Tenders

It is normal and proper procedure in the repair of a major damage to a ship to invite several repair yards to tender for the necessary work, so that the best technical solutions and commercial terms are obtained. The tenders will also indicate how quickly the damage can be repaired.

Although marine insurance based on the Plan allows the assured to decide where his ship is going to be repaired, most shipowners would probably invite several yards to tender for the work, even if the insurer involved did not interfere. In practice, tenders will normally be obtained after consultation between the assured, the hull insurer and the loss of hire insurer.

Nevertheless, competition between several yards will primarily be in the interest of the insurers and provisions have been included in the Plan in order to protect these interests. According to Cl. 12-11, sub-clause 1 (with regard to hull insurance) and Cl. 16-9, sub-clause 1 (with regard to loss of hire insurance), the insurer may require that tenders be obtained from repair yards of their choice.  The insurer must advise the assured whether or not he will demand invitations to tender. If he fails to do so, he may not object if the assured commences repairs without further notice, and the insurer will be obliged to cover the time actually lost.

If, on the other hand, the insurer has demanded invitations to tender and the assured fails to comply with such demand, Cl. 16-9, sub-clause 1, second sentence, establishes the insurer's right to obtain tenders directly, possibly even after the repairs have been carried out. The same applies if the assured repairs the damage without having notified the insurer. Even if the assured and/or the hull insurer have obtained some tenders, the loss of hire insurer is entitled to obtain additional tenders independently, if he has reason to be dissatisfied with those already obtained.

The assured may sometimes refuse to have the ship repaired at a particular repair yard under any circumstances, inter alia due to the bad reputation of the yard or due to other more specific business factors. Cl. 16-9, sub-clause 2, which corresponds to Cl. 12-12, sub-clause 3 (concerning hull insurance), reads:

If, due to special circumstances, the assured has justifiable objections to the use of a particular repair yard, he may require that the tender from that yard be disregarded. [19]


Firstly, the assured's right to require that a particular tender be disregarded is subject to the assured objecting as soon as he becomes aware of the relevant circumstances. If the assured has already invited the yard to submit a tender, it is normally too late to raise objections concerning circumstances of which the assured was, or ought to have been, aware when he requested the yard to submit a tender.

Secondly, the assured may only demand that the yard be disregarded if "due to special circumstances" the assured has "justifiable objections" to the use of the yard. The following circumstances will normally be considered "justifiable objections":

  • justifiable doubt as to whether the yard has sufficient technical capability,

  • justifiable doubt as to whether the yard has sufficient financial capacity, and

  • an actual threat of strike at the yard, or the yard has recently been involved in repeated strikes and there is reason to fear that the conflict has not been resolved.

The fact that the assured has had many disputes with a particular yard concerning earlier assignments is usually not relevant. However, the situation may be different if the assured can prove that the disputes have occurred due to dishonesty or due to a notorious unbusinesslike attitude on the part of the repair yard with regard to variation order requests.



[19] For reasons unknown to the writer, the English 2003 version of Cl. 16-9, sub-clause 2 has been amended so that the wording is no longer exactly identical to Cl. 12-12, sub-clause 3 in spite of the Commentary to Cl. 16-9 stating that the wordings are identical. There must have been some unauthorised initiative taken on this point, which though cannot have any substantive effect on the understanding and application of the two provisions. This little editorial discrepancy has not been corrected in any of the subsequent versions of the Plan.