Guest Post by Andrew Roscoe and Nicole Welch, Project Management Advisors, Inc.

Global brands understand that their facilities are a critical part of their identity, providing customers, employees and partners a uniquely defined and consistent experience regardless of location.

For one technology giant ranked in the top 100 of Fortune 500’s top-earning companies, consistency among its facilities is essential. As they expand to establish offices across the globe, their goal of maintaining programmatic and aesthetic constancy among all offices presented a myriad of challenges in locations with extremely variable standards.

From the vantage point of Project Management Oversight (PMO), overseeing multiple tenant improvement projects for this client over the past several years has required process adaptations to accommodate the circumstances presented by a diversity of locations including Sao Paulo, Brazil; Buenos Aires, Argentina; Bogota, Columbia; and Mexico City, Mexico.

We’ve learned that the following areas are critical to success for these types of projects: 

Culture

Though design, construction and project management are universally practiced professions, how they are approached can vary widely in different countries. Learning about local cultural norms and building strong connections with regional partners are vitally important. Asking questions of local firms and tapping their depth of experience can translate into invaluable efficiencies and help to avoid unnecessary risks. Working collaboratively to combine ideas and processes serves to create an approach that recognizes local standards while maintaining client goals. 

Economy

Latin American economies can be less stable than the U.S. creating a greater financial risk for clients. This volatility could mean that a general contractor (GC), subcontractors, vendors and/or suppliers could go out of business potentially derailing a project. It’s imperative for the PMO to research the history and current state of the economy to understand the potential economic issues that are predicted. Building solid relationships with local project managers (PMs) and other design team professionals provides boots-on-the ground intel that can keep a project on track.

Payments

Due to the instability of some economies, many GCs and vendors/suppliers expect down payments of 30% or higher in order to procure materials and lock-in labor rates. Advance payments generate greater risk for the client so it is critical to conduct in-depth vetting of these companies including financial capacities and statements to ensure their strength in the event of an economic downturn.

Clients are advised to negotiate as early as possible with GCs and explicitly note any maximum limits on down payments in the project Request for Proposal (RFP). It’s important that the PMO and the local team communicate with the client’s internal Sourcing and Financing teams to understand limitations, requirements and risk variables to ensure that these are conveyed to potential GCs and vendors. Clients unwilling to provide the customary down payments must understand that they may face a limited pool of potential GCs and, in the event that a client and prospective GC do agree to a lower than customary down payment, that it’s likely they will face potential negative impacts to the construction schedule.

Schedules

Project durations and task activities can be longer in Latin American countries, partially due to the down payment process which can cause construction delays. Working closely with local PM’s and the Architect of Record (AOR) team to understand typical schedule durations for tasks based on their experiences serves to mitigate this risk and ensure realistic planning. In order to better fine tune the schedule, it is crucial that the PMO gather early input from the GC to validate the schedule and advise on any needed adjustments.

Proposals /PO’s/Contracts

Depending on a country’s economic stability, GCs and vendors/suppliers may strongly prefer to quote goods and services in more secure U.S. dollars (USD) rather than local currency. Bringing awareness of this practice to the client helps them negotiate agreements that share risk between themselves and the local vendors.

For example, this technology client often stipulates that Purchase Orders (PO’s) be in local currency as payments will be made from the local office group. In Argentina the more stable USD was used for pricing, however PO’s were then converted to local currency (ARS) based on the daily rate of exchange for payment.

Overall, the contracting process tends to be lengthier in Latin American countries due to the unstable economy and it is advised that specific language be included in contracts – such as an inflation risk clause and specific bond requirements – to protect the client. It is vital that the PMO thoroughly understand the client’s contractual documents and processes and  collaborate closely with them on execution of these documents. 

Importation & Lead Times

Product quality and/or client mandated specifications sometimes prohibit local sourcing and necessitate importation. For this client’s projects, examples have included acoustical panels, lighting, furniture, culinary equipment and more.

Importation can be a long process requiring upwards of 60+ days for lead time and additional accommodations for customs delays. Identifying and prioritizing items that need to be imported early is pivotal to proficient scheduling, as is determining which items the client will direct purchase and which the GC will purchase.

The decision to direct purchase may be influenced by agreed-upon global pricing with vendor partners. These agreements can serve to hedge financial risks and schedule impacts posed by the potential that a GC might default and/or materials don’t arrive on time. This technology client has found success direct purchasing flooring, furniture and low voltage items for their Latin American projects.

Construction Administration Docs

In the U.S., GCs are familiar with completing detailed Submittals/Shop Drawings and associated Logs, along with RFI’s for review and approval by the Architect, PM team and/or Client. Latin American teams are not typically accustomed to providing this level of detail or working with elaborate Project Manuals, requiring that additional time be budgeted to get local teams aligned with these expectations. Our experience has been that many team meetings and reviews are needed to ensure that all necessary information is included. 

Labor

Labor may not be as skilled as in other markets and accommodations are sometimes an imperative to ensure client standards are met. In many instances, crews have been required to provide full-size installation mock-ups of materials and equipment for review and approval prior to proceeding with the full installation. This can translate into schedule and cost impacts of which the client needs to be made aware.

Cultural differences, economic instability and differing project delivery methodologies can present significant challenges when remotely managing projects in other countries. Investing early in understanding the local norms, leveraging strong local relationships and adapting processes to accommodate them will keep projects moving forward. Identifying additional risks resulting from these circumstances and mitigating them proactively through contractual negotiations and alternative procurement methods protect client interests and produce positive results.

Andrew Roscoe is Eastern Regional President, Project Management Advisors, Inc.

Nicole Welch is Senior Project Manager, Project Management Advisors, Inc.