The cost of a vessel is the sum of all the labor and
materials costs involved in the construction including any
overhead costs. The final price of a vessel will include
allowances for capital cost financing, inflation, and
shipyard profit. Due to the particular nature of the
shipbuilding industry and the high degree of variation
between particular projects, the necessity of reasonably
correct cost estimations is imperative. The complexity and
cost of detailed ship design and the length of time between
preliminary design and completion are the leading factors
that determine the flexibility of contract between the Navy
and the shipyard. This inherent flexibility and lack of
definition is the leading cause for the increasing number
of design change orders and final price escalation costs.
Figure 7 shows a typical project timeline