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Title: Using the Steel Vessel Material-cost Index to Mitigate Shipbuilder Risk
Authors: Edward G. Keating
Robert Murphy
John F. Schank
John Birkler
Keywords: Fixed-Price Shipbuilding Contract
Incentive-Fee Shipbuilding Contract
Labor-Cost Index
Material-Cost Index
Issue Date: 1-Apr-2008
Publisher: Acquisition Research Program
Citation: Published--Unlimited Distribution
Series/Report no.: Fixed-price
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.
Description: Acquisition Management / Grant-funded Research
Appears in Collections:Annual Acquisition Research Symposium Proceedings & Presentations

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