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NATO Specialist Team on Ship Costing PowerPoint PPT Presentation

NATO Specialist Team on Ship Costing Irv Chewning Chairman, STSC SCEA Conference Los Angeles, CA 17 June 2004 USS Port Royal ITS Maestrale USS John C. Stennis HMS Ocean HMNLS van Amstel FS de Grasse FS Charles de Gaulle USS John F. Kennedy Multi-National Deployment Operation

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NATO Specialist Team on Ship Costing

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NATO Specialist Team on Ship Costing

Irv Chewning

Chairman, STSC

SCEA Conference

Los Angeles, CA

17 June 2004

USS Port Royal

ITS Maestrale

USS John C. Stennis

HMS Ocean

HMNLS van Amstel

FS de Grasse

FS Charles de Gaulle

USS John F. Kennedy

Multi-National Deployment

Operation

Enduring Freedom

(April 2002)

FS Sercouf

ITS Durand de la Penne


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NATO Organization

Allied Naval Engineering Publication Development re Specialist Team on Ship Costing

STSC Participants, History and Products

ANEP-41 - Ship Costing

ANEP-49 - Ways to Reduce Costs of Ships

Outline


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NATO Organization

North Atlantic Treaty Organization (NATO)

Organizations & Agencies

Civilian Structure

Military Structure

Logistics

Public Policy Division

Military Committee

Standardization

Office of Security

Allied Command Operations

Civil Emergency Planning

Division of Defense

Policy and Planning

Allied Command Transformation

Communication and Information Sys.

Division of Defense

Investment

Etc...

Division of Operations


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Location of STSC within NATO Organization

Division of Defense Investment

NATO Naval Armaments Group (NNAG)

Current Chairman: ITN RADM Dino Nascetti

US Rep.: OPNAV (N096)

Naval Group 6 on Ship Design (NG/6)

Current Chairman:Howard Fireman NAVSEA 05D Current US Rep: Jeff Hough NAVSEA 05D

Specialist Team on Ship Costing (STSC)

Current Chairman: Irv Chewning NAVSEA 0175

Current US Rep: Bob Ogrodnik NAVSEA 0175


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BackgroundPurpose of the STSC

  • Establish a common framework, definitions and work breakdown structure from which the participating nations can discuss costs in a transparent manner.

  • Common understanding of approaches to cost analysis in support of national decision-making processes regarding the affordability of warships in an environment of budgetary constraints.

  • Need for cost reduction in all areas of ship life cycle costs: Design, Acquisition, Operations & Support, and Disposal.


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Australia

Belgium

Canada

France

Germany

Italy

Participants in ANEP-41 & ANEP-49 Development

Netherlands

Norway

Portugal

Spain

United Kingdom

United States

US Coast Guard


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An ANEP is a guidance document for use by NATO Allies in a collaborative program or project

An ANEP does not bind any nation to its use

Two ANEPs have been created by the STSC:

ANEP-41 on Ship Costing

ANEP-49 on Ways to Reduce Costs of Ships

Process of Creation or Update of an ANEP:

Working Group or Specialist Team chartered by NG/6

Nations intending to participate are identified and a Chairman selected

Terms of Reference and Program of Work drafted by the Team and approved by NG/6

Working Paper drafted by the Team and presented to NG/6 with recommendations

ANEP drafted and presented to NG/6 for approval and subsequently presented to NNAG for final release approval

Work of STSC is typically Institutionalized via Creation or Updating of an Allied Naval Engineering Publication (ANEP)


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History - Ship Costing

ANEP Development

NG/6 (formerly IEG/6)

ON SHIP DESIGN

Ad Hoc Working Group (AHWG) ON SHIP COSTING

(Working Paper - 1990)

Specialist Team on Ship Costing

(Working Paper - 1995)

ANEP-41

July 1992

ANEP-49

January 1996

OBJECTIVE

Coherent Approach and

Guidance for Ship Designers, Cost Estimators, Decision Authorities, and Others involved in ship acquisition

AIM

Affordable Fleet!

8


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History - Ship CostingANEP Updates

November 1997 Task as Directed by NG/6:

Prepare Working Paper regarding Ship

Cost Reduction Trends and Practices

National

Literature

Expertise:

Survey:

Contributions of

>70 Articles &

12 Nations

Presentations

3 Focus Areas

Commercial

Total

Manpower

Standards

Ownership

Reduction

&

Cost

Practices

“Trends in Manpower Reduction and the Use of Commercial Standards, Practices and Contracting Strategies to Reduce Costs of Naval Ships,” June 1999

“Total Ownership Cost Concept,” December 2002

Two Working Papers

ANEP-49 Edition 2 November 2000

ANEP 41 Edition 3 December 2003

9


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Provides a framework and overall process for discussing, comparing or developing ship cost estimates consisting of:

A comprehensive list of known ship cost elements in terms of a NATO Ship Cost/Work Breakdown Structure;

A Hierarchy of Ship Cost Terms extending from the NATO Ship Cost/Work Breakdown Structure up to the total program cost; and

Broad guidance on the use of Ship Cost Models

Edition 1 March 1991: Contains CWBS, Terms and Definitions and NATO Ship Cost Hierarchy

Edition 2 July 1992: Validates process outlined in Edition 1 by costing a common ship design

Edition 3 December 2003: Incorporates TOC Concept together with framework and definitions of elements that make up Life Cycle Cost, Total Ownership Cost, and Whole Life Cost.

ANEP-41 on Ship Costing


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ContentsANEP-41 Edition 3

Foreword

Chapter 1Introduction

Chapter 2Ship Cost Terms and Definitions

Chapter 3NATO Ship Cost/Work Breakdown Structure

Chapter 4Total Ownership Cost

Chapter 5Costing Methodology

Chapter 6Multinational Considerations

Chapter 7Implementation Guidelines

List of References, List of Acronyms

Annex ANATO Ship Cost-Related Terms and Definitions

Annex BExpanded Ship Work Breakdown Structure Title Index

Annex CNATO Ship Programmatic Cost Element Index

Annex DAllocation of NATO Ship CWBS to LCC Composition

Annex ENATO Alternate O&S Cost Categories for Ships

Annex FNATO Elements of Manpower Cost for Ships

Annex GCost Models


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NATO Ship Costing Components


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NATO SHIP CWBS

MULTIDIMENSIONAL ASPECT

* COST

TYPE

C

UNIQUE

W

COMMON

B

S

PROGRAM PHASES

PROGRAM PHASES

* Cost Type can pertain to many categories (e.g., by Recurring &

Nonrecurring, by Nation, by Cost-Share, by Work-Share)

NATO Ship CWBS Multidimensional Aspect (Top Level)

Costs separated by:

  • Common among nations

  • Unique to a nation


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NATO SHIP CWBS

MULTIDIMENSIONAL ASPECT

COMMON

UNIQUE

COST

NON-RECURRING

TYPE

RECURRING

HARDWARE GROUP

100

200

300

400

500

600

C

700

W

SOFTWARE GROUP

100

B

200

S

300

400

500

600

700

DESIGN & SUPPORT

000

SERVICES

800

900

PROGRAMMATICS

1 2 3 4 5 6

7

1 2 3 4 5 6

7

PROGRAM PHASE

PROGRAM PHASE

NATO Ship CWBS Multidimensional Aspect (Detailed)

  • WBS similar to US Expanded Ship Work Breakdown Structure

  • Program Phases per NATO Phased Armaments Programming System (PAPS)


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NATO Ship Cost/Work Breakdown Structure (Level 3 Elements)

LEVEL 1

TOTAL PROGRAM

LEVEL 2

COMMON ELEMENTS

UNIQUE ELEMENTS

HARDWARE

HARDWARE

LEVEL 3

SOFTWARE

SOFTWARE

DESIGN & SUPPORT

DESIGN & SUPPORT

SERVICES

SERVICES

PROGRAMMATIC

PROGRAMMATIC


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NATO Ship Cost/Work Breakdown Structure (Level 4 Elements)

UNIQUE ELEMENTS

COMMON / UNIQUE

LEVEL 2

LEVEL 3

PROGRAMMATIC

DESIGN & SUPPORT

HARDWARE

HARDWARE

SOFTWARE

SOFTWARE

DESIGN & SUPPORT

PROGRAMMATIC

GROUP 100

GROUP 100

GROUP 100

GROUP 100

GROUP 000

GROUP 000

BUDGETING

BUDGETING

HULL

HULL

HULL

HULL

GUIDANCE &

GUIDANCE &

PRACTICES

PRACTICES

LEVEL 4

STRUCTURE

STRUCTURE

STRUCTURE

STRUCTURE

ADMINISTRATION

GROUP 800

GROUP 800

GROUP 200

GROUP 200

GROUP 200

GROUP 200

ESCALATION

ESCALATION

PROPULSION

PROPULSION

PROPULSION

PROPULSION

INTEGRATION &

INTEGRATION &

PLANT

PLANT

PLANT

PLANT

ENGINEERING

ENGINEERING

GROUP 900

GROUP 900

GROUP 300

GROUP 300

GROUP 300

GROUP 300

LAW &

LAW &

ASSEMBLY &

ASSEMBLY &

ELECTRIC PLANT

ELECTRIC

PLANT

ELECTRIC PLANT

ELECTRIC

PLANT

GOVERNMENT

GOVERNMENT

SUPPORT

SUPPORT

REGULATIONS

REGULATIONS

SERVICES

SERVICES

GROUP 400

GROUP 400

GROUP 400

GROUP 400

CONTINGENCIES

& RESERVES

CONTINGENCIES

COMMAND &

COMMAND &

COMMAND &

COMMAND &

SURVEILLANCE

SURVEILLANCE

SURVEILLANCE

SURVEILLANCE

GROUP 500

GROUP 500

GROUP 500

GROUP 500

GOVERNMENT

GOVERNMENT

AUXILIARY

AUXILIARY

AUXILIARY

AUXILIARY

SUPPORT

SUPPORT

SYSTEMS

SYSTEMS

SYSTEMS

SYSTEMS

ACTIVITIES

ACTIVITIES

GROUP 600

GROUP 600

GROUP 600

GROUP 600

NATO PROGRAM

NATO PROGRAM

OUTFITTING &

OUTFITTING &

OUTFITTING &

OUTFITTING &

OFFICE

OFFICE

FURNISHINGS

FURNISHINGS

FURNISHINGS

FURNISHINGS

ACTIVITIES

ACTIVITIES

GROUP 700

GROUP 700

GROUP 700

GROUP 700

SHIPBOARD

SHIPBOARD

ARMAMENT

ARMAMENT

ARMAMENT

ARMAMENT

LOAD

LOAD

-

-

OUT

OUT

ITEMS

ITEMS

DISPOSAL

DISPOSAL


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PHASE

*CWBS ELEMENTS

* ESWBS ELEMENTS

MISSION NEED

DESIGN & SUPPORT

GROUPS 000, 800

EVALUATION

PROGRAMMATICS

PRE-FEASIBIITY

DESIGN & SUPPORT

GROUPS 000, 800

PROGRAMMATICS

FEASIBILITY

DESIGN & SUPPORT

GROUPS 000, 800

PROGRAMMATICS

PROJECT DEFINITION

DESIGN & SUPPORT

GROUPS 000, 800

PROGRAMMATICS

DESIGN AND

SOFTWARE

GROUPS 100 – 700

DEVELOPMENT

DESIGN & SUPPORT

GROUPS 000, 800

PROGRAMMATICS

PRODUCTION

HARDWARE

GROUPS 100 – 700

SOFTWARE

GROUPS 100 – 700

DESIGN & SUPPORT

GROUPS 000, 800, 900

PROGRAMMATICS

“M” (MARGINS)

“F” (LOAD-OUT ITEMS)

IN-SERVICE

HARDWARE

GROUPS 100 – 700

SOFTWARE

GROUPS 100 – 700

DESIGN & SUPPORT

GROUPS 000, 800, 900

PROGRAMMATICS

“F” (LOAD-OUT ITEMS)

* Denotes phase at which costs are generally incurred

NATO Ship Program Phase CWBS Correlation


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NATO Ship Life Cycle Cost Hierarchy

  • OPERATIONS

INITIAL CONSTRUCTION

COST:

PLUS:

PLUS:

PLUS:

PLUS:

PLUS:

COMMON

DESIGN

OPERATIONS

ITEMS NOT AFFECTED

BY THE EXISTENCE OF

THE SHIP/WEAPON

SYSTEM

PROJECT MANAGEMENT

SUPPORT

MANPOWER

DEVELOPMENT

& SUPPORT

HARDWARE (e.g. Structure,

Propulsion, and Electric Plant)

ITEMS&

SYSTEMS

SOFTWARE (e.g

­

RECRUITING

  • LOAD- OUT

  • ITEMS

Computer programs,

­

ACQUISITION

START-UP (e.g. Tooling,

Jigs, and Fixtures)

Coding)

­

TRAINING

- MILITARY

ACADEMIES

INFRASTURE

  • DISPOSAL

MEDICAL

TECHNICAL DATA

­

COST FOR

ALLOWANCE FOR CHANGES

e.g. Design, Schedule)

PUBLICATIONS

SUPPORT

- CEREMONIAL UNITS

- SHORE-BASED

TRAINING

- HOSPITALS

- NAVY STAFF

PLANNING,

SUPPORT EQUIPMENT

MANAGING,

TRAINING EQUIPMENT

TEST AND TRIALS

OPERATING,

INITIAL SPARES

(Shore Based)

INITIAL OUTFIT (onboard Spares,

Repair Parts, Tools, and Fuel)

AND

EXECUTING

FACILITY

CONSTRUCTION

SAIL-AWAY COST

PROJECT LEAD-SHIP

OVERCOST

NATO PROJECT MANAGEMENT

OFFICES

PROGRAM ACQUISITION COST

PROGRAM LIFE CYCLE COST (LINKED DIRECT)

TOTAL LIFE CYCLE COST ( PLCC+LINKED VARIABLE INDIRECT)

TOTAL OWNERSHIP COST ( TLCC + LINKED FIXED INDIRECT)

WHOLE LIFE COST (TOC + NON-LINKED)


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Total Ownership Cost Concept

Total Ownership Cost includes all linked-direct costs associated with the research, development, procurement, operation, logistical support and disposal of an individual weapon system (e.g., ship) plus the linked-indirect costs of:

  • the total supporting infrastructure that plans, manages and executes that weapon system program over its full life… and

  • the cost of requirements for common support items and systems that are incurred because of introduction of the weapon system…

  • but, excluding the “non-linked” Navy infrastructure costs that are not affected by individual weapon systems development, introduction, deployment or operations


  • Ship toc cost domain l.jpg

    Ship TOC Cost Domain

    • Maps Cost Types to NATO Ship LCC Hierarchy

      • Linked Direct: Costs specifically associated to the development, procurement, operation and support of the individual ship or ship’s systems

      • Linked Indirect: Costs related to other programs, ships or weapon systems, in addition to the given ship or ship’s systems

      • Non-Linked: Costs of Navy operations not associated to individual ship or ship’s systems

    • Permits flexible approach to selecting desired level of LCC in a given collaborative program


    Anep 41 implementation guidelines l.jpg

    1.The baseline ship design and technical requirements and configuration must be established.

     2.The acquisition strategy must be defined for all phases of the program.

     3.Agree to a CWBS and cost element definitions for use as the common basis for costing the proposed ship for comparison to the agreed cost target.

     4.All cost elements must be identified at the agreed level of the NATO Ship LCC Hierarchy.

     5.Each cost element identified must be assigned to the applicable life-cycle phase(s) of the NATO program.

    6. The cost elements identified must be placed within the structure of the CWBS.

    7.Each identified element must be designated as either common or unique.

    8.Cost models and databases for use in the development of Cost Estimating Relationships must be established and agreed upon.

    9.Cost estimates must be developed for each phase of the NATO ship program using the CWBS format and agreed cost model(s).

    10.The above process should occur at the beginning of all NATO ship programs in order to provide a frame of reference for all ship design and cost decisions.

    ANEP-41 Implementation Guidelines


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    History ANEP 49 Development

    Literature Survey

    “Topics”

    National Expertise

    of

    Participating

    Nations

    Compilation of

    45 Papers or

    Presentations

    “Topics”

    Identification

    of 28 Topics

    28 Point Papers

    3 Major Working

    Papers

    Literature Synthesis

    Salient Point Summaries

    Document Analysis by PAPS Phases

    ANEP 49 on Ways to Reduce Cost of Ships

    Executive Summary

    Introduction

    7 Chapters

    Conclusions & Recommendations

    4 Appendixes

    22


    Anep 49 on ways to reduce costs of ships l.jpg

    Provides emphasis and guidance to ship designers, naval staff planners, project managers, decision authorities and others on potential areas for cost reduction in naval ship acquisition, ownership and operation, that they may influence.

    The document is a guide only and thus should not be interpreted in an absolute fashion. It emphasizes that national cost specialists or experts should be utilized as an inherent part of the decision process.

    Edition 1 January 1996: Outlines considerations and opportunities for cost reduction by program phase

    Edition 2 November 2000: Incorporates TOC Concept together with expanded discussion of commercial standards, practices and contracting strategies

    ANEP-49 on Ways to Reduce Costs of Ships


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    ContentsANEP-49 Edition 2

    Executive Summary

    Introduction

    Chapter AMission Needs and Requirements

    Chapter BTechnologies

    Chapter CDesign

    Chapter DAcquisition Process

    Chapter EProduction

    Chapter FOperations and Support

    Chapter GCost Management

    Conclusions and Recommendations

    Appendix IChronology of Development

    Appendix IIGlossary of Terms and Definitions

    Appendix IIISelected Information on National Experiences Relevant to Ship Cost Reduction

    Appendix IVValue Engineering Process Steps


    Anep 49 topic areas l.jpg

    Requirements (Mission)

    Procedures/Process to Establish Requirements

    Commercial Vs. Military Standards

    Design-to-Cost

    Common Procurement/Purchases

    Technology Innovations

    Time and Decisions

    Contracting Practices

    Commonality

    Specifications/Project Definition

    Operations and Support Considerations

    Cost Management

    Value Engineering

    Eliminate/Reduce Change

    Total Ownership Cost

    Crew Reduction Vs. Automation

    Contractor Data Requirements

    Design and Production Processes

    Reliability Analysis

    Risk Acceptance Level

    Margin Policy

    International Cooperation

    Standardization of Cost Effective Solutions

    Learning Curve Maximization

    Industrial Base Productivity, Competitiveness and Reliability

    Design/Cost Tradeoffs (Affordability Analysis)

    Use of Competition vice National Concerns

    Environmental Impacts

    ANEP 49 Topic Areas

    28 Topics and Three Working Papers:


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    ANEP-49 Ways to Reduce Costs of ShipsDesign Phase

    Integrated Design

    Design-for-Production

    Investment for Life Cycle

    In-Service Flexibility

    Process Simplification

    Design Tradeoffs:

    Commercial versus Military

    Standards/Practices

    Margin Policy

    Technologies

    Product-Orientation

    Modularization

    Standardization

    Group Technology

    Commonality

    Joint-ness

    Interoperability

    International Cooperation

    Cost-Oriented Design


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    ANEP-49 Ways to Reduce Costs of ShipsAcquisition Phase

    • Lead Ship Acquisition Activity Could Involve 10 Years or More

      • Requirements changes

      • Technological changes

    • Acquisition Strategy a Significant Factor:

      • Contracting practices

      • Type of contract

      • Contractor incentives

      • International cooperation

      • Political & socioeconomic aspects

      • Risk mitigation


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    ANEP-49 Ways to Reduce Costs of ShipsProduction Phase

    • Production Costs Affected By:

      • Acquisition strategy

      • Industrial policy/technology

      • Scheduling

      • Design changes

      • Quantity ordering and learning curve

      • Technological innovation/requirements

      • Material changes

      • Environmental hazards and compliance

    • Design for Production Critical

      • Cost savings from 10 to 15% can be realized from product-oriented or integrated design and construction methods.


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    ANEP-49 Ways to Reduce Costs of ShipsIn-Service Phase

    • In-Service Phase Costs May Constitute 60 - 80% of LCC

    • Costs Heavily Dependent On:

      • Peacetime and Wartime operational scenario and tempo

      • Mission and Policy requirements

    • Cost Drivers Connected To:

      • Personnel Cost (Manning) and Training

      • Early design stage planning

      • Up-front investment

      • Level of automation

      • Equipment standardization/ Configuration control

      • Continuous acquisition and life-cycle support

      • Integrated logistics support

      • Design flexibility provisions

      • Ease of maintenance and upgrade

      • Environmental compliance


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    ANEP-49 Ways to Reduce Costs of ShipsSummary

    • Thorough up-front engineering and design work is essential to maximizing cost reductions

    • Careful consideration and scrutiny should be given the following major areas:

      • Mission needs and capability requirements

      • Cost-conscious decision-making process

      • Technology advances

      • Commercial standards and practices

      • Manpower reduction

      • Design specifications, acquisition practices and construction methods

      • Cost management techniques

      • Cooperation and teamwork between government and industry and between governments

      • Forward-looking program planning and management

    • An ingrained process that provides transparency of costs and cost driver understanding is essential


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    Shared View of NATO Allies

    • Identify Cost Drivers versus mission needs

    • Aim to make all “affected” costs transparent for decision-making


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