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37 Appendix D Icebreaker Acquisition Strategy, Design and Cost Projections, and Operating Costs Contents ACQUISITION STRATEGY .................................................................................................... 39 Fixed Price Incentives Contract ............................................................................................ 40 Block Purchase ........................................................................................................................ 41 Life-Cycle Costs ...................................................................................................................... 41 Commonality of Design .......................................................................................................... 42 Technology Transfer ............................................................................................................... 42 Use of Commercial Standards and Widely Used Machinery ............................................. 43 Reduce Risks of Cost Overruns and Delay ........................................................................... 44 Schedule and Sequencing as Key Factors in Acquisition Strategy .................................... 44 Overview .............................................................................................................................. 44 Detailed Schedule Considerations ..................................................................................... 46 ICEBREAKER DESIGN AND COST PROJECTIONS ........................................................ 53 Notional Design of New Heavy Icebreakers ......................................................................... 53 Comparable Vessels ............................................................................................................ 53 Icebreaker Size .................................................................................................................... 55 Science-Ready Aspects of the Design ................................................................................ 56 Lightship .............................................................................................................................. 56 Installed Propulsion Power ................................................................................................ 58 Heavy Icebreaker ROM Cost Estimate ................................................................................ 58 Cost Estimating Relationships ........................................................................................... 59 Labor and Material Costs .................................................................................................. 59 First-of-Class Nonrecurring Costs .................................................................................... 60 Learning Curve ................................................................................................................... 60 Indirect Costs and Cost Risk ............................................................................................. 60 Overview of Cost Assumptions .............................................................................................. 61 Heavy Icebreakers Cost Estimate ......................................................................................... 62 ROM Cost Estimate for Heavy Icebreaker Design and Construction ............................... 62 Cost of Science ......................................................................................................................... 64 Medium Icebreakers ............................................................................................................... 65 Advantages of One Contract and One Design for Multiple Icebreakers ........................... 68 Impact of MIL-SPEC ............................................................................................................. 70 Definition of MIL-SPEC..................................................................................................... 70 Application of MIL-SPEC to Heavy Polar Icebreakers .................................................. 71 Impact of MIL-SPEC on Costs .......................................................................................... 72 Value of MIL-SPEC to Polar Icebreakers ........................................................................ 73 OPERATING AND MAINTENANCE COSTS ....................................................................... 74 Review of USCGâs Operating Costs for a New Icebreaker ................................................ 74 Operating Costs for Heavy Versus Medium Icebreakers ................................................... 75 Range of Uncertainty .............................................................................................................. 76
38 Basic Work Scope of Medium Icebreaker Compared with Heavy Icebreaker ............ 87 Engineering, Detail Design, and Planning ....................................................................... 87 Material and Equipment ................................................................................................... 88 Production Labor and Productivity ................................................................................. 88 Risk Margin ........................................................................................................................ 89 Learning Rate ..................................................................................................................... 89 Profit.................................................................................................................................... 89 Total Shipyard Contract Cost Variance .......................................................................... 90 References ........................................................................................................................... 92
39 ACQUISITION STRATEGY Acquisition strategy will have a significant impact on overall program cost and performance. The objective is to achieve affordable construction and life-cycle costs for the new polar icebreaker fleet. The committee proposes an acquisition strategy that will reduce the likelihood of hazards such as higher costs, delays, poor performance in service, and lack of reliability. The following section describes proven practices for managing the costs of such an acquisition program. Acquisition strategy encompasses a wide range of activities and processes that determine how vessel construction goes forward. Among the key factors of a vessel acquisition program are the following: 1. Number of vessels to be contracted at one time. 2. Type of specification presented to the contracting shipyards: a. A performance specification laying out requirements and standards to be met but leaving the design to the contractor, b. A prescriptive specification requiring construction in accordance with an already prepared design with already detailed system requirements, or c. Some combination of the above. 3. Availability of timely funding that matches shipyard funding needs (progress payments schedule), including consideration of the major equipment purchase schedule. 4. Capability of the vessel purchaser (the U.S. government in this case) to provide the resources needed for review and approval of shipyard design documents and to make design decisions in a timely manner. 5. Maintenance of design fixity after contract award to avoid ongoing and late design changes, which are disruptive to cost and schedule. This applies equally to the government (change orders or construction changes), the shipyard (build strategy changes), the classification society (regulatory interpretations), and the supplier base (changes in equipment or scope of supply). 6. Flexibility in scheduling and sequencing, which will allow the shipyard to optimize the design and construction schedules for cost-effectiveness on the basis of completion of the design before construction and best utilization of the learning advantage attained from series ship production. 7. Capability of the shipyard to support detail and production design needs and whether it has the processes, procedures, physical plant, and resources available for efficient construction of the vessel. 8. Degree to which the latest technology improvements can be incorporated into the design and construction of the vessel so that the desired performance is achieved. The committee offers the following suggestions on how the United States can achieve cost-effectiveness in its acquisition strategy for new polar icebreakers on the basis of consideration of the above factors.
40 Fixed Price Incentives Contract Several contracting methods are typically applied to government shipbuilding projects. The most common are âcost plus fixed feeâ and âfixed price incentive fee.â Cost plus fixed fee is appropriate for projects involving significant research and development of new technologies. The government accepts the execution risk; in exchange, the contractor is obligated to provide its best effort, with no guarantee of success. At the other extreme, firm fixed price contracts are used when risks are well known and can be reasonably estimated. For this type of contract, the contractor incurs all the risks of an overrun and receives all the benefits of an underrun. For fixed price incentive fee contracts, the government and contractor share all risk above the target price until the contract reaches its ceiling price, when it will convert to a firm fixed price contract. Any benefits of performing under the target price are shared by the government and the contractor. Fixed price incentive fee contracts are often used in shipbuilding to manage risk on complex but nondevelopmental ships. For polar icebreakers, technology transfer will allow the development of a well-defined specification that uses existing technologies, which will make a fixed price incentive fee contract more appropriate. The fact that the design and specification can be fixed in advance allows the shipyard to predict design and construction costs with greater certainty and thus to reduce the risk premium incorporated in the price. Along with the fixed price incentive fee contract, other incentives can motivate contractor performance in specific areas and allow for some sharing of risks and rewards relative to performance. This type of contract will result in predictable and controlled costs for the government as purchaser. As explained in a recent Government Accountability Office (GAO) document concerning fixed price incentive contracts, the U.S. Coast Guard (USCG) could apply three such standard incentives for shipyards, such as a negotiated target price with the shipyard following analysis of responses to a request for proposal and ship specification, a 50/50 cost share, and a 120 percent maximum share of cost overruns or underruns (GAO 2017, 7â9). In the case of a heavy polar icebreaker, the cost of a 50/50 share line with a 120 percent cap could be as much as $82 million for the first ship and almost $265 million for all four ships. The GAO report also discusses other incentives such as technology transfer incentives, milestone-based incentives, and facilities improvements incentives that are specific to the type of project being performed (GAO 2017, 28). In the case of icebreakers, such incentives could be appropriate for improvements to facilities, equipment, and training for the application of best practices for welding and nondestructive testing related to thick, high-yield-strength plating; for underwater hull coatings that reduce ice resistance; or for âice-phobicâ topside coatings that reduce accumulation of ice on superstructure and masts. The normal contracting procedures would be followed under which the successful shipyard would propose the improvements to be made to the facilities, the cost of those improvements, the projected advantages to be attained by such improvements, and the cost incentives to be gained. The cap would presumably be negotiated at a 50/50 share and set at a certain amount.
41 Block Purchase A block buy authority for this program will need to contain specific language for economic order quantity purchases for materials, advanced design, and construction activities. A block buy contracting program26 with economic order quantity purchases enables series construction, motivates competitive bidding, and allows for volume purchase and for the timely acquisition of material with long lead times. It would enable continuous production, give the program the maximum benefit from the learning curve, and thus reduce labor hours on subsequent vessels. Shipyards gain a learning advantage (also called âlearning curveâ) when they build multiple ships to the same design. Many of the difficulties encountered in the first ship are overcome in the second and later ships. Production workers are better able to do the same job the second time because they are familiar with it and frequently see a better way of carrying out a specific activity. This learning process has been found to reduce production labor hours on the second ship to 80 to 90 percent of those on the first ship, depending on the issues that arise with the first ship and the distinctiveness of the vessel design in comparison with the shipyardâs experience. The reduction in labor hours continues with follow-on ships at a similar rate, so that by the fourth ship in series, production labor hours can be less than 80 percent of those of the first ship. For the learning advantage to be most effective, a proper time interval would need to occur between the shipsâ hulls (as discussed below in the section on schedules). Reductions in material costs can also occur with multiple ship purchases, but they tend to be smaller than the reductions in labor hours. A block purchase of multiple ships of the same design increases shipyard interest in the proposed building contract, which will lead to a more competitive bidding process. It will also justify increased investment in improvements geared to enhance capability and efficiency of construction of the type of vessel planned for block purchase. Both of these factors can lower overall cost and improve shipyard performance in building the vessels, which would be to the governmentâs advantage in a contract of the fixed price with incentives type. Life-Cycle Costs New construction projects often focus on the minimization of initial acquisition costs and not on overall life-cycle costs, which can lead to significantly higher overall program costs. Life-cycle cost considers both the initial cost and the cost of operating and maintaining a system or machinery unit over its lifetime; how long it can operate before it needs to be overhauled or replaced is taken into account. Future costs, particularly on long-term investments, are discounted when decisions are made on life-cycle cost by methods such as net present value. Full evaluation of the costs of the system over the lifetime of the vessel is important in proper assessment of which option has the lowest overall cost. Since new polar icebreakers are expected to operate for 30 to 40 years, overall life-cycle cost is a key consideration. Incorporating the metrics of life-cycle costs in the evaluation criteria for shipyard bid proposals will ensure proper consideration of the impact of life-cycle costs on the total cost to the government. 26 See OâRourke and Schwartz 2017 for an overview of the advantages and limitations of block buy contracting and multiyear procurement.
42 Commonality of Design Commonality of design with existing vessels and between vessels intended for similar service is another factor leading to cost-effective construction. Commonality of design is one of the main reasons large-scale Asian shipyards are able to achieve higher productivity and lower material costs than U.S. shipyards. The more efficient Asian yards build large commercial vessels at a construction cost 60 to 75 percent less than that of U.S. yards. They normally construct vessels similar to ones they have previously built and make incremental changes that do not affect their productivity. Commonality allows them to design new ships quickly and incur few design errors, since most aspects of the new design will be similar to those of proven vessels. Commonality of design with existing vessels in an ownerâs fleet also allows for ease of maintenance and training, since officers and crew are able to transfer easily between vessels and repair staffs are better able to manage systems they know well. Even if a decision were made to build separate heavy and medium icebreakers, a common design could help reduce overall costs, since many of the components and features in the two vessels would be the same or similar. Technology Transfer Technology transfer from shipyards and engineers experienced in icebreaker design, operation, and construction is another area providing opportunities for cost reductions. Icebreaker technologyâparticularly with regard to construction techniquesâis available from Japan and Korea as well as from Northern Europe. It is important that the designers and the contracted shipyard for the new U.S. polar icebreakers obtain the best of that technology and incorporate it into the vessels. The USCG design team will need to remain flexible in its specifications and requirements to allow the use of best technology and improved design features and approaches from abroad. Before leading foreign technologies can be transferred into the United States, the USCG design team and relevant shipyards would need to seek relief from certain provisions of International Traffic in Arms Regulations, which restrict and control the transfer of certain dual- use (both commercial and military) technologies. In briefings by U.S. shipbuilders, the committee learned that several major U.S. commercial shipyards have significantly reduced their design and construction costs for large tankers and containerships through technology transfer agreements with major Korean shipyards. There is every reason to expect that these types of arrangements will be made and have a similar impact on the cost of icebreakers built in the United States. The committee believes that U.S. construction costs for a polar icebreaker are about three times higher than costs at competitive international shipyards but that this factor can be reduced by up to a third through international technology transfer. The committee notes that in the successful Oden procurement (Liljestrom and Renborg 1990), the shipyard adopted an organizational feature that gave oversight of winterization and icebreaking engineering and design features to a program management team. That small team identified risks associated with system design for high latitude operations, proposed alternatives for risk mitigation, and monitored implementation in vessel design and engineering. Cost as an
43 independent variable27 could be applied to ensure reasonable trade-offs between performance and cost. For example, sewage discharge in ice-covered waters is prohibited by the Polar Code, and a ship must shift to an ice-free location to discharge treated sewage. Solutions to this problem may include increased size of black water tanks and garbage waste tanks or high- performance marine sanitation devices with membrane bioreactor plants. Use of Commercial Standards and Widely Used Machinery Another key to cost-effective acquisition of new icebreakers is the degree to which lower-cost commercial practice can be incorporated into the vessel. Since the intended service is largely outside military functions, the committee believes, in general, that the new icebreakers can be built to commercial standards without reference to military specifications (MIL-SPEC), except when such equipment may be warranted. International Maritime Organization (IMO) and class standards for vessels intended for polar service are high, and ships built to these standards will be well suited for the primary mission requirements of icebreaking and supporting missions in polar waters. The use of commercial standards and commercially available equipment could result in the following advantages: 1. An easily producible design that can incorporate design features of recently built and proven icebreakers from experienced foreign shipyards; 2. Incorporation of widely proven best commercial practices that lead to efficient operation, easy maintainability, and reliable service; 3. Significantly lower construction cost than a more specialized specification based on full incorporation of USCG cutter and resulting military-specific requirements; and 4. Incorporation of standard machinery and equipment with a long record of service. This may require opening up acquisition to more of the world market, where most of the best marine machinery is produced. Specialized, unique, and one-off machinery that may not function as well or be as reliable as top-of-the-line industry standard machinery and that will be difficult and expensive to service should be avoided. This is a failing frequently encountered in vessels built to specialized requirements, such as military-specific requirements, or built with application of strict country-of-origin requirements, such as âbuy American.â Both of these types of requirements will increase risk and cost to the icebreaker program. Full understanding of the international commercial standards developed and applied in Europe during the past several decades will be important. The engineers and designers of the USCG polar icebreakers would benefit from talking to foreign operators, the people who maintain these foreign icebreakers, and the suppliers who provide the equipment and logistics for foreign icebreakers. For example, what pipe joints and electrical connections are susceptible to breakage during the shock of ramming ice? What types of joints and electrical connections are prohibited in foreign icebreakers? 27 http://www.acqnotes.com/acqnote/careerfields/cost-as-an-independent-variable.
44 Reduce Risks of Cost Overruns and Delay Many steps can be taken to reduce the risk of cost overruns and delays. They are well established in the commercial shipbuilding industry and should be applied to government construction projects. 1. Clarify the specification before contract through comprehensive review with shipyard personnel so that the shipyard fully understands the governmentâs intent. 2. Have a complete and consolidated specification by contract signing so that the shipyard can design and plan for the project in a timely manner and be ready to begin work at contract start date. 3. Encourage a zero change mentality after contract signing, except when changes will enhance the production effort or are needed to ensure a safe ship environment. As mentioned above, changes disrupt shipyard schedules and increase costs through delay, disruption, and work-arounds far in excess of the cost of the change itself. 4. Support the shipyardâs design schedule by timely review and approval of shipyard drawings through investment in the necessary resources and organizational structure by the purchaser (USCG in this case). Ensuring that USCG has experienced and qualified persons in a position of authority to make timely decisions on design issues as they arise is important for the success of the program. In the committeeâs judgment, such a strategy is best accomplished through engagement with experts having recent icebreaker design experience. Postponing decisions and looking for others to provide answers will only cause delay, because the shipyard will need clarity on how to proceed in a timely manner. 5. Ensure that the contracted shipyard has the capability and resources to carry out the project. Technical and administrative capability and production capacity are key factors in determining whether a shipyard can successfully build a vessel such as an icebreaker. Having cost as the sole determinant of contract award can lead to overruns and delays as the low-cost shipyard attempts to build these capabilities after the fact. 6. In line with the preceding point, government construction projects have more administrative and documentary requirements than a pure commercial ship construction contract, so the contracted shipyard needs experience in contract administration with these types of programs. Schedule and Sequencing as Key Factors in Acquisition Strategy Overview Acquisition, design, and construction schedules are key drivers of cost performance. The detailed design and construction schedule determines the total magnitude of time-related costs for both shipyard and government program management. The schedule also affects life extension decisions for the Polar Star and the date by which trained USCG crews for the new vessels must be available. A major reason for the success of Asian shipyards, starting with Japan in the 1960s and continuing in Korea, is a focus on the proper sequence of design and then construction; disruption of that sequence by perceived needs to start construction early are avoided. This
45 practice (which many say was followed in the United States during the high point in ship construction here from the 1940s to the 1960s) has been reapplied by U.S. shipyards in their successful efforts over the past 15 years in the rebuilding of the U.S. Jones Act tanker and containership fleets. The committee heard from shipyard executives on the importance of following the proper sequence of design and then construction in the successful building of ships on time and within budget. The key elements of the proper sequence are as follows: 1. Complete basic and detail design engineering before starting any construction of the vessels. Making changes on paper to a design is far less costly and disruptive than making changes in steel on the already-built ship. Changes are the enemy of productivity, schedule, and cost control. Change drives rework, which, through benchmarking to Korean and Japanese shipyards, averages about 1.5 percent rework for the first ship of a class for commercial ships.28 In contrast, rework on first of class commercial ships in U.S. shipyards is often several times higher, and can even higher for more complex ships such as naval vessels. 2. Complete all construction planning and most production detail design before starting construction. As in the case of the sample schedule characterized in Figure D-1, a period on the order of 2 years can elapse between contract award and start of construction (SOC) for nonstandard vessels like icebreakers. Shipyards are always tempted to start construction sooner rather than later to show progress, keep workers gainfully employed, and advance receipt of progress payments based on construction milestones. The United States may also be tempted to accelerate the schedule because of the challenge of keeping the Polar Star fully operational, but this temptation is best avoided. Any gain would be false; problems arising from starting construction too early all too often come back to haunt the project. 3. Allow for advance procurement of long lead equipment and material to support the construction schedule. This can be affected by lack of timely funding. 4. Detailed planning and scheduling for the entire project need to be carried out before the SOC. The planning ought to cover the full range of engineering, procurement, construction, and test and trial activities. These activities are integrated and follow a rational sequence; one activity is not delayed by failure to complete a prerequisite activity. Many ship construction projects have floundered because of inadequate and poor planning. This recommendation stands in opposition to the concurrent engineering and planning methods that were a best international practice two decades ago, under which construction started shortly after the first functional design and production planning products were available for the early grand blocks. Concurrent engineering strategies often failed in the United States as development of subsequent areas of the ship design led to retroactive changes to predecessor blocks already in production. Some U.S. shipyards continue to use a concurrent engineering approach, and the committee encourages USCG to require bids to demonstrate past success on ship design and construction projects of complexity equal to or greater than that of a polar icebreaker. The first six months of a project following contract award often determine the success of cost management for the remainder of the construction period. 5. Construction of the second ship in a series should not begin until the first ship has at least been launched so that lessons learned from the first ship can be fully incorporated into the 28 From a general discussion among panel participants at the committeeâs Seattle meeting, April 11, 2017.
46 second ship. Follow-on ships can be more closely spaced, since improvements in the design and construction processes will have been determined. Lack of timely funding is a frequently overlooked cause of delay and cost increases in government acquisition programs. The shipyardâs ability to follow its schedule in a cost-effective way is predicated on receipt of timely authorizations to proceed and receipt of requisite funding at the designated times. Delays in these items disrupt the schedule and can cause further delay and cost increases as the project progresses. Commercial owners normally have already set up a funding mechanism before they sign a contract, but government agencies frequently are held up by the need for legislative appropriations. The necessary authorizations and appropriation should be in place to suit the full schedule for the icebreaker program and to take advantage of savings available from block purchases. Detailed Schedule Considerations To illustrate what an efficient schedule would look like and what timely actions are needed to make such a schedule come to fruition, the committee has prepared a pro forma schedule timeline and discusses the importance of many of the items shown on the schedule. This is useful for planning with regard to when government action needs to take place, when funding is needed, and when the new icebreakers will likely come into service. First Ship Design and Construction Figure D-1 shows a notional timeline for Ship 1 that is intended to be generally representative of current construction practice in U.S. shipyards. Specific shipyards may offer schedules differing from that in the figure because of other program commitments, production labor force and subcontractor availability, and facility configurations. A key assumption is that all bidding shipyards will be willing to develop a long-lead-time equipment (LLTE) program before contract award. Such a program should identify material and equipment that cannot be purchased within the time available for construction set by the ownerâs required ship delivery date for Ship 1. The program would likely require a 4- to 6-month engineering effort before contract award to develop purchase specifications, list candidate suppliers, and engage these suppliers in initial quotes and resolution of issues. Some shipyards may require as much as 8 months to manage the LLTE effort, with an overlap at the start of functional engineering. The shipyard would then down-select to two possible suppliers for each purchase specification. All qualified prime contractors should be ready to issue final purchase specifications for all items in the LLTE program within 1 month of award of the detail design and construction contract. In turn, the government must be prepared to fund acquisition of LLTE within 1 month after contract award to the winning shipyard. Another key assumption is that USCG will have all of its comments on the proposed contract design, proposed ship specification, and program plans available on the date of contract award. Ideally, meetings would be held with the shipyard to resolve all comments within 2 months of contract award. An omnibus change order would incorporate the comments into the ship specification and contract design. To the extent that requirements and classification interpretations can be known and deployed early, cost and schedule impacts will be minimized.
47 USCG has informed the committee that the new heavy polar icebreaker is expected to be classed in accordance with steel vessel rules of the American Bureau of Shipping (ABS), the U.S.-based classification society. During design and construction, ABS will provide class plan review, vendor-supplied equipment inspection, and shipyard survey services. While the new icebreaker will be delivered with a class certificate, it will not be maintained in class after delivery because of incompatibilities with USCGâs maintenance philosophy and technical authority organizational structure.29 Both USCG and classification society comments on the functional engineering products would be received and resolved by the shipyard in a timely fashion, generally within 30 calendar days of submittal. In turn, shipyards will perform a timely revision of these functional engineering products (Rev. A in Figure D-1) for use in transition design and detail design. Conduct of a critical design review with the government and classification society is suggested approximately 12 months after contract award. The purpose of the review is to ensure both the shipyard and the government that the shipyard is ready for a substantive start to detail design and production planning. Approximately 85 percent of collaboration between engineering, design, supply chain, and production planners would have been conducted to refine and expand the build strategy for the icebreaker by the time of the critical design review. The committee estimates that 250 to 300 engineers, detail designers, and planners would be required at the peak for the preproduction effort, which is well within the capabilities of U.S. shipyards and design agents. At the critical design review, the shipyard would present a list of special icebreaker construction process instructions and standards to be developed and applied during detail design, production planning, and production. These standards may include thick plate and high-strength steel welding, alignment guides for thick plate in the ice belt, nondestructive testing for welds in thick plating, winterization requirements and insulation for systems, special coating requirements, and installation protocols for equipment not previously applied by the shipyard. These items (also mentioned as potential incentives above) would subsequently be included in the risk management plan and quality management plan for the icebreaker project by the shipyard. Both U.S. and overseas shipyards have successfully used a technique that builds three or four pilot blocks to test the ability of the engineering, detail design, and planning process to deliver complete and accurate data for construction of the ship in the specific shipyard and with the specific supply chain. Pilot blocks test the holistic shipbuilding process, not merely the design, and they must receive close attention from the shipyardâs program manager and staff. These blocks would be intended for installation in Ship 1 and would be constructed in the process lanes assigned for similar work throughout the program. Adequate time must be allowed in the schedule for documenting lessons learned from the pilot blocks and incorporating suggested changes from production and procurement into the detail design, bill of materials and purchase specifications, planning packages, and production information. As a result of the pilot program, major risks of introducing new technology for icebreaker construction would be significantly resolved before the SOC. At the conclusion of the lessons-learned process for the pilot blocks, the shipyard will issue a release for manufacture authorizing SOC. 29 Personal communication, Commander Bill Duncan, USCG, June 20, 2017.
48 FIGURE D-1 Notional timeline for first icebreaker acquisition (Ship 1). (C4I = command, control, communications, computers, and intelligence.) (Source: Generated by the committee.) Activity Duration, months -4 -3 -2 -1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 Long Lead Equipment (LLTE) Procurement - Develop Purchase Specifications 2 Milestones MAC QAC - Discuss Purchase Specifications with Suppliers 2 Contract Award 0 - Preliminary Selection of Qualified Suppliers 1 Critical Design Review 12 Contract Award Start Detail Design 12 #1 #2 #3 #4 - Final revision of ship specification/change order negotiation 2 Start of Construction 24 8.0 14.0 18.0 22.0 - Procure LLTE 18 Keel 29 9.7 15.7 19.7 23.7 Functional Engineering Launch 39 13.0 19.0 23.0 27.0 -Develop Functional Engineering Products 9 Delivery 50 16.7 22.7 26.7 30.7 - Classification Society Review & Approval 9 Commissioning 54 18.0 24.0 28.0 32.0 - Rev. A of Functional Eng. Products Responding to Class 9 Critical Design Review - Develop Test Program & Systems Test Procedures 9 Detail Design - Develop Build Strategy & Details - Develop Design Standards for Icebreaker 6 - Transition Design 6 - Detail Design by Zone 12 Start Detail Design - Develop Eng. Bill of Materials & Steel Bill 10 - Production Review of Detail Design & Comment Incorporation 10 Production Planning - Develop Special Icebreaker Construction Process Instructions 8 - Develop Production Planning Packages 10 - Develop Production Budgets 9 Start Construction SOC - Fab & Assemble Pilot Blocks 6 Predecessor to SOC Pilot Blocks - Incorporate Feedback From Production Pilots Into Detail Design 5 - Fab & Assembly Blocks 10 Keel Laying Keel - Grand Block Assembly & Unit Construction 8 - Erection & Main Machinery Installation 10 Launch Launch - Systems Completion & Grooming 12 - Power Through Boards 2 weeks after Launch Power Through Boards - Release of C4I Spaces for Installation of GFE 8 m prior to BT - Systems Testing 6 - Builders Trials (BT) 2 weeks - Correction of BT Cards 6 weeks - Acceptance Trials (AT) 1 week - Correction of AT Cards 3 weeks Delivery Delivery - Post-Delivery Availability at Shipyard 3 - Crew Familiarization Aboard Ends 1 month after crew move aboard Commissioning Commissioning Pre-Award Months After Contract Award BT, AT & Trial Card Resolution
49 Keel laying can commence after assembly of an inventory of blocks and grand blocks sufficient for sustaining the planned rate of erection. In general, this milestone is 5 to 6 months after SOC. U.S. shipyards follow a pattern similar to the 1-3-830 pattern followed as best practice by international shipyards: work that takes 1 hour to complete in a workshop takes 3 to 5 hours to complete once the steel panels have been welded into units and 8 hours to complete after a 5 block has been erected or after the ship has been launched. Work performed early in the cycle is therefore the most efficient, and U.S. shipyards attempt to plan and perform most work in the block assembly and grand blocking stages of construction. The period required to erect the ship from time of keel laying to launch is heavily dependent on the shipyard workforce and facilities. Yards with large cranes can build heavier 10 grand blocks than can smaller facilities, which must perform a greater number of lifts to erect the vessel. Some U.S. shipyards use rubber-wheeled transporters or railroad bogies to move blocks and grand blocks; the capacity of these transport systems determines the number of grand blocks during ship construction. The impact on scheduling of design features such as location of the main diesel generators, which may be on the main deck, and âplug-and-playâ options for 15 azimuthing propulsion pods rather than stick-built propulsion shaft lines, propellers, and rudders is a suggested topic for discussion between the USCG program office and the shipyard during concept and preliminary design. Another scheduling issue that could be of interest to USCG is completion and turnover of the communications suite, secure communications and intelligence facility, operations center, and other locations where government-furnished equipment (GFE) is 20 to be installed by government personnel or subcontractors. Weapons, if fitted, and weapons alignment would be included in this planning. In past auxiliary ship programs for the U.S. Navy (USN), the shipyard has been required to turn these spaces over to the government as much as 8 months before builderâs trials, which can be supported by this timeline. A 10-month period from keel to launch may be appropriate for a first-of-class polar 25 icebreaker in a U.S. shipyard. For some shipyards, the launching or float-out date must be carefully timed for high tides because of the unique hull form of icebreakers. Launching would be planned to coincide with production progress of at least 85 percent to minimize work required pier-side after launch; follow ships would set a target of 90 percent production progress at launch. In general, all systems would be hydrotested or groomed before launch. Cabling would 30 be pulled, connected, and tested for continuity before launch. The ship would be ready for start of load testing of electrical systems immediately after ship launch and after power is available through the shipâs switchboards. Installation of azimuthing drives rather than shaft lines and propellers that must be aligned on the ship erection location would also shorten the schedule. Work performed on board the ship is less efficient after launch when the ship is pier-side 35 because of competition for crane lifts, restricted access for personnel, and the potential for damaging work already completed. A plan for well-coordinated system testing and compartment closeout that supports final outfit, paint, and load out of the ship before builderâs trials and acceptance trials are begun is important for cost control. Close collaboration between the shipyard and the classification society is required to develop this schedule with adequate time for 40 30 An icebreaker may follow a 1-5-8 pattern, which is typical for ships with densely packed main and auxiliary machinery spaces and close subdivision for damage control. Thus, installation of equipment and material as early as possible becomes a major goal of production planning. In such situations, the packaging of piping ducting and wireway grids on temporary fixtures, which allows these outfit items to be placed on the grand block in one lift, becomes economically feasible.
50 test and trials. A period of 6 months is suggested for trials and trial card31 resolution for the first ship of the class. This period may overlap the completion of systems testing by splitting builderâs trials into two events: (a) propulsion trials and (b) supporting systems such as heating, ventilation, and air-conditioning; deck equipment; and other systems remaining to be tested. The latter event would include inclining; dock trials; aviation facility inspections (Naval Air Systems 5 Command certifications); and shipwide surveys such as lighting, electromagnetic interference, hazards of electromagnetic radiation to operations, hazards of electromagnetic radiation to personnel, and hazards of electromagnetic radiation to fueling, which customarily precede trials at sea. The committee estimates that this schedule will require 750 to 800 equivalent workers at peak, with the largest concentration of manpower in the outfit trades (machinery, electrical, 10 piping, ducting, and joiner), closely followed by steel trades. Such a schedule is within the capacity of U.S. shipyards. If the ship is expected to be in the water for more than 6 months before acceptance trials, dry-docking of the ship may be necessary for final application of paint on the underwater hull. This may disrupt other production work on board the vessel and limit access for crane lifts and 15 personnel. A total period of 10 months from launch to delivery may be necessary to assure USCG that the ship is complete and ready for operation in all respects. Delivery of the first ship is therefore anticipated to be as much as 52 months (4 years 4 months) after contract award. After delivery of the ship, a postdelivery availability (PDA) is customarily accomplished 20 to perform technology upgrades and refreshment that could not reasonably be accommodated through change orders during the design and construction of the first ship of the class. The PDA for a first ship of the class is usually 3 months in duration. This pier-side availability is accomplished as a separate contract from the Ship 1 detailed design and construction contract and is managed as repair availability. 25 A period to allow the shipâs force to familiarize themselves with the ship and its operation before commissioning is also customary. Training is formally conducted during this period, and the performance of the shipâs force is assessed. The period in PDA as well as some period after crew move aboard is included. The committee suggests that USCG plan for a total period of 54 months (4 years 6 months) before committing a new icebreaker to operation in a 30 high latitude mission. If the contract award is made in September 2019 as projected by USCG, the first ship will not be commissioned until late April or early May 2024, which will be after the completion of Operation Deep Freeze 2024 in approximately March 2024. Shortening of this schedule to November 2023 to allow a new polar icebreaker to break out McMurdo Station in January 2024 is highly unlikely. 35 Follow Ships The period between delivery of the first ship of the class and delivery of Ship 2 must be carefully planned. This interval would need to be long enough to incorporate all changes required from clearance of trial cards from Ship 1 into the detailed design and production planning packages for Ship 2, as well as lessons learned and build strategy changes from Ship 1. 40 The nature of errors to be corrected would be small, based on engineering change notices issued and incorporated into the detail design and planning packages from SOC onward. In this way problems would be resolved by the designâbuild teams in a timely fashion on Ship 1. This interval should be as short as feasible to minimize loss of learning among the production 31 A trial card is a deficiency encountered or identified during vessel construction or testing.
51 workforce between Ship 1 and Ship 2. Although learning occurs among people and not facilities, it must be documented carefully to attain its full value. The committee suggests that a period of 12 to 18 months be allowed between the delivery of Ship 1 and the delivery of Ship 2; the midpoint of that interval is 15 months. The committee suggests that the interval between SOC for Ships 2 and 3 and for Ships 3 and 4 be reduced to 12 months. Figure D-2 shows a notional total 5 program timeline for the construction of four ships of the same design under one contract. After Ship 2, the program would deliver an icebreaker every year. The last icebreaker, Ship 4, delivers approximately 31 quarters (7 years 9 months) after contract award for the first ship. Figure D-2 incorporates several attributes that help minimize contract cost: 10 1. Ship 1 launches before SOC on Ship 2; since production of Ship 1 will be about 85 percent complete before launch, most required changes to the detail design and production information can be incorporated before SOC on Ship 2. 2. Only one build position is required (the previous ship is launched before the keel is laid for the next ship). 15 3. Only one outfit pier is required (delivery of the predecessor ship clears space at the dock). 4. Construction trades can be level-loaded with minimal downtime or overlap between ships.
52 FIGURE D-2 Notional total timeline, all ships of class, polar icebreaker acquisition 4 Ã 1 strategy. (BOM = bill of materials; P = production.) (Source: Generated by the committee.) Quarter After Contract Award Activity 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 Functional Engineering, Ship 1 Develop Detail Design, Ship 1 Start of Construction, Ship 1 Keel, Ship 1 Build Position Launch, Ship 1 Outfit Pier Delivery, Ship 1 Commissioning, Ship 1 Revise Design, BOM, P Specs, Build Strategy, Ship 2 Start of Construction, Ship 2 Keel, Ship 2 Build Position Launch, Ship 2 Outfit Pier Delivery, Ship 2 Commissioning, Ship 2 Start of Construction, Ship 3 Keel, Ship 3 Build Position Launch, Ship 3 Outfit Pier Delivery, Ship 3 Commissioning, Ship 3 Start of Construction, Ship 4 Keel, Ship 4 Build Position Launch, Ship 4 Outfit Pier Delivery, Ship 4 Commissioning, Ship 4
53 ICEBREAKER DESIGN AND COST PROJECTIONS One task of the committee was to evaluate cost estimates for the new polar icebreakers. To carry out that task, a notional design that can form the basis for the cost estimate had to be developed. Members of the committee with expert knowledge of ship design and U.S. shipbuilding productivity and material costs collaborated to develop independent concept designs and rough- order-of-magnitude (ROM) cost models for polar icebreakers built in the United States on the basis of requirements laid out in the Polar Icebreaker Operational Requirements Document (ORD) (USCG 2015). After they had developed their own notional design, some members of the committee met with representatives of the USCG polar icebreaker design team at USCG headquarters in March 2017 to understand USCGâs initial design work and cost estimating approach for the heavy polar icebreaker. The design and cost estimates presented in this report are the result of the committeeâs own work and were not influenced by the meeting with USCG; most of the committeeâs design and estimation work was completed before the meeting at USCG headquarters. Notional Design of New Heavy Icebreakers The first step in developing a design sufficient for preparation of a cost estimate is to understand and characterize the data needed as cost estimate inputs. At this concept level, much of the necessary data can be determined from parametric analysis and comparison with existing vessels with similar characteristics. The committee conducted an extensive literature search to identify publicly available sources of information on icebreakers and developed its own notional design by using these references and parametric analysis. Comparable Vessels One method for developing the principal characteristics of a new heavy icebreaker is to consider existing vessels that can carry out similar missions. A recently designed vessel with requirements similar to those of the planned U.S. heavy icebreaker is the proposed Canadian Coast Guard new heavy icebreaker, the John G. Diefenbaker, a ship of approximately 150-meter length overall, fitted with a dieselâelectric propulsion system of approximately 39 megawatts (MW) plus harbor and emergency generators. Even though the John G. Diefenbaker is a large ship, it reportedly has accommodations for only 125 people in total,32 which includes 100 as the operating complement and 25 visitors or scientists. In a recent design competition for USCGâs offshore patrol cutter, USCG required accommodations for a shipâs force of 120 to 126 people. A new U.S. heavy icebreaker operated by USCG may have a similar level of manpower to perform its duties, with additional accommodations for scientists, a dive team, and the aviation detachment. While the John G. Diefenbaker has a smaller planned accommodation than does the new U.S. heavy icebreaker, 32 Polar Preliminary Concept Design Package, a PowerPoint presentation by the Government of Canada to Maritech, June 10, 2010.
54 accommodation of more persons in a vessel this size is feasible since its length is well in excess of the 128- to 132-meter required stack-up length estimated by the committee. Existing overseas icebreakers are good sources for size data. From 2010 to 2013, the United States did not have a heavy icebreaker available for the breakout of McMurdo Station. Icebreaking services were provided by chartered foreign-flag ships, including the Oden and the Vladimir Ignatyuk. Principal characteristics of these two foreign icebreakers are shown in Table D-1 in comparison with the Polar Star, which currently provides breakout for McMurdo Station. These ships are significantly smaller than either the Polar Star or the John G. Diefenbaker, yet they have succeeded in breaking out McMurdo Station. TABLE D-1 Comparison of Principal Characteristics of Heavy Icebreakers Characteristic Polar Star (WAGB- 10) Vladimir Ignatyuk (former Kalvik) Oden Prospective John G. Diefenbaker Flag United States Russia Sweden Canada Commissioned 1976 1983 1988 2022 Builder and location Lockheed, Seattle Burrard Yarrows, Victoria, British Columbia GÃ¶taverken, Arendal, Sweden Seaspan, Vancouver, British Columbia Length overall (meters) 121.6 88 108 150 Maximum beam (meters) 25.5 17.8 31.0/25.0 28 Displacement, full load (metric tons) 13,200 4,234 13,000 23,500 Rated icebreaking thickness at 3 knots continuous speed (meters) 1.8 1.8 1.9 2.5 Propulsion plant Dieselâ electric or gas turbine Diesel Diesel Dieselâ electric Propulsion power (MW) 57.0 17.3 18.0 50.0 Total berths 187 34 88 125 Total price at contract (millions of U.S. dollars) 53 45 41 990 Estimated total price (millions of 2017 U.S. dollars)a 292 112 93 990 a The current year value was estimated by using http://usinflationcalculator.com. SOURCE: Generated by the committee.
55 Icebreaker Size The size of heavy polar icebreakers is a strong determinant of the cost of ship acquisition and operation. Foreign heavy icebreakers often have much smaller crews than do USCG cutters. Because of the mandate in U.S. law for cutters to be prepared to perform all missions assigned to USCG, including search and rescue and federal law enforcement at sea, USCG ships are fitted with accommodations suitable for a large complement. They include aviation facilities for landing, refueling, and maintenance of large, heavy helicopters and hangars for their storage on board. The icebreaking performance to be achieved is not a strong determinant of ship length. The Polar Star, which is a heavy icebreaker capable of continuously breaking ice 1.8 meters (6 feet) in thickness at 3 knots, is 8 meters shorter than the Healy, which breaks ice 1.35 meters (4.5 feet) in thickness at the same speed. Under current icebreaker categorization, the Polar Star would be considered a Polar Class 2 icebreaker, while the Healy would be considered a Polar Class 3. In addition, an icebreaker with the size and capabilities of the proposed new Canadian heavy icebreaker would not likely be needed to support the breakout of McMurdo Station. As demonstrated in Table D-1, the Polar Star has a considerably smaller hull than the prospective John G. Diefenbaker. The minimum size of the heavy polar icebreaker will likely be driven by stack-up length resulting from USCGâs unique requirements: fantail length for safe towing operations; flight deck length for unrestricted landing of USCGâs HH-60 helicopters; a hangar for the HH-60, plus adjacent maintenance helicopter servicing facilities; a large accommodation block forward of the hangar with berths for at least 144 and perhaps as many as 176 people; and a conventional foredeck for anchor handling. After other icebreaker designs were researched, the twin azimuthing thrusters (or azipods) on the stern of the Polaris and the forebody of the Oden were selected as references for the stack-up length analysis. The notional concept design places all accommodation spaces on or above the main deck and extends the housetop to the 07 level, similar to the Oden. The main machinery spaces are located on the main deck (to the 02 deck), similar to the arrangement of the Healy. From this analysis, the committee determined that the minimum overall length of a new USCG polar icebreaker would be 128 to 132 meters (see Table D-2). Weight estimates for a heavy icebreaker of this size are as follows: a lightship (without service life margins) of approximately 12,720 metric tons and a full load displacement of about 18,360 metric tons (which includes service life margins). The 128-meter length is the minimum, and subsequent, more detailed calculations may show that this heavy icebreaker is not large enough to meet all stability and optimum powering criteria as well as the International Polar Code. Therefore, the committee has used a length overall of 132 meters for its cost estimates. TABLE D-2 Required Stack-Up Length for a USCG-Operated Heavy Polar Icebreaker Stack-Up Component Length (meters) Fantail, SRP to aft end of flight deck 10.2 Flight deck 25.5 Hangar block 20.4 Transverse weather passage 2.5 Stair tower 5.1
56 Accommodations block 32.3 Foredeck 36.0 Length overall 132.0 NOTE: SRP = stern reference point. SOURCE: Generated by the committee. Science-Ready Aspects of the Design Scientific research is an important secondary mission that increases utilization of USCG icebreakers, particularly the Healy in Arctic waters. Science readiness incorporates critical design elements that would enable the ships to be cost-effectively retrofitted for full science capability. In the committeeâs notional design, total enclosed net area for science facilities of 510 square meters (5,500 square feet) is included, similar to that of the Healy. Exterior (weather) space is also included both for an A-frame at the stern and cranes and side operational facilities, again similar to the Healy. Other science-ready features incorporated into the notional design are described in the section on cost of science. Lightship Vessel lightship weight is a primary data input for the committeeâs independent cost estimating calculations. In the design of U.S. government vessels, a common U.S. practice follows the ship work breakdown structure (SWBS) for characterizing ship weight components by system. This is the system used by USN. At this early stage of design, the weight components categorized according to SWBS can be estimated by using parametric analysis on the basis of cubic number (CN = length overall Ã maximum beam immersed section of boat Ã distance from deck to keel amidships/100, in cubic meters), installed power (MW), and number of berths as a proxy for work scope. For a first iteration, weights for existing ships were scaled by SWBS groups to determine a starting point for algorithms that estimate the weight of polar icebreakers. Ships with an integrated dieselâelectric propulsion plant were included. An attempt was made to replicate the lightship weights of known ships, including the Polar Star, the Healy, the Oden, and the Polaris. Adjustments were made until the correlation between the lightship estimates of existing polar icebreakers and the proposed algorithms was acceptable. Figure D-3 shows a close correlation between CN and total lightship weight. Ships below the line, such as the Polar Star, have lower weight than would be expected, and those above, such as the Healy, are heavier than would be expected. The committeeâs estimates for lightship weights of heavy and medium icebreakers without margin fall just above and below the trend line, respectively. In general, there is close correlation between the committeeâs CNâlightship weight line and international practice. A reasonably conservative approach to estimating lightship weight should be taken at this stage of design. As the design progresses, constraints on lightship weight can force less efficient solutions such as closer frame spacing, which can lead to higher construction and maintenance costs.
57 FIGURE D-3 Correlation between lightship weight and cubic number. (Source: Generated by the committee.) The committeeâs independently developed lightship weight estimates for the new U.S. heavy icebreakers are summarized in Table D-3, which illustrates the expected range of values. The committeeâs estimates utilize data for the Oden, which has a wide frame spacing that improves steel productivity but increases weight. The committee cautions against using the Polar Star, which has a comparatively low steel weight and lightship weight because of its tight frame spacing, since that could lead to lightship weight constraints later in the design process. The committee applied factors for the reported frame spacing of 850 millimeters and ice belt plating thickness of the Oden. TABLE D-3 Committee Lightship Weight Estimates by SWBS, Heavy Icebreaker SWBS Group Estimate 100âStructure 8,271 200âPropulsion 1,294 300âElectrical 724 400âCommand and Control 80 500âAuxiliary Systems 1,301 600âJoiner 1,049 700âWeapons 20 Margin (7%) 892 Total lightship weight 13,631 NOTE: Values are in metric tons. SOURCE: Generated by the committee. 0 5,000 10,000 15,000 20,000 25,000 0 200 400 600 800 1,000 LI G H TS H IP (M .T on s) CNLOA (LOAxBxD/100) Polar Star Healy Oden Committee Estimate Medium Icebreaker Committee Estimate Heavy Icebreaker
58 Installed Propulsion Power Icebreaking capability is in part determined by power provided to the propellers. The Odenâs design was groundbreaking. A fraction of the propulsive power of previous heavy icebreakers, such as the Polar Star, was required. Power requirements are generally determined through model testing of a specific hull form; however, the committee does not have access to this research tool. The committee applied a factor33 to the actual power of the Healy to determine the required power for a new heavy icebreaker. The factor indicates that required icebreaker developed horsepower varies with the 1.5 power of the thickness of the ice to be broken. Such an approach (basing the power prediction on the Healy) is conservative, and further model testing of a hull form using current technology is likely to result in lower required power predictions. Table D-4 shows the principal characteristics of the committeeâs icebreaker. TABLE D-4 Principal Characteristics of Committeeâs Heavy Polar Icebreaker for Cost Estimates Characteristic Committee HPIB 132 Flag United States Operator USCG Commissioned 2023 Builder and location To be determined, United States Length overall (meters) 132.0 Maximum beam (meters) 27.0 Depth at side to main deck (meters) 13.0 Lightship weight, without margins (metric tons) 12,720 Displacement, full load (metric tons) 18,360 Rated icebreaking thickness at 3 knots continuous speed (meters) 1.8 Propulsion plant Integrated dieselâelectric Propulsion Twin azimuthing thrusters Fixed pitch propellers Propulsion power, developed horsepower (MW) 33.6 Total berths 144 SOURCE: Generated by the committee. Heavy Icebreaker ROM Cost Estimate Once a notional design has been prepared, a ROM cost estimate can be prepared on the basis of methodology consistent with U.S. shipbuilding practice. This approach provides a high-level 33 The factor was determined from research conducted by the Canadian National Research Council, Institute for Ocean Technology, Saint Johnâs, Newfoundland. See OâBrien and Lau 2010, p. 2, Equation 1.
59 estimate of U.S. shipyards bidding on this project, given their current practices and facilities. The techniques used in preparing the cost estimates are familiar to the committee members who prepared them. They were validated internally through preparation by several members of their own estimates and comparison and correlation of the results. Cost Estimating Relationships U.S. shipyards vary in their workloads, facilities, and workforces. Application of overhead, which is spread over the total number of production man-hours worked among the shipbuilding programs performed in the shipyard at the same time, varies significantly. Productivity, wage rates, and labor agreements also vary. For a realistic portrayal of the likely range of prices that may be experienced, the cost estimating methodology should consider these significant variations. Some cost models use a Monte Carlo simulation, which runs and averages a large set of estimates from standard cost estimating algorithms to develop a statistically accurate cost estimate. In view of the limited time for production of this report, a Monte Carlo approach was beyond the scope of the committee. In this study, a single estimate approach was applied. It is considered as representative of the likely outcome and a valid estimating technique for early program budgeting. For the heavy icebreaker estimate, cost estimating relationships (CERs) were developed from data on existing ships. Material and labor were scaled by CN, weights of SWBS groups, installed power (MW), and number of berths to develop CERs for the lead icebreaker. In this way, productivity for typical U.S. shipyards is portrayed realistically. All material costs were adjusted by an escalation factor to 2019 by accepted methods used in USN contracting. Material costs were also adjusted for known special costs, such as the premiums associated with high- strength steel utilized in the ice belt of the icebreaker hull and coatings to reduce the surface friction of ice during icebreaking. Material CERs include subcontracted labor costs for production and for engineering and logistics support. Scrap rates for steel were assumed to be consistent with observed U.S. shipyard experience on naval auxiliary ships. All material CERs include shipping, handling, and tariffs. Labor and Material Costs A composite labor rate representing a typical shipyard trade mix was developed from U.S. Bureau of Labor Statistics (BLS) data. The rate was not meant to apply to any specific shipyard or geographic region but to be representative of U.S. shipyards. The composite production labor rate was also adjusted by BLS escalation factors to 2019. Overhead rates represent average performance of a mix of U.S. shipyards. Production labor and overhead costs in the United States are 2.5 to 4.0 times the cost for similar work in Europe or Asia, not because of hourly labor rates but largely because of productivity associated with methods, practices, and facilities. Material costs are also escalated each year by the BLS escalation rate, so material costs increase for each ship of the class. This is modified for a block buy approach, in which no escalation is assumed for material and equipment ordered and paid for as part of a quantity purchase, such as all engines and generators for the class coming under the same purchase order.
60 MIL-SPEC procurement of approximately 20 percent of materials and equipment is assumed in accordance with USCGâs stated intention for the polar icebreakers. A premium is added for both material and shipyard labor to account for the added cost of purchasing and installing MIL-SPEC equipment. (See the separate section below for a discussion of the impacts of MIL-SPEC and opportunities for reducing the cost and risk that result from its application.) The committee endorses procurement according to best international commercial off-the-shelf standards for icebreakers, with no requirement for âbuy-Americanâ equipment procurement except as required by Federal Acquisition Regulations. First-of-Class Nonrecurring Costs Similarly, first-of-class CERs for engineering, detail design, integrated logistics support (ILS), planning, contract administration and program management, and procurement and warehousing were developed on the basis of ship size characteristics. In accordance with U.S. shipyard accounting practice, all expenses for the class of ship accrue to the first ship of the class. Specific ship expenses apply to each ship of the class. These CERs were then applied and analyzed for realism on the basis of U.S. auxiliary ship programs and foreign naval auxiliaries during the past 25 years. The experience and judgment of members of the committee were applied to adjust these CERs to eliminate known problems during the performance of the contracts. In this way, a âshould have costâ estimate results. U.S. engineering, detail design, and planning costs total 2 to 2.5 times the costs in Europe or Asia. Follow-ship cost estimates for preproduction and administrative work are based on percentages of U.S. first ship costs. Learning Curve Follow-ship costs are estimated by applying a production learning factor to the second and following ships of each class in accordance with well-accepted industrial engineering theory (Dilworth 1979).34 Each time the number of units of production doubles, a learning factor is applied. A learning rate of 0.85 was assumed. In this way, the number of production labor hours for the second ship is 85 percent of that of the first ship, and the number of production labor hours for the fourth ship is 85 percent of that of the second.35 Annual escalation of the production labor rate is also assumed. Indirect Costs and Cost Risk The total icebreaker design and construction contract price includes a modest shipbuilderâs risk margin, profit, and financial accounting standards adjustments. The values assumed for these line items are in accordance with standards commonly used for U.S. government contracts. 34 R = log (learning rate)/log 2; Yn = (Y1)nR. 35 The assumed 85 percent learning rate is based on committee membersâ personal experience and on a discussion at the committeeâs April 2017 meeting in Seattle with two shipyard executives, both with extensive familiarity in this area.
61 The government will incur costs for its own efforts in addition to the design and construction contract price. The committee accounts for these items to allow an âapples-to- applesâ comparison with USCG estimates but does not have the data needed to validate these figures. Among such items are key equipage essential to mission readiness, such as GFE and government-furnished material (GFM), communications equipment, arms, ammunition, and weapons. Government Program Executive Office (PEO) costs for salaries, administration, and travel are also included through committee membersâ experience with other programs. A test- and-trials program with an inspection by the Board of Inspection and Survey (funded by the government) is accounted for. A modest PDA budget is included to make the ship ready for commissioning and her first mission after delivery from the shipyard. The government runs some risk of growth in the cost of the contract, particularly for the first ship of the class. Since World War II, this growth has been as much as 25 to 35 percent of the total value of the contract (for U.S. naval auxiliaries), but it is commonly less than half that amount for commercial ships. In contrast, some U.S. auxiliary ship contracts in the past two decades have had little cost growth. The committee has chosen not to inflate the cost of the polar icebreakers by recommending a budget for settlement of requests for equitable adjustment (REAs) or for change orders authorized by the USCG PEO. The committee notes that a 20 percent cost overrun could be incurred in actual costs because of REAs, but the overrun will be addressed in future years if it occurs. Overview of Cost Assumptions Table D-5 summarizes the general assumptions applied to all cost estimates developed by the committee for the polar icebreaker project. Use of common assumptions ensures internal consistency among estimates. TABLE D-5 Assumptions Applied in Committeeâs Cost Estimates Description Assumed Value Contract year 2019 Production learning rate 85% Engineering and planning wrap rate, 2019 $135/man-hour Production wrap rate, 2019 $79/man-hour Shipyard risk margin 7.5% for Ship 1; 7.5% for Ship 2; 3.5% for Ship 3; 1.3% for Ship 4 Profit margin on labor, materials, and overhead 12% Escalation, engineering and detail design 2.00%/year Escalation, materials and equipment 2.75%/year Escalation, shipyard labor 2.40%/year HY-80 steel cost, 2019 $1,500/metric ton HY-80 steel content 60% of ice belt, plus 100% of deck stringers, sheer strake, and turn of bilge crack arresters EH-40 steel cost, 2019 $660/metric ton Steel scrap rate 20%
62 Total cost, GFM/GFE $102 million/ship Total cost, government PEO, representatives, and SUPSHIP $48 million/ship PDA $15 million/ship NOTE: SUPSHIP = Supervisor of Shipbuilding, Conversion, and Repair. SOURCE: Generated by the committee. Heavy Icebreakers Cost Estimate The Congressional Research Service (CRS) has published a report concluding that âa new heavy polar icebreaker might cost roughly $900 million to $1.1 billion to procureâ (OâRourke 2015). A subsequent CRS report (OâRourke 2016) in November 2016 reiterated this estimate, stating the following: âThe total acquisition cost of a new polar icebreaker that begins construction in FY2020 has not been officially estimated but might be roughly $1 billion, including design costs.â ROM Cost Estimate for Heavy Icebreaker Design and Construction Committee members independently developed cost estimating models as a means of assessing the likely cost of both the heavy and the medium icebreakers. Results were compared, analyzed, adjusted, and then summarized. The committee reached a consensus on the results before including them in this report. Comparison was then made with the overall cost estimate publicly available from USCG. The committeeâs cost estimating methods and results are believed to be consistent with those of the Naval Sea Systems Command (NAVSEA) and USCG. The committeeâs ROM estimates for design and construction of a series of up to four heavy icebreakers are summarized in Table D-6. TABLE D-6 Committee Independent Cost Estimate: U.S. Design and Construction of a Heavy Polar Icebreaker Cost Category Ship 1 Ship 2 Ship 3 Ship 4 Engineering, detail design, and planning 128 19 6 3 Materials and equipment 318 310 319 327 Production labor and overhead 255 221 208 169 Profit, risk margin, and facilities capital cost of money 120 93 82 78 Total, shipyard contract 821 643 614 577 GFM and GFE 22 22 22 22
63 Change orders 78 30 29 29 Other government expenses 62 63 65 65 Total, government program expenses 162 115 116 116 Grand total per vessel 983 759 729 692 Overall program costs Total program budget, four ships 3,163 Average price, each of two 871 Average price, each of three 824 Average price, each of four 791 NOTE: Costs are in millions of U.S. dollars, 2019. SOURCE: Generated by the committee. The committee estimates that the first heavy icebreaker total program cost is likely to be $983 million (2019 dollars). The shipyard contract, government costs, and possible overruns are included in the estimate. If four heavy icebreakers are built in the United States, the expected average cost drops to $791 million for each of the four. These total program costs are consistent with those stated by the Commandant of USCG and in CRS reports provided to Congress. Government costs in these estimates total approximately 16 percent of the total program cost (if the first two ships are considered), which is consistent with experience over the past two decades. Historically, project overruns of 20 to 45 percent have been experienced on naval shipbuilding projects in recent decades, some of which may accrue to the government through REAs.36 Another reference for estimating costs for a new U.S. heavy icebreaker is the published cost estimates for the Canadian Coast Guardâs John G. Diefenbaker. In 2013 the publicly reported program of record cost for this ship was C$1.3 billion37 (US$990 million);38 whether this price includes Canadian government expenses outside of the shipbuilding contract is unclear. If escalation over the next 6 years is considered, the 2019 cost is likely to be US$1.2 billion per ship for a Diefenbaker-equivalent heavy icebreaker. An authorization by Congress for expenditures in the first year after contract award will be required to fund block purchase of long-lead contractor-furnished equipment, design and planning activities, procurement of GFE, and government program costs and expenses. 36 GAO 2017. The report notes: âOf the 11 ships delivered as of December 2015 under the six contracts, 8 experienced growth. In one case, costs grew nearly 45 percent higher than the negotiated target cost.â The report is available at http://www.gao.gov/assets/690/683085.pdf. 37 See http://www.nunatsiaqonline.ca/stories/article/65674coast_guard_new_1.3_billion_arctic_icebreaker_to_be_read y_by_2022. 38 Currency conversion as of February 25, 2017; data from http://www.bankofcanada.ca/rates/exchange/ceri/.
64 Cost of Science Making the new icebreakers science-ready means incorporating design elements that allow cost- effective retrofitting of the ships for full science capability if necessary during the shipsâ service lives. Such design elements could include the following: 1. Structural supports for installation of side and aft A-frames; 2. Spaces in the ship to be used for laboratories and to accommodate winches; 3. Flexibility of accommodations so that a science contingent of up to 50 can be embarked for up to 2 months; 4. Deck tie-down capabilities to be used for vans and equipment; 5. Sufficient support strength for laboratory vans (up to 12,000 pounds each) on upper decks; 6. Platforms and stability calculations to support heavy critical science antennas on the mast or upper decks of the house; 7. A hull design that minimizes bubble sweep under transducers; 8. Transducer wells and flats to accommodate scientific echosounders; 9. Piping for underway science seawater systems, both inside the house and at key points on the deck; 10. Runs for cabling for the echosounders, particularly the multibeam systems; 11. Sufficient space on the aft deck to support the deployment of oceanographic moorings and large remotely operated vehicles; and 12. Hangar spaces, one that could be dedicated for a conductivity, temperature, and depth system and at least one other for flexible use (e.g., storage of autonomous vehicles). The committee recognizes that structural elements required for the deployment of unmanned aerial systems are consistent with those required for the deployment of helicopters. Thus, such elements are not cited as a science-specific design feature. The committee also notes that the cost of incorporating the above-listed elements into the ship if the full suite of scientific capabilities is required at a later date would be substantial. The committee estimated the incremental cost of including these elements and reinforcements in the original construction to be $10 million to $20 million per ship. The committee arrived at this cost by applying the same CERs used in preparing the overall construction cost estimate to the estimated structure, outfitting, and auxiliary systems needed to provide the capabilities listed above. Required additional structure on the vessel was estimated at about 5,500 square feet (net) of enclosed space that could become science laboratories, storage space, meeting rooms, and offices; overall accommodation space was increased by 25 persons. The assumption was made that accommodation space for another 25 science-related persons to reach the desired maximum of 50 persons could be arranged by using existing accommodation spaces normally housing persons for other missions. The cost of installing lighting, ventilation, and piping systems to support the future installation of a full suite of science equipment is included in the estimate. Dynamic positioning is considered a desirable feature during science missions, but provision for dynamic positioning was not included in the above science-ready cost estimate. The modifications necessary for providing this capability are too uncertain at this stage of the design. There are several levels of dynamic positioning, and which level was needed would have
65 to be determined. In addition, certification for dynamic positioning requires a high level of redundancy and independence of system operation that can have a major impact on propulsion, auxiliary machinery, electric distribution, and controls design, with a significant increase in cost that is difficult to determine. Whether provision for dynamic positioning is worth the cost is a decision the committee did not believe could be made at this time. Going beyond merely making the vessel science-ready and furnishing it fully with science capability will require installation of the actual science-related equipment and outfitting spaces for science. Overboarding equipment (e.g., winches, A-frames, cranes, load-handling systems) and ship-supplied installed instrumentation and facilities (e.g., hull-mounted acoustic sensors, meteorological sensors, a science seawater system equipped with sensors, environmental chambers, freezers, science networks, and satellite communications antennas) would be included. Appropriate equipment and capabilities for newer research vessels in the University-National Oceanographic Laboratory System fleet are described in the November 2015 USCG ORD. Such outfitting would require an outlay at acquisition of $20 million to $30 million per ship.39 Medium Icebreakers USCG is developing an ORD for medium icebreakers. Neither an indicative design nor a cost estimate was available for review by the committee before completion of this report. The Healy (WAGB-20) is the sole medium icebreaker in the U.S. fleet. Table D-7 shows principal characteristics and prices for a number of recent foreign medium icebreakers equipped for research operations in the high latitudes. The committee notes that the Harry DeWolfâclass vessels for Canada do not include extensive facilities for science but are limited to sovereignty and government presence missions. TABLE D-7 Comparison of Principal Characteristics of Medium Icebreakers Characteristic Healy (WAGB- 20) Shirase (AGB-5003) (Yamauchi and Tsukuda 2011) Araon (HHIC News 2009) Sikuliaqa Polaris Kronprins Haakonb Harry DeWolfc (AOPV-430) Flag United States Japan South Korea United States Finland Norway Canada Year commissioned 1999 2009 2009 2014 2016 2017 2018 Builder (location) Litton- Avondale (New Orleans, LA) Universal Shipbuildin g (Kawasaki, Japan) Hanjin Heavy Ind. (Busan, South Korea) Marinette Marine Corp. (Marinette, WI) Arctech (Helsinki, Finland) Fincantieri (Genoa, Italy) Irving Shipbuilding (Halifax, Nova Scotia) Length overall (meters) 128 138 109.5 79.5 110 100 103 39 D. Kristensen, Glosten Associates, briefing to the committee, April 11, 2017.
66 Maximum beam (meters) 25 28 19 15.85 24 21 19 Displacement, full load (metric tons) 16,250 Approx. 20,000 Not published 3,665 13,000 Not published 6,440 Rated icebreaking thickness at 3 knots continuous speed (meters) 1.35 1.5 1.0 0.9 1.8 1.0 1.0 Propulsion plant Dieselâ electric Dieselâ electric Dieselâ electric Dieselâ electric Dual fuel dieselâ electric Dieselâ electric Dieselâ electric Propulsion power (MW) 34.5 22.0 10.0 6.22 19.0 17.0 14.4 Total berths 136 175 85 46 24 55 65 Total price at contract US$232 million Unknown â©108 billion (approxi mately US$96 million) US$200 million â¬125 million (US$141 million) NOK 1.4 billion (approximate ly US$167.2 million) C$2.3 billion for 6 ships (US$287.5 million for each ship) Estimated total priced (millions of U.S. dollars, 2017) 362 Unknown 116 217 148 173 307 NOTE: AOPV = Arctic offshore patrol vessel. a Sikuliaq specifications, https://www.sikuliaq.alaska.edu/ops/?q=node/19. b PowerPoint presentation, New Norwegian Icegoing Research Vessel Kronprins Haakon, Lasting og Lossing I IS. c http://www.navy-marine.forces.gc.ca/assets/NAVY_Internet/docs/en/aops-factsheet.pdf. d The current estimate value was calculated by using http://usinflationcalculator.com. SOURCE: Generated by the committee. The Healy primarily operates in the Arctic Ocean. It maps the subsea continental shelf boundary of Alaska, performs sovereignty patrols as part of USCGâs mandated mission, and acts as a platform for scientific research. The Healy, therefore, has accommodations for 136 people, including up to 51 scientists. The ship is well equipped for towing and handling the variety of sensor arrays and oceanographic gear required for ocean research. Two A-frames are located on the working deck, and several articulated cranes provide the capability of lifting loads of up to 14 tons on and off the ship to the water. The Healy is equipped with a dynamic positioning system and offers precise control of navigation during science operations. A well-equipped flight deck allows operations of USCGâs large HH60-R helicopters and provides hangar space for two smaller HH65 helicopters. Several cranes permit repositioning of equipment as well as USCG specific load transfers, with access to much of the aft section of the ship. Almost 400 square meters of space is provided in five laboratories, and up to eight International Organization for
67 Standardization vans can be loaded aboard to provide additional science and workstation capabilities. In April 2012, the Healy escorted a tanker carrying an emergency fuel delivery to Nome, Alaska. This mission was the first winter delivery to Nome and required navigation through more than 300 nautical miles of pack ice ranging up to the shipâs design ice thickness of 1.35 meters (4.5 feet). The Healy also undertakes the important mission of asserting U.S. sovereignty over Alaskan coastal waters in the Arctic Ocean. Thus, it is designed to accomplish each of the statutory missions assigned to any USCG cutter. The committee estimates that the total program cost for the first medium icebreaker (a replacement for the Healy) is likely to be approximately $786 million, including the shipyard contract and government costs (Table D-8). Three medium icebreakers (the number of ships requested by USCG in its proposed 3 + 3 program) built in the United States and capable of performing USCG sovereignty missions and conducting research are each likely to cost $641 million on average. The committeeâs average estimate of $641 million for each of three medium icebreakers is 13 percent higher than the $566 million listed in the United States Coast Guard High Latitude Region Mission Analysis Capstone Summary. TABLE D-8 Committee Independent Cost Estimate: U.S. Design and Construction of a Medium Polar Icebreaker Cost Category Ship 1 Ship 2 Ship 3 Ship 4 Engineering and detail design 126 19 6 3 Materials and equipment 222 216 221 227 Production labor and overhead 193 167 157 151 Profit, risk margin, and facilities capital cost of money 96 71 62 59 Total shipyard contract 638 473 446 440 GFM and GFE 22 22 22 22 Change orders 64 24 22 22 Other government expenses 62 63 64 65 Total government program expenses 148 109 108 109 Grand total per vessel 786 582 554 549 Overall program costs Total program budget, four ships 2,470 Average price, each of two 684 Average price, each of three 641 Average price, each of four 618 NOTE: Costs are in millions of U.S. dollars, 2019. SOURCE: Generated by the committee.
68 In striking contrast, the Polaris was commissioned last year at a reported cost of only 125 million euros, or an estimated $150 million (in 2016). The cost reflects strong Finnish knowledge of icebreaker design and construction, a smaller and simpler ship, and no science facilities. However, the ship does include a liquefied natural gas fuel system and a third azipod (or azimuthing thruster) in the bow, both of which increase cost. The Polaris40 is a regional Baltic medium icebreaker, with two azipods at the stern and one azipod in the bow and an integrated electric power plant totaling 22 megawatts. It is operated with a complement of only 16 people compared with the 85-person complement plus 51 berths for scientists on the Healy. The Healy is 18 years old, almost halfway through its expected service life of 40 years. A replacement will be needed for the Healy by 2039, with start of construction no later than 2036. With increased commercial shipping traffic in the Arctic, an additional medium icebreaker may be needed to fulfill sovereignty obligations before 2036. Advantages of One Contract and One Design for Multiple Icebreakers The committee used its cost models to investigate the economics of applying one design in one contract to construct four heavy icebreakers, as opposed to constructing three heavy icebreakers and one or possibly more medium icebreakers on the basis of a separate design. Table D-9 shows the principal characteristics assumed for each ship. Both ships have integrated electric power plants with azimuthing podded propulsion. The medium icebreaker is otherwise similar to the Healy. The heavy icebreaker is based on the committeeâs estimate of the 132-meter minimum ship stack-up length necessary for meeting all USCG statutory missions suitable for an icebreaker as outlined in the November 2015 ORD issued by USCG, including aviation and scientific capability similar to that outlined by the ORD. The ORD indicated a berthing requirement for 195 persons, which the committee understands may be reduced. In the committeeâs judgment, 195 berths is excessive. The committeeâs estimate was based on a smaller accommodation size, as indicated in Table D-9; up to about 50 berths can be for mission- or detachment-related persons. TABLE D-9 Assumed Principal Characteristics of Committeeâs Icebreaker Designs Characteristic Heavy Icebreaker Medium Icebreaker Length overall (meters) 132.0 128.0 Beam (meters) 27.0 25.0 Depth (meters) 13.0 13.0 Maximum draft (meters) 9.0 9.0 Polar Class 2 3 Lightship weight (metric tons) 12,720 11,476 Design displacement (metric tons) 18,360 17,120 Ice thickness at 3 knots 1.8 1.37 40 J. Toivola, New Icebreaker Technical Details, PowerPoint presentation to Europaan laajuine liikenneverkko by Finnish Transport Agency, March 1, 2014.
69 (meters) Maximum speed (knots) 15 15 Total berths 144 136 Propulsion power 2 Ã 18.3 MW 2 Ã 11.2 MW Propellers 2 pod propulsors 2 pod propulsors Propulsion type Dieselâelectric Dieselâelectric Main generators 4 Ã 7.9-MW medium speed diesels 4 Ã 6.3-MW medium speed diesels Auxiliary generators 3 Ã 2.9-MW medium speed diesels 2 Ã 2.9-MW medium speed diesels Endurance (days) 90 80 Aviation Helicopter deck and hangar Helicopter deck and hangar Science Science-ready Science equipment installed SOURCE: Generated by the committee. The results of the committeeâs cost estimating analysis, as measured by total estimated cost (including government program costs, GFM or GFE) are shown in Table D-10. Engineering, design, planning, ILS, and other nonrecurring costs are all accrued to the first ship of the class, so these costs are not incurred for any of the follow-on ships. Any new design will likely reincur the first ship nonrecurring costs. TABLE D-10 Total Estimated Cost for Design and Construction Ship Heavy Icebreaker Medium Icebreaker Ship 1 983 786 Ship 2 759 582 Ship 3 729 554 Ship 4 692 549 NOTE: Costs are in millions of U.S. dollars, 2019. SOURCE: Generated by the committee. As indicated in Table D-9, there is not much difference in size between a medium and a heavy icebreaker, which leads to the relatively small difference in cost between the two classes of icebreakers as shown in Table D-10 and discussed below. Previous analyses of icebreaker costs, such as the High Latitude Region Mission Analysis Report (ABS Consulting 2010), estimated the cost of medium icebreakers as about 70 percent of that of heavy icebreakers. The committee believes that such a difference is unrealistic in view of the expected USCG mission requirements for a medium icebreaker, with the Healy as a model for the medium icebreaker. In Table D-10, the medium icebreaker is estimated to cost 76 to 80 percent of the cost of a heavy icebreaker. This smaller difference helps explain the conclusion of the committee, discussed below, that the purchase of additional heavy icebreakers in a series is more cost-effective than the purchase of a mix of heavy and medium icebreakers with separate designs, in view of the limited ship numbers now under consideration. A requirement for three heavy icebreakers and possibly one or two medium icebreakers could mean having two designs built by two shipyards. This approach sacrifices the learning advantage a shipyard gains from series production (multiple
70 ships to the same design) for the first medium icebreaker, but the advantage would apply to the alternative fourth heavy ship. In Table D-10, the estimated all-in price of a fourth heavy icebreaker, $692 million, is $94 million less than the $786 million for the first medium icebreaker of a second design. As shown in Table D-11, the suggested acquisition strategy of four heavy icebreakers saves more than $1 billion compared with the governmentâs request of three heavy and three medium icebreakers. TABLE D-11 Total Estimated Acquisition Costs for Alternative Acquisition Strategies Strategy (Number and Type of Icebreakers) Total Program Price Four heavy 3,163 Three heavy, one medium 3,257 Three heavy, two medium 3,839 Three heavy, three medium 4,393 NOTE: Costs are in millions of U.S. dollars, 2019. SOURCE: Generated by the committee. Impact of MIL-SPEC The committee understands that USCG plans to acquire the polar icebreakers in part through MIL-SPEC requirements, with the remainder based on commercial or ABS class guidance. USCG estimates that some percentage of the new polar icebreaker will have MIL-SPEC requirements for design, materials, construction, and testing41 but has not indicated what the mix of military and commercial might be. Definition of MIL-SPEC To ensure proper performance, maintainability and repairability, and logistical usefulness of military equipment, the U.S. Department of Defense, including USN, evolved defense standards and specifications. Each of the services applies standards appropriate to its purchasing needs, and in some cases services apply the same standards. Defense standards related to essential technical requirements for purchased materials that are unique to the military or are substantially modified commercial items are referred to as MIL-SPEC.42 MIL-SPEC is similar to MIL-STD (short for defense or military standards). Both establish uniform engineering and technical requirements for processes, procedures, practices, and methods unique to the military. Five types of MIL-STD 41 Rear Admiral M. Haycock and J. Stefany, USCG, discussion at the committeeâs first meeting, February 13, 2017. 42 Department of Defense Manual. Defense Standardization Program Procedures Number 4120.24-M, March 2000 and September 2014.
71 exist. They cover interfaces, design, manufacturing, standard practices, and testing. USN applies many MIL-SPEC and MIL-STD to the design, manufacture, and testing of equipment installed in USN ships. They are based on the need for specialized features and capabilities that enable the vessels to operate effectively in the often harsh environment faced by combatant vessels. USCG realizes that its cutters will face some of the same risks as military vessels and that in times of war or crisis USCG cutters can be incorporated into USN or perform missions similar to those of USN vessels. On that basis, USCG applies MIL-SPEC and MIL-STD to some aspects of the design and equipment for cutters, but not to the same extent as USN. The following discussion uses the term MIL-SPEC, which is intended to encompass all military standards that guide design, procurement, installation, testing, and maintenance of the ship or ship systems. These include Federal Standard, design data sheets, NAVSEA technical manuals, and other legacy documents that USCG may choose to invoke for its polar icebreakers. Application of MIL-SPEC to Heavy Polar Icebreakers While a certain percentage of each of the new polar icebreakers will have MIL-SPEC part requirements, the committee is uncertain which of the components might be subject to MIL- SPEC. The committee can only provide a general estimate as to which systems or components might use MIL-SPEC and be incorporated into the polar icebreaker specification. Among the systems to which MIL-SPEC might be applied are diesel engines, noise and vibration systems, propeller balancing systems, propulsion shafting systems, and air and exhaust systems. The rationale for invoking MIL-SPEC usually involves a desire to ensure long and reliable service of specific mission-critical components. In addition, there is a belief that such requirements would make these systems consistent with current USCG vessels and would support fleetwide standardization and ease of maintenance, training, and testing by USCG. MIL- SPEC would likely be applied to weapons systems, communications systems, and other military equipment installed on the icebreakers to make the systems interoperable with those of USN. USCG noted to the committee that MIL-SPEC may be invoked for specific components rather than as a whole, and invocation would be based on the perceived need for applying a different standard.43 While this may seem a practical solution to the challenge of acquiring a high-standard polar icebreaker, it introduces the risk to a shipbuilder that a good and lower-cost commercial standard, such as those applied to icebreakers abroad, may not be accepted by USCG. As a consequence, the performance of early-stage functional engineering may be affected, and certain design approaches may be rendered infeasible. For example, specification of propulsion shafting material to a MIL-SPEC may not be in accordance with established off- the-shelf designs of azimuthing thrusters (pods) available from Europe. Despite the significant operational advantages of azimuthing pods, MIL-SPEC requirements could eliminate such equipment from consideration. If this is discovered after contract award, when functional engineering must proceed according to schedule, the delay, disruption, and offsetting acceleration would have major cost impacts on the program. 43 Rear Admiral M. Haycock and J. Stefany, USCG, discussion at the committeeâs first meeting, February 13, 2017.
72 Impact of MIL-SPEC on Costs Committee members have been involved in the design and construction of commercial vessels and U.S. government vessels where MIL-SPEC has been invoked and understand the trade-offs. At its Seattle meeting, the committee heard from shipyard executives who said that invoking MIL-SPEC requirements in a ship construction project, even in part, can have a major impact on the cost of the ships. A limited invocation, as planned by USCG, can increase material and construction costs by 10 to 25 percent and delay the schedule by months.44 Costs and delays are subject to greater increases when the extent of MIL-SPEC is ambiguous and when application of MIL-SPEC is to be clarified at a later date or is up to the vessel buyer. Table D-12 shows how MIL-SPEC could add more than $100 million to the acquisition cost of the first of a series of heavy polar icebreakers and up to 15 percent to the overall acquisition cost of each vessel. TABLE D-12 Examples of Estimated Additional Cost of Invoking MIL-SPEC in Accordance with USCG Proposal Cost Element Ship 1 Ship 2 Ship 3 Ship 4 MIL-SPEC steel and welding differential 1.36 1.39 1.43 1.47 MIL-SPEC material differential 42.29 41.28 42.42 43.58 Non-MIL-SPEC material differential 4.17 4.28 4.40 4.52 Subtotal, materials MIL-SPEC 47.81 46.96 48.25 49.57 MIL-SPEC production and nonproduction labor and overhead 38.78 33.31 30.49 28.65 MIL-SPEC engineering, design, standards, and ILS differential 7.61 1.90 0.95 0.48 Subtotal, labor and overhead MIL-SPEC 46.39 35.21 31.44 29.13 Profit on MIL-SPEC differential 11.30 9.86 9.56 9.44 Total MIL-SPEC differential cost 105.51 92.02 89.25 88.15 Addition to total ship acquisition cost 12.8% 14.3% 14.5% 14.5% NOTE: Costs are in millions of U.S. dollars, 2019. SOURCE: Generated by the committee. In addition, compliance with MIL-SPEC can be difficult to ensure, since shipyards cannot effectively erect barriers between areas where MIL-SPEC is required and where it is not. Shipyard executives with experience in this area agreed that the impact of MIL-SPEC requirements permeates the life cycle of the project. Invoking MIL-SPEC requirements even for 10 to 20 percent of the systems could have a profound impact on construction cost and design efforts related to systems for which MIL-SPEC requirements were not specifically invoked. 44 Discussion between the committee and shipyard executives participating on a panel at the committeeâs Seattle meeting, April 11, 2017.
73 Value of MIL-SPEC to Polar Icebreakers The committee believes that the application of MIL-SPEC and MIL-STD, as described above, may not be justified. In view of the unique nature of icebreaker service, the use of applicable international and commercial standards often can achieve better levels of safety and reliability than would be achieved by MIL-SPEC. The following are examples: 1. Application of damage stability requirements according to international standards would be more appropriate for an icebreaker and may lead to greater safety in ice conditions, while simplifying the design of the ship and reducing its cost. The IMO Polar Code,45 which applies to icebreakers, has extensive damage requirements oriented to the type of damage expected from ice, with longitudinal extent of shell damage and opening to the sea along the waterline, of up to 4.5 percent of the length of the ship (about 20 feet).46 The code also requires a high standard for stability after flooding from damage to the side shell (s1 equal to 1 or greater) when the Safety of Life at Sea (SOLAS) damage stability requirement is applied. Because the ship will have more than 100 persons on board, some not nautically trained, application of SOLAS damage stability requirements for a passenger ship with more than 36 persons on board would be appropriate. In general, passenger ship damage stability requirements are significantly more severe than are those for cargo ships. Overall, the committee anticipates that applying international and polar damage stability requirements will result in a ship that is safer in ice conditions without having to manage the more costly and difficult-to-design changes needed to meet MIL- SPEC requirements for a ship anticipating combat. In assessing the subdivision and the appropriate damage stability criteria, the committee recognizes the high level of crashworthiness inherent in icebreakers due to the robust hull structure and plating required for operations in heavy ice. 2. Application of MIL-SPEC to shafting could significantly limit the availability of alternatives to conventional shafting. Podded propulsion system makers may not have equipment or designs in compliance with MIL-SPEC and may be unwilling to customize their equipment, except at a higher cost. Customizing a propulsion system design can lead to specialized designs that are difficult to service and obtain parts for, which would increase maintenance costs for the life of the vessel. In addition, shafting is one of the most reliable systems on a vessel, and many U.S.-flag Jones Act vessels are still operating after 40 years. Throughout the worldwide merchant fleet, shafting issues, even on older ships, are rare. Generally, if the shaft is installed, aligned, and lubricated properly, its life cycle is extremely reliable. The Polar Sea and the Polar Star encountered problems related to controllable pitch propellers, but these types of propellers are not planned for the new icebreakers. The committee believes that elimination of MIL-SPEC requirements for shafting and bearings will allow the use of best available technology and reduce costs without compromising reliability. 3. Diesel engines are likely planned for the new icebreaker. The major worldwide manufacturers of medium-speed diesel engines produce hundreds of engines per year, and these engines have a history of reliable operation and worldwide availability of parts 45 An explanation of the Polar Code (along with full text) can be found at http://www.imo.org/en/MediaCentre/HotTopics/polar/Pages/default.aspx. 46 IMO Resolution MSC.385(94)âPolar Code, 4.3.2, Stability in Damaged Conditions.
74 and service. Extensive testing will not make a poorly designed or hard-to-service engine reliable. The key to engine reliability is selection of an engine from a maker with a proven track record. The selection of engine suppliers will be reduced significantly if the new icebreakers are required to have U.S.-built engines that meet MIL-SPEC requirements. The result is likely to be an engine that is less reliable and less easy to maintain. USCG would be better served by procuring the best engines available and not restricting the enginesâ country of origin. 4. For specialized communications, weapons, and other systems exclusive to USN, application of MIL-SPEC would be appropriate to ensure that the equipment meets special mission requirements and is compatible with equipment on other USCG and USN vessels. The equipment to which this applies is limited in nature and much of it is government furnished, so it would not have a significant impact on icebreaker cost. The committee believes that the adverse impacts on design, cost, and availability of reliable equipment outweigh any anticipated benefits that application of MIL-SPEC requirements to a new polar icebreaker might provide. The most cost-effective and reliable icebreaker for USCG is likely one that is designed and built to appropriate commercial and international standards for a polar icebreaker, similar to icebreakers in other nations around the world. OPERATING AND MAINTENANCE COSTS Review of USCGâs Operating Costs for a New Icebreaker While indications from USCG may differ, the committee expects the operating costs for the new heavy polar icebreakers to be less than those of the Polar Star. Previous USCG experience has suggested that operating costs of new cutters are likely to be higher than those of the vessels they replace, since new cutters are more expensive to crew, operate, and maintain. One estimate suggests that operating costs of new icebreakers would be 30 percent greater than the operating costs of the Healy (ABS Consulting 2010). The committee notes that the projected crew size for the polar icebreaker replacement could be similar to that of other USCG cutters, 120 to 126 berths. Whether this number includes the crewing for any mission or scientific support detachments is unclear. USCG was unable to provide estimates for the operating costs of the polar icebreaker replacement because the design and the crewing requirements have not been finalized. The committeeâs experience with operating commercial ships is the opposite of USCGâs experience. In general, the engines and hull designs of new ships are more efficient than those of the vessels that they replace, so fuel consumptionâusually one of the largest cost components of annual operating costâis generally lower for new ships. Furthermore, newer ships, particularly in the first 10 years of life, will have fewer repairs and little wastage or deterioration. Major overhaul and repair costs, including dry dock costs, will be significantly lower than those of an old vessel requiring expensive repairs and more frequent maintenance because of hull corrosion and deteriorating machinery. The improved sensors and data tracking provided by modern technology permit greater use of planned and condition-based maintenance. The result is less
75 frequent and more just-in-time maintenance, which reduces annual cost. Modern machinery also is more reliable and allows greater time between overhauls. For these reasons, the committee believes that operating costs for the new icebreakers could be less than those of the Polar Star and the Healy. The exception is manning costs, which generally rise over time because of increased salaries and benefits. If crews on the new icebreakers are larger than or the same size as crews on existing ships, personnel costs will be higher. USCG, like the commercial shipping industry, could reevaluate the proposed crew size for the new icebreakers in light of the opportunities provided by modern automation systems. One caveat in the expectation of lower fuel and maintenance costs for the new icebreakers is the extent to which MIL-SPEC is applied. The committeeâs lower cost expectation is predicated on the installation of efficient, reliable, commercial-off-the-shelf machinery and equipment from experienced and reputable makers. If the application of MIL-SPEC results in the installation of more customized machinery from smaller and more specialized makers, there is significantly greater risk of lower reliability and less efficiency, as was discussed in the section on MIL-SPEC. The experience of the marine industry and most other industries is that, with todayâs complex automation, machinery failures are much more likely if the maker does not have a proven track record of good design, good service, and good availability of parts. In summation, the use of modern machinery presents the opportunity for greater efficiency and reliability than in the past, but with faulty implementation the opposite is more likely and the failures will be more severe than in the past. The use of customized and specialized machinery and equipment in other recent USCG cutters could be why USCG has experienced higher operating costs with new cutters. The same danger exists with the new icebreakers unless actions are taken to limit the requirements, such as MIL-SPEC, that lead to the installation of such machinery. Operating Costs for Heavy Versus Medium Icebreakers USCG was unable to provide projected operating costs for the new icebreakers to the committee, since these estimates were not yet developed. To estimate these operating costs, the committee used the annual projected 2019 operating cost for the Polar Seaâestimated at about $38.6 millionâas presented in a recent report to the U.S. Congress (USCG 2013). The committee adjusted the estimated operating cost figures for the Polar Sea downward on the basis of expected reductions in maintenance and fuel costs for the new icebreaker to produce its $31.7 million estimate for the new polar icebreaker. With the assumptions of a ârealâ discount rate of 0.7 percent and a 30-year service life, the committee estimates the projected lifetime costs (acquisition and operating) for the four-ship fleet at $6.6 billion. If multiple crews are determined to be a viable option, continuous coverage in the Arctic could be provided with two icebreakers manned by three crews. If a single crewed vessel to service the Antarctic is included, the required number of ships could be reduced to three. The committee estimates that the overall acquisition plus lifetime operating costs for the four-ship scenario may be reduced by up to 13 percent as compared with the three-ship scenario. The committee emphasizes that these estimates are notional and based on the estimated operating costs (from more than 4 years ago) of the 40-year-old Polar Sea. The committee believes that acquisition of a fourth heavy icebreaker in lieu of a medium icebreaker would reduce overall acquisition cost. According to the committeeâs estimates, this
76 strategy reduces up-front acquisition cost, but it could also be more cost-effective for operating costs over the life of the vessel. The three primary drivers of annual operating cost are often the vesselâs physical characteristics, the operating and voyage profile, and the maintenance schedule (such as when the vessel is dry-docked). The physical characteristics of heavy and medium icebreakers (see Table D-9), such as installed power, vessel size, type of machinery and propulsion systems, and number of persons on board, are similar, so cost factors based on these parameters are likely to lead to similar annual operating costs. Because the ice thickness requirements are significantly less severe for the medium than for the heavy icebreaker, the medium icebreakerâs propulsion power is estimated to be only about 60 percent of that of the heavy icebreaker, even though the vessels are similar in size. The primary difference between a medium and a heavy icebreaker is the thickness of ice it can break. The time that an icebreaker is actually breaking ice near or at its limit is a relatively small percentage of the shipâs life. Even if the assumption is made that more power will be used for breaking thicker ice, the overall fuel consumption difference over the shipâs life will be relatively minor. Most of an icebreakerâs fuel consumption occurs during transits to and from the operating areas. Since medium and heavy icebreakers are of comparable size, the fuel consumed during transit will be similar. Voyage profile and days in service are usually mission related and not necessarily related to the size of the icebreaker. Therefore, the daily costs for a medium and a heavy icebreaker operating the same voyage are likely to be similar. The heavier machinery and greater propulsion power of the heavy icebreaker could lead to higher annual maintenance costs. The main machinery and propulsion system maintenance costs are only one of several system maintenance costs incurred by the vessels, and overall maintenance costs for medium and heavy icebreakers are similar. For example, the budgetary cost estimate for annual main engine maintenance costs for commercial ships using distillate fuels, similar to what USCG vessels use, is approximately $0.85/megawatt-hour. On the assumption of about 3,000 hours underway per year and in view of the propulsion power for each vessel type, a notional estimate for the annual main engine maintenance budget for the heavy icebreaker is approximately $92,000; that for the medium icebreaker is about $56,000âa difference of about $36,000 per year. While USCG vessels can have higher maintenance costs than commercial vessels, the costs are not likely to be more than double those of commercial vessels. In the committeeâs judgment, the differences in maintenance costs between a heavy and a medium icebreaker are likely to be small compared with the savings in acquisition costs that would arise from purchasing a fourth heavy icebreaker rather than a one-of-a-kind medium icebreaker. Range of Uncertainty The committee has provided ROM cost estimates. They were produced in a manner consistent with widely accepted shipyard practices and similar to the governmentâs internal procedures. However, the degree to which the estimates will correspond to the eventual costs of the ships that are built can be difficult to establish. During preparation of bids for shipbuilding contracts, uncertainty is sometimes assessed through Monte Carlo simulations. Hundreds of runs with sophisticated software unavailable to the committee are made to determine likely outcomes. To identify possible sources of cost variability, the committee analyzed key assumptions in the following areas:
77 â¢ Basic work scope; â¢ Engineering, detail design, and planning; â¢ Material and equipment cost; â¢ Production labor and productivity; â¢ Risk margin applied by the shipyard; â¢ Learning rate assumed by the shipyard; and â¢ Profit margin assumed by the shipyard. Basic Work Scope of Medium Icebreaker Compared with Heavy Icebreaker Variance in the basic work scope will occur if the ship characteristics that the committee assumed differ from those set forth by USCG. Because USCG has not yet released the ORD for the medium icebreaker, the committee used the characteristics of the existing USCG medium icebreaker Healy as its estimate baseline. The committee acknowledges that a Healy-derived medium design may not be the smallest ship that will meet USCG mission needs. However, the design incorporates the smallest gross characteristics that the committee can envision for a USCG polar medium icebreaker equipped with aviation facilities, boats for search and rescue operations, and science facilities. The committee developed its own minimum characteristics for a heavy icebreaker meeting USCGâs heavy icebreaker ORD. The committee has a higher degree of confidence that the characteristics of the heavy icebreaker represent a realistic design. As a result of its analysis, the committee cautions that the work scope for the design and construction of a medium polar ice breaker may be overestimated by as much 5 percent and that the differences between a medium and a heavy icebreaker due to work scope can reasonably be considered to be Â±5 percent. Engineering, Detail Design, and Planning Costs of the engineering and detail design are sources of uncertainty in cost estimates. Wage rates for engineering, detail design, and engineering may vary by up to 17 percent by discipline between the U.S. East Coast, the Gulf Coast, and the West Coast. Furthermore, engineering and detail design wage rates differ significantly between the United States, Canada, Europe, and Asiaâall of which are candidates for providing design services for a polar icebreaker project. The scope of any effort that acquires expertise from abroad will be dependent on the business strategy of an individual shipyard. Another source of uncertainty is the total work scope of the engineering, detail design, and planning effort. Several members of the committee have experience with and knowledge of engineering and detail design scope for large projects that included the involvement of foreign shipyards. In general, U.S. shipyard engineering and detail design hours are higher than those of foreign shipyards and design agents. U.S. shipyards require a higher level of detail design development to support the production information needs of their workforce than do shipyards in Europe or Asia. To gauge the sensitivity of wage rates and work scope, the committee applied three scenarios to its estimate. The committeeâs baseline estimate is represented by the high (more
78 conservative) cost. The variance in prices that may arise from the combination of wage rates and work scope is shown in Table D-13. TABLE D-13 Sensitivity Analysis: Engineering and Design Work Scope and Wage Rate Total Program Cost for Four Heavy Icebreakers, Single Design Low Medium Higha Ship 1 903 938 983 Ship 2 749 752 759 Ship 3 728 728 729 Ship 4 723 723 724 Total 3,103 3,141 3,195 Maximum variance, total program 92 NOTE: Costs are in millions of U.S. dollars, 2019. a The high category was used in the committeeâs baseline cost estimation. SOURCE: Generated by the committee. Material and Equipment Normally, material and equipment costs are developed from material takeoffs from a preliminary design, which was not available to the committee. Moreover, the committee could not develop and issue preliminary purchase specifications to potential suppliers for large dollar-value items, as would be normal practice. However, the committee believes that its CERs are conservative for material and equipment, including subcontracts. The committee estimates that its material and equipment cost estimates may have a range of uncertainty of Â±10 percent. Since these items represent approximately 49 percent of the total shipyard contract value for the baseline heavy icebreakers, the committee suggests that the uncertainty in total shipyard contract cost is approximately Â±5 percent. Production Labor and Productivity Production labor rates and productivity within shipyards are closely held information that may influence competition. Thus, the uncertainty associated with these factors is difficult to quantify. The committee has relied on BLS in assessing likely variances in production wage and salary rates between regions where likely competitors are located. Furthermore, âwrap ratesâ are a multiple of overhead rates and wage rates. While they are also closely held data, overhead rates, as estimated by the committee, may vary as much as 20 percent among shipyards, depending on the volume of other work in a shipyard, the mix of commercial and naval work, and attention to overhead cost control. On the basis of benchmarking studies, productivity by trade varies significantly among U.S. shipyards. One method of assessing such variances is to examine a recent contract award for a large USCG job, which had a reported variance from the winning bid to the highest bid of 15 percent.
79 Risk Margin The committeeâs cost analysis models applied a risk margin of 7.5 percent to the basic estimate for engineering, detail design, planning, and production labor for Ships 1 and 2, decreasing to 3.75% each for Ship 3 and Ship 4. No risk margin was applied to the material estimate, and in fact, a 5 percent reduction in material costs was assumed for âtaskingâ the result of aggressive negotiation between the shipbuilder and key suppliers. The committee cannot predict the range of risk perceived by shipyards and their corporate parents on this contract. It has assumed a reasonable midrange set of expectations for the bids on the basis of its experience with bidding practices in several U.S. shipyards. Learning Rate As noted in the report, a balance between first ship cost and learning rate must be attained on the basis of each specific shipyardâs prior experience. Some U.S. shipyards have attained a high learning rate between ships while experiencing high first ship labor costs, but other shipyards typically bid lower first ship costs with little or no learning. Table D-14 shows the sensitivity of total program cost to assumed learning rates of 98, 91.5, and 85 percent. Overall, the spread in learning rate produces approximately a 5 percent growth in total program cost. TABLE D-14 Sensitivity of Total Program Costs to Assumed Learning Rate (Four Heavy Icebreakers, Single Design) Ship No. 85% Learning 91.5% Learning 98% Learning 1 983 983 983 2 759 778 796 3 729 756 785 4 724 757 792 Program 3,195 3,274 3,356 NOTE: Costs are in millions of U.S. dollars, 2019. SOURCE: Generated by the committee. Profit On the basis of the committeeâs experience, its baseline cost analyses applied a 12 percent profit margin, similar to the level that several major defense contractors require for bid submittals on any new project. A profit margin of 10.5 percent is low for a must-win contract, and some smaller, closely held corporations may bid as low as 9 percent profit if the project is simple and low risk. The bid profit margin is not the same as the actual realized profit margin after the
80 contract is completed, which is often lower than expected. If a shipbuilder bids low on its profit margin, the contract may fail to perform to shareholdersâ expectations. Table D-15 indicates that the maximum likely variance between a 9 and a 12 percent profit margin is a reduction in predicted total program cost of $69 million, or 2.2 percent. Whether this reduction can be realized through negotiation is doubtful. There is little prospect of repeat icebreaker construction after this project, which would make negotiation of a lower profit margin more acceptable to U.S. shipbuilding corporations. TABLE D-15 Sensitivity to Bid Value for Profit (Four Heavy Icebreakers, Single Design) 9% Profit 10.50% Profit 12% Profit Ship 1 962 973 983 Ship 2 743 751 759 Ship 3 713 721 729 Ship 4 708 716 724 Total program cost 3,126 3,161 3,195 Maximum program variance = 69 (2.21%) NOTE: Costs are in millions of U.S. dollars, 2019. SOURCE: Generated by the committee. Total Shipyard Contract Cost Variance The variances of the different assumptions listed above are presented individually. Occurrence of all the extremes is unlikely. On the basis of its experience and judgment, the committee considers the range of uncertainty for the baseline cost estimates as Â±15 percent for the medium icebreakers and Â±10 percent for the heavy icebreakers. These uncertainties are intended to represent a range of plus-or-minus one standard deviation, similar to the practices of major U.S. shipbuilding corporations. Table D-16 shows how these variances may accrue to the committeeâs estimates for total program cost. TABLE D-16 Total Program Cost with Uncertainties Heavy Icebreakers Medium Icebreakers Baseline Var. Low High Baseline Var. Low High Ship 1 983 82 901 1,065 786 96 690 882 Ship 2 759 64 695 823 582 71 511 653 Ship 3 729 61 668 790 554 67 487 621 Ship 4 692 61 631 753 549 66 483 615
81 NOTE: The assumed range of uncertainty is Â±10 percent of the total shipyard contract for heavy icebreakers and Â±15 percent of the total shipyard contract for medium icebreakers. Figures are in millions of U.S. dollars, 2019. SOURCE: Generated by the committee. Table D-17 shows an analysis of the recommendation to buy four heavy icebreakers for assumed learning rates. TABLE D-17 Impact of Learning Rate Assumption on Decision to Buy Four Heavy Icebreakers to a Common Design Ship No. 85% Learning 91.5% Learning 98% Learning 4 Heavy Icebreakers, Single Design 1 983 983 983 2 759 778 796 3 729 756 785 4 724 757 792 Program 3,195 3,274 3,356 3 Heavy + 3 Medium Icebreakers 1 H 983 983 983 2 H 759 778 796 3 H 729 756 785 4 M 788 789 798 5 M 582 597 611 6 M 555 576 598 4,396 4,479 4,571 NOTE: Costs are total acquisition costs in millions of U.S. dollars, 2019. SOURCE: Generated by the committee. As can be observed from Table D-17, the cost of a fourth heavy icebreaker is less than the cost of a new design for a fourth ship built as a medium icebreaker for the 85 and 91.5 percent learning rates ($724 million < $788 million; $757 million < $789 million). Moreover, total program acquisition costs are predicted to be approximately $1.2 billion less for four heavy icebreakers of a single design versus a 3 + 3 program for two designs. The four heavy icebreakers have a lower lifetime operational cost for maintenance, repair, fuel, logistics, and crewing versus the 3 + 3 program. The provision of four heavy icebreakers capable of performing in the Antarctic and the Arctic gives USCG the operational flexibility to manage mission assignments in either environment.
82 If there are two contracts, one for three heavy icebreakers and another for one new medium design, and the first contract is won with a 98 percent bid learning rate while the second for the medium design is won with an 85 percent learning rate, the total cost of Ship 4 will be slightly higher (by $4 million, the difference between $788 million and $792 million) than if four ships to the same design are bought. This amounts to approximately 0.5 percent of the total acquisition price for Ship 4 and is strongly outweighed by the commonality and operational flexibility advantages of having four identical ships. The committee believes that its recommendation to design and build four heavy icebreakers of one design versus three heavy icebreakers and one medium icebreaker or three heavy and three medium icebreakers is still valid. References Abbreviations ABS American Bureau of Shipping GAO Government Accountability Office HHIC Hanjin Heavy Industries and Construction USCG United States Coast Guard ABS Consulting. 2010. United States Coast Guard High Latitude Region Mission Analysis (HLRMA) Capstone Summary. Arlington, Va. Dilworth, J. B. 1979. Production and Operations Management: Manufacturing and Nonmanufacturing. Random House, New York. GAO. 2017. Navy Shipbuilding: Need to Document Rationale for the Use of Fixed-Price Incentive Contracts and Study Effectiveness of Added Incentives. GAO-17-211. Washington, D.C. HHIC News. 2009. HHIC Launches Araon, the First Korean-Made Icebreaking Research Vessel. June 11. Liljestrom, G., and B. G. Renborg. 1990. Experience Gained from the Design and Construction of the Icebreaker Oden. http://www.sname.org/HigherLogic/System/DownloadDocumentFile.ashx?DocumentFileKey=6 1a4267c-ed4b-476f-90d3-a85b03d07425. OâBrien, L., and M. Lau. 2010. Icebreaker Resistance Calculation for Various Hull Forms. SR- 2010-27. National Research Council Canada, Ottawa, Ontario. http://nparc.cisti-icist.nrc- cnrc.gc.ca/eng/view/object/?id=8cda01cc-3e69-4244-b1f4-bd0026226370. OâRourke, R. 2015. Coast Guard Polar Icebreaker Modernization: Background and Issues for Congress. Congressional Research Service, Washington, D.C.
83 OâRourke, R. 2016. Coast Guard Polar Icebreaker Modernization: Background and Issues for Congress. Congressional Research Service, Washington, D.C. OâRourke, R., and M. Schwartz. 2017. Multiyear Procurement (MYP) and Block Buy Contracting in Defense Acquisition: Background and Issues for Congress. Congressional Research Service, Washington, D.C., June 2. USCG. 2013. USCGC Polar Sea Business Case Analysis: 2013 Report to Congress. Washington, D.C., Nov. 7. USCG. 2015. Polar Icebreaker Operational Requirements Document, Industry Version. Acquisition Directorate, Research and Development Center, Nov. Unclassified: https://www.uscg.mil/hq/CG9/icebreaker/pdf/USM signed USCG PIB ORD FOUO industry version.pdf. Yamauchi, Y., and H. Tsukuda. 2011. The Icebreaking Performance of Shirase in the Maiden Antarctic Voyage. Proceedings of the Twenty-First International Offshore and Polar Engineering Conference, Maui, Hawaii, June 19â24.