Are High-Value Centres really adding value to our projects? or are they simply just Low-Cost Centres?
Like any other business sector, the Energy industry and explicitly the leading oil and gas EPC contractors, have been trying for the last two decades to earnestly reduce the cost of their projects and make their business models leaner and more competitive. This has caused the rise of what is called “High-Value Centres” (HVC), the engineering execution centres located in countries which can benefit from low-cost local skill workers, capable of carrying out the work under the supervision of the project head office.
Different HVCs have been utilised by leading EPC companies within various regions and countries, with Indian players being the front-runners for doing detail engineering work for many global scale projects.
So, the question is, after almost two decades of practising outsourcing the work to HVCs, how successful and efficient has their approach been?
Have lessons so far been learnt and necessary changes made to overcome the issues from previous projects? Have HVCs become a reliable option for our future projects and clients?
Evidently, the answer is NO.
In fact, a lot more could have been achieved and learned through this period of delegating work to HVCs, comparing to what we have done so far.
However, despite this criticism, the current challenging oil and gas market urges EPC companies who want to stay competitive in the bidding process and acquiring new work, to reduce their cost of workforce significantly. This won’t be possible with executing the whole project from the home office and avoiding the practical challenges of working with HVCs.
Hence, considering the painful experiences and case-studies from past projects so far, certain principals need to be regarded as the essential requirements of outsourcing engineering work to HVCs and must be implemented into any relevant work practice and process by main EPC contractors:
Setting up a robust communication system is the lynchpin of using HVCs for any project task. Regardless of the geographical locations and time differences between the project home office (HO) and the HVC, there must be a set of reliable and simple communication tools in place to let everybody in all offices communicate effortlessly when required.
While new technologies and communication tools are already helping to avoid some of the past issues and lifting some barriers significantly, more efforts need to be put towards the simplicity of any communication system. This will also have a major effect on reducing the cost of training for the project team.
Defining the right tasks
Having access to an HVC to execute a project does not mean the main tasks of the project can be divided between the offices evenly. Careful considerations need to be in place when splitting the work at the beginning of the job. This is only possible with trying to allocate the more straightforward, routine and repetitive tasks to the HVC and keep the more challenging and niche work, which might need various meetings and discussions, between the contractor, client, third parties and other involved parties in the main office.
Implementing the right Culture
One of the most challenging aspects of using HVCs and executing a project across various offices is introducing and maintaining the right culture within the global team. This might look simple but needs to be planned and implemented very carefully at the beginning of the project.
The One project – one team culture must be promoted and implemented across all project offices. However, different regions and countries have different local and traditional working cultures. This sometimes conflicts with the routine working culture of the central office which can’t be learnt and implemented over the night.
This can be seen when somebody makes a mistake, or something goes wrong which nowadays, are mainly considered as the fault of a process or system rather than blaming an individual. In contrast, in many HVCs around the world where the no-blame culture is not yet in place, employees are afraid of being punished and lose their jobs if they make a mistake. This, sometimes becomes very problematic when the head office requests a correction on the work, as they focus more on defending their work rather than following procedures and applying corrections.
This is an important fact which shouldn’t be put on the back burner and needs to be addressed early enough on the job to avoid potential impact on the efficiency of the project team.
Building and maintaining the team
While putting together the local project team at the HVCs is a crucial step to kick-start the project, maintaining its integrity for the duration of the project is even more critical.
For instance, there have been many cases where local employees of HVC offices have left the project after adding six months of work experience with a major EPC company to their CV, for a better job in the Middle East or similar places.
Therefore, the right approach is to put together a team of suitable skilful people, providing them with the required further training, and using the right incentive tools and measures to keep them loyal to the project.
In short, the competitive market will push the leading oil and gas EPC companies to use HVCs even more often, to keep their costs and prices as competitive. Despite the fact that the experience of using HVCs have not been smooth and efficient, applying the principles mentioned above and some other project-specific considerations would help EPC companies to increase the productivity and efficiency of this practice.
In Emveedo Energy, we provide a wide range of engineering and bespoke consultancy services to our clients aiming to improve their work practices, processes and workflows