Using the Steel Vessel Material-Cost Index to Mitigate Shipbuilder Risk

Abstract

This paper describes how the US Navy structures fixed-price and fixed-price, incentive-fee shipbuilding contracts and how labor- and material-cost indexes can mitigate shipbuilder risk in either type of contract. The Navy frequently uses the Steel Vessel material-cost index, a Bureau of Labor Statistics-derived cost index based on the mix of materials in a typical commercial cargo ship constructed in the 1950s. The Steel Vessel Index has excessive weighting on iron and steel, thereby providing shipbuilders with a mismatch between their actual and the Index-assumed material-cost structure. We recommend the Navy use a material-cost index with more up-to-date weightings.

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Document Details

Document Type
Technical Report
Publication Date
Apr 23, 2008
Accession Number
ADA493938

Entities

People

  • Edward G. Keating
  • John F. Schank
  • John L. Birkler
  • Robert Murphy

Organizations

  • RAND Corporation

Tags

Communities of Interest

  • Ground and Sea Platforms

DTIC Thesaurus Topics

  • Acquisition
  • Business Administration
  • Commerce
  • Contractors
  • Contracts
  • Department Of Defense
  • Economic Analysis
  • Fixed Price Contracts
  • Governments
  • Logistics
  • Management Personnel
  • Materials
  • Organizational Structure
  • Public Policy
  • Shipbuilding
  • Uss Arleigh Burke
  • Websites

Readers

  • Computational Modeling and Simulation
  • Naval Architecture and Marine Engineering.