Business & Labor

Offshoring: Is It Good Business?

Global sourcing is the latest rage, but it's enraging more engineers, owners and politicians
(Full article available at: enr.construction.com)
By Debra K. Rubin, Peter Reina, Mary B. Powers and Tony Illia
In a March 24 announcement of new steps to keep state contractors from sending work overseas,
Minnesota Gov. Tim Pawlenty (R) revved up the rhetoric. "We need to encourage jobs in New
Prague or New Ulm," he said, referring to two small towns in the state, "not New Delhi."
The rhetoric is flying in this election year as governors, members of Congress and lobbying
groups of all political persuasions, not to mention engineers and contractors in the U.S. and
abroad, square off on one of todays fastest-growing global work force trendsoffshoring.
The cost-influenced move to send or subcontract design and other tasks to overseas locations
with cheaper payrolls, from India and the Philippines to Ukraine and Poland, is not new. Large
contractors such as Bechtel Group, Fluor Corp., Jacobs Engineering Group and Washington
Group International (WGI), have been offshoring for private owners for years, often at clients
request.
In some cases, work is just spread to contractors less expensive overseas offices. In others, it
goes to outside enterprises. "Fluor has been working with global engineering centers for at least
15 years," says Jeff Faulk, group executive for oil, gas and power. "They comprise a small part
of our work force, about 1,000 people or 5% of staff around the world. This gives us a
competitive advantage on cost, but more importantly, it gives us local content."
But as offshoring spreads faster and deeper into the industrys marketplace, confusion and
resentment reign. Engineers worry that media references to offshoring as "outsourcing" may
confuse regulators and threaten firms ability to gain potentially lucrative work in
commercialized government activities.
The question of offshorings job impact also is elusive. Opponents see thousands of U.S.-based
positions headed overseas to individuals willing to work for much less. Advocates say offshoring
is needed to fill current engineer gaps that will only grow over time. They add that professionals
at most offshore locations, particularly in India, are highly degreed and well-supervised. "The
handholding is very tight," says Prasad Bhukta, a business manager for InfoTech Enterprises,
whose California unit procures offshore photogrammetry and GIS work for its Hyderabad, India,
operation. Others say offshoring is creating many high-paying management jobs in the home
country and a new crop of entrepreneurs.
But others wonder whether lower-paid workers can meet Western quality standards and if
offshored work jeopardizes project security and the profession itself. "With work being done
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offshore for less, will engineers standard of living stagnate or decline?" asked an attendee at an
engineers conference in May.
With the economic downturn, cost pressures have intensified for corporations and public
agencies. More routine, labor intensive and often low-end functions have been moving abroad,
but the trends get more attention in an election year. WashTech, a union-affiliated lobbying
group in Seattle, issued a report last month that found offshored "telephone help desks" in 42
states.
Despite the political noise, designers and clients here and abroad are hearing offshorings Siren
call louder than ever. "It actually could cost us more jobs if we did not have an overseas center,"
says Jack Herrmann, spokesman for WGI, which has a low-cost center in Romania. "Price is
king. If youre not in the competitive range, you wont get the business."
Globalized, high-speed communication has propelled offshoring, executives say. "Its hard to tell
now if work is done in Oman, Jordan or Pasadena," says Liz Moore, vice president of
engineering and technology for Parsons Corp., Pasadena, Calif. "That wasnt the case 10 years
ago when we were sending tapes with design drawings every Monday and Thursday. Now
theyre sent at the speed of light." But she says Parsons no longer uses its Philippines-based lowcost center.
More offshoring is "absolutely inevitable with the availability of professional staff as you project
forward," adds Norman Schunter, group managing director at W S Atkins plc, Epsom. "We will
keep the front-end work close to our clients, but a lot of projects will be done overseas." Atkins
now has about 100 people working globally in its office in Sharjah, United Arab Emirates.
Another 50 to 60 are based in Bangalore, India, focusing on non-U.K. work.
At least one U.S. owner agrees. "I dont think U.S. jobs are being lost, theyre being gained,"
says Jim Porter, vice president of engineering for DuPont Co., Wilmington, Del. "We get more
construction for our money; were able to build more projects and we have more work for the
majority of vendors." He says DuPont has offshored construction for "at least a decade," but still
uses it for less than 2% of total project spending. "We make certain that contractor arrangements
make business sense," says Porter. Proprietary process-related work is exempt.
Others are concerned that offshoring could spread details of critical infrastructure to outsiders,
even terrorists. "When we map for a county government, were mapping everythingtreatment
plants, airports, etc.," says Woolperts Cowden. "To have this go overseas, bothers me."
Federal offshoring legislation that has progressed farthest is in a bill originally set to retaliate
against World Trade Organization sanctions. Offshoring language, added by Sen. Christopher
Dodd (D-Conn.), would ban federal contracts to firms that offshore and require states to certify
that federally funded work is done here. It passed the Senate but has not yet been touched by the
House.