Shipbuilding : The Pre-Contract Phase



The inception of a shipbuilding project is usually preceded by a buyer’s visit to a selected shipyard for discussion and to assess its capability. The itinerary during such a visit will normally include an opening meeting, followed by a yard tour, and commercial and technical discussions. Before the visit, it is common for shipbuilders to prepare a shipyard information memo. The buyer will usually provide the shipbuilder with a meeting agenda and draft a confidentiality agreement, also known as a non-disclosure agreement (NDA). 

 

The purpose of the NDA is to ensure that the shipbuilder maintains the secrecy of business and technical information supplied by the buyer for the purpose stated in the NDA. The elements of such NDA should comprise (a) the purpose of the agreement, (b) the definition of confidential information, (c) information excluded from confidential treatment, (d) the recipient’s obligations, (e) retention of title to information supplied, (f) the duration of the agreement, and (g) governing law.


Opening Meeting

During this meeting, the shipbuilder shares information that could assist with the buyer’s initial evaluation of the shipbuilder's capability, followed by a clarification session. Thereafter, the buyer presents its proposal for the new vessel which could comprise either of the following arrangements:

 

  • Memorandum of understanding for the construction of a new vessel subject to contingent conditions.
  • Consortium to bid jointly for a shipbuilding project.
  • Shipbuilder responds to the buyer’s request for proposal.

 

After the opening meeting, the buyer visits offices, facilities, workshops, warehouse, and ongoing projects in the shipyard, followed by commercial and technical discussions.

 


Request for Proposal

During or after their visit buyer may invite the shipbuilder to submit a bid proposal for a proposed shipbuilding project by sending an invitation to bid or request for proposal (RFP) to the shipbuilder. The RFP will include instructions to bidders, the timeline for submission of bids and selection of the successful bidder, reservation of rights to accept or reject bids, and the following items:

 

  • Description of the Vessel. A brief description of the vessel that the buyer requires, the number of vessels, or option vessels. Classification society and regulatory authority’s rules applicable to the vessel. 
  • Specification. Reference document forming the basis of the proposal including specification, plans and drawings. Documents including a list of drawings, certificates, and documents. Technical and applicable industry requirements codes and standards. 
  • Scope of Work. Design, engineering, construction, commissioning, tests, sea trials, and delivery of the vessel. 
  • Planned Programme. Setting out the expected start date of construction and delivery of the vessel. 
  • Commercial. Commercial requirements include the price proposal, currency and payment terms, insurance, performance bond, and warranty bond. 
  • Subcontractors. Shipbuilder’s proposed major subcontractors and estimates of all equipment supplied by vendors. 
  • Project Team. Shipbuilder’s project organization chart and key personnel.   
  • Certificates and Manuals. Quality Assurance, ISO Certificates, Quality Management Manual, and Project Quality Plan. 
  • HSE Requirements. Health and Safety Plan. 
  • Contract. Buyer’s draft contract, pre-qualification questionnaire, contract qualifications, commercial qualifications, technical qualifications, performance bond, and warranty bond.

Bid Preparation and Submission

Upon receipt of the RFP, various departments in the shipyard work to complete their portion of the RFP, (including technical, commercial, and contract matters). The commercial department will have to work closely with the estimating department for the price proposal which is essentially derived by collating the estimates for the following items: general expenses, labor, hull, superstructure, outfitting, hull preparation, painting, piping system, propulsion, and auxiliary,  equipment ( related to electrical, electronic,  firefighting, safety, HVAC, navigation, communication), accommodation, carpentry, launching certification fees, documentation fees, insurance, designer’s fees, refund guarantee, bonds, financing costs, marketing costs, legal fees, commission, office facilities, warranty expenses, and overheads and profit.

 

A draft bid proposal and project summary are then submitted for the shipbuilder’s management consideration. After approval from management, the bid proposal is sent to the buyer. After receipt of the RFP, the buyer reviews and evaluates the same. If the evaluation is satisfactory, the buyer invites the shipbuilder for clarification meetings, followed by contract negotiation.

Comments

Himt College said…

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Martime Training Institute
April 26, 2021 at 10:58 AM
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