Hired Hands in Foreign Lands

Is outsourcing a dirty word?

By Sean Ryan

Outsourcing is creeping up on the construction industry like a clumsy phantom. People can hear it drawing near, but they can't see it well enough to know what its intentions are.

Architects and engineers in Wisconsin tell tales of unnamed firms hiring companies in Southeast Asia to do construction drawings for projects. The foreign drafters were cheaper than America's computer-aided designers, so the companies neatly underbid their competitors.

Technically, outsourcing is just another word for subcontracting. But as a buzzword in the industry, outsourcing has become one and the same with the concept of offshore outsourcing, or offshoring, in which a company subcontracts foreign firms to handle domestic work.

And that's the notion that has generated interest and concern in the construction industry. Architectural and engineering associations in Washington, D.C., are chewing on the outsourcing phantom, unsure of how widespread it is and how it will change the industry's future. For them, it goes back to a basic human instinct — fear of the unknown.

The most extreme scenario of outsourcing's impact is enough to make any engineer shudder. If the American industry is out-priced, it could go belly up and leave a wake of unemployed engineers.

That potential loss of jobs has turned the National Society of Professional Engineers against the practice of outsourcing unless no domestic firm can provide the needed service. Lee White, the society's director of government relations, said the association cre-ated a template letter on its Web site for members to write lawmakers urging them to support bills that would hinder the practice.

"We've gotten more letters sent to Congress on this than on any of our other letters," White said. "People are really upset about this. This is an emotional issue."

It's more likely that outsourcing wouldn't eliminate American engineering so much as change its operations in some fundamental way. There's no guarantee that foreign companies' labor costs are cheap enough to edge out the locals, who have advantages of their own. At this point, there's really no saying what the phantom is going to do.

"This is happening so fast that I'm not being facetious when I say I don't know," said Don Hanlon, chair of the University of Wisconsin-Milwaukee Department of Architecture. "I've never seen any clear analysis of this. It's all anecdotal."

Tne reason outsourcing is so cryptic in Wisconsin is that none of the architectural or engineering firms here seem to do it. Hanlon and the association people in Washington say big firms on the coasts in New York and Los Angeles are trying it out, but outsourcing hasn't migrated inland yet. Even if the inland companies haven't tried it, they've heard the stories.

John Miceli, director of operations for Eppstein Uhen Architects Inc. in Milwaukee, heard of an out-of-state company that used a foreign firm to prepare construction documents for a Wisconsin job. It outbid the local competition.

But outsourcing remains ambiguous, and that, in turn, makes it hard to handle, said White. He can't tell what something is all about unless he knows who is doing it and how often it's done.

"The one thing that both sides of this issue agree on is that there's not a lot of good data on it," White said. "The next step is going to be a real push by Congress, and probably the administration, to get some real numbers on this because everyone is grasping at fog here."

Although outsourcing's who, when and where are hazy, the why has been identified. The main reason for a company to outsource is to gain a competitive price advantage over other firms. Some firms do it on fast-track projects because the different time zones in Asia and America allow for around-the-clock operations. Other companies outsource because they don't have the staff to perform the work in-house.

“We haven't looked into it deep enough to see the financial benefits because I am not comfortable with it from a legal standpoint.” John Miceli

The future of outsourcing relies on what the next round of stories will be. The future of the industry relies on how it decides to use outsourcing.

The practice is still a young phenomenon in America. It's easy to show that foreign construction drawings are cheaper in the short term, but it takes time to reveal all the potential pitfalls that may come after the point-of-purchase savings.

"As with anything, the proof is in the downfalls, and I don't think those have really been developed yet," said Mark Zimmerman, vice president of Zimmerman Design Group in Milwaukee. "If it's going to cost an owner more money because there was a quality issue in the documents that they didn't find till after construction — those are the issues that are going to manifest themselves."

Foreign firms' potential for error is the sticking point for outsourcing. It is an international practice where the burden of responsibility falls at the most local level. The company commissioning the work holds all the liability and is responsible for all of the oversight. If a drafter in Bangalore fudges the construction documents, and the resulting building has problems, it's the Wisconsin company's fault.

"We haven't looked into it deep enough to see the financial benefits because I am not comfortable with it from a legal standpoint," Miceli said. "There are just hundreds of things that they could be doing wrong. So the review process we'd have to do with that would be more intense."

There's no reason to distrust the companies because they're Indian, Indonesian or Chinese. The point is that an outsourcing relationship forces local firms to put a huge amount of trust in a business they've never seen, in an owner they've never looked in the eye.

"For us to do that with someone we don't even know … I don't know if we would do that at all," Miceli said.

n Wisconsin, companies are still waiting for the proof to surface. The vague stories aren't convincing enough, and the practice hasn't spread so far that it is threatening companies that aren't doing it. But the caution is a double-edged sword because if the practice proves successful, there'll be spoils for the first companies that jump on the bandwagon.

"Wisconsin, historically, is conservative and wait and see — wait and see that it works somewhere else and it will follow suit," Zimmerman said.

“As with anything, the proof is in the downfalls, and I don't think those have really been developed yet.” Mark Zimmerman

"I think firms in Wisconsin should take a firm, hard look at it. They need to really investigate it to see if there is some merit to applying it to their business strategy sooner rather than later."

Outsourcing becomes a scarier phantom if it makes good business sense. If it turns out to be a bad idea, it'll go away. If it becomes a common practice, it'll be the industry's biggest shift since computers replaced pencils in the late ’80s.

"It's like when Wal-Mart goes to town," said Michael Welman, president of Welman Architects Inc. in Waukesha. "I think the embracing part is a long way off because, in a way, it's like embracing a thorn bush. You don't really know what's on the other side."

The shift from in-house to offshore drafting means companies would have different people in different locations working on the same construction drawings. That concept bears both the cost of losing jobs and the benefit of saving money. America's architectural/ engineering industry would lose a link in its production chain through the elimination of positions geared toward producing drawings. If foreign companies draw America's construction documents, the people who used to draft them here will have to do something else.

"That tier could diminish, or it could actually disappear," Zimmerman said.

Eliminating the drafting tier would also erase the traditional entry-level position for students graduating college, Hanlon said. The education community doesn't know how its students will break into the industry without the well-beaten path that starts at a computer-drafting console.

"This is not good to hear from our standpoint because this is taking away entry-level architecture work from our students," Hanlon said. "We don't have a solution to this. I don't think anyone has a solution to this right now."

If it is no longer good enough to just produce drawings on a computer, engineers must learn to do that and more. Out- sourcing could change the demands that firms place upon their engineers and, in effect, change what it means to be an engineer.

"They have to create their own attractive edge as they go out to be hired," Zimmer-man said. "Are we going to have bread lines because of it? I doubt it. People are going to have to adapt to raise their own bar."