Contracting for services? Qualifications should come first
Chris McGinnis had a problem. As vice president of manufacturing at original equipment manufacturer Bulk Handling Systems (BHS), it was his responsibility to engage the outside engineering services he needed to implement the controls for his clients’ automated material handling systems. His initial solution was to hire a different control engineering firm for each project, usually the low...
Chris McGinnis had a problem. As vice president of manufacturing at original equipment manufacturer Bulk Handling Systems (BHS), it was his responsibility to engage the outside engineering services he needed to implement the controls for his clients’ automated material handling systems.
His initial solution was to hire a different control engineering firm for each project, usually the lowest bidder. “That’s where we got into trouble,” says McGinnis. “We saved money in the short run, but we didn’t get 24/7 support, our computer programs weren’t being protected and backed up adequately, and we could never be sure that the control panels they were outsourcing to other contractors satisfied all the applicable codes, especially for our overseas projects.”
Moreover, McGinnis began to worry about the long-term consequences of hiring very small companies: “They could disappear tomorrow. Or if they’re a two-person firm and the one guy who wrote all our code were to leave, we’d be just as bad off. Trying to reconstruct their work would be extremely messy and costly, especially for retrofit projects on systems we’d installed four or five years ago. A couple of times we’ve had to tear out all the old controls because it was too costly to reconstruct what the original engineers — now long gone — had done at the time.”
The price of engineering services is a major concern for packagers and other buyers of engineering services, but it's not the only one.
Of course the moral of this story is that you get what you pay for. That age-old truism applies not only to products, but to professional services ranging from medical care to building construction. Cost is certainly an issue, but it’s the skill of the practitioners and the quality of their work that determine the true value of their services.
Recognizing this fact, U.S. Congress enacted the Brooks Act in 1972 to establish a qualifications-based selection (QBS) process for federal agencies when acquiring architectural and engineering services. QBS is a competitive procurement process in which engineering firms submit qualifications to the procuring agency (“the owner”), the owner assesses the expertise of the competing firms, and the most qualified firm is selected to negotiate the project scope and associated fee. If the owner and most-qualified firm cannot reach an agreement, the owner then negotiates with the next most qualified firm.
QBS has been so successful at the federal level that it has been adopted by 44 states and hundreds of localities throughout the country. It is also widely endorsed by the American Bar Association, the American Public Works Association, the Associated General Contractors, and all major design professional associations. Automation system integrators are design professionals too, so QBS can help end users procure the most qualified engineering services for their industrial automation projects.
Value versus cost
The QBS process also embraces value by identifying project fees prior to the signing of a contract. Proposals are weighed first on competence, creativity and performance, then by negotiation of a fair and reasonable price with the most-qualified firm. This creates an atmosphere of trust where the owner and a firm’s engineers can develop a detailed scope together, avoid miscommunication, and establish a mutually agreed upon price.
The fee for the technical skills and experience provided by a high quality engineering firm amounts to approximately 1% of the total cost of the project. Yet these services are critical to determining the other 99% of the project’s life-cycle costs, as well as the quality of the completed project. QBS creates a relationship that allows the owner and design professional firm to work together to develop the project scope and determine alternative materials and designs that will minimize long-term operational and maintenance costs.
That’s why it pays to remember that the best can also provide the best overall price. “Low cost does not necessarily mean low quality,” says Clarence Hines, CEO and president of system integrator Controls & Automation Consultants. “I have found that imagination, innovation, and creativity can provide low cost solutions.”
To illustrate this point, Hines points to a commodity purchased sometimes on the basis of cost and sometimes on quality: blue jeans. “Have you ever observed the quality of a high-priced pair of jeans compared to a low-cost pair of jeans? Sometimes you can notice either double stitching along the seams or single stitching. To reduce costs, some top-notch companies might opt to use single stitching, while an imaginative smaller company might invent a low-cost method to perform double stitching.”
Similarly, says Hines, his company uses “concurrent engineering methods and imaginative brainstorming sessions as a part of our project work breakdown structure. My team members are instilled with the notion of working smarter not harder to design systems that are of lower cost to clients, yet every bit as effective at getting the job done.” Such an attitude is a qualification worth noting.
Mark Massa, vice president of Glenmount Global Solutions, notes that his system integration firm also has been able to lower costs without sacrificing quality. “Leveraging the collective vertical market experience of all our divisions has allowed us to lower a client’s cost by creating industry-specific development and programming tools. We can often provide solutions with greater functionality and embedded process expertise at an overall lower cost. Clients value our knowledge from experience; it is a key component to their success and ours.”
BHS’s McGinnis has now adopted his own qualifications-based selection process that relies in part on best practices codified by the Control System Integrator Association (CSIA). “We’ve hired a CSIA-certified integrator — Concept Systems — to handle 95% of our controls work,” says McGinnis. “They build all of our control panels to code, they keep up with all the latest automation technology, they document all of their work in a standardized format, and they help us bid all of our projects, so I’ll know upfront how much the controls are going to cost and how much margin I can shoot for.”
Concept Systems also helped BHS negotiate local support for its international projects and helped the company transition from one brand of automation equipment to another, complete with code porting and staff training. “All that extra effort and expertise isn’t free,” notes McGinnis, “but it’s worth the extra cost.”
Vance VanDoren, Ph.D., P.E., is consulting editor with Control Engineering, www.controleng.com . Reach him at email@example.com . Ron Brenke is QBS manager at American Council of Engineering Companies - Michigan. Reach him at firstname.lastname@example.org .
Creates a competitive procurement process;
Chooses the most qualified firm to negotiate project scope and associated fee(s);
Ensures proper attention is given to control engineering services;
Recognizes that low cost is an issue, but it should not come at the expense of the skill of the practitioner and the quality of related work;
Avoids selecting an engineering firm based on the lowest bid;
Weighs proposals first on competence, creativity and performance, followed by negotiation of a fair price;
Allows flexibility to select the professional design firm best suited for the task.
Creates an atmosphere of trust so owner and a firm’s engineers can develop a detailed scope together;
Allows the owner and design professional firm to work together to develop the project scope and determine alternative materials and designs that will minimize long-term operational and maintenance costs.
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Before the calendar turned, 2016 already had the makings of a pivotal year for manufacturing, and for the world.
There were the big events for the year, including the United States as Partner Country at Hannover Messe in April and the 2016 International Manufacturing Technology Show in Chicago in September. There's also the matter of the U.S. presidential elections in November, which promise to shape policy in manufacturing for years to come.
But the year started with global economic turmoil, as a slowdown in Chinese manufacturing triggered a worldwide stock hiccup that sent values plummeting. The continued plunge in world oil prices has resulted in a slowdown in exploration and, by extension, the manufacture of exploration equipment.
Read more: 2015 Salary Survey