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The Art (and Risks) of Managing Owner-Furnished Equipment – Part Three

Editor’s Note:  This is Part Three of a three-part series focusing on the management of Owner-Furnished Equipment.  This article addresses additional items of supporting owner-furnished information that needs to be considered when using Owner Furnished Equipment (“OFE”), which were originally introduced in Part Two.  For readers wishing to start at the beginning of this discussion pertaining to OFE, Part One can be found here.


Integration is the engineering and design process that confirms that each item of equipment will integrate perfectly into the vessel before purchasing the OFE. This means that the owner’s team has to ensure for each OFE item that an appropriate entity is charged with the responsibility to confirm the validity of each of the following applicable aspects:

  • deck area and dimensions
  • structural arrangement to support its weight and deal with possible vibration and noise concerns
  • compartment geometry to ensure there is sufficient space for installation and maintenance
  • installation geometry, determining the route by which the item of equipment will be rigged into its final position and checking in advance for interferences in that route
  • electrical power sources, cable requirements and location of connections
  • electronic controls, alarms and signals requirements (and associated cable requirements) and compatibility with console designs
  • liquids inflow and outflow requirements, location of piping connections, and sources and destinations for such flows
  • airflow and heat dissipation requirements

Some specialized OFE may create additional integration requirements.

Vertical Integration

Integration is divided into two categories, using the modifiers ‘vertical’ and ‘horizontal’ to assist in remembering the differentiation of their roles. Vertical integration is the application of the described integration functions to the interface between each item of OFE and the ship. Which party has that responsibility? It is not realistic to expect the shipyard to accomplish those engineering tasks for equipment being purchased by the owner unless the owner’s team provides the shipyard with everything there is to know about the OFE well in advance of the time it is to be installed. Alternatively, if this task is assigned to the shipyard, the owner has to give the shipyard the authority to modify other parts of the vessel to accomplish the physical integration as may be needed, or at least contractually address those possible requirements.

Horizontal Integration

Horizontal integration comes into effect when the owner provides two or more items of equipment that have to fit and work together or otherwise communicate with one another. The objective of horizontal integration is to ensure, long before installation commences, that the two or more items do, in fact, fit and work and communicate with one another. Are they compatible with one another in terms of geometry, electrical power, signals, controls, fluid flows and heat dissipation? Which party is responsible for providing connecting cables between them? These responsibilities automatically fall onto the shoulders of the owner’s team unless, as with the vertical integration, it is contractually assigned to the shipyard, in which case the owner’s team will have had to provide the shipyard with everything there is to know about the OFE well in advance of the time it is to be installed.

Testing & Commissioning

Once the item of OFE has been installed, if it is anything more complex than a pump, it will be subjected to a series of tests to confirm that it has been properly installed and integrated into all of the ship’s systems with which it has to work seamlessly. Often, these confirming tests consume considerable resources, namely, skilled labor and schedule-critical time near the end of the project. In order to avoid surprises and last-minute impacts to the project’s cost and schedule, the shipyard has to know in advance––probably at the time of bidding the project––the entire set of requirements for the testing that is necessary to achieve commissioning deemed applicable by the vendor, classification and flag-state authorities. These requirements include:

  • identification of what other ship systems have to be up and running before these commissioning tests can be accomplished
  • description of the minimum status of the OFE’s compartment completion when the tests are conducted
  • specially purchased or rented equipment needed for the tests
  • number of craftsmen of each skill needed to support the vendor’s technical representative during the tests
  • expected duration of tests
  • identification of what other work can not be on-going at the time due to possible interferences with the tests
  • other requirements unique to the type of OFE (e.g., fluids for flushing hydraulic systems).

If the owner’s team cannot provide that information to the shipyard in advance of contracting, there will almost certainly be growth of the project in both schedule and cost. This will come about because the shipyard will not have been able to allow for such contingencies in its competitive bid unless all the bidders were told what contingencies to include in the bid price and schedule. On the other hand, if the equipment is provided by the shipyard, the owner is not bearing the risks of growth or delay due to those potential problems.


When an item of equipment is provided by the owner, there are two sources of warranty: the manufacturer’s warranty on the item itself, and the shipyard’s warranty on the workmanship of installation. While not a major concern, the existence of two sources of warranty places a burden on the owner to figure out which party to call. If the wrong one is called, the owner could be facing an expensive service call invoice from that party, and incur a delay in getting a warranty visit from the correct party.


The use of owner-furnished equipment in a ship construction or conversion project effectively transfers to the vessel owner responsibility for the consequences of problems that arise from the risks associated with that procurement decision. When a vessel owner has decided to use OFE in the project, a careful and continuous monitoring of all the potential sources of problems, as described above, can effectively minimize, if not avoid, the consequences arising from such risks.