Dry Docking -Technical and Financial Management

A shipowner when trying to fix or shortlist a drydock, invites quotes from various likely drydocks. Amongst the other things, the policy, reputation and work culture of the yard should be given prime importance. To appoint a reliable agent is key to optimize the process and avoid conflicting interests between yard and ship owner. Once shortlisted, one of the most important things to be done is to establish a clear and transparent contract with the yard.  In any agreement with the drydock authorities the accountability of the shipowner or the yard must be very clearly understood and stated. The terms must be crystal clear. The responsibility of the yard / drydock, for any damage caused during the drydocking operation must be clearly specified in the contract. Point worth noting being, a shipping company dry-docks her ships only once in a way. The yards on the other hand, are deep into the business. It is like home ground for them. The meaning, between the lines, of each clause, must be carefully read. Moreover, since rules may keep changing, ship owners must be very clear about the legal implications.

In a recent case of accident in a dry-dock, the cause was attributed to the placement of blocks inappropriately. During the initial dock inspection of the vessel’s bottom, it was discovered that large parts of the duct keel plating had been damaged over considerable length.

Apparently, an outdated docking plan was given to the yard. The yard, upon sensing an error, repositioned the keel blocks without consultations with the owners. Now, the question of liability was raised in the midst of the complex situation and unclear terms. A very important area to check is the limitation amount. Owners must also ensure clarity of terms in respect of liability for any such unforeseen event. The cost of repairs and subsequent liabilities can be enormous. The yard has responsibility to compensate any losses only to the extent of agreed limitation amount. The ship owner and/or its hull and machinery insurers will be liable for much larger part of the losses. The yard’s limitation of liability should be in reasonable proportion to the value of the vessel and the scope of work. The yard authorities must provide evidence of a ship repairer’s liability insurance, covering at least the agreed limitation of liability. The Insurers of the vessel shall be kept informed of the entire picture. The ship can receive damage to her hull or may even capsize in want of precise calculations and arrangements. Capsizing of ship in pivoted condition with reduced stability and damaged bottom block can cause catastrophic damage.

Following terms must be clearly stated in the agreement:

  • The responsibility of yard for checking the correct positioning of the docking blocks.
  • Meetings between the superintendent and the dock Master before vessel enters the dock.
  • Provision for meetings prior key operations.
  • Modes of communication between the yard and the attending superintendent or Master.
  • Any deviations from agreed procedure and probable situations leading to a meeting.
  • Identification of potential areas of dispute (limitation of liability and the amount; delayed delivery penalty; etc) and clarification / negotiation on them.
  • Clause regarding responsibility of the yard in respect of subcontractors engaged directly by the yard.           
  • Provisions regarding subcontractors engaged by owners directly.
  • Clause regarding contractual liabilities when a job is jointly performed by yard’s subcontractors and owner’s directly engaged subcontractors.
  • Inspection and testing by the owners’ representatives of completed repair work by the yard / subcontractor.
  • Various prices, costings and payment schedule.
  • Services and terms by subcontractors.

After the terms are established, shipowner must provide the drydock authorities, updated docking plan and detailed repair specifications. A proper risk assessment must be carried out prior to the pre docking meeting. During the meeting, various issues like controlling the process, documentation, contingencies, etc are defined and agreed. In order that a certain important area is not neglected a careful thought must be given to various areas of concern. The managing of these areas must be planned nicely by the senior officers, attending superintendent and the ship’s agent. They include:

  • review of repair spec;
  • discuss specialist services available;
  • plan and assess logistics;
  • arrangement of surveys;
  • daily meetings about critical repair issues;
  • assessment of  the work done reports;
  • recording and taking inventory of spares and stores;
  • account of lubes and hydraulic oils received;
  • any other issues affecting the budget;
  • scope of work in the drydock & duties of ship’s staff in the drydock; and
  • due compliance of ISM Code and the Safety Management System as appropriate.

A standard drydocking agreement can be as follows:

  • Duration of stay will be…
  • Delivery shall mean the date of completion and acceptance of the work, or the vessel leaving the drydock or the withdrawal of the workmen from the vessel, whichever happens earlier. (Note: Rules about counting the drydock time must be found out)
  • The scope of work includes primarily items, which have been specified in ……
  • Prescribe protocol must be followed. An order is not binding upon the yard until the order has been confirmed by the yard in writing. Yard undertakes, at the request of the ship to carryout additional work, modifications and changes subject to the rights of the yard in particular, to adjust the time of delivery and the price according to clauses……… (Note: Written instruction notes must be exchanged.)
  • In the event of a reduction in the work specified in the yard’s tender and the ship’s order as confirmed by the yard, a credit shall be given equivalent to the cost saved….(Note: Any allowance for reduction in duration of drydock stay to be checked.)
  • Ship must keep the following ready, in particular……
  • The vessel shall be available at the time, place and in the condition stipulated in the tender. The vessel shall be in such a condition so that the work can commence immediately and can proceed continuously until the work is completed. (Note: Ship to prepare a list of responsibilities and incharges to fulfill these, in order to avoid claims.)
  • The ship shall also have the responsibility for obtaining and maintaining any approvals or certificates related…..In particular the following documents must be…
  • The work shall be performed in accordance with the practice and rules prevailing at the yard and within normal working hours. Generally the holidays observed…..Work on overtime carried out at the request of the ship is subject to the rules applicable at the yard…..
  • The yard shall have the right to use sub-contractors for the performance of the work.
  • Normal time of delivery of spares…..If any of the specified materials or equipment is not available at the time required for incorporation in the vessel…..
  • Steel weight shall be calculated from …..using a specific gravity of…..
  • The yard shall have the right to postpone the work if the ship fails to fulfill……consequences regarding time of delivery and costs caused to the yard shall be for the ship’s account.
  • The ship shall submit the docking plan of the vessel to the yard, if drydocking of the vessel is required. The ship shall ensure the correctness and legibility. Drydocking shall take place only after the docking plan is received and accepted by the yard. (Note: The docking plan and remarks from last drydocking must be closely studied, particularly if any modifications have occurred.)
  • The maximum permissible draft for a vessel entering the yard’s drydocking facility is …..
  •  The Vessel’s ballast distribution shall also be considered in relation to cradle arrangement.
  •  Vessels shall have a trim of not more than …..meter and not less than ….by the stern. Any trim in excess shall be agreed between the parties. Vessel shall have zero list.
  • No loose wire ropes, dunnage at main deck…Tow lines, wires or cables, if any, shall be properly secured on board the vessel and shall not be trailing in the waters.
  • Before entering, the ship shall advise the yard of the docking drafts and weights on board.
  • There must be no undeclared free surface in any hold, tank….The ship shall be liable for any damage or delay that may occur to the vessel, other vessels or the dock and its equipment, due to inaccurate docking plan, draft or stability calculations.
  • An agreed date for drydocking may change due to unexpected underwater damage or defects being found on other vessels lying in dock of which immediate and continuous repair is deemed necessary in the opinion of the yard. The Contractor is at all times entitled to relocate, to shift, dock or undock the Vessel.
  • The work shall be carried out in accordance with the prevailing regulations and the rules of the Classification Society applicable to the vessel, which have been published and are in force at the time of submitting the tender to the ship.
  • The ship shall supply all drawings, models, descriptions of the vessel and technical information….There will be no charge on these… Nothing shall infringe any trade mark, patent or similar rights of third parties.
  • The tender price covers and is related only to the items which have been specified in the tender. The price for additional work, modifications and changes, including supplies not covered by the tender price, shall be determined / guided by list in annex I…unless otherwise agreed, on a time and material basis according to the agreed standard debiting rules applicable at the time when the work is performed.
  • All prices are precisely for works and are strictly net i.e. excluding any duties, storage costs, harbour and pilotage dues and cost of towage.
  • Payment must be made in an agreed mode such as banker’s draft, telegraphic transfer or in other forms acceptable to the yard. The precise mode will be agreed by …..
  • The yard has discretion by express agreement in writing to accept payment for work by installments. In case of any non payment of installation…….
  • Interest at……. percent per month shall become due……
  • Payment of any invoice hereunder must be made in the currency…..
  • Any objection against the amount of any invoice charged…..must be made in writing ….. within …….
  • .The ship shall notify……name of attending superintendent to supervise the work. The attending superintendent appointed shall be fully authorized promptly and with binding effect on the ship…..
  • There will be a joint consent of attending superintendent and yard over crucial operations like: trial and tests; flooding; etc.
  • The yard shall carry out such tests and trials as are necessary for the purpose of determining whether the delivery complies with the contract….. shall be under the sole liability and risk of the ship subject to clause……On the satisfactory rectification of such defects and defaults the ship shall be bound to accept the work, take delivery of the vessel and sign a protocol of acceptance. (Note: More clarity needed in respect of liability.)
  • Costs for tests and trials including the use of fuel, oils and other consumables shall be for the ship’s account.
  • If additional works, modifications and changes to the work for which the yard has tendered are requested by the ship then the time specified in the tender or otherwise shall be extended by the number of days…..
  • The yard shall not be liable if the completion of the work is delayed directly or indirectly by the ship….delays for war or the consequences thereof, riots, civil commotion, blockades, embargoes, vandalism, sabotage, malicious damage, epidemics or abnormal sickness, by shortage of labour, reduction in working hours, strikes, combinations or lock outs, labour disputes, etc. (Note: What will be the ship’s liability?)
  • Several other factors in addition to above such as: breakdown of machinery or plant; delays due earthquakes, landslides, floods; delays caused by the Classification Society or other bodies; delays and claims due short deliveries, defective quality or defects in materials; etc ………. (Note: More clarity needed.)
  • Subject to clause…..the yard shall, replace any defective material supplied and repair any deficiency in the work performed in accordance with the terms and conditions……..The guarantee shall apply only to the work performed and materials supplied by the yard and/or by his sub-contractors and suppliers. (Note: An agreement with subcontractor needed.)
  • Notice in respect of defects in materials supplied shall be given immediately upon discovery of such defects and prior to the delivery. Upon delivery, the yard shall be discharged from all liability for any defects except for the latent defects….
  • The yard shall have no liability whatsoever for any indirect or consequential loss, damage or expense in any way deriving from or connected with the above defects or for defects due to normal wear and tear….(Note: More clarity needed.)
  • In cases when the repairs are done at some other place, yard is liable for actual cost.
  • The ship’s property shall remain at the entire risk, liability and responsibility of the ship at all times and the yard shall have no liability to the ship for any loss or damage of whatsoever nature and howsoever arising or caused, save as otherwise provided ……shall only be liable when proven that loss or damage has been directly caused by the negligence of the yard…….(Note: More clarity needed.)
  • The maximum liability of the yard to the ship….. shall be limited in respect of any one event to the sum of ……. property, in addition shall be deemed to include also cargo, machinery and equipment removed……. (Note: Must be in proportion to the value of ship.)
  • The ship shall keep the yard and any subcontractor fully indemnified in respect of any such loss or damage whatsoever claimed by third parties against the yard… (Note: What about damage due the subcontractors appointed by yard? )
  • All liability of every kind of the yard shall save as provided in clause….cease on the delivery to the ship. 
  • The yard undertakes to have a valid ship repairer’s liability insurance to cover such loss and damage for which the yard may be held liable….. The yard is not liable as against the ship to take out any other insurances. (Note: The covered amount is adequate.)
  • All old materials except heavy parts of machinery, propellers and tailshafts shall become the property of the yard without compensation to the ship.
  • Upon delivery the ship shall at his expense remove from the yard’s premises any parts and equipment belonging to him. If such parts and equipment have not been removed within….. days from such delivery, the ship shall be deemed to have waived the rights to such parts and equipment, which shall thereupon become the property of the yard.
  • Ship cannot deploy subcontractors for following jobs….
  • The ship shall not be allowed to use any sub-contractor(s) to carryout any work on the vessel while the vessel is within the yard’s premises, unless with prior written permission of the yard, in which case the yard’s safety rules must be adhered to.
  • Following works cannot be given to crew during ship’s stay in drydock. The vessel’s crew shall be allowed to carryout normal maintenance routine work, if not interfering with…. Under no circumstances are the vessel’s crew or yard’s sub-contractor(s) allowed to carryout any hot work, while the vessel is within the yard’s premises.
  • Experts or Classification Society Surveyors are to be arranged by the ship and all expenses incurred shall be for the account of the ship. The regulations applicable at the yard shall in all respect also apply to the vessel, the crew of the vessel, the ship’s sub-contractor(s) and the ship’s representative(s) during the vessel’s stay at the yard.
  • The contract is to be construed and shall take effect as a contract made in …………in accordance with the laws of and applicable in the ………In the event of any dispute both parties agree to submit to the exclusive jurisdiction of the………..

Thus, it can be seen that there are several clauses, which can end up in disputes and heavy claims. Many of these clauses look like open pipes with no concluding ends. A very careful study of these clauses and drafting is required to ensure protection of shipowner’s interests.

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