Analysis of the current status of overseas engineering projects

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This post was last edited by “Hasty Passerby” on February 1, 2019, at 15:34. Analysis of the current status of overseas engineering projects: 1. Weak awareness of contract management. Most project managers involved in overseas engineering contracts have experience in managing domestic projects. Influenced by certain common practices in China, they have a weak sense of contract awareness and a rather superficial understanding of contracts. There are also misconceptions such as “Contracts are the concern of the market development department; they have nothing to do with design.” Concepts influence actions; in practice, there is a tendency of “not carefully studying contracts” ； Not viewed carefully or completely ； Irregular practices such as “only allowing the person in charge to see it while others are not allowed to”. Insufficient attention was paid to contract management, and rights were not safeguarded in accordance with the contract provisions regarding losses incurred during project execution due to the owner’s actions. To carry out overseas projects, it is essential to have a strong sense of contract awareness and the ability to enforce contracts. In the implementation of company projects, there is a problem of a weak awareness of contracts; often, the importance of contracts is not recognized, and there are mistaken beliefs such as \"Contracts are something related to the marketing department and have nothing to do with design or other departments.\" In practice, research contracts are often not detailed or comprehensive, and there is a lack of awareness among all project participants to regard the contract as the \"bible\" for project execution. Abroad, the contract manager is at the core of project management, playing a role throughout the entire project lifecycle; the quality of contract management directly affects the success or failure of the project. 2. There are differences between specialized division of labor and international engineering companies, mainly reflected in the fact that their approaches to specialization and management concepts do not meet the requirements of overseas projects. In most domestic engineering companies, the division of design tasks is better suited to the operational patterns of projects within the country. For overseas projects, however, the international project management approaches followed result in significant differences in terms of design task allocation compared to the company’s internal design management practices. This inevitably makes it more difficult for the company to manage design aspects as well as to coordinate with clients and PMC agencies when undertaking overseas EPCC projects. The versioned design process for international projects is better suited to efficient integration within EPCC, and it requires active collaboration among professionals at various stages of the design process. It is necessary to abandon the design philosophies and methods that involve waiting for formal commissioning documents before starting work, as well as relying on or demanding such documents. 3. The management of EPC projects needs improvement. Firstly, domestic engineering companies generally lack an overall approach that takes the project as a whole in terms of management and execution strategies for EPC projects ； Secondly, in construction management, there has been a failure to adequately seek partners or implement localization strategies to make full use of local labor resources. Therefore, it is necessary to selectively recruit, train, and develop a group of construction managers for overseas projects, while enhancing their understanding and knowledge of the host countries* ； Once again, regarding the project compensation mechanism, incentives should be provided in accordance with the actual circumstances of the project, by adopting a compensation philosophy that combines competence, responsibility, and job roles within the project. The internationalization of project operations also brings a range of challenges. To become an international engineering company, it is necessary to align domestic and international project operations in terms of standards, contracts, costs, talent, and construction, and to acquire the capability to manage international project implementations. 4. Lack of familiarity with procedures and standards for operating international projects: Domestic engineering firms lack a precise understanding and grasp of international standards and specifications. Failing to fully comprehend these standards during the bidding phase can introduce significant risks during the project implementation stage. Firstly, domestic engineering companies have weak foundational capabilities; they lack internationally recognized standards and software, resulting in a significant waste of human and material resources on basic tasks ； Secondly, currently, the internationally accepted standards for engineering projects possess a high degree of principle and flexibility. We must not only learn these standards, but also apply them flexibly. Currently, domestic engineering companies adhere to the principle of “choosing the higher standard rather than the lower one”, which has, to some extent, increased the costs of project investments. 5. Shortage of human resources: Due to factors such as a lack of experience in carrying out foreign EPCC projects, domestic engineering companies suffer from a shortage of personnel with the skills required for managing international EPCC projects across various positions within their project management organizations. Additionally, there is an inadequate environment for recruiting external human resources flexibly; as a result, taking on large-scale foreign projects can have a significant impact on the company’s project operations. The English proficiency of domestic employees, especially their writing skills, needs to be improved, and there is a need for staff who are familiar with the operations of foreign projects. 6. Lack of participation and information from international suppliers in procurement: Domestic engineering companies lack experience in managing international projects as well as international recognition; a significant issue they face during the bidding process for overseas projects is the extremely low rate of feedback regarding preliminary quotes for overseas equipment. Once overseas projects are actually implemented, international procurement represents a major risk. Domestic engineering companies suffer from a shortage of external resources, especially those related to equipment and material suppliers. They are unable to enter into long-term cooperation agreements with major international suppliers of such equipment and materials, nor can they establish a database of prices from international suppliers. This affects the accuracy and competitiveness of bids for projects, as well as the procurement of equipment and materials for EPC projects. Typically, the cost of purchasing equipment and materials accounts for 70% of the total cost of international projects. In current foreign project tenders, Chinese manufacturers are rarely found on the long lists of potential suppliers for equipment; even if the project owner agrees to domestic procurement, it may not meet the requirements. The lack of understanding regarding foreign supply situations and the international procurement process makes procurement a major challenge for engineering companies entering the international engineering market. 7. Risks related to international laws and regulations, finance, taxation, etc. Domestic engineering companies generally lack the talent and experience in areas such as laws and regulations, finance, and taxation necessary to carry out international projects, which poses significant challenges and risks to the implementation of such projects. 8. Threat from competitors: With China’s accession to the WTO, the protection period for the domestic engineering market is coming to an end. Foreign engineering companies are gradually entering this market, posing a challenge to the international expansion efforts of domestic firms. At the same time, China’s main competitors are improving their technical capabilities and EPC project management skills by pursuing an international strategy, which puts domestic companies under increasing pressure in both domestic and international markets. 9. Other disadvantages
Apart from the internal disadvantages mentioned above, domestic engineering companies also have the following drawbacks: Their work processes need to be improved. There is a significant difference in work processes between domestic companies and foreign companies, and there are irregular practices and behaviors; for example, the downstream departments wait passively for instructions from the upstream departments, rather than taking proactive steps to create conditions that facilitate the progress of work. The response rate to inquiries is low. The low response rate to inquiries is caused, on the one hand, by external objective factors, but more importantly by internal factors: domestic companies lack a mature system for preparing inquiry documents ； There is little direct contact with foreign suppliers; there is no complete set of procedures for external procurement, no proper procurement team, and so on. In short, there is insufficient awareness of the importance of expanding into overseas markets, and a lack of urgency to go global ； The current human resources situation is not suitable for the needs of expanding into overseas markets; foreign language skills need to be improved, and there is a shortage of professionals in areas such as international business, law, finance, and marketing ； Lack of experience in managing overseas projects, with relatively weak EPC management capabilities ； The company’s professional division of labor and interfaces are not entirely rational; its ability to understand and apply foreign standards is weak, which prevents it from meeting the requirements of overseas projects ； The lack of procurement capabilities that combine internationalization with localization, as well as the need to improve the ability to manage construction teams, all serve as obstacles that prevent domestic engineering companies from expanding into overseas markets and undertaking projects there. Based on this fundamental assessment, it is necessary to strengthen existing resources, address deficiencies in a targeted manner, further boost confidence, and respond calmly to ensure steady and robust progress in expanding overseas operations. Only by being tempered through overseas markets can domestic engineering companies enhance their overall competitiveness in the process of exploring and operating in those markets. Based on the above analysis of the domestic and international environments, domestic engineering companies should seize opportunities, avoid disadvantages, and take effective measures to advance bidding for overseas projects as well as their implementation.