Architects, engineers and cost consultants are all jumping on the outsourcing bandwagon. Firms such as Whitbybird, CZWG, Atkins and EC Harris outsource work already, and others, such as Aukett and Building Design Partnership are getting ready to follow. Joe Woolf, chief executive of Vietnam-based outsource provider Atlas Industries, predicts that the UK outsourcing market alone is potentially worth "hundreds of millions of pounds a year".
Outsourcing makes commercial sense for many UK companies. It offers them access to resources that can be turned on and off as required; it can reduce risk through fixed-price contracts; and with pay for designers at Atlas Industries' Vietnam offices less than £4000 a year, firms can greatly increase their profits. It's no wonder many in the industry, including the RIBA, support outsourcing.
Others, however, are alarmed at the prospect of architectural work going abroad. They fear that the trend, which is only a trickle at the moment, may turn into a flood in which all portable jobs will be done by low cost skilled labour.
For now though, outsourcing is mostly limited to detail design work. "We outsource all our production information – detail design – to an organisation in South Africa. We tell all our clients about it and promote it as an advantage," says Nick Campbell, founding partner at architect CZWG. He says outsourcing has tremendous advantages for the practice. "It saves us assembling a huge production outfit in a volatile marketplace in the limited space that we have, particularly when it is difficult to recruit skilled labour in the UK," he explains.
Other architects are also considering outsourcing their detail design. Aukett Europe has been exploring whether it offers a competitive advantage. "We've looked at outsourcing on a number of projects. We looked at getting production work carried out in India, but we haven't found it to give a benefit as yet; we're also looking at getting work outsourced to South America and Asia but we're not confident [of the quality] at the moment," says Stuart McLarty, a director at the practice. "It is happening – we've just not found the right outsource partner."
Richard Saxon, a director at multidisciplinary practice BDP and vice president of the RIBA's practice committee, says the firm has been considering it for two or three years: "We haven't taken the plunge yet, partly because we haven't needed to and partly because it would mean a change of culture – at the moment all our drawings are done by the design team," he says. BDP does outsource CAD work from its London office, but only to the capital's East End.
It is not just architects that are sending work out of the country: engineers are in on the act, too. "We get our reinforcing details done in Hong Kong; we send perhaps 50% of our details there," says Matthew Wells, senior partner of structural engineer Techniker. Once in Hong Kong, the work is outsourced again, to the Philippines, where labour is cheaper still. For Techniker this system is "very useful, and there is an eight-hour time difference so we get it back the next day", adds Wells. Engineer Whitbybird sends its reinforcement design to an outfit in South Africa.
Not all outsourcing is to external companies; some firms have set up offices in strategic locations around the globe specifically to exploit the commercial advantages of a cheap skilled labour. Cost consultant EC Harris has 44 regional offices around the world, including an office in Jakarta, Indonesia, established to support offices elsewhere for the labour-intensive task of producing bills of quantities. "It is cheaper and it means we can work around the clock," explains Peter Madden, a partner at the firm.
Megaconsultant Atkins has also opened a series of offices for outsourcing. The firm set up an arm in the Emirate of Sharjah four years ago, in partnership with contractor Balfour Beatty Rail and Railtrack, for its design work upgrading the West Coast Main Line. The office is staffed by railway engineers on contract from India, supplied by Rail India Technical and Economic Services (Rites) – the technical arm of the Indian Ministry of Railways. "We have more than 100 engineers working on the West Coast Main Line project, who are body-shopped out to the Middle East from India by Rites," explains Nick Flew, Atkins' technical director for Europe. The company considered opening an office in India but decided on the Middle East because its infrastructure there was more developed. Flew says that the main reason for outsourcing this work was the shortage of UK engineers rather than a cost-cutting drive.
Based on the success of the Middle East operation, Atkins has expanded its outsourcing operation with two further offices in China. Civil engineering work is outsourced to the firm's Beijing office, where the company employs 35 engineers, whereas civil and structural engineering for Atkins' Hong Kong office is processed at its Shenzhen office in south-east China. Setting up the Shenzhen office was a shrewd business decision that should help the company establish a foothold in the lucrative Chinese construction market. Atkins also outsources highways work to its Polish office, and mobile phone mast design for the UK to its Hungarian outpost. Flew says that although the rail outsourcing was driven by manpower shortages, outsourcing operations are "driven by cost".
If cost is the main reason for the growth in outsourcing, time comes a close second. "We do a lot of 24-hour working to meet tight programmes," says Chris Deshon, a project manager at international consultant Sinclair Knight Merz. "If a client rings at four o'clock on a Thursday afternoon saying, 'We need to know this or that by Friday morning,' we can send work to our New Zealand office or to Australia," explains Deshon. He anticipates that this strategy will catch on as consultants realise the benefits of 24-hour working. "We've been doing it for about five years now; in the future more and more consultants will be doing what we're doing," he adds.
These time and cost benefits hold a particular interest for small architectural practices. Outsourcing allows them to handle major one-off projects without the need to employ additional staff, so resources can be used as and when they are needed. "UK architects have a hell of a time maintaining workloads; it goes from feast to famine," says Atlas Industries' Woolf. "We allow the smaller firms to play competitively in the market."
Woolf says that those UK firms that outsource to his Vietnamese operation are not shedding workers by doing so: "None of the firms we deal with have laid anybody off and some are actually taking on more people," he explains. However, this success is likely to be at the expense of other UK practices.
According to Woolf, the RIBA is "very supportive" of outsourcing operations. This is because outsourcing to countries such as Vietnam can save a firm money and it helps reduce risk on a project since many outsourcing companies operate fixed-price contracts. Richard Saxon, wearing his vice president of the RIBA practice committee hat, says: "Outsourcing is not a problem for the RIBA – there is already a shortage of technicians."
The RIBA also views outsourcing as a way of involving smaller practices in PFI schemes. Generally, PFI schemes are large projects on a short timescale, which forces a contractor to use a large practice with a high capacity. Saxon says: "It wouldn't be unreasonable for small firms to outsource work to involve them in PFI. At the moment, small firms cannot be involved because they haven't got the horsepower required, so they team up with other practices or they subcontract out work. It doesn't matter whether that is local or in Vietnam."
Outsourcing has another big advantage for the RIBA: it helps the institute retain its international presence by giving more work to overseas members than they would win locally – and at a better rate. "Overseas subscriptions is the only RIBA membership sector that is drifting downwards," Saxon explains. "The issue is about making overseas membership more relevant to these people."
According to Saxon, those architectural firms that do outsource work are changing the type of personnel they employ, reducing the number of technicians but increasing the number of architects with front-end and management experience.
The British Institute of Architectural Technicians is less than enthusiastic about this. In a statement to Building, the BIAT said: "We have concerns about the concept of outsourcing overseas … Apart from the potential technical concerns, there are also the wider political issues relating to employment." The BIAT is concerned that the growth of outsourcing will change the way architects work in the UK, reduce the quality of work and could eventually lead to job losses. The statement concludes: "There is potentially a huge implication for UK architecture in terms of quality, and the whole architectural scene could alter."
Others, however, see the growth of global outsourcing as simply inevitable. "It must happen – particularly as the growth in system building and off-site manufacturing will make it easier to outsource," warns Aukett Europe's McLarty. Whether outsourcing is a blessing for overstretched practices or a potential curse for UK jobs, market forces have made it a reality that looks set to change the way UK construction operates.
Packed off to ‘Nam: Atlas Industries’ storyAtlas Industries is an outsourcing firm based in Ho Chi Minh City, Vietnam, to service the UK architectural and structural engineering market. Joe Woolf, founder and chief executive, explains how the business works.
What services does Atlas Industries provide?
We do two things: structural engineering through a joint venture with Curtins Consulting in the UK (they have some of their engineers here in Vietnam) and architectural work. The architectural work is 90% producing working drawings with the other 10% producing 3D visualisations.
Why did you set the company up in Vietnam?
My background is structural engineering. I worked in Vietnam about 12 years ago. I taught in the evenings at the university, where I found the students bright and very committed. Vietnam is unique: it has a population of 80 million, half of which is under the age of 25, and with a very high level of education.
I realised that all one had to do was to connect them with work in the West. I returned to Vietnam in 1998 to start the company. What works so well here is the cultural fit – experienced engineers are made to feel very welcome. We’ve got more than 100 staff now and we pay a good salary by local standards.
What type of projects do you work on?
We work for 15 architectural practices in the UK and we’ve done projects of between £1m and £45m. In the last year we worked on more than 40 projects including schools, residential schemes and even an aircraft hangar; and this year we will be starting work on our first healthcare scheme in October. All our clients are in the UK, where we’ve got two offices – one in Manchester and one in London to handle sales, marketing and technical support.
Why outsource work?
The advantages are two-fold. Practices have much higher levels of control because we are a subcontractor, so we have to be more rigorous in our quality control. And we do the work on a fixed-price basis to reduce the risk to our customers. Design changes inevitably occur in the detail stage and we bear the risk. We make the changes so firms can offset a huge chunk of risk. We have professional indemnity cover from a UK insurer so what we are actually doing is adding another level of design checks.
At what stage of the project does Atlas Industries become involved?
We take over projects at, or around, planning permission stage, RIBA stages E, F & G to produce the working drawings builders can build from. Producing production drawings is not the core competence of most practices and it is not the most interesting of work; it is high-value, low-margin work so if you can reduce the cost of it that is good news. Outsourcing allows architects to concentrate their resources on front-end design.
How will outsourcing affect the UK market?
There are 7000 architectural practices in the UK and 95% of them are excluded from PFI work because they are too small. Outsourcing allows the smaller firms to play competitively in that market. There is a lot of work in the UK but the architectural profession is struggling to handle the work as a result of the combination of a huge amount of fragmentation caused by architects leaving established practices and setting up as two-man practices to progress their careers and to earn decent money. It is an unhealthy state for the profession to be in and it is not sustainable. We’ve helped a two-man band on a £30m scheme. There is an immense amount of healthcare work coming through – if firms don’t outsource it through companies like Atlas it will go to US or French companies, which will be a big loss to British architecture because the experience goes with it. The UK outsourcing market could potentially be worth several hundred million pounds a year.
How much does outsourcing cost?
We aim to be between a half and two-thirds of the cost of the UK. We don’t work for the local market here in Vietnam – it would confuse the workforce with different standards and regulations.
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