Raising the industry standard

The best way to raise the standard is first to create one. Five major items create the basis of a good build: the specification, the contract, the Classification society, the Flag state and a good build management team that includes individual specialists in:
• Noise and vibration
• HVAC
• Structural engineers
• Paint surveyors
• The Classification society
• The Flag state

With all this expertise at hand, the build process still needs to be well managed and have support from all team members. So how can it still go wrong?

Let’s consider the new-build scenario, which has similar steps to a conversion or refit. The client is excited about their new adventure and investment and should be guided in a manner where the investor gets what they want, not what the broker or whoever wants to sell.

It should be very easy for the client to say this is what I want, this is where I want to go and this is what I want on my boat. Easy and simple – the client gets what they want, not what someone wants to sell them.

1. The Specification
The concept specification should be a document of around 150 pages that reflects the client’s requirements. During the build, the specification becomes a compilation of thousands of pages made up with installation guidelines by the manufacturer/supplier of the components to ensure the client gets what they want.

Just to add a bit of humour and context to this, the funniest specification I have ever seen on a job was a six-page specification, with the front page being a picture of the boat and job descriptions such as, and I quote, “It is understood that the crew area should be upgraded”. There were some other things in the other four pages and the shipyard had quoted 2.8 million to do the job. The upgrade of the crew area was ‘gutted’ back to the bare hull. The project finished at 11 million.

That’s how important a good specification is!

Once the specification is all clear and the chosen shipyard has reviewed with comments and the lawyers are happy, then it is safe then to go to the contract phase.

Start the process correctly, start with a good specification, a contract that reflects the specification, ensure that the Class surveyor has a clear understanding of the owner’s team expectations and ensure that the Flag state has that same understanding.

2. The contract
The contract should be written to reference the specification with all the legal bits added and the milestone points. The shipyard signs and the investor signs and it’s on with the show.

3. Class
The Classification society is contacted for a ‘kick-off’ meeting with the owner’s team, bearing in mind that during the build phase the Class surveyor is wearing the hat of the shipyard.

4. Flag
The Flag state is called in for a ‘kick-off’ meeting just like the Classification society. Here’s where it gets sticky if the Class surveyor walks through the door and says, “Hi everyone, I am also appointed by the Flag state”. As an owner’s rep/build manager, I have a problem.

A lot of Flag states delegate certain responsibilities of the build to Classification societies, which I understand should be beneficial to the project providing due diligence is maintained in respect of all the rules.

But now the Class surveyor has four hats to wear:

• With new build, Class is engaged by the shipyard: Shipyard hat
• The Classification society: Class hat
• Flag state: Flag hat
• Then, at the end of it all: Boat hat

It’s a very fine line that is easily determined as a conflict of interest because of the shipyard/Class/Flag and vessel relationship. But, at the end of the build, the Classification society wants to wear the boat hat. It’s a difficult balancing act.

I’ve experienced this scenario, and maintaining build quality is made more difficult because as an owner’s representative/build manager, a very important avenue of appeal over non-conformity, build standards or non-compliance is compromised by one person’s interpretation. The only person who loses out is the client/investor.

Flag state surveyors must be actively involved in on-site inspections to at least ensure the appointed Class surveyor is doing the job expected and that the ‘due diligence’ is covered, which is a part of the package of the Flag state registry.

To ensure build standard during the build process, as an owner’s representative/project manager, the only things on my side are Class, Flag, the specification and the contract. Whatever I think outside of those four things is just my opinion and can be accepted or rejected accordingly, and I have no avenue of recourse unless I am disputing ‘an interpretation of the rule’ which, in most cases, will be dismissed by someone else’s interpretation of the rule that keeps the shipyard happy.

Litigation is expensive, long and there’s always uncertainty of the outcome where the only ones certain to win in the story are the lawyers.

Once, when I told a Class surveyor that he was an insult to his profession, the gent in question obviously wasn’t happy but he must have thought about it a lot and three days later he came to me, shook my hand and then he was my best friend, and the build standard was maintained from a Class perspective.

When things start to go south, what avenues of appeal does the investor/client have?

Litigation
Litigation is expensive, long and there’s always uncertainty of the outcome where the only ones certain to win in the story are the lawyers. Suing the shipyard for poor build standards is a very grey area.

The first question is always, whose standards are we talking about? Honestly, hand on heart, when a shipyard director tells me that the client bought the Fiat not the Mercedes, what chances do you stand with that reply? Non-compliance of the specification, providing it is all clear cut, maybe. And all very costly, long and creating a lot of heartache for everyone.

Organisations such as Lloyd’s Register, ABS, DNV, BV, GL, etc and the Flag states provide safety and technical standards for ships and offshore structures. If they fail to meet their responsibilities, such as by incorrectly certifying a vessel or being negligent in their inspections, it can lead to lawsuits, particularly if such failures result in accidents, environmental damage or loss of life.

This a very long and expensive route that has a very limited chance of success unless things are crystal clear. If the client wants to proceed, they should be well informed of the elements and the hurdles involved in making this choice.

Classification societies
Contractual limitations, burden of proof, international conventions and treaties, industry protections and expert testimony: Classification societies are well-established organisations with considerable expertise and regulatory backing, so before you want to go up against that, you’d better be prepared. Maritime law, including conventions and treaties, can also provide legal protections for Classification societies.

The Flag state registry
Flag states are sovereign nations, so sovereign immunity protects them from being sued in foreign courts. If a Flag state registry fails to properly enforce these regulations or negligently certifies a ship, it could potentially be held liable under certain circumstances but are more vulnerable to the due diligence claim if they have appointed someone outside of their own organisation as their representative.

The Flag state itself generally cannot be directly sued unless specific exceptions apply such as due diligence or in cases of commercial activity or negligence that fall outside sovereign immunity protections.

Summation: Raising the standard
We – all the members of this industry – are all responsible for the raising or, even better, the creation of industry standards. There are bodies within the industry that could employ standards that have to be met for a level of industry compliance. Start the process correctly, start with a good specification, a contract that reflects the specification, ensure that the Class surveyor has a clear understanding of the owner’s team's expectations and ensure that the Flag state has that same understanding.

All of the Classification society surveyors that I have ever met are either ex-cadets who have gone through the process working at sea and studied to achieve their level of degree, or university degree people, most of whom have sailed on ships and have a very fair understanding of the rules that are involved in building a vessel correctly. This ensures a certain standard of build.

Most of the Flag state surveyors are ex-mariners, masters or engineers from the commercial world who have all spent years in study to arrive at their level of employment.

However, the yachting industry is a circus. If you want to be an independent surveyor inspecting vessels that cost millions of dollars and the investor/client is entrusting you to ensure his dream is not a nightmare, then start with a business card, because that is all you need – no level of education, no formal qualification.

The industry is full of cowboys because there are no standards to be an independent surveyor in the superyacht industry. Project or build managers are sometimes the major cause of budgets being blown away because of their lack of education of engineering processes and people management skills.

Similarly, there are no standards in this industry to be a project manager/build surveyor.

If captains, engineers and deck officers/crew must go to school to work on a ship, why is it that the people who are building the ships don’t need any qualifications? When the day comes that the industry writes a rule book that is adhered to, only then can we all stand proud in front of the investor/client and look them in the eye knowing the standards of the industry are protecting them.

It’s called a ‘pleasure industry’, so we must all make sure the owner’s dream doesn’t become a nightmare and that they enjoy and stay in the industry, unlike the many that we’ve all seen walk away.

This article first appeared in The Superyacht Report – New Build Focus. With our open-source policy, it is available to all by following this link, so read and download the latest issue and any of our previous issues in our library.

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