Any Time, Any Place, Any Product: A Roadmap for Successful International Pharmaceutical Plant Construction Projects
Oct. 12, 2005
- Onshore/offshore contractual issues Negotiating the contract for any project is more difficult these days as the parties attempt to protect their respective corporate interests. For international projects, the negotiation process demands legal expertise on both sides. The parties must first specify the appropriate entity of a corporation that will be signatory to the agreement. In most cases, two or more contracts will be required to provide appropriate legal coverage for work performed in multiple locations. As international project sites are selected, determining the split between onshore and offshore work is critical.
- Commercial issues Once the onshore/offshore portions of the scope are determined, the two parties must arrive at a mutually attractive commercial deal. Contractors rightfully expect to be compensated for undertaking the additional risks associated with an international project, so fees on these projects will typically be higher than for domestic projects, while lump sum contracting is much more common in the global construction market than cost-plus and reimbursable arrangements.
- Relationship building Positive personal relationships between designer, builder and owner are absolutely critical in international projects. Managers in certain cultures, notably Southeast Asia and Latin America, will usually not discuss business before theyve developed confidence in and a connection to their services suppliers, which can take several weeks of small talk at dinners and other events. In these instances, one should never talk business before a strong rapport has been reached.
- Site-specific risks During contractual negotiations, greater attention must be focused upon labor harmony, weather and geopolitical risks. The potential for force majeure events is significantly higher in some locations.
- Modularization and preassembly vs. onsite decisions The benefits of off-site fabrication are well-documented (Pharmaceutical Manufacturing, September 2004), and modular construction can help:
- Mitigate site labor shortages and weather-related delays;
- Improve quality compliance, since shop fabrication programs ensure a higher quality installation;
- Reduce the impact of labor interruptions, and the projects social and environmental impact.
However, modularization is not a panacea. Many countries discourage any discretionary imports, offering tax benefits for the use of local engineering, construction and materials, so a thorough cost/benefit analysis is critical. - Mitigate site labor shortages and weather-related delays;
- Electronic Tools When properly applied, electronic design, project management and construction tools can dramatically improve coordination. However, the project must be properly configured and managed to best use these modern conveniences:
- Communication E-mail communication is convenient, but it should not be overused. In international projects, particularly, the potential for misunderstandings is great. In general, if the subject is complicated or controversial, pick up the phone.
- Site infrastructure Dont assume that an adequate communication infrastructure exists in remote locations. In less-developed areas, phone and wireless access are more difficult to set up. Many people assume that, with a satellite receiver in place, the issue is resolved. However, some countries do not allow unpermitted transmissions and obtaining an appropriate permit from local authorities or communication agencies can take months
- Centrally hosted project collaboration systems Its now widespread practice to maintain all project documentation in a central database, accessible by the engineer, constructor, key suppliers and owner. For pharmaceutical projects, the main advantage of these systems is the fact that they allow team members to reuse the engineering data, stored in templates, for commissioning and validation.
- Remote design review Many projects use 3-D engineering tools and project database systems to provide a virtual representation of the proposed project. These tools offer benefits over 2-D technology, but maximum benefits are obtained when all project team members use the model for planning and scheduling their work.
- Communication E-mail communication is convenient, but it should not be overused. In international projects, particularly, the potential for misunderstandings is great. In general, if the subject is complicated or controversial, pick up the phone.
- Cost estimating A common source of severe estimate swings is the broad application of U.S. or European productivity standards. Construction productivities vary significantly around the world, primarily due to local work practices, tools, work hours, governmental influences and customs. In addition to estimating systems, project cost systems should be tested and proven capable of dealing with multiple currencies and conversions.
- Facility qualification strategy & validation master plan Without the approval of the appropriate drug regulatory agency, pharmaceutical plants become the white elephants that every CEO dreads. With international projects, the regulatory approval requirements are likely to involve multiple agencies, complicating the design process. Facility design must consider the worst case regulatory position of each of the various agencies.
- Risk assessment/mitigation The project manager must conduct an early assessment of the risks expected, and categorize each based on the likelihood of it occurring and its potential severity. The assessment is a living document as the project progresses, some risks will go away as new risks emerge.
- Engineering (3-D vs. 2-D) Most projects in developed regions have migrated to 3-D project execution platforms. However, if the local contractor doesnt have experience with 3-D, many of the benefits can be lost, and converting data from 3-D back to 2-D is more expensive than using 2-D methodology from the start.
- Engineering data At the outset of the project, the owner and engineer should commit to the central management of the project data, with the goal being to migrate data to the commissioning and qualification templates. The data is thus available for commissioning, validation and, ultimately, the seeding of the owners operations and maintenance system.
- Materials and specifications Throughout the engineering process, the owner and engineer should be aware of the differences in tolerances for international materials, and the availability of the materials themselves. For instance, in many locations, the low carbon version of stainless steel (304L, 316L, etc.) is the only form available. Owners and designers should not automatically specify their home standards without first checking material availability and pricing in the plants ultimate location.
- Complexity of controls systems/automation The degree of automation must be evaluated early in the projects life cycle to prevent catastrophic impact should the initial concept fail. In most international locations, less is better.
- Safety Owners may be surprised to find that safety programs that are taken for granted in developed countries dont exist in many locations abroad, so the owner and contractor must establish a rigorous and effective safety program. Procedures should be developed to fit local culture and customs, but the ultimate goal is to establish a project culture that ensures worker safety and environmental protection.
- Transfer of design intent Initial planning for the project should consider the means by which the design intent will be transferred to the site. Once the design has gotten cold in the field, it is occasionally difficult to reconstruct the decision process that led to a specific design feature. Sound international projects always include a methodology for ensuring that the construction site staff has the benefit of the project technical approach established during the conceptual phase and formalized during detailed design.
- Contractor capability Knowledge of the local business environment and the capability of area contractors is critical for execution in an international locale. In every instance, contractors should be prequalified prior to bidding to verify the number of available craft resources, ensure that proper management staff and procedures exist, and determine the past safety performance.
- Local customs The construction manager must be aware of the social, legal and attitudinal differences between his or her home region and the site location. Language and religious customs are the first differences that surface and must be accommodated.
In addition, the site staff must be keenly aware of the holidays and work schedules that are expected by the local work force. In several Asian countries, for instance, workforces can shrink dramatically during the rice harvest season, and the schedule can be impacted if this period was not anticipated. Overtime is commonly used as a schedule acceleration tool, but in many locations the workforce traditionally works a set weekly schedule with little or no variance.
It pays to hire an assistant project manager to serve as a translator and guide to local customs, keeping in mind that indigenous people always appreciate foreign nationals who at least try to learn their language. - Ethics and legal complications Bribery or under-the-table payments are still common in some areas of the world. Principled managers must avoid even the appearance of wrongdoing to protect the fiduciary interests of their companies and the owner.
- Differences in construction tools and methods A construction manager with limited international experience may be shocked to see some of the work practices in developing countries; for example, labor jurisdictional lines may be enforced in some countries, while, in others, these trade distinctions may not exist. In either case, the construction manager and the engineer must be aware of the approach that the local trades take to their work, so that the construction documents can match the local means and methods.
- Productivity assessment If its not measured, its not managed. The only means to ensure that the project is tracking to its budget and schedule targets is to constantly measure and track the results of construction activities.
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