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Summer Newsletter August 2016
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INSIDE THIS ISSUE
Chairman’s Address ……………………….… 2
ICEAA International Conference & Training Symposium, Bristol....... 3
Next SCAF Workshop – Integrated Cost & Risk Analysis, Bristol ………………….……… 4
Report on SCAF Reception and 2016 Awards …………………............................ 5
Report on the June Workshop, Ribby Hall, Preston ……………...… 7
Bristol Management Centre MBA Announcement ………………..…………....... 9
Report on the 2016 SCAF Challenge Workshop ..……………….………….……… 10
Article on Warship Size & Cost…11
SCAF 2016 Workshops and Events ….… 16
Summer Newsletter August 2016
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Welcome to the
summer 2016 SCAF
newsletter. Since the
last SCAF newsletter
we have held the SCAF
summer banquet and
our 3rd award
ceremony. On the 7
July the SCAF awards event went well and was well
attended, I was pleased with the round tables, rather
than the single long table that we had last year, this
stimulated people to socialise and chat after the
diner. This was a well-attended event which we held
at the Bailbrook House Hotel, Bath for the second
year. Twenty six members and partners were due to
attend the event which included dinner and the
presentation of the SCAF awards for the year
September 2014 to September 2015.
Congratulations to all those award winners and those
who received commendations. Please keep offering
us those presentations and newsletter articles!
On 19 May I met with Paul Marston
the president of the International
Cost Estimating and Analysis
Association (ICEAA) together with
Neil Morrill our SCAF secretary.
We met in the Marriott City Centre,
Bristol to discuss arrangement for
the ICEAA / SCAF conference in
October; everything seems to be in
hand. We walked around the
conference facilities and discussed
the event with the hotel liaison.
We had a conference call with Megan Jones in ICEAA
and Jason Dechoretz of MCR in the afternoon to
discuss our findings and the abstracts offered.
We have now accepted 36 abstracts for the event
covering topic on Space Systems, Models and
Methods, Software, Management, Risk Analysis and
Government’s Perspective. We have secured
sponsorship and tool workshops. It has been agreed
that the ICEAA exam will be offered, but remember
to register before the conference, you can’t register
on the day, and many attendees are already
registered and booked into the hotel.
On the 1 June I had a meeting with the Single Source
Regulatory Office (SSRO) regarding their support to
the November SCAF workshop, it was a very fruitful
meeting and they are happy to provide a speaker.
They welcomed the opportunity to talk to the cost
community and we look forward to the informative
presentation.
Also in June we had a good SCAF workshop near
Preston, at Ribby Hall we changed rooms after last
year’s workshop feedback and comments that the
audience could not see the bottom of the screen, the
facilities were much better and the room was a lot
bigger to accommodate the
larger audience. Thanks to
all the speakers for a good
day.
The future programme for
this year is shaping nicely
with the joint SCAF / ICEAA
conference in Bristol on 18
to20 October; this is
followed by a SCAF
workshop in Bristol on 15th
November. Enjoy the rest of the summer and put the
dates in your diary now.
Dale Shermon SCAF Chairman
CHAIRMAN’S ADDRESS
Summer Newsletter August 2016
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2016 International Conference
and Training Symposium
17-20 October 2016, Bristol Marriott Hotel City Centre
Register for the Symposium and book your hotel room online today:
www.iceaaonline.com/bristol2016
Every four years, ICEAA presents a conference in an international (non-US) venue to accommodate their international membership and to provide a unique experience meeting with professionals and friends from around the world.
Join us in the United Kingdom for the 2016 International Training Symposium featuring three days of peer-authored professional paper presentations and PCEA/CCEA preparation training during this unique opportunity to meet with friends and colleagues from cost communities around the globe.
The 36 presentations scheduled will cover a wide range of cost related topics and have been categorized into six topic tracks: Space Systems, Models & Methods, Software, Management, Risk Analysis, and Government Perspectives. For those who have been studying to take the PCEA or CCEA exam, the nine courses offered during the Symposium have been specifically structured to enhance and amplify your studies and provide expert insight on the content. Register today on the ICEAA website. Discounted rates are available for members of all partnering associations. ICEAA has also reserved a number of discounted sleeping rooms at the Bristol City Centre Marriott - but they're going fast! Book your room online to stay at our host hotel where you'll only be an elevator ride away from all of the sessions.
Presented in partnership with:
and
Summer Newsletter August 2016
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SCAF Workshop and AGM Integrated Cost and Schedule Risk Analysis
Tuesday 15th November 2016 The BAWA Centre, Filton, Bristol
CALL FOR PAPERS
Risk analysis is a logically structured approach to quantifying uncertainty. There are three primary areas of
uncertainty associated with most projects: cost, schedule and technical performance. As project phases
become more complex, and costly, the requirement to quantify these uncertainties has grown. As the
requirement to perform risk analysis has grown, so has the availability of computerised risk analysis
techniques.
The risk analysis of a project may be performed on either the cost risk or schedule risk associated with the
programme. Project costs often exceed their estimates because those estimates do not take into
consideration the uncertainties in the estimates of duration of project activities. Cost risk can be most
accurately estimated and completely understood if it explicitly takes into consideration schedule risk. This
workshop will examine methods of incorporating the uncertainty in cost and schedule to determine
equivalence between schedule and costs and provide application examples of the technique.
Presentations are invited on the following topics:
Project Control
Cost and Schedule Risk Analysis
Risk Management
Project, Programme and Portfolio Management (P3M)
Uncertainty Analysis and Management
Other Related Topics
Deadline
Please let us know if you plan on submitting a paper and what your planned topic will be no later than 31st
August 2016. Forward details to:
Neil Morrill at [email protected] or call 01980 955548
Summer Newsletter August 2016
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To celebrate the Society’s 32nd Anniversary SCAF organised a
combined Summer Reception with an Awards Banquet which was
held at the Bailbrook Hotel, Bath. The event provided members
and their partners with a chance to meet up with friends and
colleagues and gave us the opportunity to recognise and award
members for their contributions to the Society over the year. Dale
Shermon, Chairman welcomed everyone to the event on behalf of
the Society and presented the Awards.
Best Technical Paper
This award is given for the presentation giving the best technical content regarding
techniques that can be utilised and adopted by the wider costing community. The
winner of the award was Andy Nolan Chief of Project Estimation, Rolls-Royce for
his paper on “Requirements uncertainty analysis, defining, measuring, mitigating
and optimising”. Commendations were also given to Dr Linda Newnes from the
University of Bath for her presentation on “Costing for Availability” and to Dr
Dave Exelby from Decision Analysis Services for his talk on “Strategic Thinking and
the Need for Decision Making Tools Without the Stovepipes”
Best Newsletter Article
The first award of the evening recognised the excellent article written by
Charles Symons, Co-Founder and Past President, COSMIC (Common Software
Measurement International Consortium). The article was entitled “Bridging
the gap between Chaotic and Controlled software project estimating”. The
Chaotic world was characterised by the majority of organisations whose
projects frequently over-ran on time and budget, or that they fail completely.
The Controlled world had a very much smaller population of exemplar
organisations whose projects were claimed to be delivered to time and
budget routinely. The interesting question was why organisations in the
Chaotic world did not or could not simply learn and copy the behaviour of
those in the Controlled world and save themselves a lot of money.
This article explored the two worlds and aimed to explain the differences which were partly intrinsic and to a
degree unavoidable, and partly due to a mixture of cultural, process and technical factors, several of which
could be overcome with enough effort and perseverance. A commendation was also awarded to Brian Tanner
for his excellent series on ship costing.
Report on SCAF Summer Reception and Awards Banquet
Thursday 7th July 2016
The Bailbrook House Hotel, Bath
Summer Newsletter August 2016
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Best Quality Presentation
The Committee here were looking at content, style, structure and
overall presentation skills. The winner of the award was Michael
Christie, Director, Strategy & Market Development and Chief
Technologist, BAE Systems. Michael’s theme was “Strategic
Challenges against a Backdrop of Global Uncertainty”. The company
has traditionally operated under very large and complex long term
contracting arrangements. Against this background he explained how
worldwide threats were evolving. The presentation elaborated on this
context and provided some insight into how BAE Systems were dealing with this environmental change.
Commendations were also given to Andy Nolan and Olympia Vlad from Rolls-Royce for their presentation
entitled “Readiness, Steadiness, Go” and to Dr Dave Exelby from Decision Analysis Services for his talk on
“Strategic Thinking and the Need for Decision Making Tools Without the Stovepipes
Members Award
This Award was given in response to a members vote on who they thought was the
best paper of the year. We were delighted to announce that this award was made
to Andy Nolan, Chief of Project Estimation, Rolls-Royce for his presentation
entitled “Requirements uncertainty analysis, defining, measuring, mitigating and
optimising”. Commendation was also given to Susanna Mason from Defence
Equipment & Support for her talk on “Commercial Trends in Defence Procurement
and Support”.
The P.G. Pugh Award
This is the Society’s most prestigious award and was highly competed between a number
of very innovative and thought provoking presentations given throughout the year. The
winner of the award is Dr Dave Exelby from Decision Analysis Services who spoke on
“Strategic Thinking and the Need for Decision Making Tools Without the Stovepipes”
Dave explored the need for strategic decision makers to be able to assess a wide range of
potential options against benefits, costs and timeliness from the outset – when precision
is usually not the issue, but the ability to compare, debate and evolve these options
rapidly is. He presented on the use of novel toolsets that are cross disciplinary in nature – providing “right-
sized” models to support the strategic analysis, using three cases to illustrate their application. The first
concerned Defence affordability – a very current topic with SDSR and an election in 2015. He explained how this
model was used to show the impact of ‘what ifs’ such as a potentially worsening geopolitical situation in Eastern
Europe in the shorter term and of the political appetite for defence spending. His second case focused on
capability/affordability trades for the New Zealand Defence Force, where Equity proved to be very useful. His
third case explored the ‘use case’ for strategic portfolio planning models and concluded that a full toolbag of
techniques across decision making was critical to support such models. Commendations were also given to Bob
Mills, Jaguar Land Rover and Dr Linda Newnes, University of Bath.
Summer Newsletter August 2016
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SCAF Service Award
The final Award of the evening was presented to Max Murray-Brooks in recognition for his services to the
Society. He served as Secretary to the Society for 6 years and was instrumental in streamlining our
administrative processes which benefitted not just SCAF but the wider costing community.
Our thanks go to all our Award Winners and to everyone who attended and made this
a night to remember.
On Tuesday 7th June SCAF held a one day conference about Support Solutions at the Conference Centre in Ribby
Hall Village in Preston, Lancashire. Preston is a little further north than the usual SCAF venue and allowed us to
come into range of BAE Systems Military Air and Information. The venue was spacious and in a nice setting
allowing good communication between delegates. The contents of the day were, estimating fiction, addressing
flaws of support cost predictions, projecting random arisings and failures, advantages of an activity based
approach, pooled inventory, mapping defence for canonical modelling purposes, and cost modelling of
obsolescence management, and finally closing remarks.
The first presentation was from BAE Systems’ Parametric Lead, Gareth Johnson, entitled “Estimating Fiction”.
The context of the talk was the general problem space of three decades of support costs, a product that will not
be ready for two decades, and using technology that has not been invented yet. BAE systems stated that they
provide early phase costing for multiple concept aircraft studies, creation of new development aircraft programs
and others; so support, what is all the fuss about? There was the description of the use of trends and
parametric cost models, including commercial estimating software. The Case Study example of estimating was
about a fictional example from Battle Star Galactica, namely about the colonial fleet. One of the key interest
points was that the assumptions about the star ships were comparable to assumptions seen in major defence
platforms today. The fictional support solution contained some high level concepts, like engines are lifed for the
full in-service period of the vehicle, and assumptions, like 60-70% of the weight will be the structure.
The next talk was about Divergence Assessment from Stuart Cole and Paul Jones from Arke Ltd., addressing the
challenge of support cost predictions. Arke are an independent Small to Medium Sized Enterprise and described
their professional skill mix. The subject of the talk was confidence in support costs, and understanding drivers
and maturity. An NAO report on the MOD equipment plan stated that “Equipment support costs, which make
up over half of the equipment plan, are not subject to the same level of detailed analysis as the procurement
costs. Until the department fully understand these costs and the risks associated with them the confidence it
can express in the overall plan”. The presentation was about how confidence numbers can be obtained for
support costs and in turn how these inform contracting strategy, value for money, and how confidence numbers
are influenced by types of project.
Report on SCAF June Workshop
Theme: Support Solutions
The Conference Centre, Ribby Hall Village, Preston
Summer Newsletter August 2016
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Two concepts of divergence factors and divergence drivers are used. Divergence factors include economic
factor, usage factor, external factor and enterprise factor. Use of cross impact analysis was described as a
technique, which has been shown to be a better technique than others through citing of cases like influence
diagrams or intuition.
The last talk before lunch was from Alan Jones from Estimata Ltd. Alan has extensive experience in Cost
Estimating and also has a well-known knowledge and teaching about statistical concepts. Playing the arising
rate lottery is about Random Arisings and Failures that occur during support, and includes concepts like Trends,
Passion Process, Queuing Theory, and Weibull Distribution. Context is seen as key as a number of methods
were explained. There was specific analysis of the Poisson process and the theory of the Poisson Process.
Sample size is important for good trend fitting. And lots more data is required to mitigate against the modelling
of short term trends. Subsequent discussion was about the question, is the Weibull variable viable? Models
were demonstrated including results from queuing theory. In essence methods like, the moving average is quick
and simple, but is not predictive; regression analysis improves predictions but cannot capture the randomness
of the support problem; therefore the use of distributions and queuing theory are alternatives. The talk was
rich in content and a view is recommended for further information.
In the afternoon Frank Murphy from TFD Group gave a talk on the advantages of an Activity Based Approach.
TFD has a decision support system broad architecture including Tactical Process Management Tools, the TFD
data vault, and Strategic Planning Tools. TFD components include life cycle cost MAAP model, and the
description of maintenance events. Currently there is extreme pressure in the armed forces to do more for less.
Frank talked about addressing capability affordability by through life thinking and LCC as a metric. And about
Integrated Support Planning and Control, therefore achieving affordable availability requires planning and
control. Logistic Support Planning requires a feedback loop. Frank described an example of Developing a Power
Pack Solution in order to Maximise Combat Power on Operations, and use of an ABC model to understand Total
System Support costs. Platforms considered were Apollo and Atlas, Ajax and Warrior CSP. The best support
solution was identified through cost benefit analysis of spares, repairs, manpower, resupply pipeline and
infrastructure. Currently at army level there is a lack of science to make cost benefit decisions. ABC was used to
model 20 year scenarios.
John Gallagher from Systecon UK Ltd gave a presentation on pooling business case analysis in the context of
support solution, technical system and operation. John described the Opus Suite of tools which included tools
about performance, spares supply, and cost and revenue. Some of the key areas are budgeting and forecasting
of costs, cost control, life cycle cost analysis, consequence analysis and sensitivity analysis in order to increase
Service Level Reliability. The presentation was about the concept of pooling at a high level. Outputs included
plotting availability versus cost. Major concepts are LCC Cost Model, Repair Cost Sensitivity, Penalty Analysis,
and System Availability. The conclusion was that a Logistics Modelling Analysis can provide the foundation for
effective value for money support solution development.
The penultimate talk of the day was about the Cost of Obsolescence Management, and the Benefits of Cost
Modelling, including obsolescence capability and risk from Katie Renton of BMT Reliability Consultants Limited.
An example calculation of obsolescence risk of a cab heater was made, with prediction of years to obsolescence
as well as impact and obsolescence management strategy. OM capabilities included capability maturity
assessments, developing cost estimating models and design for obsolescence.
Our thanks to Sanathanan Rajagopal for standing it at the last minute and providing an excellent presentation.
The day was well received and we look forward to going back to Preston for next year.
Summer Newsletter August 2016
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Bristol Management Centre Announce a New MBA Course
Summer Newsletter August 2016
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Once again we were delighted to receive several nominations from
organisations wishing to participate at this year’s event. The aim
of this workshop was to provide an interactive training session in
cost estimating through the presentation of case studies that had
been conducted by professional teams from academia, industry
and consultants with the added benefit of top-level critique by
senior figures in the profession.
This year we had seven teams participating and had to turn down other teams due to lack of space. The
challenge this year was to evaluate the effect from the new EU rules on vacuum cleaners that came into force
on 1st September 2014 and will mean that “consumers will get better vacuum cleaners” and less energy will be
wasted. A statement from the EU stated that it was not power that made a vacuum cleaner perform well. The
EU will now require that all vacuum cleaners clean well and at the same time avoid wasting electricity. This will
ensure quality, help consumers save money and make Europe as a whole use less energy.
From September EU member states will have to abide to a new set of minimum requirements that cover:
Power; Performance (ability to pick up dust); Energy Efficiency; Dust Re-emission (particularly important for
people with asthma); Noise Level and Durability (nu early failure of the hose or the motor). As regards power,
the current average for a vacuum cleaner is 1800 watts. The maximum permitted input power will be reduced
to 1600 watts (from 1st Sept 2014) and to 900 watts in September 2017.
The challenge is to gather cost and performance data and produce a life cycle cost analysis (assume 10 year life)
to either support or contradict the EU assumption that wattage has become a marketing tool, steering the
market towards more power hungry appliances. The side effect is that a lot of power is wasted and not turned
into sucking power, whereas the consumer is still paying for that wasted electricity.
Our participating teams were:
Each team were allocated a 30 minute presentation time (including brief clarifications questions). A response
from the review panel and a plenary discussion followed after the afternoon break.
It was good to see similar but different approaches to the problem and this, in itself, was educational for all the
60+ attendees. For the Society it showed that the workshop had fully achieved its aims and objectives by
providing a training session in cost estimating conducted by graduate professional estimating teams and
retained the enthusiasm with a programme that was instructive, entertaining and enjoyed by all including the
experienced costing practitioners, finance mangers and project staff in addition to all the presenters. Our
thanks to all the teams and their organisations for their support to this excellent lessons learned workshop.
The comments and reviews say it all – Make sure you attend in 2017
The SCAF 2016 Cost
Estimating Challenge
April Workshop, Bristol
Summer Newsletter August 2016
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In this month’s (May 2016) issue of ‘Warships International Fleet Review’ there is an article entitled ‘Why Size
Matters’ which suggests that warship hulls should be built large enough to be capable of housing two generations
of technology within its lifetime, that is, capable of mid-life upgrades without difficulties.
It goes on to say that the larger the hull the more seaworthy can be the ship and mentions the later batches of
Type 42 destroyer and Type 22 frigates as examples stating “a few hundred thousand pounds worth of steel (in the
Batch 1 ships) was all that was necessary to turn a poor sea boat into something better” with the added advantage
of no redesign costs for later batches of the class. As regards the Type 42 there is an interesting letter in the May
2016 issue of ‘The Marine Professional’ referring to the design being cost constrained while estimated solely by
weight based parametrics.
And the point of this article: the influence of size/ spaciousness on the cost of ship construction and, since
parametrics are generally weight based, how can an estimator allow for changes in ship density in the early design
stages?
The first question is undoubtedly, “What evidence is there that a spacious design is more economical to build?
Firstly, at the ASNE Engineering the Total Ship (ETS) Symposium, Falls Church, VA, 24 September 2008 a paper titled
“Damen Schelde Naval Shipbuilding, Damen’s philosophy: Standardized Patrol Boats and Naval Vessels” was
presented by Jaap L. Gelling M.Sc., Damen Shipyards Gorinchem and Leon Goossens M.Sc., Damen Schelde Naval
Shipbuilding. Reproduced below is one section of the paper dealing with the realised benefits of a spacious hull:
Oversized hulls
Of the Damen Stan Patrol range and the Damen Fast Crew
Supplier range, a major part is of “Sea Axe” design (Axe Bow
Concept) shown in Figure, and one ship is designed to the
Enlarged Ship Concept (predecessor of the Sea Axe). These
designs make use of an oversized slender hull to improve
seakeeping characteristics. On first sight, the oversized hull might
be considered a disadvantage, as it will be heavier and more
expensive. The reality however is considerably different:
The hull of a patrol boat represents only approx. 20% of the total building cost. An oversized hull of
20% in length, in principle will increase the total building cost only by approx. 3-4%. For naval vessels,
this difference is even smaller, due to the costly military equipment and systems.
As the oversized hull is relatively empty, the limited extra cost for the larger hull is easily recovered by
significant savings on labour for installation of equipment. This was already confirmed during the
outfitting of the first series of Stan Patrol 4207’s which took significantly less labour hours than
expected.
Warship Size and Cost
Brian Tanner, Independent Cost Analyst
Figure 1. Damen Stan Patrol 5009
Summer Newsletter August 2016
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Secondly, VARD, previously STX Canada Marine, have designed a series
of successful Offshore Patrol Vessels in their 07 series1. The series began
with the PV75 ‘Vigilant’ for the Coast Guard of Mauritius built in Chile in
1994.2 This vessel was based on the 72m Canadian Coast Guard vessel
Leonard J Cowley. Subsequent vessels include the 80m Roisin class (2
off) and the 90m Samuel Beckett class3 (3 off) for the Irish Naval Service
together with the 85m Protector class4 (2 0ff) for the Royal New Zealand
Navy shown in Figure 2. The VARD website claims the design philosophy
to:
Engineer greater seaworthiness at higher speeds in a slightly larger but easier to build vessel
Design higher internal volume, easier to outfit spaces.
Thirdly, Andrew Humphries in his April 1995 PhD thesis: ‘The Development and Application of Warship Cost
Estimating Methods’ continued the Vosper Thorneycroft interest in outfit density5 and at the RINA Warship 98
conference R.D. Mulligan and M D Courts of the company presented a paper ‘Corvette Design Considerations’
which included Figure 3, presumably based on Humphries research.
This demonstrates that some increase in ship size,
while retaining the same equipment and systems, has
a small but advantageous effect on ship costs. But
there has to be a limit, but what is it? From work I did
in CAAS in the early ‘noughties’ existing warships have
a density variation of some ±15% and the overall
effect on UPC would be ±1%.
Fourthly, are there any other examples?
In Denmark the Odense shipyard built the Absalon
class of flexible support ships and in Janes Navy
International of 1st July 2004 with delivery of the first
ship imminent the company commented:
“It has been an interesting experience and a challenge
for us.” He adds “The equipment density is far greater than we are use to with commercial ships.
Coordination and sequencing of outfitting has been more challenging than we originally anticipated, and
we have exceeded our man-hours target on the first ship. However, we are improving productivity as we
go up the learning curve and we are seeing benefits on the second ship.”
1 http://vardmarine.com/vessel-design-portfolio/offshore-patrol-vessels/
2 The vessel developed a serious problem on its port shaft in May 1997, a year after commissioning. The Naval Dockyard,
Mumbai brought it under tow to Mumbai for repair. The starboard shaft was also found to be weak and several other systems on-board sub-standard.
3 These are 10m longer and 0.3m deeper than the Roisin class reportedly to improve seakeeping.
4 Public domain information suggests that the ships suffer from a weight problem allegedly due to the introduction of an ice
strengthened belt in the hull.
5 RINA Paper ‘A Family of Warships’ by P.J. Usher OBE C.Eng. RCNC and A L Dorey C Eng. read on 29th April 1981.
Figure 2: HMNZS Wellington
Figure 3: Effect of Outfit Density on Size and Cost
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An advertising pamphlet from Roxtec Seals states “The new Danish flexible support ships in the Absalon class start
out as civilian ships at the Odense Steel Shipyard. They are then moved to the Korsoer and Frederikshavn Military
Naval Bases for retrofit of military systems and equipment. This addition includes the routing of extensive amounts
of new electrical cables and piping throughout different zones and hazardous areas on-board.”
Suggesting that the Odense shipyard statement does not scope the total activity for outfitting a naval vessel.
A fifth but converse example is the US Navy DDG51 class which were reduced in size. The following is an extract
from a January 2012 GAO report (GAO- 12 – 113) on the Arleigh Burke Destroyers (i.e. DDG51 class):
DDG 51 is already the densest surface combatant class;
density refers to the extent to which ships have equipment,
piping, and other hardware tightly packed within the ship
spaces. According to a 2005 DOD sponsored shipbuilding
study, the DDG 51 design is about 50 percent more dense and
complex than modern international destroyers.
Report Footnote: Measured in terms of pounds of weight per
cubic foot (lbs/cf), the DDG 51 class has an outfit density of
close to 8 lbs/cf, which is more than the DDG 1000 and FFG 7
classes, which are approximately 7 lbs/cf, and the CG 47 class,
which is approximately 7.5 lbs/cf.
While the increase in density of some 7%
to 14% - depending on the comparator -
has an impact demonstrated by these
slides from NAVSEA 05C, the Cost
Engineering and Industrial Analysis
Division of the USDoD NAVSEA
organisation.
Figure 4 DDG 51 Flight 1.
Figure 5a NAVSEA 05C slide
Figure 5b NAVSEA 05C slide
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Japan and South Korea have built their own versions of the DDG 51, but with larger dimensions as tabled here:
Ship DDG51 Flight 1 JDS Kongo KDXIII
Length oa m 152.0 161 166
Length wl m 142.0
Beam max m 20.0 21 21
Beam wl m 18
Depth m 12.7
‘Volume’ m3 32,461
Lightship Weight Te 6,671
Standard Displacement Te 7,500 8,500
Full Load Displacement Te 8,362 9,485 11,000
A June 2014 MIT paper titled ‘Improving the Parametric Method of Cost Estimating Relationships of Naval Ships’ by
Ungtae Lee examined the parameters of ‘Electric Power Density’ (EPD) and ‘Outfit Density’. The EPD parameter
was introduced by RAND in the 2006 report ‘Why Has the Cost of Naval Ships Risen?’ It is defined as:
“Electrical power generation capacity in kW divided by Lightship Weight”
While Outfit Density is defined as:
Weight of all interior systems and equipments divided by ship volume
Which can be determined by:
Def Stan 02-163 Σ (Weight Groups 2 to 7) divided by ship volume.
The data used to determine the new Cost Estimating Relationship was the Final “end unit cost” which includes all
Government-furnished equipment and Contractor-furnished equipment6. In both reports the cost of a ninth ship is
used7 and the comparable parametric equations are:
MIT Paper:
Ln(Cost)9 = 0.626*Ln(LSW8) + 1.05*Ln(EPD) + 1.129
While RAND produced the relationship:
Ln(Cost)9 = 0.947*Ln(LSW9) + 0.943*Ln(EPD) + 11.50 +
Qualitative factors for auxiliary vessels or submarines.
6 Usually described at the Unit Production Cost (UPC).
7 Presumably as the learning curve for labour will to all intents become level.
8 LSW is Lightship Weight, i.e. Basic Weight or Build Weight
9 LSW is Lightship Weight, i.e. Basic Weight or Build Weight
Direct Costs
15%
Overheads
15%
Labour
30%
Materials
30%
Platform (Shipbuild)
60%
Combat System
40%
Unit Production Cost
100%
Figure 6. Unit Cost Breakdown
Summer Newsletter August 2016
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The 2014 MIT paper made no distinction between surface combatants and other very different vessels so the RAND
relationship is preferred and demonstrates a near linear relationship with build weight and power density.
The MIT paper includes the conclusion: ‘Additional variables such as outfit density and shaft horsepower did not
statistically improve the CER.’ Which is in keeping with other evidence. A typical breakdown of a surface
combatant UPC is shown here and demonstrates that labour is just 15% of the UPC. Outfit Density is claimed to
save on labour, the main benefit being in seakeeping and in-service support, the NAVSEA plots demonstrating a
labour increase of 12% to 16% for DDG-51 leading to a 2½% increase in UPC in keeping with the VT estimate and
probably less as the denser hull is slightly lighter. Looked at in reverse, a less dense but slightly larger vessel will be
cheaper by a similar margin.
So, the answer to the first question has to be that favourable evidence does exist. That leads to a second question:
Given that a parametric estimate will be based on existing vessels/ data, how does the estimator adjust an estimate
for varied outfit density?
A search of public domain information on the internet has not produced a definitive tool/ relationship. The MIT
paper has the graph, shown in Figure 7, of Cost per Ton versus Outfit Density which seems to contradict the finding
that outfit density had no effect on the CER. One explanation can be that the graph consists of two groups of
dissimilar vessels so its use is questionable.
While a SPAR Associates paper EM-CM-001 ‘Estimating Design & Construction’ January 2010 includes a graph
where the density factor was calculated for a selection of ships, both commercial and naval the density being
defined as:
Density Factor = Σ(SWBS 200 – 700 MTON weights)/ Ship M3 Displacement
Which is more a ratio of outfit to total weight and not
relevant to the current consideration.
So, while some evidence exists to demonstrate that a
spacious ship will cost no more than, and perhaps a little less
than, a cramped design there is no rigorous cost estimating
relationship to modify an estimate based solely on weight
parametrics that make no allowance for outfit density.
Figure 7. MIT Paper plot of Outfit Density
Figure 8: SPAR Associates plot of Density Factor
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The SDSR 2015 which reduced the number of Type 26 frigates from 13 to 8 also stated:
“We will also launch a concept study and then design and build a new class of lighter, flexible general
purpose frigates”.
Hopefully, the experience of the Type 42 destroyer will not be repeated and that the ‘lighter’ warship will not be
achieved by a dense equipment density that at the conclusion of construction will be found to have given no cost
benefit and prove expensive and difficult to operate and maintain. One example of a larger hull with lower outfit
density does exist, albeit for different reason, and that is the South African Valour class frigate. It was initially
described as a ‘Patrol Corvette’ which was a frigate hull for good seakeeping in the southern oceans with a
corvette’s armament although significant upgrades were originally planned and have subsequently been achieved.
15 Sept 2015 SCAF 2015 Annual Conference and AGM, QEII Conference Centre, London.
The fiscal situation remains very challenging whichever political party wins the election.
Organisations today recognise that the business case is the basic requirement to secure funding
and key financial metrics are underpinned by a real and detailed understanding of cost. The very
moment that funding is needed is often the time when the creator’s ‘baby’ needs the greatest
attention – a tension that demands a rapid understanding of product and programme cost in
particular. In this age of austerity, more than ever before, it is imperative that we aim to get more
for less; it is important that we help decision makers to achieve their project goals whilst staying
within their budget. Copies of the presentations are available on the website.
17 Nov 2015 SCAF Workshop Theme: Investment Appraisal: What’s in it? The BAWA Centre, Filton, Bristol
The UK Ministry of Defence is proposing changes to the financial instructions relating to the
development and application of Investment Appraisals for project approval. This workshop will
discuss the effects of the changes and their implication for Industry in delivering whole life costs and
value for money options. Copies of the presentations are available on the website
02 Feb 2016 SCAF Workshop Theme: Project Cost Control, Royal Institution of Naval Architects, London
Generating a budget and establishing a schedule for a project or programme is challenging. There
are many variables and cost drivers that can influence the baseline plan and the resources
attributed to it. There is uncertainty in the estimating and potential deviations from the baseline
caused by foreseen and unforeseen risks. But this is just the beginning of the project. The project
control function will periodically monitor the progress of the project or programme against this
baseline and attempt to proactively control its journey until its completion. Along the way there
needs to be the application of different project control and project management techniques to guide
the project or programme to a successful outcome including earned value management (EVM), risk
Workshops & Events during the 2015/16 SCAF Year
Summer Newsletter August 2016
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management, critical path analysis, benefits realisation, stakeholder management and so forth.
Copies of the presentations are available on the website
12 Apr 2016 SCAF Workshop Theme: Annual Cost Estimating Challenge, The BAWA Centre, Bristol
This year we had seven teams participating and had to turn down other teams due to lack of space.
The challenge this year was to evaluate the effect from the new EU rules on vacuum cleaners that
came into force on 1st September 2014 and will mean that “consumers will get better vacuum
cleaners” and less energy will be wasted. A statement from the EU stated that it was not power
that made a vacuum cleaner perform well. The EU will now require that all vacuum cleaners clean
well and at the same time avoid wasting electricity. This would ensure quality, help consumers save
money and make Europe as a whole use less energy. The Teams were to gather cost and
performance data and produce a life cycle cost analysis (assume 10 year life) to either support or
contradict the EU assumption that wattage has become a marketing tool, steering the market
towards more power hungry appliances. Copies of the presentations are available on the website
07 Jun 2016 SCAF Workshop Theme: Support Solutions Modelling, The Conference Centre, Ribby Hall, Preston
The delivery of a system, equipment or service is the beginning of the support period, but how is it
going to be supported? If the support solution has not been considered by this time it’s too late!
The cost community has for many years considered the Whole Life Cost (WLC) of the systems,
equipment and services that it estimates. Costing practitioners recognise that the acquisition part
of the project life cycle needs to include the logistics and support activities necessary to plan and
deliver the support solution. To enable us to forecast the support costs it is necessary to appreciate
the support solution. Availability, Reliability and Maintainability (ARM) and the Integrated Logistic
Support (ILS) community are good sources of assumptions and risks when estimating cost.
This workshop considered support solutions in the context of cost forecasting, why they were
important, the variety of options available and the techniques used for cost forecasting including
hints and tips. Copies of the presentations are available on the website
07 Jul 2016 SCAF Summer Reception and Awards Dinner, Bailbrook Hotel, Bath
This was an excellent opportunity to meet colleagues and friends in a relaxed environment and
applaud this year’s award winners.
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Nov 2016 SCAF Workshop and AGM Theme: Integrated Cost and Risk Analysis, The BAWA Centre, Bristol
The risk analysis of a project may be performed on either the cost risk or schedule risk associated
with the programme. Project costs often exceed their estimates because those estimates do not
take into consideration the uncertainties in the estimates of duration of project activities. Cost
risk can be most accurately estimated and completely understood if it explicitly takes into
consideration schedule risk. This workshop will examine methods of incorporating the
uncertainty in cost and schedule to determine equivalence between schedule and costs and
provide application examples of the technique. Please contact the Secretary if you are
interested in presenting a paper at this event
For further details on any of the above events or on the workshops planned for 2017 please
contact the SCAF Secretary, Neil Morrill by telephone on 01980 955 548 or by email:
25-29 Jul 2016 33rd International Symposium on Military Operational Research (33 ISMOR), Royal
Holloway, University of London, Egham, Surrey TW20 0EX, UK. Please see www.ismor.com
for further details.
17-20st Oct 2016 ICEAA International Conference and Training Symposium, Marriott City Centre Hotel, Bristol. Please see http://www.iceaaonline.com/bristol2016/ for further details. Please also note that SCAF and other associated organisations are supporting this quadrennial event.
Other Related
Events
SCAF is not responsible for the content of any
external websites published in this Newsletter
Networking
for the cost
estimating
and analysis
community
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19 www.scaf.org.uk
SCAF Management Committee Meetings 2015/16
Date
Venue Focus
October 2015 QinetiQ, Bristol 2016 events programme
November 2015 BMT, Fareham 2016 workshops content & SCAF challenge
December 2015 QinetiQ, Bristol Finalise 2016 events programme and interim 2017 programme
January 2016 BMT, Fareham Finalise challenge and financial budget for 2017
March 2016 QinetiQ, Bristol Discuss awards nominations
May 2016 BMT, Fareham Annual Conference, final details for awards dinner and committee nominations
July 2016 QinetiQ, Bristol Annual Conference final details and November workshop interim programme
September 2016 QinetiQ, Bristol Review AGM information for November Workshop
October 2016 BMT, Fareham 2017 events programme and November workshop
November 2016 BMT, Fareham Ideas for SCAF Challenge and February workshop
December 2016 QinetiQ, Bristol Finalise 2017 events programme and interim 2018 programme
The committee would welcome any suggestions on particular topics that can be developed for debating at future workshops or for round table/panel discussion. We would also welcome any comments on changes or otherwise you might like to see to the workshop structure and content. Please forward your comments to [email protected] where they can be put on the agenda for committee discussion and action. Please also remember that the committee works for the members and will do their utmost to address any issues raised to the benefit of the Society.
Are you a company that sends 5 or more staff to any of our workshops? There are discounts available for block bookings with further flexibility offered for Corporate Membership. Further details can be obtained from the SCAF Treasurer, Dave Hedley email: [email protected]
SCAF Corporate Membership
Summer Newsletter August 2016
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For over 20 years the Society has sought to illuminate key issues in the analysis and forecasting of project costs—and to promote best practice within the cost forecasting community.
The Society provides a single point of contact for advice to those wishing to address key issues in the analysis and forecasting of costs and timescales of complex programmes.
Workshops and seminars are held at regular intervals throughout the year. A newsletter is published electronically 4 times a year.
Collaborative links with other societies has always been maintained and a library of relevant papers are available. A single annual payment at the Annual Conference entitles members to attend all the years’ programme of SCAF events at no further cost. The Summer Reception is also provided free to SCAF members and their guests.
SCAF is committed to providing Continuing Professional Development (CPD) through the provision of its skills workshops and its support to Professional Development courses.
The Society is self-funded and a Not-for-Profit organisation that continues to provide its members with exceptional value for money.
SCAF 2014/15 Committee Members and Contact Details
Join us at our
Linkedin Group
Society for Cost
Analysis and
Forecasting - SCAF
Chairman: Dale Shermon [email protected] T: +44 (0) 1179 528 455 M: +44 (0) 7785 522 847
Newsletter Editor: Arthur Griffiths [email protected] M: +44 (0) 7792 911 279
Treasurer: Dave Hedley BMT Reliability Consultants Ltd [email protected] T: +44 (0) 1489 553 163
Secretary: Neil Morrill Dstl [email protected] T: +44 (0) 1980 955 548
Committee: Sanathanan Rajagopal MoD, CAAS [email protected] T: +44 (0) 306 798 2339
Dr Paul Baguley Cranfield University [email protected] T: +44 (0) 1234 750 111 x 5658
Dr Crispin Allard Atkins [email protected] M: +44 (0) 1454 662 089
Dr Paul Wood BMT HiQ-Sigma [email protected] T: +44 (0) 1225 820 980
