New build project management: Protecting an owner’s rights

Throughout all stages of a new build project, our project managers will apply their extensive experience and expertise to successfully navigate the contractual snares and obligations that owners may encounter

A new build project is one of the most creative and exciting journeys for a superyacht owner, but it is also one of the most complex, with many contractual snares and obligations that could cause issues if overlooked. From conceptual design to final delivery and beyond, here are some examples of how our project managers protect the owner’s rights and ensure the best outcome for the project.

Contract negotiation

When negotiating the shipbuilding contract with the shipyard, the commercial knowledge and experience of our project managers is invaluable. “The client’s lawyer won’t necessarily build in adequate commercial protections,” cautions Kevin Laverty, Director of Projects at Hill Robinson. “In our experience, we have seen many contracts that leave commercial opportunities for the shipyard to exploit, and traps for owners to fall into.”

“The client’s lawyer won’t necessarily build in adequate commercial protections,”

The most overlooked contractual snare Kevin and his team see is related to prime cost sums – a recognised mechanism that builds in a variable allowance, such as for the yacht’s luxury interior outfit, into the contract price. The client’s lawyer often neglects to stipulate in the contract what this prime cost sum includes, or whether it is indeed a prime cost sum or a provisional sum (each subtly different), or how the actual cost of this item is to be calculated, thereby leaving room for the shipyard to claim it includes a whole host of other items on top of just the interior outfit.

Meeting contractual obligations

Once the project is underway, most new build contracts place a range of responsibilities on the owner, such as approving technical drawings, making stage payments, and attending inspections and trials. Owners risk waiving their rights by simply failing to do something as per the contract, so our project managers will typically act as the owner’s representative with valid power of attorney to carry out the owner’s contractual obligations.

A prime example of how the project manager does this is through integrated planning. A key part of any new build project involves incorporating all owner’s supply items on board, from tenders and toys to crockery and artwork. “All these items need to be delivered to the shipyard in accordance with the agreed timeline and process, or the owner risks defaulting under the contract,” adds Kevin. “Our project managers, design managers and procurement department work with all the stakeholders to ensure all these items are delivered on schedule.”

“Our project managers, design managers and procurement department work with all the stakeholders to ensure all these items are delivered on schedule.”

Accepting or rejecting the yacht

Our project managers will also be responsible for accepting or rejecting the yacht in a timely manner when it is tendered for delivery. “The contract will allow a very short period of time to accept or reject the vessel,” advises Kevin. “So, our project managers will have started accepting it a long time before it’s offered for delivery, space by space, system by system.”

“So, our project managers will have started accepting it a long time before it’s offered for delivery, space by space, system by system.”

If the vessel is not accepted or reasonably rejected within the contractual timeframe, the contract will typically include a default mechanism that allows the shipyard to request the classification society to sign off on the vessel. Kevin warns, however, that class requirements are simply the minimum safety standards and are quite different to the owner’s expectations, for example for the quality of the exterior paintwork or teak decking – two of the most common areas of dispute on a new build project.

Ensuring the best outcome for the owner

As well as managing the quality, schedule and cost of the build, our professional project managers will protect the owner’s best interests. Throughout all stages of the project, our project managers will coordinate, supervise, prevent issues, and provide solutions. They will also be on hand to assist the owner during the yacht’s first year of operation, processing and resolving warranty claims against the builder and other suppliers.

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