Page 319 - Practical Design Ships and Floating Structures

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up a whole life cycle from cyclical activities, such as a voyage in the case of a commercial ship. The
voyage is in turn broken down into loading, sailing and unloading. Costs and overheads can be
attributed to individual activities, voyages, maintenance/swey periods or years. Input values are
assumed to be constant unless some step, percentage change or other function is added. The
calculations simulate the life of the ship and are, by definition, fairly lengthy, so numerous tables and
plots are available to users so that they can gain confidence in the numbers produced by checking at
each stage. The change in NPV for any variation on the basic design is used to support design decision
making.
Many MTO products undergo upgrading during their lives to meet changes in market requirements, to
accommodate new technology or to meet new regulatory requirements. Hitherto, designing for such
changes has rarely been addressed explicitly in design procedures. What has been lacking is a
systematic means of comparing alternative upgrade scenarios, in order to assess which is likely to be
the most cost effective.

Uncertainty and risk are important considerations in any attempt to predict future operating conditions
because they determine the confidence that the designer can have in a decision. A means of adding a
statistical distribution to one or more input parameters is important. In this case the NPV output values
produced by the simulation of the ship’s life also become a probability distribution. An upgrade, such
as a jumboisation can be triggered, either at a fixed point in the life of the vessel or if certain conditions
occur such as higher levels of demand. The spread of the results produced is a measure of the riskiness
of the project and the extent to which additional expenditure may be justified.

2 DESIGN FRAMEWORKS
While testing the methodology on real cases provided by the partner companies, it became apparent
that a generic approach to producing upgrade variations on a basic design does not exist. This contrasts
the position where the requirement is to optimise the value of parameters defining the chosen
components making up a design, for which many approaches are well known. There is a general
recognition that many ships and manufacturing facilities experience either, at least one major change of
operating conditions at some stage in their life, or there is a gradual change over time. Both may lead to
the need for a significant upgrade, the cost of which could be significantly reduced in comparison to
the increased revenue if provision had been made during the initial design and build. The value of this
provision can be accounted for in the NPV if DCF techniques are used in assessing the total through
life costs. A more obvious way of describing this approach is ‘spend to save’, which always requires a
convincing justification if it is to be accepted by the project’s financial backers. Other uncertainties can
also be accommodated. For example, there may be significant additional ‘regulatory’ costs if say new
safety standards were applied or an environmental levy on emissions was introduced. This introduces
two elements of uncertainty, the extent and cost of the change, and the date from which it might be
applicable. Both have probability distributions, so can be included in NPV calculations.