THE DOWN RATCHET
AND
THE DETERIORATION OF TANKER NEWBUILDING STANDARDS

Jack Devanney and Mike Kennedy

ABSTRACT

For the last 20 years, Hellespont Shipping has operated six ULCC's built in the mid 1970's. In 1999, Hellespont embarked on an eight ship newbuilding program in Korea: four 300,000 ton VLCC's and four 440,000 ton ULCC's. These are the first ships that Hellespont has built in over 25 years. These ships are required to meet both ABS and LR rules. Unfortunately, we found a number of areas where the Classification Society rules and yard standards have deteriorated drastically since the 70's, in some cases to imprudent levels. This paper outlines these areas and recommends corrective action. We argue that the primary cause for this deterioration is the "direct computation down ratchet". In the absence of a meaningful guarantee, the yards are constantly and cleverly searching for ways to shave the rules. Whenever any yard gets a relaxation in the rules, however risky, this new lower level becomes the standard. The class that approved the relaxation can't admit it was imprudent for both legal and commercial reasons. Other Classes feel they have to fall in line lest their ships become uncompetitively expensive. The rules ratchet down one level. The yards then compete away the saving and the process repeats itself. The individual changes generated by this process may not be large, but the cumulative effect can be massive. Over time, the yards are rewriting the rules, not Class Technical Committees. Examples supporting this position are offered.

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