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What Does It Cost To Design A Yacht...?

Copyright 2007 to 2016 Michael Kasten

As it turns out, design cost is very nearly the most common question we are asked, so I will elaborate on this subject...!  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.
 

COMPLETED STOCK DESIGN COSTS

You can review the cost of our stock boat designs on our Plans List page.   For our COMPLETED Stock Plans, the prices given there approximately reflect the vessel size, the amount of detail within the plans set, what year (and therefore to what standard) the plans were developed, and whether there remains any work to be done in order to finalize or update the design. 

You will find a thorough description of what's included in a typical COMPLETED Stock Plans package on our Stock Design page. Our prices for Stock designs are likely to be approximately representative among designers, provided that the amount of detail being offered in the plans and the accompanying design documents is about the same.

No doubt some designers will offer Stock designs for considerably less, in which case I would be very cautious in terms of the amount of detail that's actually provided...!
 

INCOMPLETE STOCK DESIGN COSTS

Among the designs on our Plans List page, you will find a number of designs that are as yet INCOMPLETE, the cost of which are considerably higher than the COMPLETED Stock Plans.  Those INCOMPLETE designs have at the very least gone beyond the Stage I “concept design” development, but for one reason or another were not pursued beyond discovering the layout and the hull form. 

Why bother offering INCOMPLETE designs...? 

With each of the INCOMPLETE designs, having already determined the layout and hull form, the cost to turn any of those designs into a completed set of Building Plans represents approximately a 20% discount versus the cost to develop a new design entirely from scratch. 

The reason for their cost advantage vs a new custom design is simply that those designs have completed the Stage I “discovery” phase of the design process, and are offered on the basis of completing them “as presented” without changes being made to their original hull form or layout.   Among the INCOMPLETE designs, you will also find several designs offered that have been carried well beyond the Stage I "discovery" phase and completion of the Building Plans for those designs has been discounted even further.

In other words, the cost of any such INCOMPLETE Building Plans amounts to our actual cost to complete the remainder of the design work in order to provide a completed, buildable set of plans.  Since the INCOMPLETE designs are offered at a substantial discount versus the cost of developing a new custom design, they may be a potentially attractive alternative to developing a new custom design. 
 

CUSTOM DESIGN COSTS

For any new Custom yacht design an orderly and well-established process be followed in order to achieve a completed design that is ready for the builder.  For more information about what is involved, our approach to the custom design process is outlined 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 a number of different 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 first on an hourly basis in order to create a preliminary design and specification and then on a commission basis for the final design. 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 and as a beginning place for detailing the completed design. With a hybrid fee approach, once the preliminary design is complete, a commission is ordinarily arranged for the final design and detailing work based on the projected cost of the vessel, payable at least in part prior to beginning to fully detailed 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 is 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 design contract that will necessarily restrict the client's flexibility during the design process. For example, any design changes the client requests will involve a well defined change proposal, then a formal 'change order' involving a separate negotiation for each change, and an added cost for the change. This can become complex and inordinately restrictive, and per our usual arrangements (outlined below) it is quite unnecessary.

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 is 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 known in advance, the exact amount of that commission will still not be known since it will vary according to the final cost of the yacht.

Typical Commission: A fixed-commission design fee will often be in the range of around 10% to 12% of the as-built cost of a yacht, assuming it is built at a professional boatbuilding yard, finished to a turn-key stage of completion, and fully outfitted.  It is important to note that those design cost percentages do not include further development work, such as the cost to develop NC cutting files. It is only for the design itself.

These percentages further assume 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, then it is reasonable to expect that those percentages will approximately apply. On the other hand, if the vessel is designed in North America or Europe, but built 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 turn out to be higher.

This kind of fixed percentage design arrangement must take the form of a formal legally binding contract for the design "commission" whereby the client is liable for an agreed upon percentage of the cost of the completed yacht.  Such a contract must also outline in extreme detail what will and will not be delivered in the completed design package.  Due to the extra 'margin' that the designer must include in the commission in order to cover the uncertainty factor, a fixed design commission will nearly always be the most costly design arrangement. As a result, it will usually be by far the most lucrative arrangement for the designer.  We find that this sort of arrangement is uncommon with smaller yachts, but is more or less the norm among large mega-yachts.

In addition to the 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...

As a result of these factors, it should be fairly obvious that a fixed-percentage type of yacht design commission will not be especially advantageous to the client, nor will it necessarily be favorable to achieving the most suitable 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 of the design work done on a commission basis.

By this method, it is most common to develop the Preliminary Design (Stages I & 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. During this development, 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.

Once the vessel's cost is known, the remaining design details, i.e. the Building Plans, can then be developed on a percentage basis.

Typical Cost: Taking this approach, the design commission percentage may be on the order of around 8% to 10% of the cost of the as-built yacht. This commission percentage 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 design commission percentage paid is in addition to any amounts already paid on an hourly basis in order to develop the Preliminary Design and Estimating Plans. Using this approach, the overall cost of the design work from beginning to end will amount to more or less the same percentage as would have been the case with an entirely commission based yacht design - in other words somewhere between 10% and 12%. Of course this can vary, depending on how many iterations are explored before a preliminary design is settled upon. It is important to note that this covers the cost of developing design itself, and does not include construction related services such as shop drawings, or developing NC cutting files, etc.

The hybrid approach is relatively safe for the designer, as the likelihood of unforeseen changes being introduced late in the design development process 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 will then be negotiated 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 based upon an known (the build cost)...!
 

OUR PREFERRED APPROACH

Both a fixed commission and the hybrid approach seem 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 for everyone involved. 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.

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 for the design work, and an estimate of the hours required to achieve a completed set of Building Plans.

Our Design Proposal is task-specific, therefore it is ordinarily quite accurate in terms of the hours required to achieve the actual design work.  Beyond our estimate there can be additional costs such as for client requested changes, communications, or additional owner requested tasks.  Since those additional tasks are impossible to foresee, they are not estimated in our Design Proposal.  They are however, very much under the control of the client.

Typical Cost: Using the hourly based approach, we have found on average that for a mid-size yacht (say 40 to 80 feet) our design costs will vary somewhere between 6% and 8% of the eventual build cost. This is for the design itself, and does not include owner requested extras or construction related costs that may eventually be transferred to the designer, such as developing NC cutting files, etc.

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, but the design work will still cost the same, therefore 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. 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.

Although many are tempted to do so, it is imperative to note that one cannot attempt to predict the eventual cost to build a yacht based simply on the projected cost to design the yacht...  there are too many variables...!

Process & Deliverables:  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 assume the role of owner's advocate and consultant. We provide a thorough accounting of the hours spent on each task and periodic invoices to keep everyone up to date.

We develop the design in a series of stages. During each Design Stage, we provide images or PDF's by email to illustrate the emerging design and to solicit client feedback.  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.

As soon as we have sent the Estimating Plans out to a selection of builders, we commence 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...  building the boat...!  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. While the completion 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.
 

OUR CONSTRUCTION-RELATED SERVICES...

During the construction of the yacht, 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...?

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.   In so doing, 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 on an hourly basis.
 

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 to request a written Design Proposal for a vessel you might 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.

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