However, the point is taken’and, as stated {in the reply to Mr Cook, steam and diesel might well be ‘separated if further anaiysis justified it on a basis of im- proved accuracy. ‘Mr J.W. Patterson Having read the replies to Professor Benford, Drs Buxton land MacCallum and Messrs Cook and Patterson with regard to the accuracy of the estimating methods, Mr Patterson may ‘concede that the overall accuracy of equation (6) must be Detter than tho +30, he attributed to 'order of magnitude" methods, Unfortunately, standard errors are not mentioned and Mr Patterson does not make It clear whether he regards the whole equation as an order of magnitude estimate or each term within It, Ifthe former, the contention would be that in almost all cases the total cost of the ship as estimated by equation (6) would bbe within #20%,, This then could fairly represent the +30 mits of a normal error distribution with a confidence level of 0-997, In that ease, the +0 Hmits,or the 'standard error", Would be 410%, But equation (6) consists of six elements Added together. ‘These elements are uncorrelated and inde~ pendently estimated by their own methods. Hence, 25 Mr Patterson can quiekly verify for himself, if a six-element ‘sum, such as that shown in the cargo ship example of Appendix MI produces an overall standard error of = 10%, then the latitude given to each of the constituents is +28-68"% or thereby. ‘This would mean that the +80 band would be as wide as #70%, for each of the estimating methods attaching to the elements if they were to have the stated confidence level of 0-997, 1am sure Mr Pattorson does not intond to ‘imply that the method would give errors as high as this for steelwork, outfit or machinery. So crude a method would be better left unpublished, On the other hand, if what 18 meant is that each term of the equation is an forder of magnitude’ estimate, that would be PRELIMINARY SHIP COST ESTIMATION ‘much more in line with the results recorded, A 230% error fon each term would imply a +107, standard error on each term, which when added would produce an overall standard error of #4.25%, in the example, corresponding to a #30 band of 4 12-75% with the same confidence level of 0997. This is ‘very close to what was observed in the first place, ‘The COSTER program would undoubtedly be of interest to many people if its constituent equations were published to~ gether with their standard errors. In view of the accepted Scarcity of cost estimating methods, perhaps it is the inten ton to do this, In any ease Mr Patterson is to be congratu- lated for his connection with the program. ‘The total cost of £10-18m for the cargo ship given by the COSTER program seems to be high for a ship bailding in January 1977. As a rough check, "Fairplay International? Hgures are much lower for ships building then, Also, the outfit cost is some 44%, of the total, and for cargo ships of the somewhat austere type in this example, figure of 36% would be about the maximum, would have thought. Un- fortunately, without details of the equations and thetr errors itis not poasible to show how elose or apart the methods are. am grateful to Mr Patterson for the references he has men- tioned, and agree with him entirely in that shipbuilding is far behind some other industries in its appreciation of the im~ portance of cost estimation, generally speaking. Mr C. L. Davey. ‘The factors A’,C’ and F’ relate to labour costs and they were tased on ian-hour studies as described in the reply to Mr Cook, The derivation of equation (8) explains how the ‘steelworking coefficient of 227, for example, was built up into A‘ in Table Il, Similar calculations led to C” and F” in ‘Tables IV and VI respectively. The only element to be up- ated is the average wage rate, which can be obtained periodi- cally from Ref, 6,or from actual shipyard information that ‘may be available'to the user. ‘The factors B’,D’ and G’ relate to material costs, BY was built up from British Stee! Corporation price lists for ship- building steel which are issued at regular intervals, All the ddosigner has to do is make a short list of the steel grades he is apportioning to the hull, work out the weighted average rrate for that combination from the price lists, assume a wastage allowanco, and obtain B’ from Table ill, D’ and G* have been obtained from preliminary design weight estimates for oulfit and machinery respectively, with quoted prices ‘against the main Items in each list, accounting for from 75%, 0 90% of the cost involved, the remainder having been esti- ‘mated for the minor items, These lists therefore update themselves to a large extent, as each new design is approach ed. But if a poriod exceeding, say, six months should elapse with no new quotations, the updating can be estimated trom the indices in Ref.7, which should be plotted monthly, separ- ate graphs being Kept for "Shipbuilding and Marine’, *Mechant~ eal’, Electrical’, ete., to correspond with the headings appearing in the published lists, ‘The coefficients for thrusters, stabilisers, etc. are updated in a similar manner, using the indices in Refs. 6 and 7, but always adjusting Whenever a new quotation is received, ‘A certain amount of systematic recording is required to keep everything up to date, but the effort required is sur~ prisingly little. The indices are published only once 2 month And plotting the new points can be done in a few minutes, Dr LL. Buxton ‘As mentioned earlier in this discussion, the splitting-up of ‘outfit presents no serious technical problem and Dr Buxton's ‘Suggestions for relating particular subdivisions to simple variables that can be enumerated in the early design stage ‘seem to be particularly apposite, The problem is in getting ‘cost returns of actual money spent on materials and man~ hours presented under such headings. All too often, the labour cost returns on outfit are trade returns not identified 287PRELIMINARY SHIP COST ESTIMATION with any selected part of a ship and, to make matters worse, they exclude the labour content of all the subcontracted items because accountants charge these as materials, Outi is, unquestionably the messiest part of ship in this respect, and while computer printouts can give the most complex arrays of data in many fields, nobody yet seems to have programmed them to perform the relatively simple task of accounting for shipbuilding labour expenditure to everyone's require- ments, ‘The way round this almost artificial stumbling block i8 to print out a two-dimensional matrix, with Financial totals ‘ollected say horizontally, and the Production and Technical totals vertically. This would be an expanded version of ‘Table XII whose format I once found completely successful hen asked to solve a work-in-hand evaluation problem for a certain shipyard, Dr Buxton rightly points out the wide variation there is in cost/tonne of different outfit material items. Over the range from anchors and cables to some electrical and radar equip- rent, the rate varies from a few hundred to several thousands of pounds per tonne. It would be most unwise to build wp out= fit material eosts from such details, However, the method employed in this paper relies on aggregate outfit mixes for ships whose total costs will have been obtained from recent ‘quotations, together with regular updating, as explained in replying to Mr Davey. Perhaps at present this is the best 258 way to get outfit cost totals, even if It tells us very. ‘about the constituent items. ‘The subject of validity and confidence levels has been dealt with in the replies to other diseussers, but on the general point I think the integrity of our general procedures in ship Sesign and estimating of all kinds would be improved if ‘empirieal and semi-empirical formulae, to which we so fre~ quently refer, were not only stated to be what they are but, ‘accompanied by thelr standard errors. Risks have to be taken at some stage in the design and development of any project and their quantification is the first step towards their reduction. ttle In conclusion, the response to this paper has been greater than was expected and, although T may not have answered some questions as fully as 1 would have liked, 1 am most grateful to those readers who have taken the trouble to write {n,and for the provision of many added references. REFERENCES 19, Moroney, M.J.: "Facts From Figures’, Penguin Books, 20. Steward, J..L.: ‘Overheads’. BSRA .M.No. 280, February, 1967. 21. HP, Drewry Ltd,: 'The Rising Cost of Ship Construction’, Report No. 28, 1975,