Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter.
Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.
Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.
OCR for page 15
2
CHARTERING ALTERNATIVES
In an assessment of chartering for ship services, a wide range of
alternatives can be considered. Chartering alternatives vary in terms
of who provides the vessel platform and who carries out the scientific
mission. Chapter 2 categorizes the range of charter alternatives by
the party (vessel user or the contractor) who provides the platform
and/or conducts the scientific mission. Following a discussion of all
the possible charter alternatives and examples of each type, Chapter 2
identifies three types of vessel charters that most appropriately would
address NOAA's ship service needs: the bare-boat charter, the time
charter, and the turnkey contract. Lastly, Chapter 2 includes a
discussion of short-term versus long-term charters and some of the
advantages of long-term charters.
PLATFORM AND MI S S ION ALTERNATIVES
A full range of charter alternatives is shown in Table 2-1. The
mission alternatives refer to who carries out the scientific mission,
the user (NOAA) or the contractor. All of the alternatives assume that
the quality assurance would be carried out by the user, in this case
NOAA. Almost any of the various schemes involving federal programs, in
general, and research and survey missions, in particular, can be
described by parametric combinations of the alternatives in Table 2-1.
Contractor Provides a Ship Operated by the User
In an A-1 type of charter, a bare-boat charter, the shipowner
leases the entire vessel (platform), and the charterer has the
responsibility of operating it as though it were his own vessel. As
the name implies, the bare vessel is chartered. The shipowner has
relinquished control of the vessel for the period cove-red by the
charter party. The charterer pays all expenses: fuel, stores,
provisions, harbor dues, pilotage, and so on, and employs and pays the
crew. However, there may be a clause in the charter party* that the
master and the chief engineer must be approved by the shipowner.
Party is a traditional maritime term and is synonymous with contract
or agreement.
15
OCR for page 16
16
TABLE 2-1 Charter and Contract Alternatives
Type of Charter Platform Mission
Alternative A Contractor provides 1. User carries out
ship; user operates program missions
(bare-boat)
Alternative B User provides ship; 1. User carries out
contractor crews program missions
and operates it 2. Contractor carries
out program missions
Alternative C Contractor provides 1. User carries out
ship and operates program missions (time)
it 2. Contractor carries out
program missions (turnkey)
The charterer is responsible for the upkeep, preservation, and
safety of the vessel. Before delivery to the charterer, the vessel is
surveyed by representatives of both parties and the same is done on
redelivery. The charter party will stipulate that the vessel must be
redelivered in the same good order and condition as when delivered,
with exception of ordinary wear and tear.
Contractor Operates Ship Provided by User
Alternatives B-1 and B-2 are variations of A-1, with the single
difference being that the user, almost exclusively the federal
government, has provided the ship. There are several diverse reasons
for this arrangement. One is a result of pressure from OMB (Office of
Management and Budget) Circular A-76, where the operation of the
government-owned vessel goes to a contractor as a cost-saving method.
Another reason is to assure that the best possible or otherwise unique
platform which, in this case, is owned by the government, is used for
the mission. Examples of B-1 are the U.S. Navy T-AGOR and T-AGS
vessels previously operated by the Navy, and now operated by LSC
Marine, a subsidiary of the Levino Shipping Corporation (LSC). In the
latter category are many of the university (UNOLS) ships built by the
Navy and NSF, and operated by a university laboratory on grants and
contracts from those agencies. The Navy's R/V Mizar, operated by Bell
Labs, and R/V Kaimal ino, operated by SEACO (of Science Applications
International Corporation), are additional examples.
OCR for page 17
17
Contractor Provides Ship and User Carries Out Mission Program
Alternative C-1 is probably the most common form of charter
arrangement. As a time charter, it can range from several days to
several years. Examples of these include the short-term charters by
NOAA for fisheries research and the long-term charters by the NSF for
its Ocean Science Drilling Program ~ Joides Resol union) and Antarctic
Research Program (Polar Duke). The contractor furnishes a ship to
the user's specifications and crews and operates it under a time
charter. Science work in all mission areas would continue as an
internal function of the user. Examples of this type of charter are
becoming increasingly prevalent. It is feasible in all mission areas,
probably more so in some than others. This alternative is feasible
both for long-term and limited short-term applications. It is a good
starting point in exploring charter applications.
Contractor Provides Ship and Carries Out Mission Program
Of the several levels of charter, Alternative C-2 is the final step
where both ship and science mission are contractor performed. The
contract is for an end product at either a day-rate or an end-product
fixed price. The potential for applications in mission areas is less
than in time charters for the reasons described in Chapter 5. This is
not technically a charter but a contract for services and is often
referred to as a turnkey operation. As noted earlier, it may involve
either a bare-boat or a time charter. It is not so common in marine
research and surveys as is the C-1 case, but it is becoming more
prevalent in consideration of OMB Circular A-76. In addition to the
difference between short- and long-term arrangements, an equally
important distinction exists as to whether the mission program
contractor (usually the prime contractor) operates its own vessels or,
in turn, charters them. Examples of turnkey contracts are common in
Navy research and development (R&D), activities in oil company seismic
surveys, and seen in the research programs of the Departments of Energy
and Interior (Minerals Management Service).
TYPES OF VESSEL CATERS
The charge of this study was to assess alternatives for NOAA to
charter vessels. Three of the charter alternatives discussed above
involve a contractor providing at least a vessel platform. These three
alternatives have been deemed by the committee to be appropriate for
NOAA's vessel needs. They are as follows: the bare-boat charter party
(alternative A-1), the time charter (alternative C-1), and the turnkey
contract (alternative C-2~. The application of each charter
alternative to NOAA's mission areas is discussed in Chapter 5.
OCR for page 18
18
Bare-boat Charter Party
This alternative represents the acquisition of a vessel by NOAA
through a long-term charter process. NOAA operation and science
programs would continue on as at present. Charters of this sort would
be equally applicable throughout all mission areas and are limited to
long-term applications. It is repeated that the chief purpose of this
type of charter is to replace or add to the NOAA Fleet without any
change to ship or science operations and to avoid the high up-front
cost of ship building.
The chief application of a bare-boat charter party is the classic
build and charter, whereby a user contracts with a leasing firm who
will build and/or acquire a vessel to meet the user's specifications in
return for a long-term charter. Specifically, it is common practice
for an investor to build a ship to specification and charge annual
lease payments with a "balloon' at the end designed to accommodate the
user's budgetary needs.
Long-term charters offer NOAA the attractive possibility to renew
its aging fleet assets through use of lease-purchase, or similar
leasing arrangements, which make the asset available to the user at the
end of the lease. This can be a cost-effective mechanism to avoid the
difficult process of obtaining major appropriations for high capital
cost assets. The incremental purchase of necessary vessels through
lease-purchase contracts provides immediate use of the vessel while
paying for it incrementally over a fixed period of time. Other long-
term leasing arrangements offer the user first rights of refusal to buy
the assets for a stipulated residual amount at the end of the lease
period.
Heretofore little used in the public sector, the build and charter
arrangement has been a widely employed commercial means for the vessel
user to avoid the high up-front cost of shipbuilding. Now, because of
that and other institutional constraints associated with agency
construction, the public sector is examining these means. The role,
however, is being overtaken by the additional step of contract chewing,
which returns it to the C-1 (time charter) category.
Time Charter Party
In this type of charter, the charterer hires the vessel and entire
carrying capacity for a specified time and for a specified sum per day
or other time period. All the proper cargo space, including that for
deck cargo, is at the charterer's disposal. This is sometimes referred
to in a charter party as the "full reach and burden" of the vessel and
the charterer invariably assumes it to include any mast or deck lockers
available and probably a locker or two in the mate's room.
The owner is responsible for the physical operation of the vessel
and employs the master and entire crew. The vessel owner also pays for
the stores and provisions and the upkeep and repair of the vessel. In
other words, the shipowner puts a fully equipped vessel at the
charterer's disposal and operates it for the benefit of the charterer.
OCR for page 19
19
The charterer pays for fuel, tugs and pilots, harbor dues, and
entering and clearing fees; the charterer does not pay expenses pertain-
ing to the crew, with the exception of charterer's mission overtime.
If the charterer's personnel are carried, food consumed and other
supporting expenses are chargeable.
Important elements of a time charter party are "off hire" and
"mobilization and demobilization." Off hire stipulates that in the
event of a loss of time from deficiency of stores or crew, breakdown of
machinery, stranding, fire, or any damage preventing the working of the
vessel for more than 24 hours, the payment of hire shall cease until
the ship is again in an efficient state to resume service. Mobiliza-
tion and demobilization provides for extra time at the owner's or other
base for the purpose of preparing the ship for the charter. The unique
nature of research and survey operations can make mobilization and
demobilization a significant element. This is discussed further in
Chapter 4.
Another type of charter party not especially applicable to research
operations is a "voyage charter party." This is a charter for the
carriage of cargo, not for a period of time, but at a stipulated rate
per ton. In a voyage charter party the charterer assumes no respon-
sibility for the operation of the vessel except stevedoring expenses.
Terms from a voyage charter party that may apply elsewhere are
"paydays," the time available for loading and discharging, and
demurrage, charges for time lost caused by the charterer.
Turnkey Contract
The turnkey contract describes a situation where a contractor would
agree to perform a total service for NOAA and to provide the ship,
crew, scientific party, and all supplies and equipment necessary to
produce a specified end product. Examples of end products that might
be acquired by NOAA on a turnkey basis include bathymetric maps of the
EEZ or fisheries stock assessments for a designated area.
A general contractor proposing a turnkey project may offer an end
product on a day-rate or a lump-sum basis (fixed price). The general
contractor may assemble a team of subcontractors to carry out the
proposed project. For example, a vessel could be chartered as a bare
boat from subcontractor one, the crew and ship operations from
subcontractor two, the performance of the scientific mission from
subcontractor three, and the lease of all necessary oceanographic
equipment from subcontractor four.
In a turnkey contract the precise specification of the end product
(deliverables) to be produced is critical to its success. Application
of this chartering alternative to research functions may be limited
(see Chapter 5~.
OCR for page 20
20
SHORT-TERM VERSUS LONG-TERM ALTERNATIVES
A vast difference exists between the short-term and the multLyear
charter. The-former usually is a small vessel operation with limited
capability and higher cost than a user-owned vessel. Multiyear
charters, on the other hand, can provide a highly capable and well-
outfitted ship at attractive prices.
A multiyear charter must be within the scope of an agency's
statutory authority. NOAA has maintained that it is constrained from
multiyear contracts, but this may be more of a policy determination
than statutory. Whatever the cause, it should be resolved so NOAA can
benefit from long-term contractual arrangements.
For purposes of this report, long term means 3 years or greater,
and short term means less than 1 year. Chapter 5 discusses further the
contrasting implications of these two alternatives.
A number of disadvantages associated with chartering vessel
services can be alleviated through long-term contracts as shown in
Table 2-2. Therefore, long-term charters could optimize the advantages
of chartering and reduce or eliminate many of the disadvantages.
However, the disadvantages and advantages of chartering listed in Table
2-2 may vary in importance for different types of charter alternatives
and for different mission areas. Although charter vessel services may
offer some cost savings, there are other operational and logistical
issues to be considered.
TABLE 2-2 Charter Advantages and Disadvantages
Potential Advantages
Flexibility of getting ship
where and when needed
No major capital investment
Fixed, known cost rates
Reduces FTEb positions
required of an agency
May have favorable cost
comparison under suitable
planning conditions
Can be easily terminated when
requirements change/cease
Potential Disadvantages
Suitable vessel may not be
availablea
May have substandard safety
provis ions
May be poorly designed and out-
fitted for research purposes,
e.g., inadequate laboratories,
obsolete oceanographic
equipments
May have substandard berthing,
messing, and comfortsa
Contractual problems: multiyear
funding, sole-source procurement
aReduced or eliminated by long-term (3 years or more) charter.
bFull-time equivalent.
Representative terms from entire chapter:
time charter
