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ESEARCI--1 DEVELOPMENT FU

URE CAREER CREATIVITY C

MMUNITY LEADERSI-J 10 TEC

NOLOGY FRONTI G

ENGINEERING APPI .N

GEORGE WASHI IJ

K ' tv I

CLEARIN:. H CUSE

1c r lr_ ;. .. S • nhnc . ._, Ted•n;o::.Jl

In ""' :n pr .J 1rold Vu 22 15'

SCIENCE AND ENG INEERI NG

A STATISTICAL ANALYSIS OF THE

ENGINEERING APPROACH TO NAVY

SHIPBUILDING COST ESTIMATION

by

K. C. Yu

Serial T-2A0

30 June 1970

Institute for Management Science and Engineering

Program in Logistics

D D C

» OCT 14 1970 ;

Contract W0OÜ14-67-A-0214

Task 0001, Project NR 3A7 020

Office of Naval Research

sale and release; its distribution is unlimited.

THE GEORGE WASHINGTON UNIVERSITY

School of Engineering and Applied Science

Institute for Management Science and Engineering

Program in Logistics

Abstract

of

Serial T-240

30 June 1970

APPROACH TO NAVY SHIPBUILDING COST ESTIMATION

by

K. C. Yu

to predict the total cost of a Navy ship using the physical weights

of the ship components as Independent variables was investigated.

The various forms of regression analyses fall under the following

three categories:

(2) Non-linear multiple legresslon analysis.

(3) Adding-up process, which is an aggregation

of two-variable regression analyses.

It was found that the linear model is preferable over the non-linear

model and the adding-up process. If the samples are properly selected,

linear models which are statistically significant can be derived.

Given its superiority over the other two models, the degree of

accuracy of the linear model is still not high enough to produce a

dependable point estimation for the total cost of the ship.

K STATISTICAL ANALYSIS OF THE BMGINEERINC

APPROACH TO NAVY SHIPBUILDING COST ESTIMATION

By

K. C. Yu

Bachelor of Science

Hapua Institute of Technology, 1956

Business Adalnlstration of the George Washington

University In Partial Fulfillaent of the

Baqulrements for the Degree of

Neater of Business Adalnistretlon

June 1970

Theais Directed By

John H. Norton, PH.D

Associate Profeesor of Business Administration

ACKNOWLEDGMENT

TABLE OF CONTENTS

Page

ACKNOWLEDGMENT 1

LIST OF TABLES lv

LIST OF FIGURES v

CHAPTERS

I. INTRODUCTION 1

Subject, Objectives, Scope 1

Theoretical Basis 2

Data 4

The Cost File A

The Weight File 4

Methodology 5

Detailed Descriptions of the Different

Forms of Regression Analysis 7

Addlng-up Process 7

Linear Regression Analysis 8

Non-linear Regression Analysis 9

The Stepwlse Characteristic of the Regression

Analysis 9

Nature and Limitations of the Available Data 11

Cost Data 11

Weight Data 11

Price Deflator 12

Data Processing 14

Using the Total 928 Ships 15

Stratification by Hull Weight 19

Further Stratification by Hull Weight 24

Stratification by Propulsion Weight 29

Stratification by Usage 33

Analyses of Ratios and Correlation Coefficients 33

Correlation Coefficients Analysis Between the Independent

Variables 40

Zero Regression Intercept 40

Summary 41

Addlng-up Process for the 928 Ships 43

Addlng-up Process for the Amphibious Ship Group 44

Addlng-up Process for the Transport Ship Group 44

Summary 45

li

CHAPTERS Pat

IV. NON-LINEAR REGRESSION ANALYSIS

Including More Independent Variables Into the Model

Transforming the Dependent Variable

Transforming Both the Dependent Variables and

the Independent Variables

Graphical Analysis

BIBLIOGRAPHY

111

LIST OF TABLES

TABLES Page

1. Description of Ship Types 13

2. Results of Stepwlse Linear Regression Analysis

for the Total 928 Ships 15

3. Results of Two-variable Regression Analysis for the

Total 928 Ships 17

4. Results of Stepwise Linear Regression Analysis for the

Small Hull Group 21

5. Results of Stepwise Linear Regression Analysis for

the Medium Huill Group 22

6. Results of Stepwise Linear Regression Analysis for

the Large Hull Group 23

7. Results of Stepwise Linear Regression Analysis for

the Small Hull Subgroup-1 26

8. Results of Stepwise Linear Regression Analysis for

the Small Hull Subgroup-2 27

9. Results of Stepwise Linear Regression Analysis for

the Small Hull Subgroup-3 28

10. Results of Stepwise Linear Regression Analysis for

the Small Propulsion Group 30

11. Results of Stepwise Linear Regression Analysis for

the Medium Propulsion Group 31

12. Results of Stepwise Linear Regression Analysis for

the Large Propulsion Group 32

13. Results of Stepwise Linear Regression Analysis for

the Transport Ship Group 34

14. Results of Stepwise Linear Regression Analysis for

the Combat Ship Group 35

15. Results of Stepwise Linear Regression Analysis for

the Amphibious Ship Group 36

16. Summary Table for the Values of v , s/Y and R 37

♦17. Correlation Coefficients r Between the Dependent

Variable and the Independent Variables 38

18. Results of Stepwise Non-linear Regression Analysis

for the Total 928 Ships, Independent Variable

Transformed 48

19. Results of Stepwise Non-linear Regression Analysis

for the Total 928 Ships, Dependent Variable

Transformed 50

iv

LIST OF FIGURES

FIGURES Fag«

AmphibloMs Ship Group 55

2 Graph of Total Cost Versus Propulsion Weight for the

Aaphiblous siilp Group 56

CHAPTER I

INTRODUCTION

not fully identified and the relationships among these variables are not

fully understood.

cost estimate data. The first objective of this study is to identify some

objective.

from a collection of contractor's bid proposals for Navy ships which were

i.e., during the conceptual design stage. These estimates are important

study.

-1-

-2-

Ic should be emphasized that the data used In this study are not

what their production cost will be and what their profit will be to arrive

first, they are the only data available and second, the results of the

basis the contractors prepare their bid proposals and predicting how much

the contractors will bid. In this context, the contractors can be regarded

engineering and economic aspects of ship cost with emphasis on the former

Theoretical Basis

and possible future extension of this study is derived from the work of

for at least two reasons. (1) the relative scarcity of detailed technical

information on which to base the estimates and (2) the many uncertainties

since the path from the design stage to the completion of the construction

Program in Logistics, George Washington University, 1969.

-3-

may serve both purposes, however, the demand for accuracy may in fact not

be the same. It was often suggested that for program analyaia, the abso-

lute cost value need not be accurate provided that the relative coats are

ahip or some multiple of the same ship without specific reference to the

the industry during the relevant time period. The economic approach refers

to studies which attempt to deal explicitly with the Industry and general

approaches but this integration may not come about by simply using both.

Each approach muat likely be modified in form and content to effect desired

one which cannot be accomplished within the near future. A more modest

-4-

DATA

The data base for this study consists of two files. The cost

contractors between the year 19SA to 1966. There are 989 records In the

the Navy for the construction of a new ship. Among the total 989

Involves only one distinct ship prototype although several may be built.

Each type of ship may Include one or more different classes (each

of 58 different classes.

Propulsion cost

Electric plant cost

Communication and control equipments cost

Auxiliary system cost

Outfit and furnishing cost

Armament cost

Profit

Total Cost

types of ships included in the file. Each type of ship may Include one

-5-

exactly to those In the cost file. Each record contains for one

components In tons.

Propulsion weight

Electric plant weight

Communication and control equipments weight

Auxiliary system weight

Outfit and furnishing weight

Armament weight

Methodology

regression equations which can accurately predict the total cost of the

Hull structure

Propulsion

Electric plant

Communication and control equipments

Outfit and furnishings

Auxiliary systems

Armament

-6-

size and the basis of stratification. The stratifications to

be considered are:

various forms will be presented In the next coming section).

The different forms of the regression model are:

of two-variable regression analyses.

which can be further subdivided into.

and Independent variables in linear

form.

independent variables in non-linear

form.

and Independent variables in both

linear and non-linear form.

In non-linear form.

ithod. It is not standard statistical terminology.

-7-

factors will bear better results and how significant are these results.

regression equations are derived for each of the seven weight groups

1 2

with component cost as the dependent variable and component weight as

- a + b Wi + e , j - 1 to 7 , 1-1 to n .

•i -

W component weights of the seven weight groups,

groups, i.e., hull cost, propulsion cost etc.

2

The term "component weight" refer to the physical weight of

the weight groups, i.e., hull weight, propulsion weight etc.

-8-

Aftcr ehe a 's and b.'s are determined by the regression analysis,

which will now be called a. and b , the prediction equation for the

c b w 1 to

lj " •j ^ j 14« J " 7,1-1 to n

The total cost of the ship can then be estimated by using the equation

7

Y. - .J. cl1 + DEC. + CSC^ + proflt1 , 1-1 to n

e. - the residual.

-9-

The equations for the non-linear multiple regression analysis may

take the following forms:

(1) Y f(

i "''o + j^j V1 + e

i

7 m

(3) Y b + b W 1 h! X + e

i " o lSl i ii +' '

such as the squares or the cross products.

m ■ number of X.,

Ik variables.

With respect to the computational tasks for all of the regression

analyses to be performed in this study, the stepwlse regression analysis

2

method given by the Biomedical Computer Program will be adapted. This

method is based upon the least-squares principle, a sequence of multiple

linear regression equations is computed in a stepwlse manner. At each

total cost and the component weights such as for example, the square roots,

the reciprocals, the log values, the log., values etc.

d

V. J. Dlxon. biomedical Computer Programs (Berkeley, California.

University of California Press, 1968), p. 2j3.

-10-

added Is the one which makes the greatest reduction In the error sum

of squares.

Y independent variables.

is equal to Y .

Y

multiple correlation coefficient. (R - r if there is only

one independent variable; r is the correlation coefficient).

b regression coefficient.

b

n number of observations.

-11-

Statistical Analyses to be Performed

Cost Data

The data in the cost file are In reality the estimated cost of

performed in this study, they are not estimated data; they are the given

Weight Data

The component weights of the ships are given in the weight file

In tons. As mentioned earlier, the ship classes found under each type

of ship in the weight file are not exactly the same as those found in

the cost file. (Recall that each class represents a prototype of ship.

One type of ship may include one or more different classes. There are

59 different classes in the cost file and 143 classes in the weight file).

This means that the true weight for the ship's components are not avail-

able for all the ships in the cost file. Weight averages were computed

for the component weights for all the classes under a given ship type in

the weight file and these computed average component weights were assigned

to every ship under the same type in the cost file. Use of approximate

weights and not the true weight will affect the accuracy of the experiments.

-12-

There are some ship types In the cost file for which weight Infor-

must be reduced from 989 records to 928 records and the number of types of

different types of ships which are to be used for statistical analyses are

shown In Table 1.

weights:

PW - Propulsion weight

Price Deflator

The data In the cost file have been collected from the years 1954

Therefore, all cost data In the cost file were adjusted with the

price deflator for producer's durable equipment obtained from the Economic

-13-

TABLE 1

Under 'rhis Type Under This Type

AE Ammunition ship 3 33

AS Submarine tender i 19

DD Destroyer *! 19

-14-

TABLE 1 — Continued

Under This Type Under This Type

SS Submarine 2 8

YP Patrol craft 1 28

Data Processing

the data and computations must be performed by the computer, except for

In this study. The cost file was not arranged In formats which could be

used readily as data Input for performing the needed computations with

the computer, and the file had to be edited for errors and missing data.

create numerous Input files which contain data from both the cost file

and weight file and put In format which allows computer execution of the

for his joint effort with the editing task.

CHAPTER II

predict the total cost of a ship if the component weights are known.

of the ship as the dependent variable and the seven component weights

(HW, PW, Of, AUW, EW, OFW, ARW) as independent variables. The entire

TABLE 2

928 SHIPS. TOTAL COST AS DEPENDENT VARIABLE, COMPONENT

WEIGHTS1 AS INDEPENDENT VARIABLES, n - 928

Independent

variable added R2 AR2 s/Y

weights HW, PW, BW, CW, AUW, OFW, ARW unless otherwise specified.

-15-

-16-

the reduction of the error sum of squares (or equivalently contributes most

2

to increase the value of R ) is the one to be included ahead of the other

remainders. For example, in reeling Table 2, PW is the one which has the

2

variable is added, the increase in R is so small as to be negligible,

the computation will stop and ignore all remaining independent variables

v - Coefficient of variation.

v-i-

Y

1/2

2 2

AR * Increase in R .

-17-

2

increasing the value of R , one should not Immediately assume that

The fact Is that sometimes the Indepenuent variables are highly cor-

2 2

contribute to the value of R .so that when the contribution to R

come later. To prove and demonstrate this point, seven separate two-

variable regression analyses were performed using the total 928 records,

with total cost of the ship as dependent variable and with one and only

Table 3.

TABLE 3

SHIPS. TOTAL COST AS DEPENDENT VARIABLE, COMPONENT WEIGHT

AS INDEPENDENT VARIABLE, n - 928

Independent

variable R2 AR

2

s/Y

-18-

TABLE 3 — Continued

Independent

variable R2 AR2 s/Y

Y - 176,170 0 317,977 v

V - 1.8

Y"

2

The values of AR for the weight components in Table 3 are much

higher than those in Table 2 except for PW which was the first indepen-

2

Table 3, it is evident that the values of R and s/Y in these experi-

ments are not satisfactory. One visible reason is the value of the standard

deviation of the dependent variable o , which has a high value and conse-

mean.

2

satisfactory or not satisfactory for the value of R and s/Y . The

>

A. _

appears that an R of less than .70 and/or a s/Y of greater than .30

aire usually associated with a regression analysis where the sample strati-

fication and/or the regression form used were poor; poor in the sense

that much better selections of one or both of these two factors can lead

2 -

to much improvement in th« value of R and s/Y .

For example, one can

2

observe in Table 4 that for the small hull group, the value of R is .1183

-19-

and the value of s/Y Is 2.73 these results are evidently poor. By

the Small Hull Subgroup-1 shown in Table 7. Therefore, from the vlew-

2

point of statistical significance, an R of less than .70 and/or an

total coat of the ship (which is the dependent variable of the regression

the total cost of the ship is often much over ten million dollars. In

this case, the determining factor which Is Important is the purpose for

different experiments where samples are made up of ship groups with dif-

samples used were more homogeneous, the total 928 ships were stratified

than 2000 tons. There are 12 types1 with 605 ships

in total.

^he types are: AGOR, ACS, DD, DDG, DE, DEG, MSC, MSI, PGM,

SS, SSN, YP.2

2

Detailed descriptions of ship types are given in Table 1.

-IQ-

2000 sad 7000 tons, there are 11 types1 with 303

ships In totsl.

8000 tons. There sre 3 types2 with 20 ships In

totsl.

Three stepwlse regression snslyses were performed for the above three

groups using the totsl cost of the ship as dependent variable and the seven

Tables 4, 5, and 6.

The reaulta show significant laproveaent for the Mediua Hull group

2

and the Large Hull group. The value of R 's had increaaed and the value

observed that theae two groups had a relatively aaall value for the coeffi-

cient of variation v . However, there waa not laproveaent for the Saall

Hull group, it can be seen that this group haa a high coefficient of varia-

tion, v - 1.8 .

. ^e types are: AE, AFS, AKA, AS, OLG, DLGH, DPD, LPH, LSD, LST,

SSBN.*

2 3

The types are; A0E, A0R, OVA.

-n-

TABLE 4

SMALL HULL GROUP WHICH CONSISTS OF SHIPS WITH HULL

WEIGHT LESS THAN 2000 TONS. TOTAL COST AS DEPENDENT

VARIABLE, COMPONENT WEIGHTS AS INDEPENDENT VARIABLES.

n - 605

Independent _ 2

Variable added R AR s/Y

Y - 115,557

o - 334,630

Y

v - 2.9

-22-

TABLE 5

MEDIUM HULL GROUP WHICH CONSISTS OF SHIPS WITH HULL

WEIGHT FROM 2000 to 7000 TONS. TOTAL COST AS DEPENDENT

VARIABLE, COMPONENT WEIGHTS AS INDEPENDENT VARIABLES.

n - 303

Independent

variable added R2 AR2 s/Y

Y - 250, 081

o - 93, 704

Y

v - .376

-23-

TABLE 6

LARGE HULL GROUP WHICH CONSISTS OF SHIPS WITH HULL

WEIGHT GREATER THAN 7000 TONS. TOTAL COST AS DEPENDENT

VARIABLE, COMPONENT WEIGHT AS INDEPENDENT VARIABLES.

20

Independent

variable added R2 AR2 • /Y

Y - 889,961

o - 702,641

v - .795

-24-

2

group and the Large Hull group. The value of R 's had increased

s

and the value of — had decreased substantially from those in Table 2.

Y

It should be observed that these two groups had a relatively small value

for the Small Hull group, it can be seen that this group has a high coef-

point:

expected if the coefficient of variation of the

dependent variable v is high.

improved if the sample can be stratified into sub-

samples which have smaller value of v .

the small hull group whose results were reflected in Table A to be poor was

than 500 tons. There are 4 types2 with a total of

128 ships.

and a high value of R^. -

2

The types are: MSC, MSI, PGM, YP.3

3

Detailed description of ship types are given in Table 1.

-25-

500 to 1000 tons. There are 5 types1 with a total of

228 ships.

1000 to 7000 tons. There are 3 types2 with a total of

199 ships.

with total cost as dependent variable and the component weights as inde-

of v , it is .55 for the Subgroup-1, .545 for the Subgroup-2, and 2.38

not always result in reduction in the value

of v .

2 3

The types are: DDG, DEC, SSN.

3

Detailed descriptions of ship types are given in Table 1,

-26-

TABLE 7

SMALL HULL SUBGROUP-1 WHICH CONSISTS OF SHIPS WITH HULL

WEIGHT LESS THAN 500 TONS. TOTAL COST AS DEPENDENT VARIABLES,

COMPONENT WEIGHTS AS INDEPENDENT VARIABLES.

n - 178

Independent

variable added R2 AR2 8/Y

EW .8135 .0043 .24

Y - 12,523

oY - 6,932

v - .55

-27-

TABLE 8

SMALL HULL SUBGROUP-2 WHICH CONSISTS OF SHIPS WITH HULL

WEIGHT BETWEEN 500 to 1000 TONS. TOTAL COST AS DEPENDENT

VARIABLE, COMPONENT WEIGHTS AS INDEPENDENT VARIABLES.

n - 228

Independent _ .

variable added R AR a/Y

Y - 91,375

o.Y - 49,952

v - .545

-28-

TABLE 9

SMALL HULL SUBGROUP-3 WHICH CONSISTS OF SHIPS WITH HULL

WEIGHT BETWEEN 1000 to 2000 TONS. TOTAL COST AS DEPENDENT

VARIABLE, COMPONENT WEIGHTS AS INDEPENDENT VARIABLES.

n - 199

Independent „ »

variable added R AR s/Y

Y - 235,432

oY - 560,374

v - 2.38

-29-

2

in multiple regression equations which have a higher value of R and a

lower value of s/Y . But so far all previous attempts show that the

value of s/Y has not been less than 20%. This is not satisfactory for

are some better approaches to stratify the samples other than by hull

weight will be discussed. The entire 928 ships were divided on the basis

than 500 tons. There are 10 types-^ which make a total

of 440 ships.

between 300 and 1000 tons. There are 12 types^

with 463 ships in total.

greater than 1000 tons. There are 4 types- with

23 ships in total.

are shown in Table 10, 11 and 12. The results show no significant improve-

ment over the stratification by hull weight, it exhibits the same characLer-

istics that a low value of v leads to better results and a high value of

^he types are: AGOR, AGS, DE, DEG, LST, MSC, MSI, PGM, SS, YP.4

2The types are: AE, AFS, AKA, AS, DD, DDG, DOG, LPD, LPH, LSD,

SSBN, SSN.4

3 4

The types are: A0E, ADR, CVA, DLGN.

4

Detailed descriptions of ship types are given in Table 1.

-30-

TABLE X0

SMALL PROPULSION GROUP WHICH CONSIST OF SHIPS WITH PROPULSION

WEIGHT LESS THAN 500 TONS. TOTAL COST AS DEPENDENT VARIABLE,

COMPONENT WEIGHTS AS INDEPENDENT VARIABLES.

n - 440

Independent

variable added R2 AR2 a/Y

Y - 57,883

o - 48,600

v - .84

-31-

TABLE 11

MEDIUM PROPULSION GROUP WHICH CONSISTS OF SHIPS WITH

PROPULSION WEIGHT BETWEEN 500 to 1000 TONS. TOTAL COST

AS DEPENDENT VARIABLE, COMPONENT WEIGHTS AS INDEPENDENT

VARIABLES.

n - 465

Independent

variable added R2 AR2 s/Y

EW .0033 .0033 1.45

Y - 254,717

oy - 370,110

v - 1.46

-32-

TABLE 12

LARGE FROFULSION GROUP WHICH CONSISTS OF SHIPS WITH

PROPULSION WEIGHT GREATER THAN 1000 TONS. TOTAL COST

AS DEPENDENT VARIABLE, COMPONENT WEIGHTS AS INDEPENDENT

VARIABLES.

n - 23

Independent

variable added R2 AR2 s/Y

Y - 851, 066

Oy ■ 661, 724

v - .78

Stratification by Usage

Wot satisfied with tne hull weight and propulsion weight stratifi-

cation, three groups of ships having the same usage were selected for

ar.alyses.

AS, AKA. The total number of ships Is 94.

DEC, OLG, DLGW. The total number of ships Is

358.

LSD, LSI. The total number of ships Is 101.

with total cost as dependent variable and the component weights as inde-

pendent variables. The results are shown In Tables 13, 14 and 15.

value of v thus very poor results and second, the value of a has been

Y

reduced and at some Instance to as low as 13.3%, which the previous two

Y

Is still not satisfactory for practical prediction.

Just performed, two tables were prepared. Table 16 tabulates the values

2

of v , s/Y and R for the 13 different groups. Table 17 tabulates the

xy

and the component weights (independent variables) for the 13 different

groups.

-34-

TABLE 13

TRANSPORT SHIP GROUP. TOTAL COST AS DEPENDENT

VARIABLE, COMPONENT WEIGHTS AS INDEPENDENT VARIABLES.

n - 94

Y - 221,420

Oy - 71,662

.323

-35-

TABLE 14

COMBAT SHIP GROUP. TOTAL COST AS DEPENDENT VARIABLE,

COMPONENT WEIGHTS AS INDEPENDENT VARIABLES.

n - 358

Independent

variable added R2 AR

2

8/Y

Y - 161,531

o - 68,085

v - .425

-36-

TABLE IS

AMPHIBIOUS SHIP GROUP. TOTAL COST AS DEPENDENT

VARIABLE, COMPONENT WEIGHTS AS INDEPENDENT

VARIABLES.

n - 101

Independent

variable added R2 AR2 8/Y

Y - 226, 419

oY - 78, 586

v - .35

-37-

TABLE 16

STEPWISE LINEAR REGRESSION ANALYSES FOR THE DIFFERENT

STRATIFICATIONS.

Stratification V s/Y R2

-38-

TABLE 17

xy

VARIABLE AND THE INDEPENDENT VARIABLES FOR THE

DIFFERENT STRATIFICATIONS.

Total 928 ships .50 .54 .54 .38 .49 .38 .32

Small Hull group .31 .30 .30 .19 .26 .15 .17

Medium Hull group .03 .41 .48 .34 -.11 .02 .19

Large Hull group .97 .97 .96 .97 .97 .97 .96

Small Hull Subgroup-1 .90 .31 .88 .90 .90 .89 .12

Small Hull Subgroup-2 .81 .92 .82 .88 .59 .70 .91

Small Hull Subgroup-J .20 .11 .20 -.21 .21 -.21 -.14

Small Propulsion group .83 .94 .89 .63 .77 .82 .88

Medium Propulsion grouo .01 .02 .06 -.04 -.02 -.02 -.01

Large Propulsion group .93 .95 .96 .72 .94 .92 .96

Transport Ship group .67 -.80 .76 -.15 .12 .85 -.13

Combat Ship group .80 .91 .91 .86 .79 .83 .82

Amphibious Ship group .85 .58 .81 .89 .85 .85 .61

Note:

The entries in the table are value of r

's between the total

xy

cost of the ship and the respective component weights which are shown

at the top of the column.

-39-

v is over 1.00 the result is extremely poor. The value of ■§■ tends to

Y

2

increase or decrease with v. However, the value of R is also a

9

2

high v if R is high, this Is shown in the Large Hull group.

?

2

R is low. This is shown In the Medium Hull group. All these point

Y

2

with v and decreases with R

relationships:

2

(1) In a particular group, if all the r 's are high, R

y

is also high.

2

(2) In a particular group, if all the i 's are low, R

y

is also low.

(3) In a particular group, if some of the r 's are high

be high. This is shown In the Transport Ship group.

tently higher values of correlation with the dependent

variable over the other component weights throughout

all the different experiments.

(2) The component weights CW, AUW, OFW, ARW have more

occurrence of negative r than HW, PW, and EW.

xy

the Independent variables does not always mean that

there is a lack of true correlation between the

dependent and independent variables. With the present

ship cost data, it would seem more likely that it is

due to poor stratification of samples. This is shown

in the Small Hull Group where r 's are small, but

after further stratification, theySmall Hull Subgroup-l

and Small Hull Subgroup-2 produced high values of

r 's.

-40-

The correlation matrix for the Independent variable was computed for

each experiment performed. It was found that In many cases the correlation

xy

performed, it was found that if the Independent variable which accounted for

2

the highest contribution to R was eliminated from the computation, some

other independent variable would come up in its place, and as a result, the

2

value of R did not change significantly. This high value of r 's

deviations and correlations are computed about the origin rather than about

the mean.

The method was performed on the total 928 ships. The following is a

obtained obtained s/Y

2

It can be observed that although the value of R was Improved,

12 2

Best R means the largest value of R obtained from the stepwise

regression analysis.

2

Best s means the smallest value of standard error of estimate

obtained from the stepwise regression analysis.

-41-

2

The Amphibious Ship group shows consistently better velue of R and

s among the many groups chosen for regression analysis in this chapter.

It is therefore favored for testing new methods to find out if the new

method can make further improvement for groups which have comparatively

2

good results already. The experiment shows improvement in R and

2

Best R Best s Best

obtained obtained s/Y

error of estimate.

SUMMARY

2

(1) The parameters v I , s/Y are important in

examining the results of ths regression analyses.

2

The value of s/Y is a function of v and R , it

2

increases with v and decreases with R .

between the dependent and independent variables

r 's are high. R2 is likely to be high. If

xy -

all r 's are low, R is likely to be low. If

xy 2

some r 's ars high and some are low, R could

*y

possibly still be high.

-42-

xy

most likely it is due to poor stratification of

samples rather than due to lack of relationships

between the dependent and independent variables.

requirements must be met.

(not higher than 0.8).

xy

independent variables, but not necessarily

all the independent variables, must be

sufficiently high (higher than .75).

proper stratification of samples.

usage is more promising than grouping by hull

weight or grouping by propulsion weight.

slightly improved by using a zero regression

intercept.

performed in this chapter, the lowest value

of s/Y is 13.3Z which is still not satis-

factory for practical purposes because the

total cost of a ship is usually in the

magnitude of many million dollars such that

the tolerance for error is small. It is

suggested that better results could be

achieved if the actual weight instead of the

approximate weight of the ship components

were used, but how significant will be the

Improvement is still unknown.

CHAPTER III

and the component cost as the dependent variable, i.e., hull cost versus

hull weight, propulsion cost versus propulsion weight, etc. The regression

c

i3 ■ boj+ Yu+ ei • ]:\\i »28 (4-i)

e is the residual .

After the parameters b 's and b 's have been determined, the estimated

oj j

total cost of the ship was computed by the equation

Y, ■ iMb . +

b.W,,) + CSC, + DEC. + Profit. i - 1 to 928 (4-2)

1 J"l oj j ij i i i

1

2

1 928 (4-3)

= r K(Y - Y )

928-10-1 i-1 i V

-A3-

-44-

The value of s couiputed liere shows significant improvement over the one

s; s

Y

The results are t'Kmpated with those obtained from the multiple regression

analysis as follows

s s

Y

Contradictory to the results obtained with the >28 ships, for the

-45-

hare «gain shows that the adding-up process yields poorer results than

s

s

Y

Addlng-up process 54,892 .248

sit.

Multiple regression analysis iH,802 .175

SUMMARY

the ship rfas compared between the adding-up process and the mt „tiple

better results for the 928 ships but poorer results iur the Amphibious

variation v regression R y

For the 928 ships, the values of the R's obtained from the two-

not true for the Amphibious Ship group and the Transport Ship group

The abova facts seem to lead toftfe^gogcluslon that tor poorly

CHAPTER IV

performed with total cost of the ship as the dependent variable and the

3

to be tested are W . ^i. , -i— IOB W W IOB W

7

b +

^ " 0 I bj tiV^) + e1, i - 1 to 928.

2

column under W^. shows the results of the regression analysis

-47-

-48-

TABLE 18

TOTAL 928 SHIPS. TOTAL COST AS DEPENDENT VARIABLE,

TRANSFORMED VALUES OF COMPONENT WEIGHTS AS INDEPENDENT

VARIABLES

—

1

" ~ —- —— ^~ " — —— —

1

W

^J

' W

«•i

''

•s, lo

« lO^J

"u

1 W

U

3 lo

«eWiJ

xy

—

- do - ARW .32 .27 .35 . >4 -.25 .24 .34

g

Value of — 1.48 I.52 1.52 1.61 1.71 1.57 1.62

Y — — ™ — —-

Y - 176,170

-w-

weights, the squares of all the seven component weights

are also included as independent variables. The regres-

sion equation takes the form

7 7

■ 2

Y. - 1 b, W,.+ Lb W. + e (3-1)

i j.i J U J=1 j U

i = 1 to 928,,

weights, the cross products of the component weights

HW, PW, EW, CW were also included as independent vari-

ables. The regression equation therefore has the

following 18 independent variables

(d) HW x PW x CW x EW

The results of the two experiments are shown and compared to the

Best R Best s

obtained obtained

Using equation (3-1) 6957 262 019

Using the 18 variables in [2] 5763 261 423

weights were mostly highly correlated with one or more of the seven

-50-

and the transformed values of the total cost Y. , which we shall call

form

h + e 1 to 928

f(V

1 - bo 1

+ j"l tJ WIJJ i ' ' '

1 i 1 e 1

The results of these various regression analyses are shown in Table 19.

TABLE 19

THE TOTAL 928 SHIPS. TRANSFORMATION OF TOTAL COST AS

DEPENDENT VARIABLE, COMPONENT WEIGHTS AS INDEPENDENT VARIABLES

n - 928

1

Y

i ^ *r Y

i l0

*eYl

s

1.48 .218 33 .0064

Y

-51-

.57 for the linear model to .87 and a decrease of the value of s

Y

from 1.48 for the linear model to 0.218. However, to test whether

7

1 0 b W

j-1 J ij

o j

regression analysis

2

Yi - (^)

ei - Yi - Y1 (3-2)

^28

s = -r1! 2

1 i e

928-7-1 " i (3-3)

-52-

and ^B^^ wara parformad for tha Amphlbloua Ship group, Coabat

Ship group and Tranaport Ship group; all raaulta indlcata no laprovaaant

7

fCY^ - b0 + T^ f(w^) + 6^ 1 - 1 to 928 •

aa follows:

Beat R Beat a

Transforming variablaa to their aquara root .8966 261,767

Tranafarming variablaa to their log.Q value .9806 299,032

Tranaforming variablaa to their log value .9806 278,202

-53-

Ship group, Combat Ship group and Transport Ship group. The same

experiments •

Graphical Analysis

weights, a graph was prepared with points plotted between the total

cost of the ship and the componenc weight. Two representative graphs

are shown here. Figure 1 Is a graph of the total cost versus the

the same value for each of the component weights to all ships of the

same type. The Amphibious Ship group includes four types of ships

-54-

This also opens the possibility of making a conjecture that the true

•

-55-

FIGÜRE 1

TOTAL COST VERSUS HULL WEIGHT FOR THE AMPHIBIOUS SHIP GROUP

grsph denote the number

of points concentrsted

st the psrtlculsr locstlon

45

40

35

i

I 30

1

2

1

4

4

3

25 < 6

4

20 ..

2

3

4

15 ■

9

4

1

3

10 • 4

2

tk 2.7 3.2

—r—

3.7 4.2 4.7 5.2 5.7 6.2

HULL WEIGHT IN THOUSANDS OF TONS

-56-

PI6URB 2

TOTAL COST VIMU8 PI0PUL8I0N WBIGHT FOR T.IE AMPHIBIOUS »HIP GROUP

50 •

Hot«: th« nuabcra insld« th«

graph danot« tha nuabar 1

of polnta eoacantratad

at tha particular location

1

45

1

40 < 1

1

2

1

35 •

1

1

I 30 •

1

2

1

4 1

a 4 1

25 3 3

6 5

4 5

3

4

20 ■

•7

3

2 3

3

4

3

15 ■ 4

1

3

10 • 4

2

-t-

5.04 5.34 5.64 5.94

— t«

6.24 6.54 6.84

CHAPTER V

weights of the ship and the total cost of the ship. Multiple regres-

using the total cost of the ship as the dependent variable and the

the total cost of the ship leaves much to be desired. This degree

sion analysis were chosen. It was found that the chances of achieving

accordance with the following two guidelines: (1) The ships are

poses. However, one has to take Into consideration that there are

total cost of the ship which was used as the dependent variable was

cost. Second, the weights of the ship components which were used as

-57-

-S8-

th« indap«nd«nt variables war« only approximate weight value«. They were

not the exact weight value«. In eddltion to the above two limitationa,

this study to perform experiments which further stratify ships into even

but none has shown any significant Improvement over the linear models in

prove« to be an Inferior prediction tool for the total coat of the «hip

regression analysis will not produce the kind of accuracy desired for

ship cost estimation. But It does suggest that with the use of

functions or curves within which a certain range for the total coat of

the ship can be established to enable the Nevy to assess the credibility

BIBLIOGRAPHY

Program In Logistics, George Washington University. April 8,

1969.

Shipbuilding Programs and Some Proposed Solutions." Program

In Logistics, George Washington University, 1970.

New York: Academic Press, 1966.

Analysis of Experiments. California: Wadsworth Publishing

Company, Inc., 1968.

Company, Inc., 1963.

of California Press.

New York: John Wiley & Sons, Inc.

-59-

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u ABSTRACT In this st[J(iy ^ the feasibility of developing reRresslon models to

predict the total cost of a Navy ship using the physical weights of the ship

components as independent variables was investigated. The various forms of

regression analyses fall under the following three categories:

(2) Non-lim multiple regression analysis.

(3) Adding-up process, which is an aggregation

of two-variable regression analyses.

It was found that the linear model is preferable over the non-linear model

and the addlng-up process. If the samples are properly selected, linear

models which are statistically significant can be derived. Given its

superiority over the other two models, the degree of accuracy of the linear |

model is still not high enough to produce a dependable point estimation for

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14 LINK A LINK B LINK C

KEY WORDS

ROLE ROLE ROLE

Linear Regression Analysis

Non-linear Regression Analysis

Adding-up Process

Standard Error of Estimate

Coefficient of Variation

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