The superyacht build budget: commitments and forecast final cost.

Each yacht’s cost depends on its size, its design, its specification and its yard, and on the market when the contract is signed. Two yachts of the same length can differ widely in cost, because volume, systems and finish count as much as length. A figure given without the project behind it would mislead, so this guide does not give one. What it can set out is how the cost is built up, and how the Owner can follow it.

The cost is shaped mostly by choices made early: the size and volume of the yacht, the complexity of its design, and the specification of its systems and interiors. Most of these are fixed in the brief and the specification, before the contract is signed.

The contract price is the starting point, not the final cost. Variations, items supplied by the Owner, design and specialist fees, and the preparation for operation are added to it. Whether these sit inside or outside the contract depends on how the contract is drafted, which is a question for the Owner’s lawyers.

A complete budget covers the whole project as the Owner will pay for it, not only the yard’s contract. It usually includes:

• the build contract price and its stage payments;
• the variations approved by the Owner, and the credits for work removed;
• items supplied by the Owner outside the yard’s contract;
• the fees of the designers and of the specialists engaged for the Owner;
• the Chief Engineer, who is funded separately by the Owner;
• sea trials, delivery and the preparation for operation;
• a reserve for what cannot yet be foreseen.

The reserve is kept as its own line. Each use of it is recorded with its reason, and what remains of it is reported every month, so the Owner can see how much of it has already been used.

Specialists’ scope, timing and fees are agreed in advance, within the project programme and the approved budget. Supplier discounts belong to the Owner.

The forecast final cost adds up three amounts, which the report keeps apart:

The forecast final cost changes as commitments are made and forecasts are revised; each change is explained in the report. An illustrative example shows why the three amounts matter. If a stage of the work has been paid, but the orders already placed for the next stage are missing from the report, the project looks cheaper than it is.

Together they give the forecast final cost: the number that tells the Owner where the project will finish. Compared with the approved budget, it shows the gap early, while there are still choices to make.

Payments to the yard follow the stages set in the build contract, usually linked to milestones in the construction. Before each stage payment, the Owner should see that the milestone has been reached, what remains open and how the payment fits the budget. A milestone is reached when the work it describes is complete and inspected, not when its date arrives in the programme. The contract terms that govern each payment are a question for the Owner’s lawyers.

The Owner keeps control of the payments. The Owner’s Representative prepares the evidence for each one, and the Owner approves it.

A budget rarely moves because of one large event. More often it moves through many small ones that were not seen together. Common causes include:

• variations decided late, after the work they change has been built;
• items supplied by the Owner that were never in the budget;
• costs outside the yard’s contract, such as fees and the preparation for operation, left out at the start;
• a reserve spent early, without a record of what it paid for;
• reports that show only what has been spent.

Each of these is easier to see in a register and a monthly report than in invoices read one by one.

Each variation has an effect on price and on time, and each one enters the budget at a known point. Once approved in writing by the Owner, it becomes a commitment. A variation that saves money, such as a credit for work removed, is recorded in the same way. While it is pending, it is a forecast cost, and it appears in the monthly report among the decisions due.

The budget itself belongs to the Owner. It is approved by the Owner at the start, and any change to it is approved in the same way, in writing. How a variation should reach the Owner sets out the steps and the register.

Once delivered, the yacht has costs of its own: crew, maintenance, berthing, fuel, insurance and the management company, among others. They belong in the Owner’s planning before delivery, because the first season of operation often begins while the build accounts are still open.

Rules of thumb that give running costs as a share of the price are only a rough starting point. An operating budget is built line by line, for the yacht in question and for the way it will be used, and it is kept apart from the build budget.

Between the monthly reviews, an updated dashboard and a weekly coordination meeting keep the project in view. Important issues are raised at once, with the options and their effects. Once a month, the Owner reviews a report that covers:

• the work completed since the last report;
• the forecast dates against the baseline, and the critical path;
• the budget, the commitments, the forecast final cost, the pending variations and the decisions due;
• the inspections, the open defects, the main risks and the tests ahead.

The figures in a report should match the registers behind them, so that any line can be traced back to its source. Each update says how current its sources are and where evidence is still missing. The dashboard does not replace formal communication or an approval: a decision is still taken in writing.

Where there is a family office, budgets, commitments and exposures are reported to it on an agreed cadence, alongside the Owner. How Owner reporting works, and how ASYA works through a new build.

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