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Some of these extra costs could not have been prevented or foreseen. No one could have anticipated China's thirst for steel back in 2001, let alone 1995/6; or t

Some of these extra costs could not have been prevented or foreseen. No one could have anticipated China's thirst for steel back in 2001, let alone 1995/6; or the fact that, prior to the GFC, investment in major/mega public/private infrastructure projects worldwide was snowballing due to burgeoning western economies, putting a significant increase on demand for that (relatively cheaper) steel too, as well as the engineering services and human capital to drive it. One thing I see time and again, in projects I've either been involved with directly, or indirectly, is a failure to do any substantive geo-technical assessment in the early planning phases. Not understanding your environmental invariants properly (when they are usually diverse due to the physical scale of these projects) always comes back to bite you later on. It's usually (eventually) a critical path item on any schedule since the structural design is so dependent on them. "In April 2006, a consortium involving American Bridge and Fluor won the tower contract. It was built in China to save money—a decision that carried its own costs when inspectors later found poor welding and busted bolts at key points that required fixing. Frick says the current $6.5 billion total is a rough estimate, and that it doesn’t include interest or financing costs." A mistake most larger EPCM's made in those days. The horror stories regarding the quality of Chinese steel and fabrication back then are very real. It is unthinkable now to let any fabrication of that nature happen there without adequate on-the-floor supervision and oversight.

PhantomGremlin 11y ago
It is unthinkable now to let any fabrication of that nature happen there without adequate on-the-floor supervision and oversight. Why let it ever happen "there" again? What hope is there for domestic manufacturing if China is the go-to source of everything? As one of our great presidents once said: Fool me once, shame on ... shame on you. Fool me... You can't get fooled again! Okay, you get the gist of it.
- triggercut 11y ago
  Two reasons: Because when researched and managed properly you can still get a quality product at much lower costs. It just requires more effort on your part (a decent supply chain department that does their research and manages the risks, mobilizing an appropriate team in country and all the costs associated with that, which may or may not end up working out more). I'm not from the US but we (Australia) have similar issues here. At the moment I work on projects with fabrication of big steel structures with high quality requirements, design once, build three or four slightly the same. So maybe take what I say next about manufacturing (design once, build millions) with a grain of salt. Chinese manufactures can do things that no one else can. There was a blog around 12 months ago where a group of MIT students went to Shenzhen. This quote stood out to me and really summed up the situation for me. "In an interesting twist, the factory boss suggested that we could build the precision molding tools in China and then send these tools to a US shop for running production. Due to our requirement for clean-room processing, he thought it would be cheaper to run production in the US -- but the US shops didn't have the expertise or capability that his shop in China had to produce the tools; and even if they did, they couldn't touch his cost for such value-added services." http://joi.ito.com/weblog/2014/09/01/shenzhen-trip-r.html http://joi.ito.com/weblog/2014/09/01/shenzhen-trip-r.html
SixSigma 11y ago
Except one of the tenets of project management is "what happens if the cost of my raw materials spirals?"
- mikeyouse 11y ago
  You do everything you can to control raw materials prices, hedging gets you a lot of the way there, but what happened to commodities prices in the mid-2000's was completely unprecedented. After holding pretty much steady for the previous 25 years, from 2002 to 2008, the price of steel tripled on worldwide markets. https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=28Fu https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=...
- hugh4 11y ago
  And they knew exactly what to do: bump up the cost knowing the taxpayer would be on the hook anyway.

PhantomGremlin 11y ago

It is unthinkable now to let any fabrication of that nature happen there without adequate on-the-floor supervision and oversight. Why let it ever happen "there" again? What hope is there for domestic manufacturing if China is the go-to source of everything? As one of our great presidents once said: Fool me once, shame on ... shame on you. Fool me... You can't get fooled again! Okay, you get the gist of it.

triggercut 11y ago
Two reasons: Because when researched and managed properly you can still get a quality product at much lower costs. It just requires more effort on your part (a decent supply chain department that does their research and manages the risks, mobilizing an appropriate team in country and all the costs associated with that, which may or may not end up working out more). I'm not from the US but we (Australia) have similar issues here. At the moment I work on projects with fabrication of big steel structures with high quality requirements, design once, build three or four slightly the same. So maybe take what I say next about manufacturing (design once, build millions) with a grain of salt. Chinese manufactures can do things that no one else can. There was a blog around 12 months ago where a group of MIT students went to Shenzhen. This quote stood out to me and really summed up the situation for me. "In an interesting twist, the factory boss suggested that we could build the precision molding tools in China and then send these tools to a US shop for running production. Due to our requirement for clean-room processing, he thought it would be cheaper to run production in the US -- but the US shops didn't have the expertise or capability that his shop in China had to produce the tools; and even if they did, they couldn't touch his cost for such value-added services." http://joi.ito.com/weblog/2014/09/01/shenzhen-trip-r.html http://joi.ito.com/weblog/2014/09/01/shenzhen-trip-r.html

SixSigma 11y ago

Except one of the tenets of project management is "what happens if the cost of my raw materials spirals?"

mikeyouse 11y ago
You do everything you can to control raw materials prices, hedging gets you a lot of the way there, but what happened to commodities prices in the mid-2000's was completely unprecedented. After holding pretty much steady for the previous 25 years, from 2002 to 2008, the price of steel tripled on worldwide markets. https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=28Fu https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=...
hugh4 11y ago
And they knew exactly what to do: bump up the cost knowing the taxpayer would be on the hook anyway.