cost estimation - orv sagar kanya generalised

COST ESTIMATION TECHNIQES IN SHIPBUILDING

IMU-VISHAKAPATNAM CAMPUS

REPORT ON COST ESTIMATION OF

O.R.V SAGAR KANYA

SCHOOL OF NAVAL ARCHITECTURE AND OCEAN ENGINEERING

INDIAN MARITIME UNIVERSITY

VISHAKAPATNAM CAMPUS

PROJECT GUIDE SUBMITTED BY

Sri U.S RAMESH PRAMOD K.B

CHIEF MANAGER,SMDR M-TECH (NA-OE)

VISHAKAPATNAM 2011-13 BATCH



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 : O.R.V SAGAR KANYA

Operator : National Centre for Antarctic and Ocean Research (NCAOR)

Owner : Ministry of Earth Sciences ,Government of India.

Date of commission : March 1983

Year of Estimation : 2009

Constructed by : Germany

Vessel Parameters

Length over all 100.34 m

Length ,LBP 89 m

Breadth overall 16.39 m

Depth to main deck 9.8 m

Draught 5.6 m

Mass displacement 1554.5 tonnes

Gross Tonnage 4209 RT

Net Tonnage 1029 RT

Vol.displacement 1516.585 m3

Engine Electric propulsion 2x1230 kw

Speed 14.25 knots

Endurance 45 days/10,000 nautical miles



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 bid-

ding 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



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



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.



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



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



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..



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 Overheads

of direct labour £/hr 75% 100% 125%

1.6 700 800 900

2 875 1000 1125

2.4 1050 1200 1350



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£



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 ×1.071×25722/3 × 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



Table 2



1.6 8350 9550 10750

2 10425 11925 13425

2.4 12500 14300 16100

plot of' C' for different wage rates



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 £




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



1.6 323 369 415

2 404 461 519

2.4 485 553 622

A plot of' F' for different wage rates



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 )



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 Wastage +welding rods

shipbuilding steel £/tonne 8% 10% 13%

150 178 182 186

200 237 242 248

250 296 303 310

A plot of' B' for different prices of steel



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× 1.45×1.0375×2572

Total steel material costs = 976794.73 £


STEEL MATERIAL COST 1983

From corresponding steel rate of 146.55 £/tonne value of B'=181.22

Total steel material costs = 181.2× 1.45×1.0375×2572

Total steel material costs = 703298.68 £




b) Outfit material costs

Com=D'Wo0.95

CoM-total steel material cost

D'-factor given in table 5

Wo - outfit weight,tonnes

Table 5

DATE D'

Jun-75 1500

Jun-76 1725

Jun-77 2011

OUTFIT MATERIAL COST 1977

D'= 2011

Total outfit material costs = 2011*1.45*1.05*(628.09 ^(0.95))

=2459813.99£


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 £




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 G'

Jun-75 735

Jun-76 845

Jun-77 980

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)



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)



b) Stabilisers

CST = £331Δ3/4

CST-cost at mid '77 rates(£)

Δ-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)



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



Total cost = 13.31 million USD 1 GBP= 1.714 USD approximately (1977 march rate)

SOURCE-(www.research.stoulfield.com)



Total cost = 32.26 million USD

1 GBP= 1.55 USD approximately (1983 march rate)

SOURCE-(www.research.stoulfield.com)



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.



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 INDEX

1983 135

2006 168.1

2008 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



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.



Vessel Particulars-Sagar Kanya.

Length L= 89 m

Breadth B= 16.39 m

Depth D= 9.8 m

Draught T= 5.6 m

Mass displacement= 4855 tonnes

Vol.displacement= 4736.585 m3

BHP = 2460 kw

Speed= 14.25 knots

Cb= 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.

=4736×1.10231

=5351.715 tons

speed = max sustained speed in knots.

=14.25 knots.



ship type factor from table below



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.



APPENDIX 1.

Determination of block coefficient Cb

We Know Mass Displacement

Δ =L×B×T×Cb×ƿ×1.005

So

Cb =Δ/(L ×B×T ×ƿ×1.005)

= 4855/(89×16.39×5.6×1.025×1.005)

= 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)



= 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 - Munrosmith

=437.08 tons

= 414.27 tonne

( Taking 10% more for twin screw engines.)



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) H. Benford

CN - cubic number = (L×B×D/1000)

= 422.54 tonnes

Hull equipment weight is calculated as follows

WHE = CHE(CN/1000)0.825

where CHE = 1023 (A constant between 1023 & 1196) H. Benford

CN - cubic number = (L×B×D/1000)

= 205.54 tonnes

Total outfit weight= 628.04 tonnes



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 shıp desıgn’, (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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