Predicting the Final Cost at Completion for Overhauling a Ship

The purpose of this paper is to propose and illustrate a model for predicting the final cost at completion (FCAC) of overhauling or constructing a ship. This proposed model impacts planning, production, and business processes in ship overhaul and new construction. The model is also a critical element in information systems and risk management. The general practice for predicting the final cost at completion is to multiply the budgeted cost by the cumulative actual cost to date and to divide the result by the cumulative earned value. Two weaknesses of this practice is its high percentage of error and its inability to measure or evaluate the effectiveness of managements cost control actions. There are three differences between our proposed model for predicting FCAC and the general practices method. The first difference is that the proposed model uses Monte Carlo simulation to estimate unfinished work. The second is that the model ignores initial cost allocated for estimating the project budget, and the third difference is that the cost for the level of effort is estimated as a function of time for overhaul completion. The comparison shows the proposed model to be a better tool for predicting FCAC in accuracy and sensitivity to management effects on cost control.