Outsourcing vs. In-House Vessel Vetting: Which Is Right for Your Business?
Choosing the right vetting strategy can significantly impact trade deliverability, operational efficiency, risk exposure, and bottom line.
One overlooked detail in vessel vetting can cost millions of dollars in delays, fines, or even legal action.
So, here’s the question: Should you build an expert vetting team in-house - or leave it to the external specialists?
In our previous article, we established why a vessel vetting process is essential to your organisation, providing peace of mind and helping you navigate the sea of potential problems that may arise when selecting a vessel to transport your cargo.
Using a vetted ship minimises the chances of operational failures, accidents and pollution incidents or detentions, reducing potential liability and helping to mitigate your financial, legal and reputational risks.
In this article, we consider the pros and cons of outsourcing vessel vetting versus managing it in-house, helping you to decide what works best for your business, whether you're a global oil major or a niche commodity trader.
Why This Matters:
Vetting isn't just a box to tick. It’s your first line of defence against detentions, delays, disasters and damage to your reputation. Whether you're shipping oil, LNG, or agricultural goods, one wrong call can cost you. Likewise if your vetting policy is overly constrictive/restrictive it may limit your ability to move cargo at all.
And with vessel vetting evolving rapidly, many companies are rethinking how they handle it…
In-House Vetting: Control and Customisation
Who uses it?
Oil Majors:
Leading oil companies conduct vessel compliance checks internally due to their high-risk exposure and the need to uphold strict safety standards.
Large Commodity Traders:
Trading houses rely on in-house vetting teams to assess vessels transporting crude oil, LNG, and refined products. Given their high shipping volumes, managing vetting internally enhances efficiency.
State-Owned Energy Companies:
Government controlled enterprises oversee vessel vetting within their operations to ensure compliance with stringent government regulations while managing national energy exports.
Shipping and LNG Operators:
Commercial shipping and liquefied natural gas carriers implement in-house vetting to select vessels within their fleets, maintaining high safety standards and operational control.
Advantages
- Ability to maintain full control over compliance and risk management. Organisations that opt for in-house vetting typically handle high volumes of vetting and possess substantial internal expertise with an emphasis on constant retraining to keep up to date with evolving industry practices.
- Keeping the vetting process in-house allows for direct oversight and ensures alignment with company-specific standards and procedures. For businesses that require frequent vessel assessments, leveraging existing staff can also prove more cost-effective in the long run compared to outsourcing.
Challenges
- Lack of In-House Expertise: Not all companies have the capability to conduct detailed internal vetting assessments. Building and maintaining a skilled vetting team requires substantial investment in training and resources.
- Risk of Internal Bias: In-house vetting may be influenced by company culture or internal pressures, potentially leading to overlooked critical issues.
- Resource Constraints: Internal teams may lack access to the latest industry best practices, specialised technical knowledge, or the capacity to handle a high volume of assessments efficiently.
Third-Party Vetting: Expertise and Efficiency on Demand
Many companies outsource vessel vetting to specialised third-party agencies. This approach offers several advantages, including cost reduction, enhanced operational efficiency and access to expert risk assessments.
Who Outsources?
A broad range of industry players rely on third-party vetting services, including:
- Oil and gas traders and distributors
- Refineries and upstream producers
- FPSO operators
- Chemical manufacturers
- Terminal operators
- Insurance and financial institutions
- Mining companies
- Freight forwarders and shipping operators
- Chartering and logistics providers
- Commodity and agricultural trading firms
These organisations turn to third-party vetting to:
- Ensure compliance with international safety and environmental standards
- Meet regulatory requirements
- Reduce operational and reputational risk
- Optimize logistics and fleet management
- Avoid costly compliance violations
Advantages
- Expertise and Experience: Third-party organisations often possess extensive experience across various vessel types and operational scenarios, they also have access to global databases with historical data on vessel performance, deficiencies and compliance records, ensuring a comprehensive risk assessment.
- Objectivity: Independent vetting organisations provide an unbiased perspective; since these organisations are independent, they provide an impartial evaluation, reducing the risk of conflicts of interest that may arise if the vetting is done internally.
- Standardisation and regulatory compliance: Their evaluations often adhere to widely recognised standards and methodologies, which can be particularly valuable in ensuring regulatory compliance and enhancing operational safety.
- Perceived Credibility: External validation can be reassuring to stakeholders such as investors, insurers and regulatory bodies, adding an extra layer of trust.
- Speed and efficiency: Third-party organisations can provide quick, reliable assessments, given the breadth of information available and relationships with vessel technical managers.
Challenges
- Cost Considerations: That can be costly for frequent users. While hiring external experts might seem more expensive upfront, the impartiality and comprehensive assessment provided can help avoid costly oversights and potential liabilities in the long run.
- Less operational familiarity: May lack a deep understanding of internal procedures.
How Does Third-Party Vetting Work?
To ensure vessel safety, environmental compliance, and strong operational performance, third-party vetting agencies conduct comprehensive assessments using a wide range of data sources. These evaluations are in-depth and multifaceted, focusing on both the vessel and its operator. While the criteria may vary, key areas typically include (indicative, not exhaustive):
- Recent inspection reports: Independent assessments such as SIRE, CDI, and BIRE provide critical insights into vessel condition and operational practices.
- Casualty and incident history: A review of past accidents or operational failures to evaluate risk exposure.
- Technical specifications: Analysis of documentation like Q88, VPQ, and BPQ to assess the vessel’s design, equipment, and capabilities.
- Sanctions screening: Ensuring vessels, owners, and related parties are not listed under international sanctions regimes.
- Port State Control and Flag State inspection records: Evaluation of detentions, deficiencies, and inspection results across global ports.
- Classification society records: Verification of class status, survey history, and outstanding recommendations.
- Crew qualifications and experience: Assessing the competence and operational record of onboard personnel.
- TMSA (Tanker Management and Self Assessment) status: Reviewing the operator’s safety and quality management systems against industry benchmarks.
- Insurance and P&I Club coverage: Confirming sufficient and compliant liability coverage in line with recognized protection and indemnity standards.
Real World Wins:
Third-party vetting eliminates overhead costs associated with salaries, training and software maintenance
A shipping company discovered that maintaining a full-time vetting team required a six-figure annual budget. By switching to an outsourced provider and paying per vetting, they cut costs by 30%.
Third-party vetting offers objectivity, standardisation and enhanced external credibility
A mid-sized oil trading firm struggled with inconsistent vetting standards when using an in-house team. After outsourcing to a dedicated vetting service, they reduced non-compliance incidents by 40% and gained access to a global vessel history database.
Third-party vetting agencies specialise in risk assessment, compliance and industry regulations, they have access to proprietary databases, vessel safety records and sanctions lists
A chemical tanker operator unknowingly chartered a vessel with a history of detentions. After switching to outsourced vetting, they avoided similar mistakes and potential reputational damage.
External firms process multiple vetting requests swiftly, leveraging extensive networks
A commodities trader faced a last-minute charter request but lacked internal vetting capacity. By outsourcing, they obtained a full vetting report within hours, preventing costly delays.
Outsourcing ship vetting services reduces exposure to compliance risks and regulatory fines
A company using in-house vetting overlooked a vessel’s ties to a sanctioned entity, resulting in legal complications. After outsourcing, they received automated alerts on high-risk vessels, enhancing compliance and risk management.
Conclusion: Navigating the Right Course
- Outsourcing is ideal for companies that lack dedicated vetting expertise, need cost savings, or require quick scalability. It can enhance efficiency, reduce costs, and mitigate compliance risks, providing unbiased assessments which can enhance credibility
- In-house vetting offers control and continuity for organisations with the scale to support it
So… Which One’s Right for You?
Go In-House If:
- You vet 200-300 vessels monthly
- You’ve already invested in a strong compliance team
- You need full alignment with internal procedures
- You have a local or relocatable talent pool of experienced master mariners/safety inspectors
Go Outsourced If:
- You don’t have dedicated vetting staff
- You want fast, scalable support
- You need an expert, unbiased evaluation
- You operate in high-risk or rapidly changing markets
Or Blend Both:
Many firms use a hybrid model: in-house for routine checks, third-party for deep dives or high-risk charters.
Key Takeaway
There’s no one-size-fits-all solution. Both outsourcing and in-house vetting have their merits, depending on a company’s size, risk profile, compliance requirements and operational needs. Whether you vet in-house or outsource, the goal is the same: to ensure your cargo moves safely, efficiently, and in full compliance.
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