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Maintaining the relationship

What are the common causes of the relationship between owner and shipyard breaking down?

In the lead-up to the publication of The Superyacht Buyer Report, which upon release will become the primary reference point for any client or their team of advisors when purchasing or commissioning a superyacht, SuperyachtNews speaks with the team at Hannaford Turner about the various reasons why the relationship between owner and shipyard, on occasion, breaks down.

While it is often commented upon, it bears repeating that there is no one-size-fits-all solution when it comes to superyacht build projects. Unlike analogous industries, such as the worlds of commercial shipping and private aviation, superyachts are more emotional purchases. Less rooted in hardened, even anodyne, commercial thinking and more prone to changes in whim and want. It must further be noted the vast majority of superyacht projects reach delivery without a major qualm on the part of the owner or indeed a serious breakdown in the relationship between client and shipyard. Nevertheless, these breakdowns do occur.

“Typically, the breakdown in the relationship between owner and shipyard can be attributed to a few common occurrences. It is more than likely that these breakdowns are the result of a mismatch between the expectations of the owner and the deliverables from the yard or, indeed, the other way around,” starts Mark Needham, partner at Hannaford Turner. “What form these expectations and deliverables take can vary hugely from project to project, but the most obvious examples relate to the build quality of the vessel or, more likely, a particular element of the build project, delay in build schedule or the failure to provide financial instalments on the part of the owner. The perfect scenario is that the contract is honoured to the letter and in the correct spirit, but superyachts are incredibly complex projects and, more often than not, issues do arise.”

That issues will arise during a build should almost be a given. For all the superyacht market’s rhetoric about building dreams, any asset as inherently complex as a superyacht, with so many parts moving in conjunction, will naturally face challenges. However, the breakdown in relationship often occurs when these challenges are approached in a manner that fails to meet the expectations of either party, possibly due to a lack of transparency.

“Many of the issues that lead to a breakdown in the relationship...can be traced to a breakdown in communication."

“Many of the issues that lead to a breakdown in the relationship between the owner and the shipyard, as with any business, can be traced to a breakdown in communication,” continues Adam Ramlugon, partner at Hannaford Turner who, alongside Needham, is the co-head of the firm’s Yacht and Luxury Asset department. “Whilst the industry is always quick to point the finger at the shipyard, it must be understood that communication is a two-way street and that a number of parties are involved in the chain.

"The manner in which a build is completed has much to do with the approach a particular owner wants to take on any given project. Once the contract is signed, some owners that are used to carrying out their business on the strength of little more than a handshake will effectively, say ‘see you in four years’ time’ and expect their perfect yacht to be delivered with minimal oversight on their part."

Conversely, others prefer their teams to have heavy involvement. Some go so far as to require an “open book” transactional model. Indeed, the approach of the individual owner will have a bearing on which shipyard is most suited to a particular project.

“In essence, it is about both parties treating their counterparts as intelligent equals..."

“In essence, it is about both parties treating their counterparts as intelligent equals during the build,” adds Needham. “Where issues arise during a build, it is unwise for the shipyard in question to try and hide this fact from the client. Where the owner’s team is concerned, when issues arise, they will often get a sense that something is going on. In these situations, rather than reporting any issues to the owner with potential solutions, they are forced to report that they suspect issues have arisen, while intimating that the yard is hiding something. More often than not, this can be more damaging than a transparent approach to crisis management.”

Avoiding breakdowns in relationship is essentially about preserving goodwill. One positive thing to come out of the COVID-19 pandemic is that while the market was fretting about force majeure clauses and potential contract cancellations as projects ran beyond their permissible delay thresholds, the vast majority of owners met the shipyards with understanding and support. There is no reason that this goodwill should not be carried into, and maintained, in all build projects. Like any relationship, communication, transparency and a clear understanding of expectations on the part of all involved are a sure way to mitigate avoidable challenges.

Within The Superyacht Buyer Report the first section, The Buyer Journey, will comprise 16 sequential sections that will outline, with the aid of 48 of the industry’s leading experts, best practice at every step of the ownership journey, from project inception to usage and enjoyment, to curate their knowledge and advice into a powerful reference tool that explores the macro themes and minute details of the buyer journey.

 

Photo credit - Guillaume Plisson

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