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ANEP-41 Edition 3 DRAFT - The Society of Cost Estimating and

VIEWS: 80 PAGES: 31

									                                                                           Irv Chewning
      NATO Specialist Team on                                              Chairman, STSC
          Ship Costing                                                           SCEA
                                                                              Conference
                                                  USS Port Royal
                                                                            Los Angeles, CA
    ITS Maestrale           USS John C. Stennis
                                                                             17 June 2004
                                                   HMS Ocean               HMNLS van Amstel




   FS de Grasse


                      FS Charles de Gaulle                         USS John F. Kennedy




Multi-National Deployment
        Operation
                            FS Sercouf                 ITS Durand de la Penne
    Enduring Freedom
       (April 2002)                                                                           1
               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
                                         2
                NATO Organization
           North Atlantic Treaty Organization (NATO)

                                                 Organizations &
Civilian Structure        Military Structure     Agencies

Public Policy Division    Military Committee     Logistics

Office of Security        Allied Command         Standardization
                          Operations
Division of Defense                              Civil Emergency
Policy and Planning                              Planning
                          Allied Command
                          Transformation
Division of Defense                              Communication and
Investment                                       Information Sys.

                                                 Etc...
Division of Operations
                                                                   3
           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
                                                              4
           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.
                                                            5
      Participants in ANEP-41 &
      ANEP-49 Development

Australia           Netherlands
Belgium             Norway
Canada              Portugal
France              Spain
Germany             United Kingdom
Italy               United States
                    US Coast Guard


                                     6
           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

                                                                            7
                  History - Ship Costing
                   ANEP Development
                           NG/6 (formerly IEG/6)
                           ON SHIP DESIGN

Ad Hoc Working Group                                Specialist Team on
(AHWG) ON SHIP COSTING                              Ship Costing
   (Working Paper - 1990)                          (Working Paper - 1995)


        ANEP-41                                    ANEP-49
        July 1992                                  January
                                                   1996
                   OBJECTIVE
             Coherent Approach and                              AIM
        Guidance for Ship Designers, Cost                    Affordable
       Estimators, Decision Authorities, and
        Others involved in ship acquisition
                                                               Fleet!
                                                                       8
                                History - Ship Costing
                                ANEP 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
                                  Standards      Ownership     Manpower
                                      &           Cost         Reduction
                                   Practices


“Trends in Manpower
Reduction and the Use of                                                   “Total Ownership Cost
                                           Two Working Papers
Commercial Standards,                                                      Concept,” December 2002
Practices and Contracting
Strategies to Reduce Costs
of Naval Ships,” June 1999

                                  ANEP-49 Edition 2 November 2000
                                  ANEP 41 Edition 3 December 2003
                                                                                                     9
               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.
                                                                       10
                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                                      11
NATO Ship Costing Components




                               12
           NATO Ship CWBS
           Multidimensional Aspect (Top Level)

                                  NATO SHIP CWBS
Costs separated                   MULTIDIMENSIONAL ASPECT

  by:
   – Common        * COST
                     TYPE
     among
     nations
                     C
   – Unique to a     W
                     B
                                      COMMON                       UNIQUE

     nation          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)

                                                                                   13
              NATO Ship CWBS
              Multidimensional Aspect (Detailed)
                                            NATO SHIP CWBS
• WBS similar to                            MULTIDIMENSIONAL ASPECT

  US Expanded                                           COMMON             UNIQUE

  Ship Work        COST
                   TYPE
                                   NON-RECURRING
                                    RECURRING
  Breakdown               HARDWARE GROUP   100

  Structure                                200
                                           300
                                           400
                                           500
                                           600
• Program Phases   C
                   W
                                           700
                   B      SOFTWARE GROUP   100
  per NATO         S                       200
                                           300
  Phased                                   400
                                           500
  Armaments                                600

  Programming             DESIGN & SUPPORT
                                           700
                                           000

  System (PAPS)           SERVICES         800
                                           900
                               PROGRAMMATICS
                                                 1 2 3 4 5 6   7   1 2 3 4 5 6   7
                                                 PROGRAM PHASE     PROGRAM PHASE
                                                                                     14
     NATO Ship Cost/Work Breakdown
     Structure (Level 3 Elements)

LEVEL 1                TOTAL PROGRAM


LEVEL 2   COMMON ELEMENTS         UNIQUE ELEMENTS



LEVEL 3        HARDWARE                 HARDWARE



               SOFTWARE                  SOFTWARE



            DESIGN & SUPPORT       DESIGN & SUPPORT
                SERVICES               SERVICES


             PROGRAMMATIC              PROGRAMMATIC




                                                      15
NATO Ship Cost/Work Breakdown
Structure (Level 4 Elements)
 LEVEL 2                    COMMON / UNIQUE
                            UNIQUE ELEMENTS

 LEVEL 3    HARDWARE
            HARDWARE         SOFTWARE
                             SOFTWARE         DESIGN & SUPPORT
                                             DESIGN & SUPPORT    PROGRAMMATIC
                                                                  PROGRAMMATIC


            GROUP 100        GROUP 100           GROUP 000          BUDGETING
              HULL             HULL             GUIDANCE &          PRACTICES
 LEVEL 4    STRUCTURE        STRUCTURE        ADMINISTRATION


             GROUP 200        GROUP 200          GROUP 800          ESCALATION
            PROPULSION       PROPULSION        INTEGRATION &
              PLANT            PLANT            ENGINEERING


             GROUP 300        GROUP 300          GROUP 900           LAW &
           ELECTRIC PLANT
              ELECTRIC      ELECTRIC PLANT
                               ELECTRIC          ASSEMBLY &        GOVERNMENT
                                                  SUPPORT
                                                 SUPPORT           REGULATIONS
              PLANT            PLANT              SERVICES
                                                 SERVICES

             GROUP 400        GROUP 400                            CONTINGENCIES
                                                                  CONTINGENCIES
            COMMAND &        COMMAND &                            & RESERVES
           SURVEILLANCE     SURVEILLANCE


             GROUP 500        GROUP 500                            GOVERNMENT
             AUXILIARY        AUXILIARY                              SUPPORT
              SYSTEMS          SYSTEMS                              ACTIVITIES


            GROUP 600        GROUP 600                            NATO PROGRAM
                                                                  NATO PROGRAM
           OUTFITTING &     OUTFITTING &                             OFFICE
           FURNISHINGS      FURNISHINGS                             ACTIVITIES


            GROUP 700        GROUP 700                              SHIPBOARD
            ARMAMENT         ARMAMENT                                    -
                                                                    LOAD OUT
                                                                      ITEMS


                                                                     DISPOSAL

                                                                                   16
           NATO Ship Program Phase CWBS
           Correlation
            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

                                                                         17
                      NATO Ship Life Cycle Cost
                      Hierarchy
•OPERATIONS
 INITIAL CONSTRUCTION
 COST:                          PLUS:                     PLUS:          PLUS:           PLUS:          PLUS:
                                   • DESIGN               • OPERATIONS                   • COMMON
 • PROJECT MANAGEMENT                                                                                   ITEMS NOT AFFECTED
                                   • DEVELOPMENT            & SUPPORT     MANPOWER         SUPPORT
                                                                                                        BY THE EXISTENCE OF
 • HARDWARE (e.g. Structure,       • SOFTWARE (e.g                       - RECRUITING      ITEMS&
   Propulsion, and Electric Plant)                        • LOAD- OUT                                   THE SHIP/WEAPON
                                     Computer programs,                  - ACQUISITION     SYSTEMS
 • START-UP (e.g. Tooling,                                  ITEMS                                       SYSTEM
                                     Coding)                             - TRAINING
 • Jigs, and Fixtures)             • TECHNICAL DATA       • DISPOSAL     - MEDICAL       • INFRASTURE     - MILITARY
                                                                                           COST FOR         ACADEMIES
 • ALLOWANCE FOR CHANGES           • PUBLICATIONS                          SUPPORT                        - CEREMONIAL UNITS
    e.g. Design, Schedule)         • SUPPORT EQUIPMENT                                     PLANNING,
                                                                                           MANAGING,      - SHORE-BASED
 • TEST AND TRIALS                 • TRAINING EQUIPMENT                                                     TRAINING
                                                                                           OPERATING,
   INITIAL OUTFIT (onboard Spares, • INITIAL SPARES                                        AND            - HOSPITALS
   Repair Parts, Tools, and Fuel)    (Shore Based)                                                        - NAVY STAFF
                                   • FACILITY                                              EXECUTING
 SAIL-AWAY COST                      CONSTRUCTION
                                   • 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)

                                                                                                                    18
          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
                                                                 19
                          Ship TOC Cost Domain

• Maps Cost Types to NATO Ship
  LCC Hierarchy                                                   TOC Cost Domain
                                                                   TOC COST DOMAIN
   – Linked Direct: Costs specifically
     associated to the development,                       Cost Type                  PLCC TOC                  WLC
     procurement, operation and support of
     the individual ship or ship’s systems                Linked-Direct-Fixed             X           X          X




                                               Affected
   – Linked Indirect: Costs related to                    Linked-Direct-Variable          X           X          X
     other programs, ships or weapon                      Linked-Indirect-Fixed                       X          X
     systems, in addition to the given ship               Linked-Indirect-Variable                    X          X
     or ship’s systems
                                                          Non-Linked                                             X
   – Non-Linked: Costs of Navy
                                                                                     Ø
     operations not associated to individual                                         Ø
                                                                                         PLCC = Program Life Cycle Cost
                                                                                         TOC = Total Ownership Cost
     ship or ship’s systems                                                          Ø
                                                                                         WLC = Whole Life Cost

• Permits flexible approach
  to selecting desired level of
  LCC in a given
  collaborative program
                                                                                                               20
                 ANEP-41 Implementation Guidelines

1. The baseline ship design and technical     6. The cost elements identified must be
   requirements and configuration must be         placed within the structure of the
   established.                                   CWBS.
2. The acquisition strategy must be defined   7. Each identified element must be
                                                  designated as either common or unique.
   for all phases of the program.
                                              8. Cost models and databases for use in the
3. Agree to a CWBS and cost element               development of Cost Estimating
   definitions for use as the common basis        Relationships must be established and
   for costing the proposed ship for              agreed upon.
   comparison to the agreed cost target.      9. Cost estimates must be developed for
4. All cost elements must be identified at        each phase of the NATO ship program
   the agreed level of the NATO Ship LCC          using the CWBS format and agreed cost
   Hierarchy.                                     model(s).
5. Each cost element identified must be       10. The above process should occur at the
                                                  beginning of all NATO ship programs in
   assigned to the applicable life-cycle          order to provide a frame of reference
   phase(s) of the NATO program.                  for all ship design and cost decisions.

                                                                                  21
                 History
                 ANEP 49 Development
                                                  Literature Survey
 “Topics
 National
 Expertise                                         Compilation of
 ” of                                              45 Papers or
Participating                                      Presentations
  Nations
                        “Topics”
                    Identification
                    of 28 Topics
                                                  Literature Synthesis
                    28 Point Papers
                    3 Major Working           Salient Point Summaries
                    Papers                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

• 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
                                                              23
       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              24
                    ANEP 49 Topic Areas

28 Topics and Three Working Papers:
 •   Requirements (Mission)                  •   Crew Reduction Vs. Automation
 •   Procedures/Process to Establish         •   Contractor Data Requirements
     Requirements                            •   Design and Production Processes
 •   Commercial Vs. Military Standards       •   Reliability Analysis
 •   Design-to-Cost                          •   Risk Acceptance Level
 •   Common Procurement/Purchases            •   Margin Policy
 •   Technology Innovations                  •   International Cooperation
 •   Time and Decisions                      •   Standardization of Cost Effective
 •   Contracting Practices                       Solutions
 •   Commonality                             •   Learning Curve Maximization
 •   Specifications/Project Definition       •   Industrial Base Productivity,
                                                 Competitiveness and Reliability
 •   Operations and Support Considerations
                                             •   Design/Cost Tradeoffs (Affordability
 •   Cost Management                             Analysis)
 •   Value Engineering                       •   Use of Competition vice National
 •   Eliminate/Reduce Change                     Concerns
 •   Total Ownership Cost                    •   Environmental Impacts
                                                                                   25
                   ANEP-49 Ways to Reduce Costs of Ships
                                    Design Phase

Integrated Design                                   Design Tradeoffs:
 Design-for-Production                               Commercial versus
 Investment for Life Cycle                                   Military
 In-Service Flexibility                                 Standards/Practices
 Process Simplification                              Margin Policy
                                                     Technologies



Product-Orientation                                 Joint-ness
 Modularization                                      Interoperability
 Standardization                                     International Cooperation
 Group Technology
 Commonality


                             Cost-Oriented Design
                                                                         26
              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                              27
   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.
                                                        28
         ANEP-49 Ways to Reduce Costs of Ships
                            In-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
                                                            29
             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
                                                                              30
            Shared View of NATO Allies


• Identify Cost      Cost-Conscious Decision Making
  Drivers versus
  mission needs                Affordability                                            Capability

• Aim to make all         Life Cycle                   ab
                                                          le
                                                            s
                                                                          Flexibility              Mobility
                                                    m
  “affected” costs                           C on
                                                  su
                                                    en
                                                      t
                                                              tio
                                                                 n      Survivability              Lethality
                               er       e
                                           &      m         za
                             w        nc        e        ni
  transparent for      M
                         an
                           po
                                 nte
                                    na roc
                                         P
                                              ur
                                                   M
                                                     od
                                                       er
                                                              spo
                                                                  sa
                                                                    l    Habitability           Sustainability

                               ai                         Di                        Interoperability
  decision-making            M

                                       TOC                                       Performance




                                                                                                        31

								
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