Background: The Pacific Northwest Section of The Society of Naval Architects and Marine Engineers sometimes schedules a Past Chairperson’s Night. Once when I was called upon to take a bow as a past chairperson, instead of saying something that was expected, I presented the following mini paper:
A Comment for the 2 December 1994 Past Chairperson’s Night
by Louis D. Chirillo
During the year that I was Chairman, a significant event occurred that was to provide insight that is the basis for advice I wish to leave with you. I was assigned to be a program manager in the newly created government\ industry National Shipbuilding Research Program (NSRP). In that capacity I was especially alert for reasons why North American shipyards could not compete in the world market. A statement by John Boylston and Warren Leback, representing Sea-Land and El Paso LNG respectively, made a profound impression:
“When shipyards in years past provided their own design… it made sense in a contract for the owner to require guarantees on horsepower, speed, fuel economy and other such factors. It still makes sense today where an owner purchases a standard shipyard design. If, however, the design is prepared for the owner by a naval architect and presented to the yard for bidding, we believe the responsibility of the shipyard then reverts to that of an assembler of component parts as specified by the owner. Most owners presently have the naval architect prepare a preliminary design that is used for preliminary economic studies and model testing. If the owner decides to proceed, then this preliminary design is embodied in a contract design. The naval architect, who writes the specifications and draws the contract plans, then binds the shipyard to strict adherence to those contract plans and specifications while at the same time making the shipyard fully responsible for the final performance of the vessel. The shipyard is instructed to retest the lines, recalculate the calculations and in general to give the naval architect, on behalf of the owner, a ‘hold harmless’ agreement. It is the owner, whether he realizes it or not, who pays for this double engineering and who, through the technical bickering that always seems to ensue between yard and naval architect, receives a compromise design that neither fully meets his requirements nor one that has a responsible party for recourse.” 
Elsewhere in the same paper John Boylston and Warren Leback state, “…nowhere else in the world is a great percentage of the construction cost of a vessel allocated to legal fees, accounting procedures, and associated personnel.”
During my work for the NSRP, I acquired insight into the shipbuilding approach employed by Ishikawajima-Harima Heavy Industries Co., Ltd. (IHI) of Japan. I discovered that in IHI yards, contract design is regarded as part of the shipbuilding process and that each contract is the consequence of negotiation. The owner insures that ship performance aspects are incorporated and the shipbuilder insures that the emerging contract is consistent with the shipbuilding system. I also learned that IHI was never sued as a consequence of delivering approximately 3,000 vessels during the last three decades.
I recommend that you work to the extent that you can to achieve negotiated design/build contracts that avoid the pitfalls that the two enlightened owner representatives warned us about nineteen-years ago. If direct negotiations do not seem to be attainable, for example when some public agencies are involved, then I recommend that you seek ways to achieve the effect of negotiated design/build contracts.
In this way you would contribute to restoring the viability of shipbuilding in North America. In this way you would contribute to the health of this Society, provided you write about such experiences.
 J.W. Boylston and W.G. Leback, Toward Responsible Shipbuilding, Transactions, SNAME Annual Meeting,
13-15 November 1975.