National Features: Articles from Sean Hanscomb and David Tresidder

David Tresidder, Associate Director

Beckett Rankine (Consultant Maritime Engineers)

UK Port Infrastructure and Smarter Asset Management

A Poor State of Affairs

Having inspected maritime structures (including diving inspections) for the last 23 years and designed many solutions, the trends, particularly for the UK market, seem clear. Lessons learnt from the expert services I have provided following infrastructure failures are I believe, applicable around the world.

As a result of a change to the widespread use of less robust materials such as reinforced concrete and steel piles commencing circa 100 years ago, much of the UK port infrastructure is now at a tipping point and there appears to be a recent increase in the number of significant failures occurring.

As the UK ports industry faces an ever-increasing risk of infrastructure failures, the need for a considered and smarter approach to the ongoing monitoring and maintenance of maritime infrastructure assets is clear.

Drivers and Trends

There is an underlying trend of increasing vessel size, which results in larger berthing and mooring forces as well as the need for deeper berths. Combined with climate change, the processes that degrade port infrastructure tend to accelerate over time.

UK ports have a long history of having to reinvent themselves with frequently changing cargo and usage. Brexit and Covid are just the latest drivers for change and the need for adaptation of the often-aging port infrastructure.

The UK port capacity generally meets or exceeds the demand and with minimal market growth, efficiency competition between operators to retain their market share is strong. Maintenance and replacement of port infrastructure is often considered unaffordable. 

With much port infrastructure in critical condition and market constraints, many ports find themselves in a difficult position, it is not therefore surprising that there is an increase in the number of failures occurring.

Insurance

Typical insurance policies will exclude normal wear and tear. One might therefore conclude that insurers and premiums should not be concerned with the condition of an infrastructure asset.

Failures are caused by several contributory factors and determination of the primary cause is often not straightforward. Fortuitous (chance) events are usually insured but the definition of fortuitous is not always clear, for example, where does change of use as a cause of failure sit? Insurers therefore seem to incur costs irrespective of policy exclusions and as such, condition and asset maintenance is relevant. Conversely, asset owners can also find themselves with an uninsurable loss as it often possible to prove wear and tear as a probably primary cause, especially where there are limited or no records of maintenance or condition assessment.

Inspection and Maintenance

The owners and operators of port infrastructure apply often disparate approaches to asset management.  In some cases, durable and non-critical assets are being unnecessarily inspected. More common however, is the lack of a good quality benchmark by which to assess degradation rates and develop a maintenance strategy.

Each asset is unique and an assessment in terms of age, usage, materials, environment, and condition is required to optimise an asset management plan. The more thorough the initial information is, the more informed the risk assessment will be.  This will in turn, determine how appropriate the future inspection regime, maintenance plans and budgets are.

A Helpful Tool

At Beckett Rankine, we are acutely aware that the maritime environment and its degradation process are unique, requiring specialist knowledge and experience. Equally, we want all asset owners and operators to be as informed as they can be about the infrastructure risks, they have. To address this, we have developed a free to use online tool called BRSAM (Beckett Rankine Smart Asset Management) that we believe will help the industry.

The tool is designed to help inform maritime asset management considerations, maintenance, and capital works budgets, and works programming. A series of multiple-choice questions are posed in the interactive tool enabling the user to define the asset, its use, condition, age and the environment it is in. Our extensive engineering experience of surveying and assessing similar structures is then tapped to provide the user with risk ratings for the asset as well as the residual life and a recommended inspection frequency. A report on the asset is produced for free.

Feel free to try the tool: https://beckettrankine.com/brsam/

Conclusions

The requirement for maintenance and replacement of much of the UK port infrastructure is increasing as assets reach the end of their lives. With limited ability for the industry to invest, it is critical that good quality, thorough inspection, and maintenance records are kept. These will enable informed decisions to be made and acted upon, significantly decreasing the potential of uninsured wear and tear being determined as the probable cause of a failure.

Each maritime infrastructure asset needs to be individually assessed to determine an appropriate inspection and maintenance regime as well as enabling budgets to be forecast.

As an initial guide, Beckett Rankine has developed a free and what we hope, is a helpful tool to offer guidance on the residual life and required inspection frequencies for a large range of maritime assets.

Knowing the assets condition and establishing the mechanisms and rates of degradation allow for smart asset management strategies to be developed.

Sean Gibbs, CEO

Hanscomb International

THE END OF LIBOR = THE END OF LIBOR + X%

The London Interbank Offered Rate (LIBOR) is a benchmark interest rate at which major global banks lend to one another in the international interbank market for short-term loans. LIBOR serves as a globally accepted key benchmark interest rate that indicates borrowing costs between banks. The rate is calculated and published each day by the Intercontinental Exchange (ICE), but due to historical scandals and questions around its validity as a benchmark rate, it is being phased out. The LIBOR is due to end towards the end of 2021 for major currencies such as CHF, EUR, GBP JPY and EUR, the cessation date being 31st December 2021, with the USD data ending just after.

LIBOR is currently produced in 7 tenors (overnight/spot next, one week, one month, two months, three months, six months and 12 months) across 5 currencies. It is based on submissions provided by a panel of 20 banks. These submissions are intended to reflect the interest rate at which banks could borrow money on unsecured terms in wholesale markets.

Of the publicly published ICSID awards it is thought that around 33.3% are based on LIBOR with an uplift applied. As it is being discontinued, experts and tribunals will no longer be able to rely on it as a reference rate.  Tribunals award interest on a variety of bases including:

(1) compensation for the time value of money;

(2) compensation for the actual risks to which the claimant has been exposed; and

(3) compensation for the specific consequences for the claimant of being deprived of funds

With the end of LIBOR, experts and tribunals will need to look for alternative ways to award interest. There are other rates, but they are usually based on shorter durations than the 12 month rate which is the most commonly used for high value ICSID awards.

These are the views of the author and not of Barton Legal, and should is not to be treated as advice or guidance