Slide1 : NATO Specialist Team on Ship Costing ITS Maestrale FS de Grasse USS John C. Stennis USS Port Royal FS Charles de Gaulle HMS Ocean USS John F. Kennedy FS Sercouf ITS Durand de la Penne HMNLS van Amstel Irv Chewning
Chairman, STSC Multi-National Deployment
Operation
Enduring Freedom
(April 2002) SCEA Conference
Los Angeles, CA
17 June 2004
Outline : Outline 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
NATO Organization : NATO Organization North Atlantic Treaty Organization (NATO) Public Policy Division Office of Security Division of Defense
Policy and Planning Division of Defense
Investment Civilian Structure Division of Operations Organizations & Agencies Military Structure Military Committee Allied Command Operations Allied Command Transformation Logistics Standardization Civil Emergency Planning Communication and Information Sys. Etc...
Location of STSC within NATO Organization : 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
Background Purpose of the STSC : Background Purpose 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.
Participants in ANEP-41 & ANEP-49 Development : Participants in ANEP-41 & ANEP-49 Development Australia
Belgium
Canada
France
Germany
Italy
Netherlands
Norway
Portugal
Spain
United Kingdom
United States
US Coast Guard
Work of STSC is typically Institutionalized via Creation or Updating of an Allied Naval Engineering Publication (ANEP) : Work of STSC is typically Institutionalized via Creation or Updating of an Allied Naval Engineering Publication (ANEP) 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
Slide8 : History - Ship Costing
ANEP Development NG/6 (formerly IEG/6)
ON SHIP DESIGN Ad Hoc Working Group (AHWG) ON SHIP COSTING
(Working Paper - 1990) ANEP-41
July 1992 Specialist Team on Ship Costing (Working Paper - 1995) ANEP-49
January 1996 AIM
Affordable Fleet! OBJECTIVE
Coherent Approach and
Guidance for Ship Designers, Cost Estimators, Decision Authorities, and Others involved in ship acquisition 8
History - Ship Costing ANEP Updates :
“Trends in Manpower Reduction and the Use of Commercial Standards, Practices and Contracting Strategies to Reduce Costs of Naval Ships,” June 1999 November 1997 Task as Directed by NG/6: Prepare Working Paper regarding Ship Cost Reduction Trends and Practices National Expertise: Contributions of 12 Nations Literature Survey: >70 Articles & Presentations 3 Focus Areas Commercial Standards & Practices Total Ownership Cost Manpower Reduction Two Working Papers ANEP-49 Edition 2 November 2000 ANEP 41 Edition 3 December 2003 “Total Ownership Cost Concept,” December 2002 History - Ship Costing ANEP Updates 9
ANEP-41 on Ship Costing : ANEP-41 on Ship Costing 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.
Contents ANEP-41 Edition 3 : Contents ANEP-41 Edition 3 Foreword
Chapter 1 Introduction
Chapter 2 Ship Cost Terms and Definitions
Chapter 3 NATO Ship Cost/Work Breakdown Structure
Chapter 4 Total Ownership Cost
Chapter 5 Costing Methodology
Chapter 6 Multinational Considerations
Chapter 7 Implementation Guidelines
List of References, List of Acronyms
Annex A NATO Ship Cost-Related Terms and Definitions
Annex B Expanded Ship Work Breakdown Structure Title Index
Annex C NATO Ship Programmatic Cost Element Index
Annex D Allocation of NATO Ship CWBS to LCC Composition
Annex E NATO Alternate O&S Cost Categories for Ships
Annex F NATO Elements of Manpower Cost for Ships
Annex G Cost Models
NATO Ship Costing Components : NATO Ship Costing Components
NATO Ship CWBS Multidimensional Aspect (Top Level) : NATO Ship CWBS Multidimensional Aspect (Top Level) Costs separated by:
Common among nations
Unique to a nation
NATO Ship CWBS Multidimensional Aspect (Detailed) : NATO Ship CWBS Multidimensional Aspect (Detailed) WBS similar to US Expanded Ship Work Breakdown Structure
Program Phases per NATO Phased Armaments Programming System (PAPS)
NATO Ship Cost/Work Breakdown Structure (Level 3 Elements) : NATO Ship Cost/Work Breakdown Structure (Level 3 Elements) LEVEL 1 LEVEL 2 LEVEL 3 DESIGN & SUPPORT SERVICES SOFTWARE HARDWARE PROGRAMMATIC HARDWARE SOFTWARE DESIGN & SUPPORT SERVICES PROGRAMMATIC COMMON ELEMENTS UNIQUE ELEMENTS TOTAL PROGRAM
NATO Ship Cost/Work Breakdown Structure (Level 4 Elements) : NATO Ship Cost/Work Breakdown Structure (Level 4 Elements) UNIQUE ELEMENTS SOFTWARE HARDWARE DESIGN & SUPPORT PROGRAMMATIC GROUP 100 HULL STRUCTURE GROUP 200 PROPULSION PLANT GROUP 300 ELECTRIC PLANT GROUP 400 COMMAND & SURVEILLANCE GROUP 500 AUXILIARY SYSTEMS GROUP 600 OUTFITTING & FURNISHINGS GROUP 700 ARMAMENT GROUP 100 HULL STRUCTURE GROUP 200 PROPULSION PLANT GROUP 300 ELECTRIC PLANT GROUP 400 COMMAND & SURVEILLANCE GROUP 500 AUXILIARY SYSTEMS GROUP 600 OUTFITTING & FURNISHINGS GROUP 700 ARMAMENT GROUP 000 GUIDANCE & GROUP 800 INTEGRATION & ENGINEERING GROUP 900 ASSEMBLY & SUPPORT SERVICES BUDGETING PRACTICES ESCALATION LAW & GOVERNMENT REGULATIONS CONTINGENCIES GOVERNMENT SUPPORT ACTIVITIES NATO PROGRAM OFFICE ACTIVITIES SHIPBOARD LOAD - OUT ITEMS DISPOSAL LEVEL 2 LEVEL 3 LEVEL 4 COMMON / UNIQUE SOFTWARE HARDWARE DESIGN & SUPPORT PROGRAMMATIC GROUP 100 HULL STRUCTURE GROUP 200 PROPULSION PLANT GROUP 300 ELECTRIC
PLANT GROUP 400 COMMAND & SURVEILLANCE GROUP 500 AUXILIARY SYSTEMS GROUP 600 OUTFITTING & FURNISHINGS GROUP 700 ARMAMENT GROUP 100 HULL STRUCTURE GROUP 200 PROPULSION PLANT GROUP 300 ELECTRIC
PLANT GROUP 400 COMMAND & SURVEILLANCE GROUP 500 AUXILIARY SYSTEMS GROUP 600 OUTFITTING & FURNISHINGS GROUP 700 ARMAMENT GROUP 000 GUIDANCE & ADMINISTRATION GROUP 800 INTEGRATION & ENGINEERING GROUP 900 ASSEMBLY & SUPPORT SERVICES BUDGETING PRACTICES ESCALATION LAW & GOVERNMENT REGULATIONS CONTINGENCIES
& RESERVES GOVERNMENT SUPPORT ACTIVITIES NATO PROGRAM OFFICE ACTIVITIES SHIPBOARD LOAD - OUT ITEMS DISPOSAL
NATO Ship Program Phase CWBS Correlation : NATO Ship Program Phase CWBS Correlation
NATO Ship Life Cycle Cost Hierarchy : NATO Ship Life Cycle Cost Hierarchy OPERATIONS INITIAL CONSTRUCTION
COST: • PROJECT MANAGEMENT • HARDWARE (e.g. Structure,
Propulsion, and Electric Plant) • START-UP (e.g. Tooling,
Jigs, and Fixtures) • ALLOWANCE FOR CHANGES
e.g. Design, Schedule) • TEST AND TRIALS • INITIAL OUTFIT (onboard Spares,
Repair Parts, Tools, and Fuel) SAIL-AWAY COST • DESIGN • DEVELOPMENT • SOFTWARE (e.g Computer programs, Coding) • TECHNICAL DATA • PUBLICATIONS • SUPPORT EQUIPMENT • TRAINING EQUIPMENT • INITIAL SPARES
(Shore Based) • FACILITY
CONSTRUCTION • PROJECT LEAD-SHIP
OVERCOST • OPERATIONS & SUPPORT DISPOSAL PLUS: PLUS: PROGRAM ACQUISITION COST TOTAL LIFE CYCLE COST ( PLCC+LINKED VARIABLE INDIRECT) TOTAL OWNERSHIP COST ( TLCC + LINKED FIXED INDIRECT) • COMMON SUPPORT ITEMS&
SYSTEMS • INFRASTURE COST FOR PLANNING, MANAGING, OPERATING, AND EXECUTING PLUS: PROGRAM LIFE CYCLE COST (LINKED DIRECT) PLUS: MANPOWER RECRUITING ACQUISITION TRAINING MEDICAL SUPPORT WHOLE LIFE COST (TOC + NON-LINKED) PLUS: ITEMS NOT AFFECTED
BY THE EXISTENCE OF
THE SHIP/WEAPON
SYSTEM - CEREMONIAL UNITS
- SHORE-BASED
TRAINING
- HOSPITALS
- NAVY STAFF
LOAD- OUT
ITEMS - MILITARY
ACADEMIES NATO PROJECT MANAGEMENT
OFFICES •
Total Ownership Cost Concept : 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 : 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 : ANEP-41 Implementation Guidelines 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.
History ANEP 49 Development : History ANEP 49 Development Literature Survey Compilation of
45 Papers or
Presentations ANEP 49 on Ways to Reduce Cost of Ships Executive Summary
Introduction
7 Chapters
Conclusions & Recommendations
4 Appendixes “Topics” National Expertise
of
Participating
Nations Literature Synthesis Salient Point Summaries
Document Analysis by PAPS Phases “Topics” Identification
of 28 Topics
28 Point Papers
3 Major Working
Papers 22
ANEP-49 on Ways to Reduce Costs of Ships : ANEP-49 on Ways to Reduce Costs of Ships 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
Contents ANEP-49 Edition 2 : Executive Summary
Introduction
Chapter A Mission Needs and Requirements
Chapter B Technologies
Chapter C Design
Chapter D Acquisition Process
Chapter E Production
Chapter F Operations and Support
Chapter G Cost Management
Conclusions and Recommendations
Appendix I Chronology of Development
Appendix II Glossary of Terms and Definitions
Appendix III Selected Information on National Experiences Relevant to Ship Cost Reduction
Appendix IV Value Engineering Process Steps Contents ANEP-49 Edition 2
ANEP 49 Topic Areas : ANEP 49 Topic Areas 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 28 Topics and Three Working Papers:
ANEP-49 Ways to Reduce Costs of Ships Design Phase : Cost-Oriented Design
Product-Orientation
Modularization
Standardization
Group Technology
Commonality
Design Tradeoffs:
Commercial versus Military
Standards/Practices
Margin Policy
Technologies
Joint-ness
Interoperability
International Cooperation
Integrated Design
Design-for-Production
Investment for Life Cycle
In-Service Flexibility
Process Simplification ANEP-49 Ways to Reduce Costs of Ships Design Phase
ANEP-49 Ways to Reduce Costs of Ships Acquisition Phase : ANEP-49 Ways to Reduce Costs of Ships Acquisition 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
ANEP-49 Ways to Reduce Costs of Ships Production 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. ANEP-49 Ways to Reduce Costs of Ships Production Phase
Slide29 : 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 ANEP-49 Ways to Reduce Costs of Ships In-Service Phase
ANEP-49 Ways to Reduce Costs of Ships Summary : 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 ANEP-49 Ways to Reduce Costs of Ships Summary
Shared View of NATO Allies : Shared View of NATO Allies Identify Cost Drivers versus mission needs
Aim to make all “affected” costs transparent for decision-making