COST ESTIMATING—A CRUCIAL FUNCTION OF THE SHIP ACQUISITION PROCESS

Abstract

ABSTRACTThe purpose of this paper is several fold: a) to identify the important roles of cost estimating in the ship acquisition process, b) to explain the complexity of estimating the costs of naval ships, and c) to identify existing and potential problems with estimations of budget costs and to propose solutions to these problems.Recommendations to improve the Navy's cost estimating effectiveness by building a data base from actual return costs, developing and utilizing parametric cost models, continuously updating and validating cost estimating models, planning budget submittals to occur after all major characteristics are determined, staffing the cost estimating function with numbers and quality of personnel commensurate with the importance of its role, organizing with a higher costing authority responsible for setting policy. Recommendations are also made to integrate total ship program estimates with “satellite” cost estimating offices in the various engineering organizations responsible for performing detailed estimates, to budget with integrity by submitting only budget figures consistent with the cost estimates, and to exercise stringent change control once the budgetary cost constraint is set by allowing only those changes which correct engineering deficiencies or which are compensated in costs by other changes.