This is the second post in a three-part series on the shrinking infrastructure market that we are posting in an attempt to dispel myths about moving business across state and national borders and to show how businesses can adapt to a global market.
Why is the U.S. construction industry lagging behind its European and Asian counterparts when it comes to moving where the work is? All indicators suggest that infrastructure development is shifting from the developed West and moving to emerging-market countries: China, India, Brazil, Russia, and many of the countries in Latin America, Eastern Europe, the Middle East, and North Africa. These emerging market countries are undergoing explosive demographic and economic changes that make them the primary consumers of infrastructure development for the next 10 years, and possibly beyond.
Domestically, budgetary realities are giving rise to more public-private partnerships and creative financing solutions. Internationally, growing urbanization and industrialization is driving three key construction segments: residential, commercial and infrastructure. As a result, a wide range of opportunities have arisen in the short term for all types of excavation and site work contractors, specialty contractors, manufacturers, suppliers, service providers and institutional supporters.
Yet a majority of U.S. companies are holding back. They view with discomfort, and sometimes even outright suspicion, new ways of doing business, or even familiar business models that are conducted in new states, new regions, or outside the United States. In many cases, it is only myths that hold many companies back. Often, a little bit of information can go a long way to sweeping the myths away:
(1) I don’t know the rules and I don’t know their impact on construction costs. Whether you move from Massachusetts to Texas, Florida to Oregon, or Pennsylvania to Nairobi, doing construction in a new market is not all that different from working in your existing markets. The key to overcoming the new hurdles is to allow time for preparation and to recruit assistance to obtain local knowledge about local cultures, and the normative and regulatory systems.
(2) I don’t know how to hire labor or run crews long-distance. Whether they operate at home in the United States or abroad, contractors hire local personnel or engage subcontractors who are familiar with local rules, regulations and operations. Management of these forces becomes paramount, and measurement of results, in time to make appropriate adjustments, must become the focus of the home office.
(3) Going outside my own neighborhood is risky. If there is a dispute, I won’t be “on home turf” and able to get a fair hearing or collect on my claim. Whether operating outside or inside the United States, it is always necessary to build in protections that minimize your risks — legal, financial or commercial. In addition, contracts can be drafted to stipulate arbitration as a way of solving disputes, and companies can select, in advance, a place where neither party has any advantage. For foreign contracts, this could be somewhere outside the host country, or it could be a neutral forum, with disputes decided under the International Chamber of Commerce’s International Arbitration Rules, or the American Arbitration Association’s rules, for example. This would ensure the entire process is conducted with efficiency, fairness, transparency and impartiality.
For contracts outside the U.S., there is always the cultural/language concern:
(4) I don’t speak the language; I won’t be able to read or understand the contracts. In general, large international projects use standardized contract forms, very similar to those long in use in this country. Often, they are written in English or a translation to English is available.
In our next installment in this series, we’ll talk about some companies that have made the decision to move into new markets, how they have did it, and why they knew that they were “ready.”