Last month, SuperyachtNews was invited to join the ICOMIA Superyacht Refit Group members at their biannual group meeting, which, on this occasion, comprised a jaunt to the cosy saloon of a 1906 steamship named SMS Bussard during a wet and windy Kiel Week regatta.
The agenda was to tackle some of the pressing issues facing the refit sector with the aligned goal of improving sector standards, and also, to discuss how this growing division of the market can better clarify its services proposition for decision-makers. With representatives from nine shipyards in attendance, it was the lack of quality infrastructure for 60m+ yachts that kicked off the discussions.
“There is definitely an increasing shortcoming of dedicated refit resources for larger yachts at the moment, which is not just because of greater refit demand but increasing new build occupancy,” explained Rasmus Topsch of Nobiskrug’s refit division.
“There is now great demand for significant infrastructure and there are shortcomings because a lot of shipyards have been laid up for a while and have now been brought back to life through refit, so infrastructures like proper crane capacity have been taken down or not maintained. With a mobile crane, you are limited,” added Topsch.
Eric Prior of BAE Systems mentioned that there is an increasingly noticeable shortage of adequate manpower and skill-level in the US refit sector. “We have a highly skilled but ageing workforce here in the US, and that’s a big concern because there isn’t the same quality of personnel being trained to replace them,” he explained.
We then turned the group’s focus to contracts and asked what they thought about considering substantial refits as rebuilds and approaching them as new builds in terms of contracts, specifications and supervision. “We’ve discussed this regularly within the group – where the ICOMIA refit contract is no longer applicable and you need something that is more along the lines of a new build contract, because there are insurance implications,” answered Rob Papworth of Compositeworks, saying that it’s undoubtedly a grey area. “If a vessel starts with a value of X and ends with a value of X-plus, then it might conform to a new build model.”
“There are plenty of refits now that cost more than €10 million and fall into the repair and maintenance category.”
That said, he doesn’t believe one can simply use the value of the works as a yardstick. “There are plenty of refits now that cost more than €10 million [for example] and fall into the repair and maintenance category. You have to look at it as a proportion of the value of the vessel and then consider whether it’s a rebuild.”
Mary Batchelor of MB92 agreed and added: “Perhaps the best formula is to say that if you increase the value of the vessel by X per cent, then it’s no longer repair and maintenance but a rebuild or conversion.” The members agreed that the only way to create this distinction is to consider whether you are drastically changing the value of the vessel.
“A new build-style contract is definitely more applicable to some projects,” Papworth continued. “We did one project with extensions and changes to the engine room and the value was going to more than double, so it does change things. We’ve made some additional insurance-related clauses to our contracts for projects that have zero value; whether or not they are covered by yard insurance or the owner requires insurance.”
The group is still bemused by the lack of pre-planning many decision-makers undertake prior to conducting refits as a measure of security for the owner. “Everyone says that they can meet the price and quality demands of an owner,” grumbled Papworth. “I could set up tomorrow and say that I can deliver a quality product. Are you going to tell me I can’t?
“If you did your due diligence, you would be able to say, ‘How? You don’t have insurance. Where’s your workforce? Where’s your accounts department? How is this going to happen? If I come to you next year, can you carry out warranty work?’ People look at the names, the location, the price and their relationships but not risk mitigation for the owner,” Papworth added.
In defence of captains, and in agreement with the other members of the association, Albert Willemsen of ICOMIA said that just because someone is a good captain doesn’t automatically place them as someone who can choose and assess shipyards for refit work.
“Everyone says that they can meet the price and quality demands of an owner. I could set up tomorrow and say that I can deliver a quality product. Are you going to tell me I can’t?”
“In the Merchant Navy, the captain is not making any decisions regarding yard periods,” Willemsen explained. “The owner has a fleet of 10, 15 or 20 ships and someone shore side is taking all of them into consideration – it’s a professional business. But, in our market, owners only have one boat, sometimes two, and it’s a toy. And they think that the captain is the best person to decide where to go and they make the decisions based on interest.”
Batchelor suggested that it would be “a better investment of time” for the yards to be educating shore side management companies about their respective offerings because they are dealing with a large number of vessels. “We need to make agreements with management companies and explain to them what specifications are best suited to our yards, what we can offer and what others can offer. Then, you’re getting a better and clearer message out to more clients which states the best criteria for each shipyard,” she said.
For Papworth, it’s a concern that captains are not choosing the right refit yard for the right product because they are ill-informed. “I recently read an article written by a captain and he said that all yards should let in contractors and not charge a markup,” he explained. “And it showed that the guy just didn’t have any understanding of business. Everyone in this room is spending a fortune on their facilities; upgrading lifts and sheds, it costs a lot of money.
“In the last five years, it’s become almost inevitable that you’re in competition with at least three other yards when quoting – you all put your prices in and then you get chosen for whatever reason. So, for this guy to say that yards are ripping him off and that we should all change is just naïve and disappointing, and it showed that he didn’t know what he was talking about.”
SuperyachtNews will be meeting more regularly with the ICOMIA Superyacht Refit Group in the future, so stay tuned to our channels for the latest commentary on the refit sector. If you have any topics that you would like raised for discussion with the association, email: firstname.lastname@example.org
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