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RISK MANAGEMENT IN DRAFTING SHIPBUILDING CONTRACTS

APPLICATIONS IN PRACTICE
 by Dimitri Capaitzis Consultant Surveyor


In 1940 a British Mission, headed by R.C. Thomson, went to the USA and Canada to propose the building of their EMPIRE LIBERTY Design — 10,000 DWT, ‘Scotch’ Cylindrical Boilers, Reciprocation Steam Engines, 2500 BHP, 10 Knots, 25 tons/day. From 1940 to 1945 various Canadian Yards built 300 of this type, all riveted. These were the EMPIRES or FORTS or PARKS.

In the USA the Maritime Commission partly modified the design to allow for extensive welding, prefabrication, series production, assembly line methods, a single ‘block’ deck house midships and watertube boilers. New TODD and KAISER shipyards originally built 60, called OCEANS, at about $1,600,000 each, followed by 200 on the ‘Emergency Liberty Fleet’ program in all US Yards, which established the LIBERTY name for this EC2-S-CI type standard design. New yards and more slipways were built and productivity records achieved. The ROBERT PEARY, in late 42, was launched four days and 15.5 hours after keel laying and delivered three days and 12 hours later, about 8 days total. The first ship however, the PATRICK HENRY in end 41, had taken a total of 245 days, the 20th 120 days and the 50th 58 days, which was maintained as an average building time figure. Until 1945 about 2600 LIBERTIES were built which more than justifies the one ship a day legend, but not one ship in one day. The other legend ‘good for one Atlantic voyage’ reflects the enormous losses of the wartime convoys. The LIBERTIES that survived lasted 20 years or more

Liberty Contracts must have made an interesting exercise in Risk Management.

Ships have since grown in size, efficiency and capabilities.

A LIBERTY carried 10,000 tons at 10 knots on 25 tons of Fuel.  A Panamax Bulker carries 75,000 tons at 15 knots on that consumption.  A tenfold increase in efficiency.  Five years ago one could order a new Panamax at $20 million.  Today one may not find a berth at $30 million.

There are many risks, but also many rewards.

My experiences with shipbuilding have taken me to England, Scotland, Japan, Germany, Poland, Korea, Brazil, Spain, Denmark, Italy, Romania, Ukraine, China, Turkey.

A substantial personal risk.  Not so much in dealing with the Builders, as with local officials, customs, inn-keepers and of course national cuisines.

The ships were mostly cargo and tankers and gradually also extending to container, multipurpose, gas, cement and other specialities.


There were of course plenty of other risks, but the ships built were great and the Contracts therefore adequate at the time.


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