Avoid maritime liquidated damages
More and more often, shipyards are paying huge sums on maritime liquidated damages. That should and can be stopped. How? We are going to explain that to you in this article.
But let’s first have a look at the cause. Worldwide, maritime projects are increasingly delayed due to Covid-19. It is a time of uncertainty for the maritime sector. When projects are delivered overdue, claims may lie ahead. Liquidated damages can amount to enormous sums, up to tens of thousands of Euros per day of delay. Prevention is better than cure, and that certainly applies here. Always prepare a good maritime Extension of Time claim, or, in short, maritime EOT claim. This is a claim that requests more time for the project for reasons outside the contractor’s influence.
However, for a good Extension of Time Claim, you need to do your homework first. Our experience shows that this is often not the case. In this article we will give you three tips to help you prepare for a good EOT claim. We provide tips both for shipyards and superyacht shipyards and their subcontractors, as well as for their clients, such as shipping companies and owners of superyachts.
1. Main contract must be solid and include planning + critical path
If you want to submit a good Extension of Time claim as a shipyard, you must be able to rely on a very solid contract with your client, and that contract must contain a good, original planning, including a "critical path". We’ll explain.
In a solid contract you make agreements about the planning and therefore you also include a critical path in the planning. This is a sequence of all related, main maritime activities with a corresponding lead time. But that’s not all. The contract also includes agreements on how both parties will deal with delays.
The truth is that maritime contracts often include something about scope and price, but that there is no critical path schedule at all. Hardly any contract mentions how delays will be dealt with, and that can turn out badly. Therefore, always let yourself be assisted by an external expert who assesses the proposal of your contract accordingly. The Synergy Partner is such an expert that helps maritime companies draw up watertight contracts.
2. Maritime Project Control is King: Get started with reliable and verifiable project records
Making contractual agreements about good project records is equally important, and often forgotten. That simply means that you, as a shipyard, indicate at an agreed interval, for example once a week, where you are on the critical path. Naturally, you also indicate which main activities have been carried out to achieve that status. Make sure you create verifiable project records (facts). For instance, when and where was piping installed, when were the required materials ordered and when do you expect them, when did you do the work preparation, and so on. You can only achieve good project records if your maritime project control is in order. The Synergy Partner helps maritime companies to create good and reliable project records and improve your maritime project control.
3. Don’t forget your subcontractors!
A lot of work is outsourced in shipbuilding and yacht building (around 70% or sometimes more). This implies that the maritime sector is dependent on suppliers and subcontractors when an EOT claim needs to be made up. This is usually forgotten. Therefore, draw up a contract with your subcontractors as well, about the planning, critical path and agreements on what to do in case of delays. AND, in turn, let them also report accurately on the progress, so that you have 100% control over your project. This way you will do your project control right in one go.
A good relationship with your stakeholders, much better than maritime liquidated damages
It is precisely in order to improve the relationship with your stakeholders that it is important to draw up a good contract. You don't want a dispute with your client that could have easily been avoided, do you? Or worse than that, an expensive maritime arbitration? P.S.: We wrote this article on maritime arbitration.
Strengthen your relationships with your stakeholders by drawing up good contracts that prevent disputes and liquidated damages. And, if an EOT claim occurs, both parties will know where they stand and what to do. Very convenient.
Preparing or receiving an Extension of Time Claim - now what?
Are you about to make an EOT claim and are you not sure about your position? Let yourself be assisted by an expert such as The Synergy Partner and avoid high damages. We also help clients to assess a received EOT claim. In addition, The Synergy Partner acts, if desired, as an intermediary to prevent a dispute or maritime arbitration. Contact us right now!
