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ASNE Day 2016 - Technical Paper Session 5 : Thursday, March 3, 2016 1330-1500

Current Trends in Naval Applications


Authors: James Rogal, Raphael Lockett, and Philip Koenig

Title: Analyzing and Forecasting Overhead Costs in U.S. Naval Shipbuilding


The cost of ship design and construction, at a high level, consists of direct labor, direct material, and overhead. Overhead is the least understood of those elements. There are constant calls for the Navy to reduce overhead costs in the shipbuilding plan. How can that be done? In this paper, we define the concept of overhead, and how shipyards document it and report it. Then we present our process for analyzing and forecasting shipyard overhead costs. Topics include:

  • Overhead drivers
    • Shipyard economics
    • Shipyard workload forecast
  • Shipyard economics: data sources for benchmarking, rates of growth
  • Workload forecasting: how it is derived from the ship design
  • Eleven standard overhead categories we use to construct our analyses and forecasts
  • Fixed and variable overhead: why the difference is critical
  • Future programs: How we spread fixed overhead costs to the future programs
  • Overhead and rates forecasts: How they are done in NAVSEA 05C.
The paper wraps up with a discussion of the relationship between shipyard overhead cost and labor productivity.

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