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20.0% to 30.0% of the contract value within ten days of signing the sale memorandum of agreement and upon
keel laying. The remainder of the contract price is typically paid after trial and commissioning and before
delivery of the vessel.
Outsourcing
We are outsourcing the construction of small to medium offshore support vessels to third party shipyards
in China in order for us to focus on construction of higher value offshore support vessels at our shipyard in
Batam, Indonesia. In the past, we have also outsourced to third party shipyards in South-east Asia and we may
do so in the future again. We do not have exclusivity arrangements with any of the shipyards in China.
As at 8 August 2008, we have contracted with seven shipyards in China to build 26 vessels. The
outsourced contract value in aggregate for these vessels amounted to S$207.2 million, with no more than 25%
of the contracted value vesting with any one of the seven shipyards. These contracts are for the construction of
hull structure, fabrication of steelworks and installation of equipment and do not include the purchase of
owner-furnished equipment, which are procured directly by us.
We typically outsource the construction of basic hull to the third party shipyards while we procure and
supply the engine and main equipment to these third party shipyards.
Prior to awarding contracts to third party shipyards, we conduct a review of their operations, including
the review of their management teams, capacity, quality control, project scheduling and financial capabilities.
We also deploy our personnel to such shipyards to monitor the vessel’s construction through to precommissioning
and delivery. While majority of the monitoring team consists of engineers from our Batam
shipyard, we also have a representative office in Foshan, China to support the outsourcing activities in China.
The payment terms vary from shipyard to shipyard and vessel to vessel. We are expected to make down
payment and progressive payments at different stages of construction.
There have been some incidents of delays mainly attributed to the delayed delivery of the main equipment
from equipment suppliers.
The diagram below illustrates the principal stages in our shipbuilding process:
Design and Engineering
Basic design (external)
Detailed engineering (inhouse)
Project Kick-Off
Fabrication, Assembly and
Systems Installation
Launching
Commissioning and Trial
Vessel Delivery
Warranty Support
(12 months)
Quality
Inspection
Design and Engineering
Our design process involves two elements: basic design (which is produced externally) and detailed
engineering (which is produced in-house). Our design process allows us to remove uncertainties in the final
vessel performance and concentrate on quality production.
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