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by: Dr. Kenneth W. Fisher

The ultimate outcome of the work product of vessel design engineers, shipbuilding contractors, equipment suppliers, vendors and subcontractors is controlled through the mechanisms defined by a shipbuilding contract. The contract defines the rights and responsibilities of the two parties that execute the contract, the Owner and the Contractor. The Owner's design engineers who continue on the project, as well as all the other organizations participating in the project, have to work within the boundaries of their contractually stipulated rights and responsibilities. If those rights and responsibilities have not been adequately defined during contract formation, each participating organization may not be able to make its contribution to the project in the manner it anticipated. Accordingly, it is in the interest of each organization, and the professionals within them, to not only understand the contract that controls their actions, but perhaps also to have a role in the formation of the contract. But in order to appreciate the interaction between the various elements of the contract, of which there are many, as well as to appreciate the role of each participant, it is necessary to have a fundamental understanding of the content and composition of shipbuilding contracts. This paper provides a description of the elements of such contracts, and the purpose of each such element of the contract, all in a manner that is suitable for persons who are not lawyers. The ultimate purpose of this paper, by providing insights based on actual shipbuilding contractual experiences, is to assist readers in the avoidance of contract management difficulties as well as the more significant contractual disasters. - read more

by: Dr. Kenneth W. Fisher

This presentation identifies many of the functions that must be fulfilled by representatives of ship owners during the process of acquiring new vessels. Many aspects of this presentation are also applicable to ship conversion and repair. The items discussed below, while not constituting all of the owner's contract management functions that must be addressed, include ones that are frequently either overlooked or insufficiently fulfilled, potentially leading to disputes between the contracting parties. Besides creating the risk of contract disputes, insufficient fulfillment of these contract-related functions exposes the owner to receiving an unsatisfactory, late or over-budget newly-built, converted or repaired vessel. The vessel may be unsatisfactory for reasons of impaired quality, maintainability, performance characteristics or operating limitations relative to those anticipated by the contract documents. The perspective of this paper is not a theoretical approach to contract management, but is based on numerous analyses of contractual problems and disputes experienced by ship owners in North America and Australia. - read more

by: Richard Dinapoli, Jr. and Albert H. Bowers, III

Since 1976, the firm with which the authors are associated has used its technical and managerial expertise to assist clients in the resolution of high-value, marine-based contract disputes. We believe that this firm is the only engineering management consulting firm in the maritime arena that has successfully developed-and-asserted or rebutted numerous ship owner/shipyard-related claims on behalf of clients in a prompt and cost-effective manner, often without having to resort to trials or arbitration. The firm has also provided considerable support on behalf of clients, regarding similar matters in both arbitration and litigation, when the matters were not otherwise resolved.

Based on some of the corporate experiences of the firm, the focus of this paper is a demonstration of some of the basics of contract dispute avoidance. The topics addressed include the potential benefits of avoiding disputes, common sources of disputes and preventative measures which have been observed to be successful. Obviously, the need to constrain this presentation to a very brief amount of time permits only a superficial examination of the subject matter. We have endeavored however, to amplify some of the points addressed through the use of actual examples taken from our case files. - read more

by: Dr. Kenneth W. Fisher

There is, in the title of this presentation, "Liability Avoidance in Ship Design and Construction," an implicit assumption which is central to this paper. That assumption is that liability occurs and re-occurs in ship design and construction, and that it is desirable to avoid such liability.

It appears to be a rare designer or shipyard that has successfully avoided being engaged in a lawsuit testing their potential liability for their design or construction efforts in the maritime field. Several firms have, however, successfully knocked back those attempts to pin liability on them, but not without significant cost. The most successful counter-attacks to alleged liability undoubtedly stem from considerable preparation and forethought by firms at the time of contracting to undertake their design or construction efforts, -and by well-planned contract management throughout the rendering of those efforts. - read more

by: Robert R. Hart

One of Bob Hart's last employments was on the teaching staff at the California Maritime Academy. Prior to that he was associated with commercial and naval shipyards, as you will discover below. This two-part paper was originally an oral presentation at a two-day seminar in 1979 on contract management for ship construction and repair. Bob Hart has since passed away, but has left the maritime industry this legacy of his appreciation and learning process. In reviewing it again, more than a decade later, its timelessness becomes evident. Bob Hart clearly subscribed to the school of thought that since we don't live long enough to make all the mistakes ourselves, we should learn from the mistakes of others. But the educational benefit of those mistakes becomes available only when such matters are 'translated' by analytical minds, such as Bob Hart's. The industry is fortunate that Bob Hart was generous with his professionalism. - read more

by: Dr. Kenneth W. Fisher

There are many facets to the responsibilities and obligations of the ship owner and the Contractor (shipyard) associated with the transmittal of drawings from Contractor to owner pertaining to the construction or modification of a vessel. Historically, a number of significant contract disputes have arisen pertaining to the interpretation of those responsibilities, as well as innumerable minor disputes. Having witnessed some of them, helped resolve others as an 'expert witness' and having adjudicated others as a commercial arbitrator, I appreciate that a consolidated discussion of those responsibilities could be helpful to the avoidance or minimization of such disputes. - read more

by: Dr. Kenneth W. Fisher

The causes and consequences of mismanagement in the design, construction and repair aspects of the marine industry are examined in nine case studies. Selected from actual case histories, the studies focus on representative samplings of mismanagement in the ship design phase, in the design-to-construction transition, in the construction phase, in the construction-to-testing transition, and in the testing-to-delivery transition. Tugs, ferries, chemical carriers, cargo vessels, tankers and special purpose vessels are included. The conclusions focus on (i) the necessity of assessing the benefits and the risks whenever changes in procedure are anticipated or observed, (ii) the reason why non-immediate consequences of both delay and acceleration can be costly, and (iii) how misplaced responsibility can topple a project. The conclusions note that things will go as planned, but it is a question of whose plans -- yours or the proverbial Murphy's?

"Beware misplaced optimism: things will go as planned, but it is a question of whose plans -- yours or Murphy's?" - read more

by: Dr. Kenneth W. Fisher

"We don't live long enough to make a sufficient number of mistakes from which to adequately learn; so learn from the mistakes of others." This has been the theme of my training program in Contract Management for Ship Construction and my seminar on Shipyard Change Order Negotiation, Pricing and Scheduling.

It is amazing, to say the least, to come across contract problems of the same nature and content at different ends of the shipbuilding world, and at multiple places in between: from Australia to Korea; from Canada to Germany; from USA to Japan. Shipyards and ship owners who have never done business together make nearly identical mistakes in contract management at such diverse locations. This illustrates that, regardless of location, an inherent characteristic in shipbuilding contracts promotes mismanagement through abuse of the contract. Those mistakes and that contractual abuse prove to be costly to all contracting parties in both financial and schedule matters. - read more

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