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Estimating Boatbuilding Costs
Is there a cost benefit to building offshore...?
Originally Titled: "US Yacht Designs For Building Offshore"
Copyright 2000 - 2011 Michael Kasten
Introduction
This paper was originally prepared at the request of the Pacific Northwest Section of the Society of Naval Architects and Marine Engineers. It was presented on 13 May 2000 in Vancouver, BC at the SNAME Annual Spring Meeting. The theme for the SNAME Spring Meeting was "Pacific Northwest Designs on the World Stage."
This article will make particularly valuable reading for anyone considering having a boat built, whether the intent is to make use of a stock design or a custom design. Described here is a method for estimating construction costs both in the US and elsewhere. A similar method allows one to very approximately estimate the cost of custom design. The relative economies of building with the various hull construction materials such as FRP, wood, steel or aluminum will be considered, along with the advantages of each material.
Cost saving strategies are presented here, as well as in the companion article, Affordable Boatbuilding.
Abstract
This essay will focus on a few of the issues surrounding designing boats for construction offshore. By that, I mean creating a new vessel design that is intended for construction outside of the US, mainly for the sake of the possible cost advantages.
I will use New Zealand as an example venue for building yachts that have been designed in the US for US clients. I will use two power yachts as example vessels, a 38' steel and aluminum tug yacht built in the US, and a smaller aluminum tug yacht built in New Zealand.
With these projects as examples, the following general topics will be discussed:
* Cost effectiveness of building offshore
* Estimating boat building & custom yacht design costs
* Relative cost of different construction materials
* Cost saving strategies
* Design considerations for building offshore
* What standards will apply with regard to stability, structure, safety
* Communicating effectively
* Construction inspections
* Import / Export considerations
* Sea trials and delivery
Cost Effectiveness
What is our main incentive to consider building a boat offshore to start with? It should come as no surprise that the primary rationale for seeking an offshore venue comes down to one basic consideration: Cost.
So, where are the savings?
Materials
It seems that among countries where we encounter a familiar business environment, such as in the US, Canada, Australia, New Zealand and the EU, that materials are essentially a commodity. By this I mean that the parts and pieces used to build a yacht such as steel, aluminum, paint, wiring, plumbing, engines, pumps, electronics, and so forth will more or less cost the same amount regardless of the location or currency that was used to purchase the materials, except in regions of high taxation such as the European Union. However in most cases, vessels built for export will not incur a local tax. More on that subject below...
It is interesting to note that in the US, while we may not officially be able to refer to a yacht built in Canada as having been built "offshore," the provincial US mind may still think in those terms. Perhaps we may more properly refer to it as "building foreign."
Labor
Canada and the US have a varying exchange rate, which has in the past been favorable to a US client when having a boat built across the border. Due to the extraordinary depreciation of the US dollar during 2007 & 2008 this is no longer the case. Also, what may not be widely recognized is that the living standard in Canada is in most places higher than in the US. For example, Canada's blue collar workers are more often protected by unions, they have single payer health insurance provided by the government, and in most of Canada the base labor rate is higher than in the US.
These factors to diminish the incentive for US clients to build in Canada, especially on the West Coast. However from the Great Lakes and eastward into Nova Scotia, the wage disparity has in the past often favored favor a vessel built in Eastern Canada for a US client. But with the value of the US dollar at historic lows (2007 & onward) this no longer appears to be the case. Of course these are generalities for which we will always be able to find exceptions.
A labor cost disparity is seen within the US as well between, say, the Pacific Northwest and the US Southeast. Labor rates are ordinarily much lower in the US Southeast than they are in the Pacific Northwest.
South of the US border it is sometimes said, "Poor Mexico, so far from God, yet so close to the United States." Proximity to the US has not had the same equalizing effect on wages in Mexico, therefore one would expect a cost advantage when looking south of the border.
There are many good boat building venues outside North America. When looking across the water to more distant places, we tend to gravitate toward countries that have a familiar language and business environment. In particular we often look toward the EU, Australia and New Zealand.
In recent years we have seen a severe devaluation of the US dollar. While other venues may still contain regions of good value, the advantage to a US customer having a vessel built offshore has been dramatically reduced (2007 & onward).
Then... and Now...!
Please note that while I have revised some of the above text to reflect current conditions (2007 to 2010), I have NOT revised the article that follows, primarily because the original article, as written, illustrates how quickly the picture can change over a relatively few years. The world markets are quite different now (2007 and onward) than they were in early 2000 when this article was written. It has even reached the point that the US dollar is somewhat of an international joke - albeit a tragic one.
In the following article it is worth noting that while we might still see slight benefits in terms of labor costs within countries such as New Zealand, the living standards and local wages there have for the most part surpassed those in the US. This has dramatically turned the tides with regard to the following information...
A few interesting venues do still exist however, in particular within the EU among recently admitted or soon-to-be admitted countries. Possibly the best examples are the Baltic nations which have a strong maritime tradition and highly skilled labor. Another venue of considerable interest is Turkey, a very well developed maritime nation with a long boat building history. With the push toward EU membership in these nations, the business climate has become much more uniform and familiar, making the Baltic nations as well as Turkey the most attractive venues for clients in Europe, and for US clients as well. Other Nations on the Mediterranean should also be considered such as Croatia, home to the beautiful Dalmatian coast.
Other countries of interest are in Asia. Of course there is Taiwan which has been a favorable boat building venue for quite a long time. In recent years China has become an important international player and well worth considering. In South Asia, there is increasing interest in Thailand and Malaysia, both of which have "free ports" where imports can be received without duty. Due to its duty free status, even Dubai begins to look interesting for finishing out.
Certainly we will see more US and EU boats being built in these alternate venues, the reason being primarily the cost difference due the reduced cost of labor in those locations.
Conversely, if the slide in the value of the US dollar continues, it may well turn out that the United States will become competitive on the world stage as a reasonably priced venue for boat building, especially for customers from Canada, Australia and the EU... A mere five or six years ago this concept would have been impossible.
Consider that when the Euro was first introduced in early 1999 it was valued at USD $0.85. In other words, one dollar would buy you approximately 1.18 Euro. In 2008 the US dollar had gone all the way to $1.60 per Euro, i.e. in 2008 the US dollar would only buy you 0.625 Euro. Thus in less than 10 years' time (1999 to 2008) we have seen roughly a 50% loss in the value of the US dollar against the Euro..! Yes, you have read that correctly: the purchasing power of the US dollar has been CUT IN HALF relative to the Euro in just ten years. It is not at all difficult to understand why countries worldwide are seeking a replacement for the US dollar as the world's benchmark currency...!
The decline in the value of the US dollar is quite a big deal for anyone from the US wanting to purchase foreign goods or foreign labor. As a result, most of the Euro zone has become unaffordable to a US client. We cannot predict the future with any certainty, but we do observe from recent events that all Western currencies are being devalued in what amounts to a macabre race to the bottom.
These factors have almost completely reversed the landscape in terms of the subject of this article, i.e. Building Offshore... Perhaps one day in the not too distant future wealthy Chinese clients will prefer to have their yachts built in the US because it is a bargain..! It could easily happen.
IMPORTANT NOTE...!
The following cost estimating calculations were based on an exchange rate at the time of writing this article (early 2000) when the New Zealand dollar cost around USD $0.40 - at the lower end of its range.
Since then, the US dollar has varied widely in value. A few examples...
In May 2004 the New Zealand dollar was around USD $0.63. The Canadian dollar was around USD $0.73. The Australian dollar was around USD $0.72, and the Euro was at USD $1.18.
In November 2007, the New Zealand dollar cost USD $0.76, the Australian dollar cost USD $0.91, the Canadian dollar cost USD $1.09, and the Euro cost USD $1.47.
By early 2008 however, the dollar had miraculously strengthened such that the New Zealand dollar cost USD $0.53, the Australian dollar cost USD $0.67, the Canadian dollar cost USD $0.82, and the Euro cost USD $1.28.
By mid-2010 the US dollar returned to relative weakness due in large part to "quantitative easing" by the US Federal Reserve. In mid-2010 the Canadian dollar cost USD $0.94; the Euro cost USD $1.30; the Aussie dollar cost USD $0.86; the Kiwi dollar cost USD $0.71.
The US dollar has continued its downward slide. In mid-2011 the Canadian dollar cost USD $1.05; the Euro cost USD $1.44; the Aussie dollar cost USD $1.08; the Kiwi dollar cost USD $0.86.
Presently (mid 2011) we can only say for certain that whatever happens next "will be interesting." As a result of the dollar's decline, offshore currency values have become relatively unfavorable to US customers, but possibly have tended to make the US a favorable build venue..!
Due to the variations in exchange rates since early 2000 when this article was written, an adjustment to the relative costs from one country to another must be made when using the following approach to cost estimating.
Due to the wild excursions of the US dollar, the cost of MATERIALS such as aluminum, copper, imported electronics and machinery, etc. have also changed. In other words, a substantial adjustment in the absolute (per pound) cost of boat building discussed below must be made.
The global economic map continues to change, making certain countries better candidates for effecting labor cost savings at different times. Therefore, please consider the following essay to be an outline of how the venue where built can have a dramatic impact on the cost of boat building - and an illustration of how quickly that landscape can change.
A Snapshot From the Year 2000...
Canada's dollar (as of 2000) has in the past usually hovered between USD $0.60 and USD $0.75, Australia's between USD $0.50 and USD $0.65, and New Zealand's between USD $0.40 and USD $0.55, with excursions in either direction around those values.
If we make use of New Zealand as our example foreign venue, it is interesting to observe that nominal labor rates in New Zealand are approximately the same as they are in the US. In other words, a yard that would charge USD $45 to $55 per hour in the US will very approximately charge NZD $45 to $55 per hour in New Zealand.
Based on the exchange rate as of the time of the writing of this article, each "New Zealand Dollar" being paid to a New Zealand yard will cost a US client around 40 US cents. At that exchange rate, a US customer will very approximately be getting a 60% discount on the labor to build their boat. Given that the number of hours will be roughly the same for a specific vessel, regardless of where built, a yacht built in New Zealand will be considerably less costly than one built in the US.
At this point we may begin to understand the rationale for pursuing construction in a country like New Zealand. For a US clientele, provided that the value of the US dollar remains stable, New Zealand becomes quite a viable place to build a yacht.
Using the yard's "hourly rate" as a gauge, and adjusting for the applicable currency exchange rate, we can work this same equation for building in Australia or Canada.
Estimating Costs
Given a fixed level of finish, complexity and outfit, the cost of a vessel will usually vary according to the vessel's cubic contents.
At the beginning of the design process, in order to make use of a readily available parameter that also varies as the cube of the overall dimensions, I ordinarily use the Design Waterline Displacement.
Although not always the case, a vessel's displacement will usually provide a convenient variable that roughly parallels the cubic contents of the whole boat. If it is less, I will use the light load case weight. In other words, I do not include any tank contents or other consumables, nor any owner supplied outfit items, i.e. just the "boat" itself and all items permanently attached to it.
The guidepost I currently use when asked what a medium sized metal yacht might cost is to begin at a preliminary average cost of around USD $12 to $15 per displacement pound (in 1999). Presuming we are comparing like to like, we may then infer that the cost of a vessel will approximately vary directly with the displacement.
This preliminary "cost per pound" presumes that the vessel will be built in the US; that it is reasonably simple in terms of equipment and outfit; that the interior is elegant but not fancy; and that the structural components will be NC cut. For most small craft, I refer to this level of finish as being done to a "high end commercial standard" both on the interior and exterior. This assumes that the interior finish will be done simply but nicely using North American hardwood face frames and trim with otherwise painted surfaces, and that the systems will not be overly complex, i.e. that they will be more or less typical for a small sailing or power yacht.
If the vessel is to be of aluminum, then this cost per pound implies that the exterior will not be painted except where necessary, therefore approximately equaling the cost of a painted all steel vessel.
I will then adjust that preliminary baseline cost per pound up or down depending on various factors such as increased or decreased systems complexity; higher or lower grade machinery; more or less equipment and / or electronics; higher or lower grade interior; yacht grade or commercial grade exterior paint job, etc.
Each one of those cost-adjusting factors can have a significant impact. Collectively, their impact can be dramatic. One can indeed embellish a vessel to the point of unaffordability, whether it is a production boat or a custom design. For example if one were to ramp up all of these factors, the baseline cost could easily be well in excess of USD $20 per pound (in 1999), plus the cost of any unusual equipment or outfit extras.
Conversely, a very simply specified vessel may turn out to be between USD $10 and USD $12 per pound (in 1999). These cost variations illustrate why we tend to prefer simple, rugged, reliable boats. They are much more affordable, and in the long run easier to care for.
Once the preliminary baseline cost is adjusted for various owner induced factors, an approximate cost per pound is applied as though the vessel is to be built in the US.
How Much Can You Save Offshore?
Once the appropriate general assumption has been made with regard to cost per pound, and assuming that we are making a comparison to a similarly specified vessel. I will then make the following assumptions:
1. Very approximately, if built in the US, the costs for materials and labor for a boat with a nicely done yacht finish will hover somewhere around 40% for materials and 60% for labor. If we are considering a somewhat less complex or a more simply finished boat, then the ratio of labor to materials may tend more toward 50 / 50.
2. One can assume approximately that materials will cost the same regardless of where purchased, once the monetary translation has been made.
For example when approximating construction costs in another country I do not assume there will be any materials or equipment cost advantage, regardless of where the equipment or materials get purchased.
As we have noted the nominal shop rates in New Zealand (in 1999) are approximately the same as they are in the US. A yard that might charge USD $45 or so per hour in the US will have a similar New Zealand counterpart charging approximately NZD $45 or so per hour.
Accounting for the exchange rate (in 1999), this very approximately amounts to nearly a 60% discount on the overall labor bill. If the cost of labor amounts to approximately 60% of the total cost (if the boat were to be built in the US) that becomes very approximately a 35% discount on the project as a whole to a US customer.
Naturally, there are costs involved to build in New Zealand, such as travel, shipping, and import duties. Factoring in these considerations means that the benefit may come closer to an average of some 25% to 30% overall savings for a US client to consider New Zealand as a venue for the construction of their vessel.
Of course there are adjustment factors to throw at the equation at every step, such as for what percentage is assumed to be expended on labor. For example, should the finish be aimed at a less yacht-like finish the labor percentage may dip closer to 50%, and therefore the savings may be more on the order of 20% to 25% if built in New Zealand. Conversely, with a higher finish and a more complex (i.e. more labor intensive) equipment specification, the savings will be proportionately greater.
Variations in the exchange rate will obviously affect the above percentages, possibly dramatically.
An Example
We might consider a generic vessel as an example, such as a fairly simple and somewhat traditional 38' medium displacement metal Tug Yacht of my design, the Nidaros, which was built in the Puget Sound area (US Pacific Northwest) for around USD $9.20 per pound (year 2000). This is a small "trawler yacht" type in terms of the level of finish, and has a steel hull and deck with an aluminum house structure. To a large extent this vessel follows the level of finish described above for our "basic example vessel."
On this small Tug Yacht, per client request there were two price increasing factors: 1) A hydraulic system for winches and thruster. 2) A relatively high-end Lugger / Twin Disc engine and gear combination. Another price increasing factor was that the hull is steel and therefore requires a very thorough and complete paint system inside and out, and that the house is alloy, requiring a relatively expensive bi-metal transition bar between.
At USD $9.20 per pound, we can see that the builder in that case was obviously highly motivated and that the price was extremely favorable, especially in light of the above mentioned cost increasing factors. A more realistic price for that vessel in the hands of a more typical US builder would have been somewhere around USD $12 plus per pound at the time it was originally estimated for construction (1999).
A more detailed look at costs for this vessel are as follows: The vessel has a DWL displacement of around 30k pounds. Factoring in the complexities we have mentioned for this vessel, and assuming construction at a typical US yard, therefore using approximately USD $12.50 per pound, we would have a US build cost of around USD $375,000. Applying our very approximate 25% discount for construction in New Zealand, we have the possibility to end up with a total cost of somewhere around USD $281,000, or perhaps $9.38 per pound.
In general, the designs we create tend toward an economically achieved "simple but elegant" yacht finish, or what we call a "high end commercial" finish. These fairly simple yacht designs can be built using around USD $12 to $15 per pound as a base number, then adding on for embellishments, or subtracting for simplifications.
For New Zealand construction then, using the exchange rate at the time of writing (April 2000) the base numbers come to somewhere between USD $7.80 and $9.60, plus or minus the usual correction factors for complexity and finish.
Is this Method Accurate?
The prices quoted are roughly applicable at the time his article was written (April 2000). Variables such as inflation, interest rates, and currency exchange rates will naturally have their effect over time.
The above method is intended to provide a quickly achieved "target" cost, and is based on a given "typical" type of example vessel. It is of course a very rough approach and will require that corrections be applied depending on variations in the type of vessel.
The actual prices quoted by yards will often vary considerably from the above approximate guide, depending on the yard's accustomed "quality level," their overhead costs, their market, their typical customer types, and on how busy they may happen to be when the construction cost estimate is solicited.
Among other considerations, one must look at whether the boat is relatively heavy or relatively light for her overall size. We should throw in a correction factor for a vessel's displacement to length ratio, since a lighter vessel will invariable cost more "per pound" than a heavier vessel on which there will be more pounds to spread the cost.
In spite of the possible shortcomings of this method, as a base-line estimating tool and as a means to provide a quick comparison between boat types and between differing locations for construction, we have found the price per pound approach to be highly useful.
I have spoken with experienced project managers here in the US who use completely different "off the cuff" ways to create a quick "ballpark" estimate for a prospective project. Even though these yards may use entirely different methods, their estimates do seem to come out more or less in the same range, once adjustments are made for complexities, relative displacement, etc.
Overall, it must be kept in mind that this approach is based on comparing "like for like" since one vessel type can vary substantially from another vessel type. For our example, we have used a typical small "trawler" type that has a "high end commercial finish" throughout. A different type such as a fast motor yacht will have fewer 'pounds' with which to divide the costs, will tend toward a much higher finish, will have a more elaborate 'style' and will often have a much higher specification - in particular with regard to propulsion machinery and other support systems.
The Cost of "One Off" Construction
Can one-off construction compete with a production environment?
By "one-off construction," I am assuming that the boat is to be unique, including the vessel's design, and that only one vessel will be built to that design.
In other words, I am inquiring whether a client can consider custom design and custom building as a viable and cost competitive option when planning a new yacht.
A comparison published during 1998 in Ocean Navigator magazine showed a number of fiberglass production "Trawler Yachts" built in the US and elsewhere. It revealed an average "as built" cost of around USD $13 to $15 per pound. Among them, the Nordhavens and Krogens tended closer to an average of around $16. Others were as low as around USD $10 per pound for an extremely basic boat such as a Willard.
It must be kept in mind that these quoted prices for production boats ordinarily do not include outfitting and in many cases do not even include electronics or other systems beyond just the basics. However, these production boat prices ordinarily do include a fair sized margin for middle management, for promotional events, for advertising, and for brokerage overhead. For example, a yacht broker will usually charge 10% commission on the sale of a vessel, and that will be added to the top.
Fiberglass
One-off fiberglass construction requires that new hull mold tooling be created. This has the obvious disadvantage of adding overhead to the project both for materials and for labor.
One highly promising technology that has the potential to benefit the labor side of the equation for one-off fiberglass boats is to make use of computer modeling, with the resulting ability to employ NC cutting to create the hull mold.
A specialized shop doing just that is Janicki Machine, in Sedro-Woolley, Washington. Janicki uses a 5 axis NC router mounted on a large overhead carriage to carve out hull and superstructure molds. At this shop, their maximum machine size is 88' x 20' x 8'. If the project is larger, the mold is segmented with parts that are keyed together.
Janicki begins with the designer's NURBS surface computer model of the hull and superstructure, and import the model to their CAD system using the IGES file exchange format. If the designer has not supplied a computer model of the hull, Janicki creates a computer model in-house from which to create the mold.
Janicki's shop is set up to carve out a foam-block mold using a large 5 axis NC router. Their strategy is to stack up "lifts" using relatively light foam. The lifts are routed to a clearance of some 3/8 inch beyond the required surface location, then a higher density foam is sprayed on. The high density foam is machined to the final tolerance, and the result sprayed with a fairing material, usually a high build paint that is applied to a relatively heavy thickness for sanding. The mold is then shipped to the builder for assembly and final sanding.
The costs for the NC mold making process by this method are slowly becoming competitive with manually done mold work. Currently, for intricate superstructures, there seems to be a cost advantage favoring the NC cut method. At the other end of the spectrum, for simple chine hull forms it seems to be less costly to build a disposable mold manually.
This approximate parity of manual versus NC methods for mold making is due both to the increased materials costs for the foam mold, and for the high cost of "machine time" on the large NC router.
For the time being, the primary advantages offered by this type of NC mold making system are the dimensional accuracy of the mold, and that the lead-in time for mold construction can be removed from a boat builder's schedule. Another advantage offered to the boat builder is that lofting may be completely eliminated, which translates into a savings of labor and shop space for the builder, ultimately reducing shop overhead.
On the basis of cost, in spite of the advantages of NC cutting, the above factors have made one-off fiberglass boat building relatively un-competitive with a production environment. As a result, the one-off fiberglass yacht market is currently focused on vessels above 80 to 100 feet where production boats are relatively less common, and where owners often want a 'signature' vessel with, say, a unique styling to the superstructure.
Metal
Among boats built in the US, one-off metal construction costs can compete very well with production fiberglass costs. The trade-offs are approximately as follows.
Considering just the production costs themselves, while there is considerably more labor involved in the fabrication of a metal hull and superstructure than there is in the laminating of a GRP vessel, to offset the added cost for labor, the cost of materials for a steel hull is quite a lot less than with for GRP hull. Even if the metal hull is aluminum, material cost will still be less than for fiberglass. With higher labor costs for metal, and higher materials costs for fiberglass, we may for the moment assume the costs of metal and fiberglass to be approximately at parity.
For metal then, where are the savings?
Obviously, there are no mold costs with metal construction as are required for fiberglass, and there is no mold to take up shop space during or after construction, therefore lesser overhead. This gives a slight edge to metal construction.
Taking metal construction technique one step further in terms of efficiency, if hull and superstructure are pre-cut NC driven tools (plasma torch or water-jet) the labor saved can be substantial, and metal construction will generally win the cost comparison.
Let's take a brief look at what kind of savings are possible for metal boats via NC cutting.
NC Metal Cutting
What's NC...? It simply means "Numerically Controlled."
With NC cutting, the number of hours added to the design tasks in order to create the structural detailing for a computer-cut hull is not so great, particularly if the design work has already made use of computer modeling to create the hull geometry. Even if the hull model must be created just for sake of the NC cutting operation, the cost expended to create the model and the NC cutting files will be compensated for several times over by the labor saved while building the boat.
Estimates of the metal fabrication time saved via NC cutting for one-off construction will typically range from 40 to 60 percent of the hull building labor, depending on the builder, and on the degree to which the boat is pre-cut.
We can look at a generic example here, using the same 38' tug yacht design. If the vessel's structure were all manually cut, we can approximately assume that it will take roughly 2,500 hours for the hull and deck metal fabrication, including final weld-up. For ease of calculating, if we assume a conservative savings of around 40% for an NC cut hull, deck and house, the savings may amount to some 1,000 hours. This saving of hours times the shop rate being considered provides an example of the possible savings.
Our estimate of the time required to generate NC cutting files for this fairly "typical" 38 foot metal tug-yacht example is between 150 and 170 hours. The cut files for such a project usually include all internal structure for the hull, deck and house structures, except for extrusions such as longitudinals or pipe guards, etc. In other words, all frames, girders, tank ends, tank faces, large cut-outs, tank lids, etc. will be pre-cut. The NC cutting files also include all hull and superstructure plating as well as the rudder internals and plating. Small parts such as cleats and hatches are not detailed for NC cutting, however chain plates, anchor roller cheeks, and reinforcement insert plates are included.
In order to permit ease of bending-in the shell plating, there are generally no cutouts made for portlights, windows or doors, even though marking lines for those openings are provided. Marking lines are also provided for grid elements, and all parts and grid elements are labeled for ease of assembly.
In exchange for the relatively small amount of time expended at the computer to create the cut files, we can see that the cost trade-offs heavily favor NC cutting. We assume of course that the hull geometry will have been accurately developed, that the NC cut files are carefully and accurately prepared, and that the cutting is done to a close tolerance.
One of my designs built in New Zealand was the all aluminum 25' tug-yacht Boojum. Done as a proof-of-concept in terms of being able to repay the cost of developing the NC cut files, the Boojum project has accurately confirmed the above assumptions. Since then, we've done a number of other NC cut projects that have re-confirmed our original estimates of the fabrication labor saved.
For a good overview of the process of developing NC cutting files, please see our Design Stream article and other articles linked from there.
Cost of NC Cutting
Per the various NC metal cutters in the US Pacific Northwest, costs are given approximately as follows:
For plasma cutting steel to a "standard" tolerance at Far West Steel in Seattle, the work is roughly estimated at around USD $0.12 per pound using the gross NC cut steel order weight. For plasma cutting the same order using a "high definition" tolerance, Far West estimates the work at around USD $0.18 per pound.
The range of costs quoted for plasma cutting aluminum by Northwest Plasma in Seattle seem to have settled at around USD $0.44 to USD $0.46 per pound. For estimating purposes, I use around USD $0.45 per pound for aluminum, using the gross order weight.
A newly competitive method of cutting aluminum has begun to gain popularity: water jet cutting. In most shops in the Pacific Northwest the cost of water jet cutting is estimated on par with or slightly greater than the cost per pound of plasma cutting aluminum. Therefore there can be cost advantages to plasma cutting, versus quality of cut advantages to water jet cutting.
Very roughly, around 12% to 15% of a small yacht's as-built structural weight will be in the form of extrusions such as longitudinal stringers and pipes which will not be NC cut. It is assumed that all other structure will be NC cut. In order to estimate the weight of the gross NC cutting order, a 25% to 30% waste allowance is assumed on the material that is to be NC cut (after deducting the appropriate percentage for the vessel's extruded members).
Acceptance of NC Cutting
For new construction of commercial vessels in the US, it is nearly unthinkable to consider manually cutting the structure for a new boat. However, there has been very slow acceptance of NC cutting for yacht building in the US.
In other words, here in the US, where we imagine ourselves to be at the leading edge of technology, we are currently quite behind the times in the yacht building industry. In my view, this is mainly a matter of unfamiliarity with NC cutting among yacht builders. Many yacht builders are simply not willing to admit that a computer can be a real boatbuilding tool.
It is interesting to observe that in New Zealand, Australia, and throughout the EU, this situation is just the opposite. Builders in those locations now expect that a metal boat will be NC cut, even if it is a one-off yacht.
In the final analysis given the excellent software tools available there is just not a more practical means to build a vessel, whether small or large, regardless of the material of construction. Since this kind of software has become increasingly affordable to smaller design offices, the general acceptance of computer modeling and computer cutting is on the rise.
We can expect to see the computer cutting process employed for yacht construction more and more often in the coming years even for one-off boat projects.
The Cost of One-Off Design
Compared to a production environment, one-off construction implies that the cost of the design work itself will be added to the project. We must then ask, "Can one-off design be competitive in terms of cost?"
In order to answer this, we have to ask, "What does custom yacht design actually cost?"
For larger yachts, custom design may cost between 6% and 8% of the as-built cost of the vessel as-built by a professional yard to a 'turn-key' stage of completion. Smaller vessels (say below 40 feet) will usually tend toward a somewhat higher percentage for design work, there being a certain minimum number of hours required to design even small vessels.
Of course the same caveats must be applied to design costs as apply to vessel costs, including vessel size, added complexities, exotic structure, elaborate systems, whether the vessel is light or heavy for her length (the D/L factor). Other factors affecting the cost of design are variables such as changes, tank testing or other special requests.
For a thorough discussion of the cost of one-off design, please see our separate web article on Yacht Design Costs.
Regardless of the material chosen for hull construction, if the designer has been the source of the client, then there are considerable savings to the client in terms of there being no promotional costs or brokerage fees. For example, simply eliminating brokerage fees alone (ordinarily around 10% of a vessel's cost) will immediately offset the entire cost of custom design work, plus some.
Other Cost Saving Factors?
Whether using a large NC router to create tooling for a one-off fiberglass boat, or using NC plasma cutting for a custom built metal vessel, it should go without saying that if the designer has created the hull geometry within a NURBS based computer modeling environment, the labor already expended in the design office to create the hull model can then be leveraged and put directly into the production environment.
Both designers and builders can use NURBS surface modeling in combination with other construction oriented CAD tools to effect a substantial labor savings and therefore a cost savings to the builder, and those savings will be to the benefit of the client. In the case of NC metal cutting, the labor savings are enough to pay for the cost of generating the cutting files some 2 to 3 times over.
There are other often overlooked ways a boat owner can save build costs and still have a first class vessel. For a thorough discussion of those strategies, please see our web article on Affordable Boatbuilding.
Design Considerations For Building Offshore
What special considerations are designers faced with when developing a new design for offshore construction?
For US designers and possibly for a large portion of Canadian designers, there will be the issue of differing measurement systems. It is more or less the case in North America that all construction trades still use the Imperial measurement system, whereas in most other countries of the world the Metric system is in use.
As an example, in the US and Canada, whether you are purchasing plywood for fiberglass mold construction or for interior joinery, it will most often be supplied in feet and inch dimensions. The same is the case when specifying metal structure: The metal components will virtually always be supplied in Imperial sizes.
This situation means that a designer must know the construction venue as early on as possible in the design process. For example, with metal construction, the difference between Imperial plate thicknesses and Metric plate thicknesses can have a dramatic effect on the overall weight of the structure.
In addition, the designer must make frame size and spacing allowances in order to create a structure of equal strength, using materials which will be locally available to the builder of choice.
For example, my 25' tug-yacht Boojum was originally designed using all Imperial dimensions for construction in the US, in aluminum. The drawings were done using an architectural scale, typically 3/4" to the foot. When it was discovered that the vessel would be built in New Zealand, we made changes to the called out dimensions on the plans, and left the Imperial scale as it had been drawn.
Since Boojum was to be NC cut, there were quite a few changes to be made to the hull model, and to the computer defined parts. Fortunately, the decision to build in New Zealand was made prior to having expended much time on creating the actual NC cutting files, and it was a relatively simple transition. The main adaptations required in the NURBS surface hull model were to accommodate Metric sizes of aluminum tubing where Imperial aluminum pipe sizes had been originally specified.
Having been designed at first using Imperial materials sizes, of course all the plating, framing, and longitudinal members' strengths needed to be re-calculated via the ABS rule, using the Metric components' new dimensions. This did require additional design costs, but those added costs did not amount to a great deal. I had originally sized components and their spacing quite conservatively. As an example, there were no changes of location required for the longitudinals, only changes of dimension.
Several of my current vessel designs are being considered for construction in New Zealand. These vessels have typically been designed using metal hull, deck, and house structures. In all cases I have encouraged the clients to pursue estimates for construction as early on as possible, in order to establish a relationship with a yard, and therefore to know in advance the country in which the vessels will be built. With this decision made early on in the design process, I will be able to begin the NC cutting files sooner, and be that much farther ahead of the process when construction begins.
What Standards Will Apply?
In addition to differences in the available sizes of materials and differing measurement systems in use, there will be differing standards with regard to stability, structure, and safety.
Among them, what standards should be applied?
Structure
Whether construction is to be done in the US, Canada, Australia, or New Zealand, one will need to choose which body of standards to apply. For my design work, I most often make use of the ABS rule for structure. If the vessel makes use of a wooden structure, it will be according to Lloyds. I have also come to appreciate the simplicity of the German Lloyd's rule.
With a few minor exceptions, the ABS rule books are clear and well organized. The ABS rule provides the benefit of being flexible in terms of skin thickness, as well as frame and longitudinal spacing.
Other scantling rules, such as the one recently put forth in Elements of Boat Strength, by Dave Gerr, instead provide a prescriptive or "cookbook" approach, giving the designer a much simpler rule, but one with much less flexibility.
In New Zealand, the ABS rule is often used, so building a vessel to an ABS inspection is easily done. Other structural rules in regular use in New Zealand are Det Norske Veritas and Lloyds. For a US client, ABS, Lloyds, or DNV would all be equally satisfactory.
New Zealand also has an in-country "Maritime Safety Authority" referred to as the "MSA." The MSA provides a body of structural rules that are based on a collection of Lloyds and ABS. The MSA also provides inspections during construction.
Power Vessel Stability
For a US client, if the vessel will for some reason be US Coast Guard inspected, the stability criteria applied will be found within the US Code of Federal Regulations (CFR).
The specific stability criteria used will vary somewhat according to the type of US registry that is being sought. Although fairly well organized, the US CFR is very obtuse, having been developed over many years by the US legislature (i.e. lawyers and politicians) in a very non-linear fashion. In places, the US CFR is confusing to the point of absurdity. Nevertheless, it is the standard.
For passenger vessels, although the CFR does not directly acknowledge any "foreign" stability criteria, the US CFR entirely reiterates the IMO (International Maritime Organization) basic stability criteria for "vessels of unusual form" within 46 CFR 170.173 Subchapter S, Subpart E, "Weather Criteria."
For power vessels I have used the US CFR on occasion, for example when working with passenger carrying vessels. However for power yachts I have found the internationally recognized IMO Code On Intact Stability to be both more rigorous, and far more easily applied (Publication IMO - 874 E). Ordinarily I will additionally impose the requirements of the IMO Severe Wind and Rolling Criterion contained in Chapter 3, Section 3.2. By comparison to the US CFR criteria, the ISO criteria are uniformly applied, therefore they are relatively easily calculated for a wide variety of sailing vessel types.
Sailing Vessel Stability
For sailing vessels, the US CFR contains criteria for Sailing School Vessels and other Passenger Carrying Sailing Vessels. These criteria can be excessively restrictive in terms of sail area due to induced heeling angle. I believe the CFR methodology to be appropriate for very large and / or very heavy displacement sailing vessels. However for small offshore sailing yachts or passenger carrying sailing vessels, in particular if they are relatively light displacement, the CFR criteria are at best difficult-to-impossible to satisfy. The net result is extremely heavy displacement and / or very scant sail area - a very non-optimum combination for yachting.
For smaller sailing yachts, say below 100 feet, it seems far more appropriate to make use of stability criteria for offshore sailing yachts recommended by the International Standards Organization (ISO). The preliminary work to develop the ISO criteria was originally referred to as the Dynamic Stability Factor (DSF). The DSF method was originally proposed by Moon and Oossanen using stability data gathered after the well-known Fastnet race losses. The basics of the originally proposed DSF criterion are given in "Principles of Yacht Design" by Larsson & Eliasson. Now in its final form, the ISO criteria for sailing vessels are contained within ISO - 12217 (applicable to yachts from 6 meters to 25 meters in length).
The ISO - 12217 criteria have been derived by a variety of studies done within various member nations of the European Union, and are now included by reference within the EU's Recreational Craft Directive (RCD). Although complex, the criteria are rigorous. Rather than establishing a simple range of positive stability, eight separate seaworthiness factors are calculated and accumulated into a "Stability Index" (STIX) which rates the yacht for service in one of four categories: Ocean; Offshore; Inshore; Sheltered.
As an assessment of relative seaworthiness for sailing yachts, I have found both the original DSF and the final STIX criteria to be highly appropriate and extremely useful.
Safety
Safety is provided for via adherence to applicable ABS, ABYC and COLREGS standards. For construction in New Zealand, unless a given feature or equipment item is specified otherwise, builders there will ordinarily defer to the requirements of the New Zealand Maritime Safety Authority (MSA).
Construction Inspections
In New Zealand, construction inspections may be arranged for compliance with scantling rules such as ABS (American Bureau of Shipping), DNV (Det Norske Veritas), GL (German Lloyds), or LR (Lloyds Register). In New Zealand, certified inspectors are used, much as they are in the US, Canada or Australia.
If desired, various inspections can also be made by the New Zealand in-country Maritime Safety Authority (MSA) inspectors. Weld quality, structural arrangement, safety, and other types of inspections are easily accommodated through the MSA.
Workmanship
Prior to choosing a yard in New Zealand to build the tug-yacht Boojum, the client invited me to accompany him on a trip there with the purpose of meeting with the prospective builders, and to discover if other yards might be more suited to the project than the few which we had already contacted.
We toured New Zealand from Invercargill to the Bay of Islands, and in the process met nearly every significant builder on the South Island, then began looking around the North Island.
We discovered that the level of experience in the boat building work place in New Zealand is very good. New Zealand has an apprenticeship program for boat builders, and the results of that seemed to be evident in the quality of the work being done at the yards we visited. In other words, we were impressed.
In the US where GRP construction is most common, it often seems somewhat unusual to consider a new yacht built in metal. As a result, it can at times be an adventure to find a qualified US metal boat builder with shop space available.
In New Zealand by comparison, metal yachts large and small are everywhere, and the metal working expertise is readily available for their construction.
Communicating Effectively
During the last several years, internet connectivity has become widespread. We can now take advantage of quick and inexpensive worldwide communication via email and via the web.
We have all become increasingly dependent on email as a working communication tool, even locally. As a tool to help manage projects on the other side of the world it has proven to be indispensable.
Using the Boojum project as an example, we made use of email right from the very start. We initiated contacts with New Zealand yards via email and sent the Preliminary Vessel Specification as an email attachment, usually as a PDF file (Portable Document Format). Sending documents as PDF's permits all formatting to be preserved including special fonts that may not even be on the recipient's computer system. The recipient can view the document and print it out as it was intended to be seen. Perhaps of greater value, they are unlikely to edit what they receive.
Using these methods we negotiated the contract via email and kept the yard up to date with the most current Vessel Specification.
Except for the Lines Drawing itself, the plans sheets for Boojum were hand drawn, so updates were sent via international courier. Presently however, we use nearly 100% CAD and even the drawings will be sent as PDF files which can be plotted to scale at any well equipped print shop.
Once completed, the NC cutting files for Boojum were sent as email attachments directly to the metal cutters in New Zealand using the DXF or DWG file format in general use for the exchange of CAD files.
Parts were nested onto metric plate sizes that had been specified by the New Zealand metal cutter. After a "pre-flight" process of verifying the accuracy of the files, the parts were cut, then delivered to the builder.
By email the New Zealand yard provided us with weekly updates on the progress of construction and using a digital camera they emailed photos of the vessel taking shape. The emailed photos were used primarily to keep us informed of progress, but also to verify the yard's interpretation of the drawings. Occasionally they were used in order to ask for clarification of some detail or other. This worked extremely well.
In my view, internet connectivity is what made building Boojum in New Zealand such a smooth process.
Since then, email has become central to all our communications and even to the work flow, allowing our design team to be 'location independent' not just with regard to the project, but with each other.
Web Pages
During the design and construction of Boojum I researched product specs on the web. This was especially useful for items available locally in New Zealand for which I did not previously have information. In recent years, a large book case full of catalogs is totally obsolete... since all that information is now readily available on the web.
On other vessels we've designed I have made use of public and private web pages. As drawings are completed, they are posted either to a private page for the client, or to a public page, whichever is appropriate to the situation.
As a communication and visualization tool, the internet has become vital.
Import / Export Considerations
Exporting a Vessel From New Zealand: New Zealand has a GST or General Sales Tax. However, boats built for export are exempt from GST and all other local taxation within New Zealand. A yard building a boat in New Zealand for export may also import materials and equipment for that vessel without customs duty being imposed on import to New Zealand, or on export from New Zealand.
Importing a Vessel to the United States: As mentioned, there is currently no duty imposed on a vessel that has been built in Canada when imported to the US. For a vessel built in New Zealand there is a 1.5% duty on the value when brought into the US.
Sea Trials
When the vessel is completed and launched, there will be a period of Sea Trials, done either by the yard, or by both the yard and the new owner. In New Zealand, as in the US, Sea Trials are considered to be an extension of the construction of the vessel, during which time no taxes are levied.
In New Zealand, after Sea Trials have been completed to the owner's satisfaction, title to the vessel is completely transferred to the owner, and a period of "in-country" use begins. In the case of Boojum, the builder asked the New Zealand authorities for a three month in-country trial period for the owner, to allow cruising around New Zealand without taxation.
If Boojum then exits New Zealand within the allowed three month grace period, there will not be any New Zealand taxation. We have not investigated whether this grace period could be extended, but we anticipate that it would not be a problem if requested in advance.
Delivery
According to pricing provided by the builder in New Zealand, shipping Boojum to the US as cargo on the deck of a ship would cost approximately the same it would cost to truck the vessel across the US. Boojum is 25 feet long, and weighs around 14,000 pounds light. The shipping costs quoted (April 2000) were in the range of USD $5k.
For an ocean going trawler yacht or sailing yacht the use of a delivery skipper is always an option. Most of them will quote on the basis of a cost per mile, plus consumables and expenses.
Despite her relatively small size, Boojum was designed for long range passage making so is capable of making that kind of voyage on her own bottom.
Summary
We can see that building offshore can provide a decided cost advantage to a US client, and in particular that New Zealand, Australia and Canada are quite good places to build a boat.
New Zealand for example has a well trained work force, and a very boat-oriented population. As a confidence factor, New Zealand, Australia and Canada are familiar cultural environments in which to do business, and there are no language barriers to US customers.
Have we missed any hidden advantages in our inquiry with regard to New Zealand or Australia?
Yes, I believe so.
New Zealand and Australia are pleasant to visit, the people are friendly, and the countryside is stunningly beautiful. As a bonus, we can visit "down under" during our winter and get a good dose of summer sun...!
Michael Kasten
May 2000
Updated as Noted AboveMore Articles on Cost:
Nomadic Watercraft | Estimating Boat Building Costs | Affordable Boatbuilding | What Will The Boat Cost..? | What Will the Design Cost..?
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