Part 7-1: Working Overseas, Advanced Civil Engineering, (NTUST, 5908701)
MT KAO (Blog: http://mtkaoforum31.blogspot.tw/)
1) Evolution of International Construction Projects:
(1) Stag 1: Free Movement of Construction Resources across the Borders
Lack or insufficiency of construction resources in terms of material, working capital, and technologies prompted the host countries to accept foreign construction companies to come to their turf when they build economies from scratch. It’s time when machine were expensive, native workers only available in number, local engineers yet to be trained, even the surrounding infrastructure to support the construction activities of the referred project were poor.
The recipient countries needed to implement the projects but they were also obliged to nurture their own construction forces for long term purpose. Therefore, they called for international tenders requiring more experienced and resourceful foreign contractors to be the main signing party, and demanded the local ones playing the supporting role.
Though the contractors from developed economies might complain the restraint sometimes made by the local partner as unnecessary; in general, as a stranger, they really need good guides helping them to recruit native workers, obtain regional material, and solving all kind of problems in a culture that they feel weird and helpless every so often.
The local partners would act as sleeping partners or agents at the start when their ability to handle construction works was limited. But as time went by, they would grow in size and strength to advance their scope of undertaking. Their ascending, in certain extent parallel with the speed up economy development of the host countries, was inevitable that the international construction firms should have accepted and adjusted for their approaches.
In view of the changing market in favor of the nurtured local construction firms, the governments used to welcome the international contractors would begin to amend the relevant laws so originally permitted free flow of machine, man and resources would be regulated. Always the new discretion would ask the foreigners only to carry out minor part of the business which the locals still need assistance; or sell expertise through “Technical Collaboration” arrangement by provision of plan, drawing and instructors. No more hefty revenues for the ones from overseas.
After all, the governments holding the budget and opportunity to build the project should have final say to decide who he wanted to deal with. And for civil engineering, it had never been too difficult for people started with amateurism; therefore, the authority’s choice for the locals would be apparent because they could build things cheaply after brief learning process, and know how to navigate through local bureaucracies that foreigners would’ve never known.
(2) Stage 2: Work Hard vs Work Smart!
Thanks to the rising human cost and vanished technology edges, construction and engineering firms from developed economies had to withdraw from conventional third world market, only to see the fledging contractors of newly industrialized country (NIC) eager to fill the vacancy. The new comers took lessons learnt at home for past decades: trained professionals, learnt advanced technologies, and pay much attention for tangible construction, such as harnessing machines and plants once considered only the monopoly of the westerners for exceptional efficiency and exactness.
So, the construction companies of newly industrialized country (NIC) wanted to go to overseas countries for projects that only yesterday the Westerners would come to their turf yelling yes and no for their technical and management supremacies. And now they had no problems to excel themselves as quick developed home market had offered many venues for practice.
Yes, it’s almost a definite conclusion that the construction companies from NIC would always out beat the westerners in international competition as price and schedule were concerned. But the outcome was disappointed as their accrued competence for overseas ventures didn’t even guarantee return of the costs let alone the profit.
The reason is that the international contracts now are no more centered on pure construction. And in the name to make the investment more secure, a construction contract now require participation of those non engineers: notaries, law firms, inspectors, laboratories, certifiers, appraisers, unions, arbitrators etc. The absolute figure of fees paid to them is not significant within total contract price but still enjoyable sum compared to the meager overhead allowed for the hard-working general contractor, most of them now from NIC.
The rules of the game have changed. We also understand the contract and its practice mainly are stemmed from custom and history; conditions and specification are drawn by contract experts from developed economies, language and proceeding offspring of the same culture. When westerners quit the substantial construction, they create added values continually to complicate the works in the form of "norm", "standard", and "proof", which the Asians may have difficulty to comprehend.
It’s not to say that the values generated by technology, craftsmanship and labors for construction projects become less important. But it’s conceivable that working hard as the only way to thwart competitors from the developed economies isn't practical. The industry evolved, not everything can be repeating.
(3) Stage 3: Investment Security Trump Everything and in Favor of the Establishment
The trend for construction works in 21st century is many of the gigantic projects will be invested by private entities as schemes like BOT or BT continuously churned out from governments with drained out coffer. Money is everywhere but the mammon doesn’t like to face uncertainty; so the professionals now including commercial experts are flattered to present risk free schemes to woo investors. The security of capital and return of vowed profit will be priority to trump anything else. As a result, the concerned parties have to pay attention in project phases starting from planning, design, construction, O & M, and until even marketing of the product.
Construction cost is important judged from the big number it used to be, but its share in total price become lower as non-engineering cost rises in weight. Then, the guarantees for work completion is everything, the evolution continues, that the real constructor may not be the one awarded the contracts because the records to complete the similar projects, capability to accelerate the delaying works, or financial power to indemnify the relevant parties will be more critical.
Public or private clients, when they want to initiate or kick start a valuable project, justification as to determine who shall be main partner is important because when something happens there must be questions drawn by stakeholders, only then the decision maker will find awarding to a reputable company is a safety play.
Nowadays there won’t be many conventional “build according drawing” construction contracts among international tenders, the contractors from advanced economies adapt very quickly that they go beyond traditionally a pure construction company will have to do so as to respond to the client’s diversified demand. On the other hand, many contractors from NIC consider technology and work efficiency most essential part of competition have met difficulties for overseas projects.
So, no wonder that the main contractors undertaking great overseas project today don’t need to own any construction resource themselves, they can have many choices to sub-let part or whole construction works to single or dual constructors who maybe local, or a self-regarded higher tier contractor from overseas countries. He may exercise control and deliver the work effectively similar to what Nike or Adidas have done over jerseys and shoes.
Under the so-called globalization market system, free flow of man, money, machine, and material is encouraged; and it seems fair. But the problem is now the companies in less developed economies will provide labor and skill for substantial part of the works but share limited added values compared with those set up the standard, specification, giving checks and certificates, maintain the margin and profit, but seldom bear the risk.
The 20th century capitalists in construction industry established powerful machine fleet, fostered engineering capability, put up contractual and legal frame, and monopolized banking system with all their cultural and political advantages indeed commanded the business for long time. But when those escaped from exploitation considered themselves a good learner to be one member of the new class; the 21st century capitalists evolve and thrive, that they now will secure capital and retain return through "possession" and "exchange", exhibited in forms like “added value”, “creation”, and “reputation”, to the frustration of late comers.