Made In America: Buying Criteria for Infrastructure Projects

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The notion of “Made In America” takes on new meaning when one considers the evolution of a story that first appeared in the New York Times on June 25. That story examined the rationale behind the State of California’s decision to source the San Francisco-Oakland Bay Bridge largely from China (at least the materials; e.g. steel and the structural fabrications).

On July 4 we wrote about that project, specifically calling out the fact that arguably the most tree-hugging state in the nation thought nothing of either sustainability or carbon footprints when deciding to accept the project bid from American Bridge (yes, that moniker is somewhat ironic given the story) and Fluor Enterprises.

Not surprisingly, Roger Ferch, executive director of the National Steel Bridge Alliance, submitted an open letter to the NY Times (that was not published) in which he cited large cost over-runs, the loss of US jobs as well as poor environmental stewardship in the Caltrans award decision. MetalMiner reviewed both the NSBA letter to the Times editor and spoke with Brian Raff, NSBA’s marketing director, to verify how the trade association calculated the cost over-run.

He pointed us to this article and quote: The SF Public Press (December 2009) states, “the stated price of construction has grown nearly fivefold, from the $1.3 billion estimated in 1996 to more than $6.3 billion today. A year and a half later, the NYT article specifically mentions that, “at $7.2 billion, it will be one of the most expensive structures ever built.” This reasoning led us to state an overrun of $5.2 billion ($7.2B (NYT) 1.3B(SF Public Press) = $5.2B).

This video highlights the delay with the steel shipments:

From a Sourcing Perspective

Call us crazy, but based on our own personal experience in the area of strategic sourcing with dozens of global sourcing projects under our belts, we would argue that statehouses lack the understanding needed to make TCO (total cost of ownership) decisions. In fact, we’d submit that our own home state of Illinois likely leads this list. So we thought we’d reiterate the high-level sourcing criteria states ought to consider in greater detail when sourcing mega infrastructure projects:

  1. Materials (the obvious place most organizations will examine)
  2. Labor costs — let’s not just look at a wage comparison chart, but rather factoring in the cost of quality (QA trips to China ought to be part of the equation)
  3. Contract administration costs
  4. Project management costs (particularly in light of potential delays)
  5. Inspection costs — both US QA personnel and also third-party inspectors
  6. Freight/logistics costs
  7. Duties/tariffs
  8. Inventory carry and finance
  9. Carbon footprint as measured in output of emissions associated with the movement of the materials (raw materials and otherwise), transportation costs (fuel, pollution costs)
  10. Sustainability use of recycled materials for the production of steel (China mostly uses blast furnaces as opposed to electric arc furnaces)

Somebody once told me the best items to source from China ought to fit in shoe boxes. Whoever thought this would save California money had a screw loose.

Undoubtedly, other major domestic infrastructure projects will come to fruition soon. Hopefully, state procurement offices will do a better job sourcing those projects than Caltrans did.

–Lisa Reisman

Comments (5)

  1. bret koprowicz says:

    They were going to get the steel from Japan if it were not coming from China. We do not have any US steel makers who could have filled the order.

    1. admin says:

      Hey steel producers – anyone care to chime in on that last comment “we do not have any US steel makers who could have filled the order.” That sounds ludicrous to me but maybe I’m mistaken…

  2. Ex-Beam Guy says:

    don’t know the details of the steel requirements, but i am not aware of any steel product that can not be manufactured in the U.S. The reality is that likely when this project was bid, construction activity was booming in the U.S. and the folks in China overcommitted and underperformed on costs and delivery. Now the $64,000.00 question is how do you hold them accountable ???

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