COST ESTIMATION TECHNIQES IN SHIPBUILDING

REPORT ON COST ESTIMATION OF O.R.V SAGAR KANYA

SCHOOL OF NAVAL ARCHITECTURE AND OCEAN ENGINEERING INDIAN MARITIME UNIVERSITY VISHAKAPATNAM CAMPUS

PROJECT GUIDE Sri U.S RAMESH CHIEF MANAGER,SMDR VISHAKAPATNAM

SUBMITTED BY PRAMOD K.B M-TECH (NA-OE) 2011-13 BATCH

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COST ESTIMATION TECHNIQES IN SHIPBUILDING OBJECTIVE: The main objective of the project is to estimate the cost of construction of the given vessel from the empirical formulae recommended by J Carreyette. and analyse for an optimal technique of cost estimation during design stage of a Ship.
Name of Vessel Operator Owner Date of commission Year of Estimation Constructed by : : : : : : O.R.V SAGAR KANYA National Centre for Antarctic and Ocean Research (NCAOR) Ministry of Earth Sciences ,Government of India. March 1983 2009 Germany

Vessel Parameters
Length over all Length ,LBP Breadth overall Depth to main deck Draught Mass displacement Gross Tonnage Net Tonnage Vol.displacement Engine Electric propulsion Speed Endurance 100.34 89 16.39 9.8 5.6 1554.5 4209 1029 1516.585 2x1230 14.25 m m m m m tonnes RT RT m3 kw knots

45 days/10,000 nautical miles

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Introduction
In recent years, there is severe competition in the shipbuilding industry due to the increased shipbuilding capacity compared with demand. The shipbuilding yard has to deal with a highly variable product that makes bidding on contracts very difficult. The pricing for new shipbuilding could have a high risk especially with minimal profit margins and precious little time available. To reduce such risk in estimation, there should be a quick and accurate means to accomplish reasonable and reliable cost estimate method. 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 completed vessel, miscellaneous services and establishment charges. J Carreyette presented a paper in 1977 at RINA where he suggested a simple parametric approach of cost estimation of merchant ships in early stages of design. System and subsystem costs are characterised as a proportion of ship particulars like length, volume, displacement, propulsion power etc. Using regression and other statistical methods Cost Estimating Relationships(CERs) were developed based on following methodology.

Methodology

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Total cost of Vessel

(Carreyette's Method)

The total cost of ship is defined as follows: Total cost = Total Labour cost + Total material cost

Where
Total Labour cost = Direct Labour cost + Overheads +Profit

And
Total Materials cost = Suppliers cost + Handling and wastage + Profit

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This Formulae of Cost Estimation is based on productivity of a shipyard in Britain during 1977.So changes in productivity over the last three decades has to be incorporated in the calculations. One of the main disadvantages of Carreyette's approach is that it does not take into account the impact of any progress and development in ship production man-hours which has happened in last two decades of 20th century due to various advancements in production like numerically controlled machine tools robots automated process control equipment computerized flexible manufacturing systems associated computer software

Some of the novel techniques and processes ,listed below, have improved shipbuilding quality, productivity, practice and promoted sustainable development quality assurance concurrent engineering continuous process production technology energy efficiency waste minimization design for recyclability or parts reuse inventory management upgraded worker skills communications with customers and suppliers The productivity metric man-hours/Compensated gross tonnage (MH/CGT) can be considered as a good indicator of productivity in a given shipyard. The change in (MH/CGT) from 1977 to required year of construction can be used to make a correction factor(Cpr) which can be included in cost check equation.

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From above figure productivity in US shipyards have gone up from 70 MH/CGT to 28 MH/CGT from 1990 to 2004 Cpr = 28/70 Cpr= 0.4 This correction factor can be multipiled with labour costs to account for improvements in productivity and to get closer to an accurate estimate of labour costs. Also Carreyettes's methed has been based on general cargo vessels which are less complex in construction when compared to NCCV. This variation in complexity of construction can be incorporated in cost chech equation by using Compensated Gross Tonnage, CGT as a parameter reflecting complexity of vessel.The Compensated Gross Tonnage, CGT, is considered as a worldwide yardstick for shipyard output in commercial shipbuilding replacing the traditional measures, man-hours/tonne steel weight .The organization of Economic Co-operation and Development(OECD) in 1984 published and adopted the CGT system as a parameter on which to base national shipbuilding output comparison. This coefficient reflects the amount of work
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necessary to produce that particular type and size of ship. One gross ton of a passenger ship, for example, with its sophisticated accommodation and public spaces, contains a significantly greater level of work content than one gross ton of a bulk carrier which is effectively little more than a large steel box with an engine on the back. One CGT of either ship on the other hand should contain roughly equivalent work content. The system has now been highly developed and is fundamental to the analysis of shipbuilding activity.

For a General cargo vessel

- OECD 2007

CGTCARGO = 27* (4209^0.64)

= 5634.278 For Research vessel (NCCV) - www.worldyards.com

CGTR.V = 46* (4209^0.62)

= 8123

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Research vessels come in the category of NCCV (Non cargo Carrying Vessels)

CCGT= CGTCARGO/CGTNCCV

CCGT = 8123/5634 CCGT =1.45

Dividing both we get a factor of 1.45 which is multiplied with steel and outfit labour costs respectively to get corrected values for research vessel..

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1)

Labour costs

The estimation of labour man-hours for ship production is considered an important item during the early stage of negotiation before signing the contract. With few information about the ship during the preliminary design stage, it is necessary to apply a good prediction method for estimating the ship production man-hours

a) Steel work labour cost

If

Rh -actual man hours per tonne of net steel Cb -block coefficient at laden summer draught Ws -net steelweight in tonnes L -LBP in metres A' -factor from table 1

Rh= A' / [Cb(Ws/L)1/3]

Table 1
Average wage rate of direct labour /hr 1.6 2 2.4 Overheads 75% 700 875 1050 100% 800 1000 1200 125% 900 1125 1350

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A plot of' A' for different wage rates

a) Labour cost 1977 Assuming overheads as 100% , value of A' was plotted as shown and for a wage rate of 2 /hr, A' was obtained to be 1000 Total steelwork labour costs

H = RhWs = A'*Ws2/3L1/3 *CCGT / Cb

= 1000 1.45 25722/3 891/3/ 0.5798 = 2200432.62

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b) Labour cost 1983 Corresponding to wage rate of 7.14 /hr - A is taken as 3587 Total steelwork labour costs = H * Labour average rate * Overheads * Profit = 3587 1.45 1.07125722/3 891/3/ 0.5798 = 7801172.81 = 12.08 million USD (Accounting for 7.1% error) Determination of block coefficient , Steel weight, outfit weight and machinery weight is given in APPENDIX 1.

2)

Outfit labour cost

Assuming no subcontracting, We have

Co1=C'Wo2/3
Where Co1-total cost of outfit labour C'-factor given in table 2 Wo-outfit weight, tonnes Taking into account CCGT and productivity correction factor (Cpr) modified equation becomes

Co1=C'*CCGT*Wo2/3
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Table 2
Average wage rate of direct labour /hr 1.6 2 2.4 75% 8350 10425 12500 Overheads 100% 9550 11925 14300 125% 10750 13425 16100

plot of' C' for different wage rates

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Outfit cost 1977 Corresponding to wage rate of 2 /hr - C is taken as 11925 Total outfit labour costs = 11925 1.45 1.07 628.09 2/3 = 1356802.38 (Accounting for 7% error) Outfit cost 1983 Corresponding to wage rate of 7.174 /hr - C is taken as 42760 Total outfit labour costs = 42760 1.45 1.07 628.09 2/3 = 579412.9 (Accounting for 7% error)

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3) Machinery Installation labour cost

Assuming no subcontracting, We have

CM1=F'*CCGT * P0.82
CM1-total cost of Machinery installation labour F'-factor given in table 3 P-Service propulsive horsepower Table 3
Average wage rate of direct labour /hr 1.6 2 2.4 Overheads 75% 323 404 485 100% 369 461 553 125% 415 519 622

A plot of' F' for different wage rates

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Machinery installation cost 1977 Corresponding to wage rate of 2 /hr - F is taken as 461 Total outfit labour costs = 461 1.15 1.075 2460 0.82 = 423449.12 (Accounting 15% increase for twin screw ships & 7.5% ERROR .) Machinery installation cost 1983 Corresponding to wage rate of 7.174 /hr - F is taken as 1653 Total outfit labour costs = 1653 1.15 1.075 2460 0.82 = 1518978.39 (Accounting 15% increase for twin screw ships. & 7.5% ERROR )

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2) Material costs
a) Steel material costs

Csm=B'*CCGT * Ws
Csm - total steel material cost B'- factor given in table 4 Ws - net steel weight ,tonnes Table 4
Average price of shipbuilding steel /tonne 150 200 250 Wastage +welding rods 8% 10% 13% 178 182 186 237 242 248 296 303 310

A plot of' B' for different prices of steel

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STEEL MATERIAL COST 1977 From corresponding steel rate of 200 /tonne and assuming 13% wastage value of B'=875.08 Total steel material costs = 248 1.451.03752572 Total steel material costs = 976794.73

(Accounting for 3.075% error) STEEL MATERIAL COST 1983

From corresponding steel rate of 146.55 /tonne value of B'=181.22 Total steel material costs = 181.2 1.451.03752572 Total steel material costs = 703298.68

(Accounting for 3.075% error)

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b) Outfit material costs

CoM-total steel material cost D'-factor given in table 5 Wo - outfit weight,tonnes Table 5
DATE Jun-75 Jun-76 Jun-77 D' 1500 1725 2011

Com=D'Wo0.95

OUTFIT MATERIAL COST 1977 D'= 2011 Total outfit material costs = 2011*1.45*1.05*(628.09 ^(0.95)) =2459813.99 (Accounting for 5% error)

OUTFIT MATERIAL COST 1983 Taking linear extrapolation in march1983 D'= 3550 Total outfit material costs = 9931.5*1.45*1.05*(628.09 ^(0.95)) =900173.83 (Accounting for 5% error)
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c) Machinery cost
CM=G'P0.82
CM-total cost of Machinery G'-factor given in table 6 P-Service propulsive horsepower Table 6
DATE Jun-75 Jun-76 Jun-77 G' 735 845 980

Machinery Cost 1977 F'= 980

Total Machinery Installation costs = 1.15*980*1.1075*(2460^(0.82)) = 900173.83 (Accounting 15% increase for twin screw ships & 10.75% error) Machinery Cost 1983 Taking linear extrapolation in march 1983 F'= 1800 Total Machinery Installation costs = 1.15*1800*1.1075*(2460^(0.82)) = 1653380.51 (Accounting 15% increase for twin screw ships & 5% error)

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3)

Additional cost

a) Thrusters
CT=48000+35000Tt
CT-cost at mid '77 rates Tt-thrust in tonnes

1977 Thruster costs

Total thruster costs = 48000 +35000*167.763*0.9 = 325025

1983 Thruster costs

Total thruster costs =(48000+35000*(7.91))*1.3 = 422305 (Assuming 30 % escalation)

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b) Stabilisers

CST = 3313/4
CST-cost at mid '77 rates() -Volume displ. In tonnes.

1977 stabiliser costs

Total stabiliser costs = 331*4855^0.75 = 481293

1977 stabiliser costs

Total stabiliser costs = 331*4855^0.75 = 481293 =681992 USD (Assuming 30% escalation)

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Total cost of Vessel

The total cost of ship is defined as follows: Total cost = Total Labour cost + Total material cost

Where
Total Labour cost = Direct Labour cost + Overheads +Profit

And
Total Materials cost = Suppliers cost + Handling and wastage + Profit

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Total cost = 13.31 million USD 1 GBP= 1.714 USD approximately (1977 march rate) SOURCE-(www.research.stoulfield.com)
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Total cost = 32.26 million USD

1 GBP= 1.55 USD approximately (1983 march rate) SOURCE-(www.research.stoulfield.com)

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Assumptions Vessel is built with 75%-85% Grade 'A' steel and remaining B,E,AH,DH or EH.No other material like Aluminium is accounted for. No part of the ship is built by subcontracters Overheads are taken to be 100% and profit as 10%. Complexity of construction in steelwork is neglected. This estimate does not take into account research equipment onboard or special cargo handling devices,winches etc. No life cycle costs have been considered.

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Clarksons shipbuilding index

The cost estimates produced by carreyette for the year 1983 are extrapolated to 2006 using clarksons shipbuilding index to compute cost at 2006 level .

YEAR 1983 2006 2008

INDEX 135 168.1 176.5

Cost of construction 1983 32.26 million USD So cost of construction in 2006 is 32.26 168.1 / 135 =40.169 million USD

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PODAC MODEL COST ESTIMATION

Product-Oriented Design And Construction Cost Model (PODAC) was forformulated by US navy in 1997 as an effective tool in cost estimation.It uses a PWBS system to define costs.the work is defined using three types of information:product structure,process and work type. Emperical CERs of PODAC model provide a top down approach for estimating Basic construction costs at the concept,Preliminary and contract stages of design. Concept design level cost based on complexity factor,displacement and speed Preliminary design level cost based on complexity factor and system based weight at various levels

Contract design level cost based on complexity factor and system based weight. The last two levels are overlooked because of lack of data and concept level estimation is carried out as follows.

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Vessel Particulars-Sagar Kanya.

Length L= Breadth B= Depth D= Draught T= Mass displacement= Vol.displacement= BHP = Speed= Cb= 89 16.39 9.8 5.6 m m m m

4855 tonnes 4736.585 m3 2460 kw 14.25 knots 0.57984

Cost Estimation
Price = complexity Factor *(752*displ (0.835)*speed1.24)

complexity factor= ship type factor *size factor.

size factor = 32.47*displ (-0.3792)

displ = full load disp in tons. =47361.10231 =5351.715 tons speed = max sustained speed in knots. =14.25 knots.

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ship type factor from table below

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Selecting Naval Resarch vessel ship type factor - 1.25 size factor = 32.47*5351.75^(-0.3792) =1.252

complexity factor= 1.252 * 1.25 =1.56512 Price = 1.56512 *(752*5351.75^(0.835)*14.25^1.24) =41.189 million USD

(2006 year of construction)

This estimate varies with Carreyettes cost extrapolated using clarksons index by 2.47 % which is an acceptable account. Any estimation of cost beyond 1983 using Carreyettes method would not be accurate as the constants used in cost equation would have to be extrapolated to infitisibaly big values therby compromising on accuracy. Instead computing 1983 cost of construction and extrapolating using indices would yield a good estimate.

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APPENDIX 1.
Determination of block coefficient Cb We Know

Mass Displacement
=LBTCb1.005

So Cb =/(L BT 1.005) = 4855/(8916.395.61.0251.005) = 0.5798

Steel Weight:
Watson & Gilfan.

= 2400 tonnes

= 2479.92 tonnes Where K- constant for different vessels E- Hull numeral k= 0.045 for research vessels. E=L(B+T)+0.85L(D-T)+0.85(l1*h1)+0.75*(l2*h2)

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= 3063.34 (l1= 45.65,h1=2.34 m ,l2=4.97 m ,h2=2.77 m ) (from GA of the given vessel)

=0.6358 Optimising. and taking 15% margin for scrap weight. Wst= 2618.156 tonnes

Machinery Weight:
Wm = (0.98) BHP / 10 + 200 =437.08 tons = 414.27 tonne ( Taking 10% more for twin screw engines.) Munrosmith

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Total Outfit Weight:

Outfit weight is divided into outfit and hull equipment weight outfit weight is calculated as follows WO = Co (CN/1000)0.825 where Co = 2103 (A constant between 2103 & 2412) CN - cubic number = (LBD/1000) = 422.54 tonnes H. Benford

Hull equipment weight is calculated as follows

WHE = CHE(CN/1000)0.825 where CHE = 1023 (A constant between 1023 & 1196) CN - cubic number = (LBD/1000) = 205.54 tonnes H. Benford

Total outfit weight= 628.04 tonnes

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REFERENCES
1) Carreyette J- Preliminary ship cost estimation,RINA,1977 2) Mishra S.C - Preliminary Ship Design, IMU-Visakhapatnam 3) Ahmad .M.Rashwan Estimation of ship Production man hours, Alexandria university, Egypt. 4) Watson ,D.G.M and Gilfillan, A.W., Some Ship Design Methods. Trans. RINA, Vol. 119,1977,p 279. 5) R. Munro-Smith Elements of shp desgn, (1975-1995) 6) H. Schneekluth and V. Bertram- Ship Design for Efficiency and Economy,1998. 7) www.research.stlouisfed.org 8) Compensated gross ton(CGT) system-OECD 2007 9) Harry Benford - 'The Practical Application of Economics to merchant ship Design' 10) Bureau of census, Annual survey 0f manufacturers-'Earnings in shipbuilding', September 8,2011. 11) www.valuewalk.com 12) Dorel Paraschiv, Andreea Caragin, Ana Maria Marinoiu-"Going Global. Focus Shipbuilding Industry in Romania". 13) "Delegation of Estonian shipbuilders in Germany"-Overview by Heinart Puhkim-BLRT GRUPP AS 14) Laurent Deschamps and Charles Greenwell-'Integrating Cost Estimating with the Ship Design Process'-SPAR Associates, Inc. 15) PODAC cost model-SNAME, 1997. 16) Clarksons Shipbuilding index.

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