Fisher Maritime's Fairleads

'Lessons Learned' Strategies & Ideas for the Marine Industry

The Second Translation of Technical Requirements

Technical specifications are an everyday fact of life in the repair, conversion and construction of ships and offshore equipment. The ultimate purpose of specifications is to describe what the customer wants the contractor to accomplish.  In vessel repair, unless there is a specification, the contractor cannot know what the customer really wants, aside from the generic vessel repair specification, “Its broke. Fix it.” For new vessels, the generic specification is equally vague: “Build it to last forever and easy to operate.” While these generic specifications may sound extreme, they present to a potential contractor the same problem that many other, more detailed specifications inadvertently create as well.

The contractor is expected to “translate” specifications and drawings into three dimensional, tangible hardware. After all, that is what is ultimately needed – a repaired or converted or new vessel that is tangible hardware. But what is often overlooked is that customers also want from the contractor another form of translation of the specifications. Namely, the customer wants a fixed price for the described work in advance. This means that the contractor has to accomplish this other form of translation before commencing the tangible work. This is the quantitative translation.

In order to be meaningful, a fixed price for the contract work, agreed upon in advance, has to include all the anticipated work. The contractor has to be able to reliably translate the specifications into estimated quantities of man-hours, material costs, subcontractor costs and schedule days.  Thus there is burden on the writers of specifications to provide to contractors sufficient information to enable a quantitative translation, so a firm, fixed price can be negotiated and relied upon.

Examples of specifications that cannot be reasonably translated into quantities include these. None of these examples are fictitious, but we’ll keep the identities confidential to prevent embarrassment.

  • Vee and weld eroded bottom plate welds as considered necessary” [tug boat].
  • “Repair or replace seals and bolts as needed” [work boat].
  • “Furnish and install suitable lighting in all passenger-occupied spaces” [crew boat].
  • “All work necessary to accomplish the specified work shall be deemed specified whether specified or not” [fisheries vessel].

How many man-hours and how much material costs should the contractor have included in its budget for each of those items? Obviously, a contractor cannot know whether it is 10, 100 or 1000 man-hours or any other approximate number.

The specification writer has to keep in mind that when asking for a fixed price bid, the contractor has to first translate the specifications into reasonably close quantitative estimates of man-hours, material costs, subcontractor costs and schedule days.   Often, specification writers are too familiar with their own specifications to see that they cannot be reasonably translated into those forms of quantities.   Another major form of ambiguity that is often overlooked by persons drafting specifications is the identification of the standards by which the workmanship and/or materials will be judged acceptable.

Accordingly, specification writers should reexamine their writings, before sending them out in a bid package, to ensure that the specs can be quantitatively translated.  Third-party quality assurance and risk-minimization reviews of major specifications are also merited for conversions and newbuildings to ensure that all the ambiguities and vagueness are identified and corrected before the bid package is released to potential contractors.

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.