Saturday, October 13, 2012

Non-Legal Fine Points of Contract Negotiations and Management – X

Very few yacht building projects begin with fully developed engineering. Preliminary engineering, perhaps, but not fully developed, because few, if any buyers or owners are prepared to wait long enough before starting construction. It is, therefore, critical to assure that a sufficiently detailed and complete general specification has been developed and agreed to before the contract for a new project is signed.
Commitment to a detailed general specification presupposes that sufficient preliminary engineering has been done to judge whether the yacht can be built as represented during the initial development of the project. The general specification also provides the project consultant/manager, employed by the yacht's owner, with sufficient data to compare to previous builds and potentially identify anomalies that indicate potential obstacles to successfully executing the current project.
For example, you can pretty much tell from a detailed and complete general specification if the yard will be realistically employing a program of weight control and reduction for the project at hand. If not, and the basic details of the yacht call for a static displacement significantly less than other yacths of roughly the same size and type, you can conclude there are going to be problems with meeting performance projections.
Of course, if weight and performance are an issue, it would be better to have the engineering for the hull and other structure before making such a judgement. But the reality is that you usually won't have the full engineering package available at the inception of a project, and will have to settle for having the contracted general spec.

Tuesday, July 10, 2012

Non-Legal Fine Points of Contract Negotiations and Management – IX

In my experience, while most large-yacht buyers and owners are adamant about building under survey and classification,very few, if any have strong preferences as to precisely which classification society is chosen.

The sensible project manager, therefore, encourages all stakeholders involved (buyer, yard, naval architect, and so on) to consider which classification society best fits the project at hand.

The single exception to this rule of thumb is MCA classification. The British Maritime and Coastguard Agency (MCA) provides survey and classification services that are required for large yachts that are British flagged or flagged under the “red ensign”, i.e., yachts flagged in Bermuda, Cayman Islands, Gibraltar, BVI or the Isle of Man. MCA classification is required in these countries for charter work.

In cases where the eventual flag is unknown or other than British, the Large Yacht Unit of MCA (designated “Ensign”) will still undertake survey for compliance with the LY2 Code. It should be noted, however, that the documentation which the Ensign unit issues (either a Charter Yacht Certificate or a Letter of Compliance) may very well lack any official standing with other flag authorities, notwithstanding that it indicates a standard of safety as required by the relevant safety Code. So, the most that a non-British yacht will receive, following survey and classification by MCA, is a letter of compliance. In all cases MCA classification is layered on top of another form of survey and classification, e.g., ABS, DNV, Lloyds, RINA, and so on.

While all of the major classification societies are reputable and, for the most part, well respected, some yield better results than others, depending on the type of yacht being designed, engineered, and built. For example, my experience is that for higher-performance oceangoing yachts, American Bureau of Shipping (ABS) rules almost always result in a vessel that weighs from 15% to 20% more than is necessitated by real world conditions. For such vessels, I’ve found DNV, RINA, and occasionally even Lloyds more conducive to keeping structural weight down and, conversely, performance up. On the other hand, if you are building an ice-breaker expedition style yacht, there are strong arguments in favor of going with ABS for survey and classification.

One should also keep in mind that, once independent, third-party review and approval of engineering and construction are enshrined in a building contract, that review and approval becomes the only standard by which the yard can be said to be meeting or failing to meet its relevant contractual requirements. Consequently, a yacht’s buyer/owner can expect to pay for change orders in the event that he or she, or his or her captain, naval architect, project manager, or other representative wants something over and above, or different from that which has been submitted to, and approved by the classification society specified in the build contract. The prudent course of action, therefore, is to assure ahead of the build, and at the time of developing the build and its associated engineering, that any owner-preferred specifications meet class requirements. 

My next post will deal with engineering and specifications.