Anonymous has kindly provided the following model of Life Cycle Costs of Submarine Building (with referencee to FY2014 Annual Report on Life Cycle Cost Management, 30/May/2015, by the Acquisition, Technology & Logistics Agency (ATLA), Japanese Ministry of Defense (MoD)
http://www.mod.go.jp/atla/souhon/about/pdf/26lifecyclecost_houkokusyo.pdf noting "there is no intention to criticize others."
[Pete Comment - This examination is highly complex as it is:
- translated from Japanese language, and
- uses accounting assumptions and methodology
- and within that, Japanese accounting assumptions and methodology which have different yearly start and finish milestone conventions eg. when looking at "27SS" (see TABLE for SORYU & Oyashio Program at the end of this article) what year was 1SS?
TABLE for SORYU & Oyashio Program as at October 30, 2018
http://www.mod.go.jp/atla/souhon/about/pdf/26lifecyclecost_houkokusyo.pdf noting "there is no intention to criticize others."
[Pete Comment - This examination is highly complex as it is:
- translated from Japanese language, and
- uses accounting assumptions and methodology
- and within that, Japanese accounting assumptions and methodology which have different yearly start and finish milestone conventions eg. when looking at "27SS" (see TABLE for SORYU & Oyashio Program at the end of this article) what year was 1SS?
Thorough Management policy of defense spending by Germany brought possible sale of TKMS by ThyssenKrupp, but, there is something to learn.
Though the batch building system has adopted in Japan for submarines to maintain navalsuperiority, this system has not been adopted by Australia because of Australia's defense budgetconstraints. Instead, Australia's indigenous submarine building project adopted a system that also satisfies demands of employment and industry.
If Australia's top priority is maintenance of regional superiority, it could consider the introduction of a batch building system because Australia's indigenous submarine building project does not correspond to submarine updates of naval rivals. Australia could consider participation in a foreign batch building system if this is within reasonable costs and these cost savings are used for satisfaction of demands of employment and industry.
Japan's Life Cycle Cost for Soryus 27SS [launched on October 4, 2018] and 28SS [likely to be launched around October 2019] was estimated based on
FY2014 Annual Report on Life Cycle Cost Management, 30/May/2015, by ATLA of the Japanese MoD [1]. If all submarines are built in Japan and operate in Australia (Cases 2-4), totat costs are 3, 11 and 16 billion $AU for Cases 2-4, respectively. Considering adoption of US combat system and development cost, increase in total costs presumably become 20% at most. Total cost, when 4 submarines correspond to next Soryu (29SS series) and 4 submarines correspond to next Soryu (post 29SS series) are built in Japan according to batch building system, is around $AU 13B resulting in huge cost reduction [for Australia]. Building of other 4 submarines is determined in accordance with the situation.
Table 1 - [below] Life Cycle Cost of 27SS and 28SS
Case 1 2 submarines, 24 years-operation, including 8-10% consumption tax
Case 2 2 submarines, 30 years-operation, excluding consumption tax
Case 3 8 submarines, 30 years-operation, excluding consumption tax
Case 4 12 submarines, 30 years-operation, excluding consumption tax
Case 1 | Case 2 | Case 3 | Case 4 | ||
Classification | |||||
Precondition and others | Number of acquisitions [subs] | 2 | 2 | 8 | 12 |
Operation number [sub] | 2 | 2 | 8 | 12 | |
Operation period [year] | 24 | 30 | 30 | 30 | |
Repair | - | - | |||
Refinement of LCC | - | - | |||
Consumption tax | 10% | 0% | 0% | 0% | |
others | - | - | - | - | |
Concept stage | Consideration on concept | 0 | 0 | 0 | 0 |
Research on technology | 0 | 0 | 0 | 0 | |
Subtotal | 0 | 0 | 0 | 0 | |
Development stage 1 year | Research & development | 0 | 0 | 0 | 0 |
Practical test | 0 | 0 | 0 | 0 | |
Performance test | 0 | 0 | 0 | 0 | |
Design cost | 0 | 0 | 0 | 0 | |
Government supply goods | 0 | 0 | 0 | 0 | |
Subtotalis | 0 | 0 | 0 | 0 | |
Building stage 5 years | First year cost | 16 | 0.02 | 0.04 | 0.06 |
Product cost | 1,272 | 1.50 | 6.01 | 9.02 | |
Subtotal | 1,288 | 1.53 | 6.09 | 9.13 | |
Operation & maintenance stage | Operation cost | 40 | 0.06 | 0.24 | 0.35 |
Combat service support cost | 744 | 1.10 | 4.40 | 6.69 | |
Improvement & repair cost | * | * | * | * | |
Ammunitions | * | * | * | * | |
Subtotal | 783 | 1.16 | 4.63 | 6.94 | |
Disposal stage (After 2038s) | Decommission cost | 1 | 0.001 | 0.005 | 0.007 |
Facility | * | * | * | * | |
Subtotal | 1 | 0.001 | 0.005 | 0.007 | |
Total | 2,073 x100M Yen? | 2.95 $AU Billion | 10.72 | 16.08 | |
Reference
FY2014 Annual Report on Life Cycle Cost Management, 30/May/2015, ATLA, Japanese MoD
1. Aim of Life Cycle Cost Management
Life cycle cost (hereinafter referred to as "LCC") Management, cost necessary to acquire the equipment is considered not as mass production unit price, but as the total expenses necessary for the entire process (life) from concept, development, mass production, operation / maintenance to disposal. By LCC management, i) acquisition judgement based on cost effectiveness at the turning point such as start of development or mass production, ii) enhancement of accountability related to cost, and iii) decision making based on cost reduction at the operation and maintenance stages become possible. In this way, the purpose of LCC Management is to optimize the cost of the entire lifecycle of the equipment.
2. Background
3. Organizations for LCC Management
4. Calculation method of LCC
In calculation of the LCC, break down the cost* related to the equipment was broke down into the various components and each cost component was estimated by using CBS ** in order to predict necessary cost of the equipment in the future.
Data necessary for the calculation are prescribed number of acquisition and data of the similar equipments in the past, etc. Particularly important data are those considered as high proportion in the LCC, i.e., body cost at the mass production stage, cost of supplies and repairment in the operation and maintenance stages. By using these data and the scale ratio (eg., weight ratio) between the equipment and the similar equipment, the cost necessary for the equipment is estimated. In this estimation, the most recent exchange rates are used, and no price fluctuations are assumed.
* Here, “cost” is a price government pays
**CBS (Cost Breakdown Structure: a tool used for planning of project management. CBS is a cost allocation expressed in a hierarchical structure by classifying project costs in detail)
5. Abstract of Annual Report
6. Composition of Annual Report
7. Explanation of the equipment whose LCC estimation is different from last year's Annual Report (skip)
8. Annual report for each equipment
9. Note Expenses such as guided missiles and (actual/training) ammunitions are not included in the LCC estimation.
FY 2015 submarine (27SS submarine), page 77-80 [again see
http://www.mod.go.jp/atla/souhon/about/pdf/26lifecyclecost_houkokusyo.pdf 1. Outline of the equipment
2. Performance of the equipment
3. Method and preconditions of LCC calculation
Common items | Preconditions | Assuming that one submarine in FY 2015 and another same type of submarine within during New Meduim Term Defence Program are acquired, LCC is calculeated. Assuming that the latter submarine with the same specification as the former submarine is acquired in FY 2016, LCC is calculated. Operation period of each submarine is 24 years. Exchange rates until FY2013 are used, and no price fluctuations are assumed. |
Each stage | Concept | No contract result |
Development | Cost is calculated based on DDD (Design Description Document) of same type of submarine. | |
Building | Cost is calculated based on result of most recent same type of submarine. | |
Operation & maintenance | Cost is calculated by using result of resemble goods or services. |
4. Prediction line against base line for LCC Estimation (skip)
5 LCC summary table (100JPN Yen = 1.3AU$)
JPN100million Yen | ||
Classfication | Original baseline (FY2014) | |
Precondition and others | Number of aquisition | 2 boats |
Operation number | 2 boats | |
Operation period | Ca.24years | |
Repair | - | |
Refinement of LCC | - | |
Consumption tax | *1 | |
others | - | |
Concept stage | Consideration on concept | 0 |
Research on technology | 0 | |
Subtotal | 0 | |
Development stage (2015) | Research & development | 0 |
Practical test | 0 | |
Performance test | 0 | |
Design cost | 0 | |
Government supply goods | 0 | |
Subtotalis | 0 | |
Building stage (2015-2020) | First year cost | 16 |
Product cost | 1,272 | |
Subtotal | 1,288 | |
Operation & maintenance stage (2020-2038s) | Operation cost | 40 |
Combat service support cost | 744 | |
Improvement & repair cost | * | |
Ammunitions | * | |
Subtotal | 783 | |
Disposal stage (After 2038s) | Decommission cost | 1 |
Facility | * | |
Subtotal | 1 | |
Total | 2,073 | |
*Consumption tax is set 8% and 10% for FY2014-2016 and FY2019-, respectively.
6. Possible factors affect on LCC
SS No. Diesel Type Motor | Build No Name | Pennant No. | MoF approved amount ¥ Billions FY | LABs, LIBs, AIP | Laid Down | Laun -ched | Commi ssioned | Built By |
8105 Oyashio | SS-590/ TS3608 | ¥52.2B FY1993 | LABs only | Jan 1994 | Oct 1996 | Mar 1998 | KHI | |
6SS-15SS | 8106 -8115 various | SS-591-600 | ¥52.2B per sub FY1994-FY2003 | LABs only | 15SS Feb 2004 | 15SS Nov 2006 | 15SS Mar 2008 | MHI & KHI |
16SS | 8116 Sōryū | SS-501 | ¥60B FY2004 | LABs + AIP | Mar 2005 | Dec 2007 | Mar 2009 | MHI |
17SS | 8117 Unryū | SS-502 | ¥58.7B FY2005 | LABs + AIP | Mar 2006 | Oct 2008 | Mar 2010 | KHI |
18SS | 8118 Hakuryū | SS-503 | ¥56.2 FY2006 | LABs + AIP | Feb 2007 | Oct 2009 | Mar 2011 | MHI |
19SS | 8119 Kenryū | SS-504 | ¥53B FY2007 | LABs + AIP | Mar 2008 | Nov 2010 | Mar 2012 | KHI |
20SS | 8120 Zuiryū | SS-505 | ¥51B FY2008 | LABs + AIP | Mar 2009 | Oct 2011 | Mar 2013 | MHI |
No 21SS | No 21SS built | |||||||
22SS | 8121 Kokuryū | SS-506 | ¥52.8B FY2010 | LABs + AIP | Jan 2011 | Oct 2013 | Mar 2015 | KHI |
23SS | 8122 Jinryu | SS-507 | ¥54.6B FY2011 | LABs + AIP | Feb 2012 | Oct 2014 | 7 Mar 2016 | MHI |
24SS | 8123 Sekiryū | SS-508 | ¥54.7B FY2012 | LABs + AIP | KHI | |||
25SS | 8124 | SS-509 | ¥53.1B FY2013 | LABs + AIP | 22 Oct 2013 | 12 Oct 2016 | MHI | |
26SS end of SMC-8s | SS-510 | LABs + AIP | 2014 | 6 Nov 2017 | Mar 2019? | KHI | ||
27SS First | SS-511 | LIBs only | 2015 | 4 Oct 2018 | Mar 2020? | MHI | ||
28SS Second | 8127 | SS-512 | ¥63.6B FY2016 | LIBs only | 2016? | Oct 2019? | Mar 2021? | KHI |
29SS First Soryu Mk 3 SMC-9? | 8128 | ? | ¥76B FY2017 | LIBs only | ? | ? | 2023? | MHI? |
8029? | ? | ¥71.5B FY2018 | LIBs only | ? | ? | 2024? | KHI? |
Table from information exclusively provided to Submarine Matters. LABs = lead-acid batteries, AIP = air independent propulsion, LIBs = Lithium-ion Batteries. ¥***B = Billion Yen. MHI = Mitsubishi Heavy Industries, KHI = Kawasaki Shipbuilding Corporation of Kawasaki Heavy Industries.
---Anonymous