Fisher Maritime's Fairleads

'Lessons Learned' Strategies & Ideas for the Marine Industry

Contracting Strategies Central to Success of Project

Well-designed ships often become poorly executed shipbuilding projects due to lack of a comprehensive contracting strategy. The contracting strategy should take into account the resource limitations of potential shipbuilders and a realistic view of the on-going capabilities of the ship owner. Some exemplar considerations when forming your own strategy include the following:

  • The reality of many recent shipbuilding and ship conversion projects is that the shipbuilders do not have substantial in-house engineering and design capabilities. When faced with such obligations, they subcontract them out as best they can manage. This means that there are multiple layers of contract between the ship owner’s staff and the team that is translating the owner’s design concepts. Thus, whenever trade-offs occur during design development, whether large or small, they are made out of sight of the owner.
  • Ship owners may often promise to provide detailed information pertaining to owner-provided equipment, but fail to do so on a timely basis. This may lead to project delays and extra costs.
  • Contractual overruns of both schedule and costs have been seen to occur when shipyards want the structural design completed rapidly to enable physical work to commence (and thus cash flow) while the design team has not yet finished the remainder of the design. This leads to unnecessary design compromises later when it is realized (for example) that the structural layout and design should have taken into account the distributive systems. An example of this led to a very costly change to increase deck heights in a deckhouse after physical construction had already begun — all because the structural design was completed before the distributive systems were considered. By the time the problem was identified, it was too late to redesign the structure to take those systems into account. Another example involved reconfiguring a deck and relocating a davit when it was realized that the rescue boat could not be launched from the intended location. This occurred because the structural design was finalized before equipment selection.
  • In many newbuilding or conversion projects, commercial shipbuilding contracts can no longer simply give the shipyard the responsibility to complete the design from the contract plans and specifications. The risks of unwarranted design compromises, construction delays and extra costs cannot be tolerated by either the owner or the shipyard. Thus, a comprehensive contracting strategy needs to be developed for both the design and construction, especially for relatively-unique vessel designs and for nearly all conversion projects.

The key observation is this: the success of a project is just as dependent on good contracting strategy as it is on good ship design. One without the other inevitably leads to a compromised outcome.