What Does It Cost To Design A Yacht...?
Copyright 2007 Michael Kasten
As it turns out, design cost is very nearly the most common question we
are asked, so I will elaborate.... First I will review how the cost of
a stock boat design is determined, then I'll explain a few of the various fee approaches
that may be used by designers when creating a new custom yacht design.
STOCK DESIGN COSTS
You can review the cost of our stock boat designs on our Plans List page. Prices there approximately reflect the amount of detail within the plans set for each vessel,
and also whether there remains any work to be done in order to finalize the
design. Those prices are likely to be approximately representative among designers, provided that the amount of detail being offered
in the plans and design documents is about the same.
If interested, you will find a thorough description of what's included in a typical
Stock design package on our Stock Design page.
CUSTOM DESIGN COSTS
For any new Custom yacht design, regardless of who will do the design work, an orderly and well-established process will need
to be followed in order to achieve a completed design that ready for the builder.
If you'd like, you can review our approach to the custom design process in detail on our Custom Design and our Design Stream web pages. You'll
find several links there to other articles about our design process as well.
As for the fee structure to create a new custom yacht design, there are
differing approaches taken. Some designers prefer to work on a "commission" basis, charging a percentage of the yacht's build cost,
and other designers prefer to work on an hourly basis throughout.
Still other designers will use a hybrid approach, working on an hourly
basis in order to create a preliminary design and specification. This
allows the owner and the designer to get most of the decisions and changes
out of the way, so that the preliminary design can be used as an estimating tool.
A hybrid approach then arranges for a commission to be paid, based on the
projected cost of the vessel, and prior to fully detailing the design for
construction.
A general summary of these differing approaches follows, including some of the rationale for each...
COMMISSION BASED YACHT DESIGN
When a "design commission" is arranged in advance, the
commission will ordinarily be based on a fixed percentage of the cost of the completed yacht.
A fixed-commission yacht design arrangement requires an extremely well defined owner's specification and a highly explicit contract that may ultimately restrict the client's flexibility during the design process. For example, any design changes requested would
necessarily involve a formal 'change order' and a separate negotiation to
determine the cost of each change request. This can become complex and inordinately
restrictive, and in my
view it is unnecessary.
When used, a fixed design commission is ordinarily based on a percentage of the cost of the vessel 'as-built' by a professional
yard. It turns out however that it is generally not possible to determine a vessel's build cost before the
design even exists...! In other words, one cannot pre-ordain a yacht's build cost before there is even a design on which to base
its build cost.
Further, in order to cover unforeseen contingencies during the process of developing a design
that will ultimately be exactly tailored to a client's specific requirements, in advance of even knowing those requirements, a fixed-commission-based design will necessarily
include a generous margin, and the owner will be bound to the pre-arranged
percentage regardless of the eventual cost of the yacht.
In other words, while the commission percentage may well
be agreed upon in advance, the amount of that commission
will still not be known.
Typical Commission: A fixed-commission design fee will often be in the range of around 8% to 10% of the as-built cost of
a yacht, assuming it is finished to a turn-key stage of completion and fully outfitted. This percentage also assumes that the build venue will be local to the designer. For example, if the designer is in the US and the yacht is built in the US, those percentages
will approximately apply.
On the other hand, if the vessel is designed in North America or Europe,
but built elsewhere - possibly in a much lower cost venue - the vessel's cost
may well be less but the design cost will not vary, thus the 'commission' percentage will
necessarily have to be higher.
This kind of arrangement must always take the form of a formal legally
binding contract, whereby the client is liable for an agreed upon
percentage. Such a contract must outline in extreme detail what will
and will not be delivered in the completed design package. Due to the
extra margin that must be built into the commission in order to cover the
uncertainty factor, a fixed design commission will nearly always be the most costly design arrangement.
Often as a result it will be by far the most lucrative arrangement for the designer.
In addition to its inherently higher overall cost, a percentage based commission encourages the designer to specify higher cost equipment and furnishings, more elaborate structure and a higher level of finish than may be necessary to satisfy the owner's actual requirements...
after all, the designer is getting a percentage! This is exactly why building architecture is so profitable - and the same
situation applies to marine architecture.
As a result of these factors, it seems fairly obvious that a fixed yacht
design commission will not be especially advantageous to the client, nor
will it necessarily be favorable to achieving the best design...
HOURLY FEE BASED YACHT DESIGN
Rather than working to a fixed-percentage design commission, at the opposite end of the spectrum is an hourly fee based design arrangement. This approach will be elaborated below.
HYBRID APPROACH TO YACHT DESIGN
In many cases a yacht design will be created using a 'hybrid' approach,
with part of the design work done on an hourly basis, and part being
commission based.
By this method, it would be typical to develop the Preliminary Design
(Stage I) and the Estimating Plans (Stage II) on an hourly basis, and then arrange
a fixed fee or percentage based commission for completion of the Building
Plans (Stage III drawings and documents).
This approach allows the preliminary design to be defined in terms of size, layout, materials, and preliminary performance, weights, hydrostatics, stability, etc. on an hourly basis.
Changes can be freely made and the designer's time is simply paid for by the
hour. Once the yacht has been well-defined and the likelihood of any change orders
diminished, a packet of Estimating Plans can be prepared and circulated to a
selection of builders in order to determine the cost of the vessel. The
remaining design details, i.e. the Building Plans, can then be developed on a percentage
basis. In other words, once the cost of the vessel has been
determined, the Stage III commission can be based on a percentage of the
known construction cost.
Typical Cost: Taking this approach, the design commission
percentage may be on the order of around 5% to 7% of the cost of the as-built yacht.
This amount will be added onto the overall build cost and paid to the designer prior to the start of construction. For second or third-world build venues, the percentage will of course be varied accordingly. In other words, these percentages assume
the vessel will be built in the same location as the designer.
Using a hybrid fee approach, the the design commission percentage paid is
in addition to the hourly cost of developing the Preliminary Design and Estimating Plans. Using this approach, the overall cost of the design work from beginning to end will commonly amount to the same percentage as would have been the case with an entirely commission based yacht design - in other words somewhere between 8% and 10%.
Of course this can vary, depending on how many iterations are explored
before a preliminary design is settled upon.
The hybrid approach is relatively safe for the designer, as the likelihood of unforeseen changes being introduced late in the design development is minimal. For larger yachts, this approach is extremely lucrative for the designer, though it does require a very secure, legally binding, explicitly worded design contract that is agreed to by all parties, plus a highly specific definition of
what the deliverable documents and drawings will be. Change orders are then required if the owner or builder request any variations from
the preliminary design.
Using the hybrid approach, the actual cost of the design work will still
not be known in advance, essentially being a percentage of a variable...!
OUR PREFERRED APPROACH
In my view, both a fixed commission and the hybrid approach are inordinately complex, restrictive, and not especially advantageous to the client / owner. We therefore prefer to work on an hourly basis throughout, which we find to be
100% fair to both client and designer, more flexible, less costly overall, and
in the end much less hassle. By this method we are compensated for the
hours expended to achieve the design, and we charge only for the hours
actually spent in pursuit of that goal.
In my view an hourly fee is therefore the most fair all around design arrangement. An hourly based approach offers the client maximum flexibility with regard to the
scope of the design work, and to accommodate any changes or other special requests they may wish to include as the design emerges. By this we mean that an hourly arrangement allows the client maximum freedom during the development
of the design; compensates us most fairly for our time; avoids the expense of drawing up contracts and change orders; and ultimately reduces the overall cost of the design work to the client.
How then do we know what the design costs will be?
For each potential new design, we pre-estimate the required design hours based on the
'owner's specification' or 'mission statement.' This estimate takes
the form of our usual written 'Design Proposal.' Our Design Proposal is an outline of the design process, a list of the deliverable documents and drawings, an approximate choreography and an estimate of the hours required to achieve
the design work. Our Design Proposal is task-specific, therefore it is ordinarily quite accurate in terms of the hours required to achieve the design work.
We develop the design in a series of stages. We refer to the Preliminary Design
as Stage I, during which we take the napkin sketch or preliminary owner's requirements and turn them into a proposed design. Once
that has been approved, we then begin to develop the Estimating Plans within Stage II.
These consist of the essential drawings and documents that a yard will need
in order to prepare construction estimates.
During each stage, we provide images or PDF's by email to illustrate the
emerging design, and to solicit owner feedback. We provide a thorough accounting of the hours spent on each task and periodic invoices to keep everyone up to date.
Typical Cost: Using this approach, we have found on average that for a mid-size yacht (say 40 to 80 feet) our design costs will vary somewhere between 5% and
7% of the eventual build cost. Of course the same caveats apply with regard to build venue. In other words, these percentages assume the vessel will be built in
the EU or in North America. If built in a low-cost venue, the vessel's
cost will be less so the design cost percentage will turn out to be higher.
Naturally the eventual design costs will vary according to the relative complexity of the vessel, thus the range of approximate costs. For example, a simple canal boat vs. a multi-level ocean going motor yacht, even though they may have the same length, will require a very different number of hours for the detailing, drafting, analyses, specifications, etc.
As soon as we have sent the Estimating Plans out to a selection of
builders, we immediately commence our work to complete the Building Plans
within Stage III. During our Stage III work, we fully detail the design for construction, finalize the various calculations,
create a number of additional drawings, and issue the final documents,
calcs, and Building Plan drawings.
By this method, as soon as the construction estimates arrive we are in
the best position to commence work on the next stage... i.e. building the
boat...! Our involvement in the construction side of things is
limited to developing NC Cutting files. Yes, we actually begin the
construction process by starting to build the boat right here on the
computer...!
For a more complete outline of the custom design process and a
description of the deliverable drawings and documents, please see our
Custom Design page.
Process: While developing the design, it is our aim to keep the owner involved as much as possible with planning the layout, the overall aesthetic, the equipment choices, performance, etc. From the preliminary imagining to the eventual designing of the yacht, we remain the owner's advocate and consultant.
In other words, we view our role as being that of owner's representative. In that sense, we are
the owner's best tool to achieve their vision of the yacht, from napkin sketch to launching.
How do we accomplish that once the Building Plans have been completed...?
OUR CONSTRUCTION-RELATED SERVICES...
We are always available during the build process as needed. While the achievement of the Building Plans is a requirement prior to being able to build any new vessel, during the building process we also offer several optional construction-related services. When we are asked to participate in the construction of the yacht we are pleased to do so, and that work is done
on an hourly basis.
A few examples are as follows...
When the Building Plans have been completed, we will make builder recommendations and introductions. We
can help review the builder estimates and we
will assist with contract review as needed. Once a builder has been selected, we
will assist the build process as needed.
For metal vessels we advocate pre-cutting the metal structure. In order to do this, we will develop NC cutting files to prepare the vessel's structure for automated cutting. At this point, we are in fact building the boat virtually on the computer.
How is that done...?
Each of the vessel's structural parts are pre-defined by computer, fully detailed, labeled, and nested onto the cutter's available sheet sizes. At that point the parts are ready to be cut by plasma or water jet, and will then be sent to the builder. This is not only extremely accurate, it also has the potential to save the builder considerable fabrication
time. Much more detail on the NC cutting process can be found on our NC Cutting and
CAD Design Stream web pages.
During construction of the vessel we remain available as needed to create shop drawings of possible new features or small parts; to make on-site inspections of construction to establish progress, or for quality assurance; for consultation on any matter during construction; to make any requested additions or changes; to provide documentation for commercial registry; etc.
In other words, throughout the construction process we are 'on call' as needed.
OVERALL...
You will find a complete outline of how we approach the design process itself on our Custom Design
page and by following the links provided there.
As always, please feel free to contact me as needed for more information or possibly to request
a written Design Proposal for the vessel you have in mind. My
written Design Proposal is an overview of the design process, a list of the
deliverable drawings and documents, and an estimate for the design work
involved that is tailored to your requests. It is provided at no cost, and
implies no obligation... At this point, it is just good information for
your planning purposes.
Your specification need not be elaborate since most of the various
details will grow out of the design process itself. A paragraph or two
that describes the size and general configuration or other preferences will
ordinarily be sufficient for the purposes of estimating design costs, and to
provide you with my Design Proposal.
I think you will find our design services to be attentive to your
requirements; thorough; competently done; and fairly priced. It is our
goal that the design process be a pleasant journey as well!
If you'd like to review several excellent comments from our clients, check
out our Testimonials web page.
