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Objectives. Lesson objective - to discuss the fundamentals of Life cycle cost to include… What does it include? Why is it important? Expectations - You will understand why life cycle cost is so important and what kinds of issues it addresses

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  1. Objectives • Lesson objective - to discuss the fundamentals of • Life cycle cost • to include… • What does it include? • Why is it important? • Expectations - • You will understand why life cycle cost is so important and what kinds of issues it addresses • At the end of this lesson, you should understand (1) the fundamental issues and (2) how to make life cycle cost estimates Life Cycle Cost 13-1

  2. Discussion subjects • Review • Parametric cost estimates • Development • Procurement • UAV application • Operations and support • Manned aircraft • UAV applications Life Cycle Cost 13-2

  3. Review - Life cycle cost • Development cost • The cost of developing a system • Considered a “non-recurring” cost • Occurs only once (hopefully) • Procurement cost • The cost to buy a system once it is developed • Includes a lot of “recurring” cost • Costs incurred every time a system is produced • Operations and support cost (Q&S) • The cost to maintain and operate a system after purchase • Includes the cost of maintaining crew proficiency • Excludes the cost of combat operations Development + procurement + O&S  Life cycle cost Life Cycle Cost 13-3

  4. Review - cost issues • Development cost • Customers want this to be as small as possible • New systems are expensive • Most of the cost is associated with risk reduction, engineering and test • Programs need “margin” to cover uncertainty • Procurement cost • This cost is sensitive to procurement quantity • Repetitive tasks become more efficient • Also sensitive to the size and complexity • Aircraft empty weight is considered a cost driver • Operations and support cost • Most of the life cycle cost of an aircraft is the “O&S” • O&S cost can be reduced by good up-front design Life Cycle Cost 13-4

  5. Pre-concept design • The product of this phase is a set of initial requirements and cost, risk and schedule estimates • Key technical issues addressed during this phase include: • Overall needs and objectives • Concepts of operation • Potential design concepts • Initial cost and schedule • Effectiveness estimates • Analysis of alternatives The technical work done during the pre-concept design phase establishes the initial cost and schedule estimate that the project will have to live with for the rest of its life Review - LCC importance Life Cycle Cost 13-5

  6. 100 95 85 70 50 10 Cumulative Percent Of Life Cycle Cost Milestones I II III IOC Out of Service The cost driver - early decisions Detailed Design Preliminary Design Concept Design Pre-concept Design Source – Defense Systems Management College, 3 Dec. 1991 Life Cycle Cost 13-6

  7. Next subject • Review • Parametric cost estimates • Development • Procurement • UAV application • Operations and support • Manned aircraft • UAV applications Life Cycle Cost 13-7

  8. Parametric cost estimates • Parametric models or cost estimating relationships (CERs) are used widely for aircraft cost estimating • - By industry for initial cost estimates • - By customers for proposal evaluation • Used when little is known about the design • - But also used to check internal consistency of detailed estimates • Methodology updates occur periodically • - Need to capture technology benefits and costs • Most recent updates focused on advanced structural materials • - Composite airframe materials drive airframe cost • Although no CERs yet exist for UAVs, they will exist someday and we need to understand the approach * (1) Advanced Airframe Structural Materials, a Primer and Cost Estimating Methodology, RAND R-4016-AF, Resetar, Rogers and Hess, c1990 Life Cycle Cost 13-8

  9. Material Aluminum Titanium Steel Composites Other USAF/AFRL data RAND data F-18 (1978) 48% 14% 15% 11% 12% F-15 (1972) 52% 40% 5% 2% 1% AV-8B 47% ?% ? 26% 27% F-111 (1967) 59% 5% 33% 1% 2% F-16 (1976) 79% 2% 4% 5% 10% B-2 27% 23% ? 37% 13% C-17 70% 9% ? 8% 13% F-22 16% 39% ? 25% 20% F-18 (E/F) 27% 23% ? 22% 13% Material utilization trends RAND Data - Advanced Airframe Structural Materials, a Primer and Cost Estimating Methodology, RAND R-4016-AF, Resetar, Rogers and Hess, c1990 AFRL Data – Evolution of U.S. Military Aircraft Structures Technology, AIAA Journal of Aircraft, Paul,Kelly,Venkaya,Hess, Jan-Feb 2003 Life Cycle Cost 13-9

  10. Cost drivers • CERs capture overall air vehicle cost drivers • 1. Size including airframe and empty weight, area, etc. • 2. Performance including speed, specific power, etc. • 3. “Construction” including load factor, engine location, area ratios, wing type, avionics weight ratio, etc. • 4. Program including number of test aircraft, new vs. existing engines, contractor experience, etc. • Of these, a few emerge statistically as real drivers* • - Airframe unit weight (AUW) • - Empty weight (EW) • - Maximum speed (Vmax) • - Number of test aircraft (NTA) • - Airframe material type and composition • Software should also be a driver (no data in 1990?) • * (2) RAND N-2283/2-AF, Aircraft Airframe Cost Estimating Relationships : Fighters, December 1987 Life Cycle Cost 13-10

  11. Cost categories and elements • RAND defines CERs in two major overall cost categories: non-recurring and recurring costs* • - Non-recurring (development) cost elements are: • - Non-recurring engineering hours (NRE) • - Non-recurring tooling hours (NRT) • - Development support cost (DS) • - Flight test cost(FT) • - Recurring (production) cost is normalized for 100 air vehicles and made up of the following elements: • - Recurring engineering hours (RE100) • - Recurring tooling hours (RT100) • - Recurring manufacturing labor hours (RML100) • - Recurring manufacturing material cost (RMM100) • - Recurring quality assurance hours (RQA100) • * Their methodology does not include engines, avionics, armament, training, support equipment and spares. These elements must be added. Life Cycle Cost 13-11

  12. Baseline CERs • RAND starts with an aluminum baseline cost estimate • - Non-recurring cost elements • NRE(hrs) = 0.0168(EW^.747)(Vmax^.800) (13.1) • NRT(hrs) = 0.01868(EW^.810)(Vmax^.579) (13.2) • DS = 0.0563(EW^.630)(Vmax^1.30) (13.3) • FT = 1.54(EW^.325)(Vmax^.823)(NTA^1.21) (13.4) • - Recurring cost elements • RE100(hrs) = 0.000306(EW^.880)(Vmax^1.12) (13.5) • RT100(hrs) = 0.00787(EW^.707)(Vmax^.813) (13.6) • RML100 (hrs)= 0.141(EW^.820)(Vmax^.484) (13.7) • RMM100 = 0.54(EW^.921)(Vmax^.621) (13.8) • RQA100 (hrs-cargo acft) = 0.076*RML100 (13.9) • RQA100 (hrs-non-cargo) = 0.133*RML100 (13.10) Life Cycle Cost 13-12

  13. Typical application • RAND example, hypothetical all-aluminum fighter • EW (lb) 27000 • Vmax (kt) 1300 • NTA 20 • Structure (lb) 13000 • Production quantity 100 • Typical labor rates (1999 $/hr)* • Engineering $86 • Tooling $88 • Manufacturing $73 • Quality Assurance $81 • * From Raymer, page 588 - Inflation factors can be used to adjust these to current year prices (also required for material costs) Life Cycle Cost 13-13

  14. From equations 13.1 through 13.10 • NRE(Khrs) = 10634 • NRE($) = $914.5M • NRT(Khrs) = 4611 • NRT($) = $405.7M • DS($) = $389.4M • FT($) = $577.6M • Nonrecurring = $2,287M • Total program (from NR + R) = $5.44B • RE100(Khrs) = 7463 • RE100($) = $642M • RT100(Khrs) = 3636 • RT100($) = $320.0 • RML100(Khrs) = 19502 • RML100($) = $1423.7 • RMM100 ($) = $559M • RQA100(Khrs) = 2594 • RQA100($) = $210.0 • Recurring($) = $3,155M Baseline cost Life Cycle Cost 13-14

  15. Engine cost • - Raymer’s cost discussion (Chapter 18) includes an equation for engine procurement cost in 1999$ • R(propul) = 2251*(0.043*Tmax + 243.25Mmax • + 0.969*TiT -2228) (13.11) • where • Tmax = Maximum thrust (lb) • Mmax = Maximum Mach • TiT = Turbine inlet temperature (degR) • ≈ 2000 - 2500 degR • - For other propulsion cycles we will use $/lbm(engine) • Avionics cost • - Raymer recommends a weight based approximation of $3000-$6000 per pound ($1999) • - We will use $5000/lb for both avionics and payloads Other costs Life Cycle Cost 13-15

  16. RAND recurring cost methodology is based on production quantities of 100 aircraft • - Other quantities are adjusted for the “learning curve” • - A term used to describe the efficiencies that result from learning repetitive processes and tasks • - Learning curve effects are generally expressed by exponential forms such as the following from RAND • Cost (Qn) = Cost(Q100)*(Qn/100)^exp (13.12) • exp(engineering hours) = 0.163 • exp(tooling hours) = 0.263 • exp(manufacturing hours) = 0.660 • exp(manufacturing material) = 0.231 • exp(tooling hours) = 0.714 • exp(total program) = 0.356 where Quantity effects Life Cycle Cost 13-16

  17. Advanced material effects • Advanced materials effects are applied to the aluminum baseline as separate cost factors • Effects of advanced materials vary by element • - Tooling (both nonrecurring and recurring) has twice the sensitivity to material type as engineering • - Tooling focuses primarily on airframe structure • - Engineering hours are driven by a wider range of design and manufacturing issues such as, design, integration, test, evaluation, etc. • Overall effects are captured by historical Structural Cost Fractions (SCF) for airframe structure • NonrecurringRecurring RE - 42% RT - 82% RML - 67% RML - 67% RMM - 58% RQA - 69% NRE - 45% NRT - 87% Life Cycle Cost 13-17

  18. Complexity factors • Used to capture labor hour and cost effects of different design and manufacturing processes • - RAND uses complexity factors (CFs) to determine material effects by structural cost element • NRE NRT RE RT RML RMM RQA • Al 1.0 1.0 1.0 1.0 1.0 1.0 1.0 • Al-li 1.1 1.2 1.1 1.1 1.1 2.7 1.1 • Ti 1.1 1.4 1.4 1.9 1.6 2.8 1.6 • Steel 1.1 1.1 1.1 1.4 1.2 0.7 1.4 • GrExp 1.4 1.6 1.9 2.2 1.8 4.9 2.4 • GrBi 1.5 1.7 2.1 2.3 2.1 5.5 2.5 • GrTP 1.7 2.0 2.9 2.4 1.8 6.5 2.6 Life Cycle Cost 13-18

  19. Methodology • Advanced material effects are applied to each cost element • MWC (j) = SCF(j)*[CF(i,j)*SW(i)/ SF(I)]+[1- SCF(j)] • (13.13) • where • MWC(j) = Material weighted cost element j • SCF(j) = Structural cost fraction for cost element j (chart 24-18) • CF(i,j) = Complexity factor (chart 24-19) • SW(i) = Structural weight by material type • See RAND Report R-4016-AF, Advanced Airframe Structural Materials, a Primer and Cost Estimating Methodology, for more application information Life Cycle Cost 13-19

  20. UAV cost issues • Unfortunately, there are no known UAV CERs and no consistent UAV cost data bases. An example: • - Total procurement cost projected by the Defense Airborne Reconnaissance Organization (DARO) for Predator in 1996 was $118M for 13 systems. • - In 1998 12 Predator systems were listed as $512M or $42.7M per system • - The same document budgeted $23.9M for one system for delivery in 1998 • These contradictions exist across a number of UAV types and it is clear that a comprehensive cost study is needed to resolve the issues • - Such a study is beyond the scope of this course • We will take a simpler approach Life Cycle Cost 13-20

  21. UAV cost approach • We will assume that manned aircraft CERs apply to UAV air vehicles and propulsion • - Cursory checks show this not a bad assumption • Global Hawk development cost ≈ $350M • - The RAND aluminum baseline development cost CER for EW + payload = 11,100lb, Vmax = 360 kts and two flight test aircraft predicts a development cost of $313M in $1999 (less engines and avionics) • - Avionics development costs are not available • Global Hawk procurement cost goal = $10M • - The RAND aluminum baseline procurement cost CER predicts a unit 20 development cost of $15.7M • - The customer acknowledged in 1998 that Global Hawk unit cost would be about $13M • - Latest reports are that the airframe costs $16-20M Life Cycle Cost 13-21

  22. Other UAV system elements • Little information is available on UAV control station and communications development and no CERs • - Available data indicates Tactical Control Station (TCS) development costs exceed $100M • Development costs for the Global Hawk/Dark Star common ground station (GCS) appear ≈ $250M • We will assume, therefore, that control station development (including communications) ≈ 70% of air vehicle development cost • Ground station procurement is harder to determine • - Predator ground and communications station costs appear about equal at around $3M each • - Global Hawk/DarkStar initial GCS procurement ≈ $25M each for 3 units. Latest reports = $45M • - We will assume control station procurement including communications ≈ 1 air vehicle + payload procurement Life Cycle Cost 13-22

  23. Other system elements - cont’d • We have no good information on UAV payload development costs • - However, there are many payloads available off the shelf and we will assume development cost is limited to integration, which is covered under the air vehicle • We also have no good information on UAV payload procurement costs • - We will use Raymer’s assumed $5000 per pound parametric until something better comes along • - This would imply that predator payload (450lb) costs are about $2.25M, far more than airframe cost • - At a payload weight of 1900lb, Global Hawk payload cost would be $9.5M, about equal to original airframe estimate (recent USAF data cites payload at $11M) • Despite the fact that some of these estimates are guesses, we will use them until something better comes along • - It is better to guess than to leave something out Life Cycle Cost 13-23

  24. Next subject • Review • Parametric cost estimates • Development • Procurement • UAV application • Operations and support • Manned aircraft • UAV applications Life Cycle Cost 13-24

  25. Manned aircraft data • O&S costs are driven by 2 factors • 2/3 by manpower (pilots, operations, maintenance, logistics and other personnel) • 1/3 by flight hours - Flight hours (and numbers of missions) drive maintenance and fuel consumption • Average annual O&S ≈ 10% unit procurement cost • - Typical SE fighter ≈ $3M/yr or $9000/flight hour • Typical manned fighter O&S cost breakdown • - Direct personnel (pilots, maintenance, etc.) = 40-45% • - Pilots (10%), ops support (15%), maintenance (75%) • - Approximately 20-30 maintainers per aircraft • - Indirect (security, medical, facilities etc.) = 20-25% • - Fuel and spare parts = 25-35% (≈ $2K/FH for fighter) • - Other = 5-10% • - 1997 O&S data shows USAF average annual squadron personnel costs at about $45K per person Life Cycle Cost 13-25

  26. This is the portion of the O&S cost that is directly related to flight hours (fuel and spare parts) • - Direct operating costs are key figures of merit for commercial operators • - Airlines typically quote direct operating costs in terms of cost per seat mile • - Others including the military use cost per flight hour ($/FH) and it appears to correlate with empty weight and speed Direct aircraft operating costs Life Cycle Cost 13-26

  27. Other direct operating costs • There is no information available on O&S cost for payloads, communications equipment and ground stations • - We can assume that the equipment is reliable but that it undergoes regular upgrade and refurbishment at least every 10 years • - We will assume, therefore, annual O&S cost to be about 8% of initial procurement cost • Once again, we are simply making an educated guess but it is better to do so than to leave out an important element of cost • - If our guesses are incorrect, we can improve them when we get more data • - If we leave something out, there is no chance for improvement Life Cycle Cost 13-27

  28. UAV data • Three O&S data points • In 1997 DARO budgeted Hunter UAV operations and support costs were at about $17.5 million for about 2000 flight hours or $8750/FH (almost the same as as a typical manned fighter) • In 1999 the VTUAV program established an O&S cost goal of 25% less than Pioneer at $6500 per flight hour • Published lifetime (10yr?) O&S cost for 11 Predator systems (44 air vehicles) = $697M in $FY97 • Other data • - UAV squadron manning data provides insight to adjust manned aircraft O&S data for UAV applications • - A 4 air vehicle Predator squadron, for example, deploys with 55 people, of which 30 are operators and analysts and 24 are maintainers (13.75 total people or 6 maintainers per aircraft) Life Cycle Cost 13-28

  29. UAV air vehicle application • The minimum data required are number of personnel (maintenance and operators), flight hours (FH), direct cost per FH, other direct cost and indirect personnel • Predator for example has 13.75 persons per air vehicle. At $45K per person per year (FY 97 est.), personnel costs would be $620K/year per air vehicle • Also assuming an indirect personnel cost ratio of 25%, annual indirect costs would be $155K • Assuming 1000 FH per year at $75/FH (chart 13-24 @ 100 kts), air vehicle operating costs would be $75K • Payload O&S is estimated at 8% procurement cost/year = .08*(450lb*$5000/lb) = $180K • Ground station plus comms is also estimated at 8% or cost/year = 0.08*(≈$6M) = $480K • Estimated annual O&S cost for Predator, therefore, would be about $1.5M per air vehicle Life Cycle Cost 13-29

  30. Comparison From Defense Airborne Reconnaissance Office (DARO) 1996 Annual Report - Predator 11-12 System LCC (Base-year FY 1996 $M) * RDT&E = $ 213 * Production = $ 512 * O&S, etc. = $ 697 * Total = $1,422 At 3% inflation = $761M in FY99$ Our estimate for 11-12 systems (44-48 vehicles) would be $660 - $720M • - O&S/production = 1.36 or 14% of production cost per year (assuming a 10 year Life Cycle) • - Average manned fighter ratio = 11% Life Cycle Cost 13-30

  31. System cost - summary • Airframe • Development - Equations 13.1 - 13.4 • Procurement - Equations 13.5 - 13.10 • Propulsion (procurement) - Eq 13.11 • Ground Station + communications • Development - 70% air vehicle development • Procurement ≈ 1 air vehicle + sensor payload • Payload (procurement) - $5000/lb • Operations and support • Air vehicle & payload operators - estimate number • Maintenance personnel - chart 12-30 • Other personnel - add 25% • Air vehicle operating costs (inc. engine) - chart 24-27 • Ground station + communications - 8% procurement/yr • Payload - 8% procurement/yr Life Cycle Cost 13-31

  32. Expectations • You should now understand the basic concept design cost issues including • Development • Procurement • Operations and support Life Cycle Cost 13-32

  33. Reading assignment • Raymer, Aircraft Design - A Conceptual Approach • Chapter 3 – Sizing from a conceptual sketch • Chapter 3.1 : Introduction • Chapter 3.2 : Takeoff weight buildup • Chapter 3.3 : Empty weight estimation • Chapter 3.4 : Fuel fraction estimation • Chapter 3.5 : Takeoff weight calculation* • Total : 25 pages • Note – Use Raymer as a reference book. It is not necessary to memorize or derive any of the equations. Read the sections over for general understanding of the concepts. Life Cycle Cost 13-34

  34. Intermission Life Cycle Cost 13-34

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