Run trap lines daily
optimizing cultural, bureaucratic and political risks in large international projects
Commander David F. Kelley, CEC, USN, Resident Officer in Charge of Construction, Northern Italy
In the early 1800s, European entrepreneurs moved into the uncharted lands of the Northern American continental frontier. Trading Companies sponsored expeditions to satisfy market demands for quality furs, and these territories offered virtually unlimited product. The challenge; however, was to be first to market. To succeed in their quest, trading companies established supply networks and outposts and hired thousands of adventurous people to trek into the wilderness to harvest pelts.
The trappers answering the call became the international project managers (IPMs) of their time. Working in unknown territories with limited support, specific objectives, and demanding production schedules, they faced challenges and risks at every turn: unfamiliar terrain, severe weather, an unfriendly indigenous population, political differences among competing nations and unwilling participants in the harvest. Like today's IPMs, those rugged individuals had to cope with cultural, political and bureaucratic challenges found in their very special situation.
To survive they had to quickly adapt, track, and produce. Getting fur to market quickly required all the knowledge, experience and wiles they could bring to the task. It wasn't simply laying trap lines and reaping the reward—they had to know how, when and where to work and had to overcome the dangers along the way. The work was physically and mentally hard, challenges were many, and risk of misread signals could be deadly. If they didn't run their trap lines, they could lose their catch (and profit) to unscrupulous contenders or hungry prey.
Today, being an IPM is a bit more civilized. But, on the other hand, an IPM's project success requires just as much attention to cultural, political and bureaucratic risks. Managers who want to survive on international PM assignments have to overcome all the risks posed to their counterparts from the 1800s.
This paper relates the story of “Aviano 2000,” the US Department of Defense's (DoD) largest current base construction program. It is being carried out in Italy under the financial sponsorship of the North Atlantic Treaty Organization (NATO) and the United States. Our aim is to provide examples of real-life challenges faced by the program team and individual project managers as they strive to complete the program and meet sponsors' expectations. The focus is on the cultural, political and bureaucratic constraints and risks faced by project managers, how they've been met, and what the results were. It shares successes and failures and gives PMs working in global project management tips to prepare them for success.
Let's begin by discussing the scope and environment of our program.
Dating back to 1956, the Italian Air Base in Aviano has been home to a series of United States Air Force (USAF) units, mostly in support roles. From then until the 1990s it did not even have aircraft permanently assigned, serving only as a forward deployment site for USAF fighter squadrons involved in NATO contingencies. In 1994, things began to change dramatically for the 1700 permanently assigned USAF personnel, when NATO, recognizing Aviano's key strategic position in the Mediterranean, relocated the 31st Fighter Wing and its two squadrons of F-16's to the base.
With the new squadrons and support personnel, the base military population doubled and grew to nearly 10,000 including families. Base facilities were inadequate, undersized and in poor condition to cope with this influx and new mission. Land for development was at a premium, but in May 1996, the Italian Air Force ceded an additional 210 acres for US use adjacent to the 950-acre main airstrip. Even with the additional land Aviano is considered small by US Air Force standards.
The Aviano 2000 program, as laid out by initial planners, was a half billion dollar base expansion. It is a mixture of operational and community support facilities; 264 in all, with projects ranging in size and complexity from simple renovations to existing facilities to ground-up construction of major new buildings. It also includes utility infrastructure and communications backbones to support the entire complex. Operational facilities include restoration of the 7500-foot runway and its lighting, a new control tower and radar approach control system, and fighter squadron operations facilities. Support facilities include jet engine and avionics buildings, ground fuel stations, warehousing, munitions storage and assembly, crash fire station, passenger and freight terminal, an integrated communications complex and a security force complex. Community support facilities include a 20-bed hospital, a 1,500 student school, dorms and family lodging, dining facilities, an exchange and commissary, a gym, library, youth center, theater, post office, and a childcare center. Aviano 2000 builds an entire new city.
Exhibit 1. Program Environment
The program is being executed in a dynamic, multinational, multicultural environment. Exhibit 1 is a diagram from our orientation program. It depicts elements that impact our core task: project delivery. All of these, customers, sponsors, management and oversight layers, external actors, and rules and events combine to present us with international project management issues that need attention every day. The cultural, political and bureaucratic aspects upon which this paper focuses are identified in the following boxes.
External actors/rules. External actors shown here are Italian, from defense officials, to regional and provincial administrators, to a group of 11 local mayors who are impacted by the presence of the base in their communities. Many of these actors are politically motivated. To fully understand this, one must know that Italy currently has more than 20 political parties at the national level, and each is represented at regional, provincial and local levels. Also within the box, Italian safety, security and environmental laws have increased in recent years. This is due largely to Italy's strong commitment to the European Community and strong activism by Italian citizens.
Political Events. Politics impact our program as it does anywhere in the world. In this block we show the Environmental or Green Party, which has come into its own in recent years. We can count on the environmentalists to closely scrutinize our projects and their impact on the Italian way of life. “EA-6B” refers to the February 1998 incident involving a U.S. Marine Corps EA-6B operating from Aviano that hit a cable car in the Alps, killing 20 skiers. The repercussions of that event impacted our program for quite awhile. Also, major air campaigns and recent terrorist threat increases affect our work.
Construction Contractor Selection. Another bureaucratic, and potentially political and cultural, aspect of our environment is how we select contractors. ICB or NCB refer to “International Competitive Bidding” and “National Competitive Bidding.” For NATO's $350 million investment, ICB is used. This affords the 19 NATO allies who contribute to the common infrastructure fund an opportunity to participate in the award process. This has its own set of practical, bureaucratic and political challenges.
As with most large construction programs, day-to-day technical execution of projects pales in comparison to how cultural, political and bureaucratic aspects can impact a program. The ways that stakeholder expectations, process and procedures (including funding), labor, contractor relations, security and safety touch us sometimes seem infinite. Let's examine them.
Stakeholders are found at every level of the NATO, Italian and U.S. structures and interests, responsibilities and agendas abound! Communicating and coordinating with sponsors, customers, managers, production employees, producers, suppliers, contractors, and local government agencies is a full-time job.
NATO. NATO pays a large share of the construction bill. When we started planning in 1994, there were 16 nations in NATO. Membership later increased to 19 and the Alliance is planning to increase it again soon. NATO project approvals are based on “Consensus” rather than “majority vote.” The reality is we have 19 NATO stakeholders to consider.
Italy. Italy is also a primary stakeholder because the base is its sovereign territory—the U.S. and NATO are guests here. The NATO-U.S.-Italy relationship involves considerable bureaucracy.
United States. The USAF also funds a large share of the program. Therefore, our program team is accountable to a very complex hierarchy that runs from the local commander to the U.S. Congress, and we have oversight at every level to ensure we meet the public trust.
Agents. There are actually four agents performing construction management services for the Air Force and NATO clients: the Naval Facilities Engineering Command, the Army Corps of Engineers, the Air Force's Base Civil Engineer organization, and the Italian Air Force.
Process and Execution Challenges
Project and Funding Approvals. Our project and funding approval process is bureaucracy at its finest. Because the projects are being built on an Italian Air Base, Italy is a full participant at every step. NATO and U.S. funding systems require those bureaucracies also be involved. These approval processes and relationship are lengthy and ripe with pitfalls for the uninitiated.
In the conceptual stage, each project must be approved by Italy, NATO and the U.S. for scope of military operations authorized within Italy, approved program scope authorized by NATO Ministers, and U.S. force structure planning.
Italy. The Italian Defense General Staff (IDGS) reviews each project to ensure it meets approved NATO and U.S. operations within Italy. Each fiscal year (1 October-30 September) the USAF presents projects to Italy for review. Once it receives our project requests, Italian military headquarters staff them with defense officials and regional civilian authorities. At various points the USAF is called in to explain economic, environmental and cultural impacts. This system frequently becomes complicated as special interest groups raise concerns.
NATO. Following its decision to station the fighter wing in Italy, the NATO program and project approval process began in earnest. The NATO Security Investment Program (NSIP) funds 90 of the largest projects ($350 million). NSIP funding comes from the 19 member nations. Therefore, each expects to have a say in how the funds will be expended.
United States. The U.S. total contribution is close to $265 million, when one considers new or renovated USAF funded facilities ($175M), “Cost-Shares ($50M)” to add needed scope to NATO funded projects, and communications, furniture and equipment to outfit the new facilities ($50M). Approval of US funded projects falls into specific rules established by Congress. Each funding source has its own set of submission rules, which have been standardized over time by the DoD and individual Services. Project submissions are also based on DoD, budgetary and planning cycles.
Labor Issues and Risks
For any large international construction program, labor availability affects delivery timelines. We have experienced considerable challenges in various aspects of labor and have adjusted program progress to take this into account. Some of our major challenges include:
Manpower Availability. Shortages of manpower in Italy's Northeastern region, where Aviano is located, have become a way of life for us. Current Italian demographics show zero growth rates, a move away from manual labor because of higher educational levels, and increasing labor costs in all sectors. Our contractors have complained about the high costs of manning their job sites to their schedules. Italy has a strong demand for non-Italian workers. While the Italian government has provisions to allow a regulated number of foreign workers into Italy for industry and the trades, the bureaucracy is complex and can be costly for contractors.
Skilled/Unskilled Labor. At one time this region of Italy had all the requisite skills for construction work. This has changed. Today's youth are not interested in the trades. Again contractors complain about a scarcity of skilled labor and the costs of finding and relocating the necessary labor to our job sites.
Perceptions of Illegal Labor. Partly related to the labor situation described above, Italy also has a serious problem with clandestine workers, commonly referred to as black labor or “Lavoro Nero.” In some cases, clandestine labor is portrayed as being supported by organized crime. Periodically, for political reasons, there have been accusations in the press of “rampant” illegal labor on the base. These emotional articles resulted in the local regulatory agencies responding. On occasion, local police authorities “blitz” our job sites to roust workers and inspect their documents. We run a very clean program, but negative press and constant police scrutiny impact our work.
• Partner with local authorities (police and labor inspectors) to increase your understanding of the labor situation, to help locate laborers, and to keep your job sites clean.
Contractor Issues—Bidding and Pricing Challenges That Lead to Challenges in Construction
Our main challenges during initial contract pricing are the NATO ICB process (similar to the sealed bid, firm fixed price method), bid preparation timelines, native language differences with regard to contract specifications, and other cultural differences.
To have a project accepted for funding by participating NATO nations, one must assure initial pricing is market based; that there is competition in the bidding process. The directed solution is to use ICB procedures where prospective bidders are given a copy of the drawings and specifications and 45 days to provide a sealed price offer. Contracts are awarded to the low responsible, responsive bidder. Challenges surface as prospective bidders develop their offers. First, they must read and interpret a 200-300-page specification, written in English. To imagine the difficulty of this, think of trying to read a technical novel in another language, and then using it to price out a $5-20M construction job. Drawings are a bit easier to interpret, but this also leads to challenges. Since specifications are so daunting, we have discovered many prospective bidders look only at the drawings and bid based on historical square meter pricing data. Ultimately this manifests itself in construction execution slowdowns when the successful low bidder discovers he underbid the real work to be accomplished.
Secondly, different standards of quality control and safety enforcement among nations frequently create problems. On U.S. Navy executed projects, our specifications are consistent with US standards. They have different requirements than Italian contractors are used to. For example, we require a full time safety officer on the site whenever work is going on. This person can have no other duties. In Italy, the Site Superintendent normally performs this job. This creates a price challenge when we inform the contractor he must provide an additional full time person for a two-year job.
Another example of price (and time) equation differences relates to the size of subcontractor firms. In Italy most subcontractors are family run units of 5-10 people. Prime contractors putting together bid proposals on $5-20 million projects are stressed to coordinate subcontracts within the 45-day submission timeline we require. This also results in underestimating, causing problems in execution.
So, given these challenges, how does one get good pricing and ensure performance during construction?
First, we concentrated on ensuring our designers were familiar with Italian materials and work methods. Design project managers at Engineering Field Activity, Mediterranean (EFAMED) and Atlantic Division, Naval Facilities Engineering Command (LANT-DIV) have responded to the challenge. This improved over time as the U.S. based designers spent more time in Italy and as feedback was provided from the field to ensure designers were aware of any significant differences. These improvements applied to work methods and processes as well as material substitutions.
• Know what materials and work methods are available in your area of the globe and use them to your advantage.
• Next, we expanded the bidding time from 45 days and ensured we keep the solicitation period out of normal Italian vacation periods. NATO procedures allow for additional time for the bid period if projects are technically complex. By properly communicating the issues with sponsors we were able to meet program objectives.
• Know how the local contractors price their goods. Make sure your requirements are well understood.
In addition, where possible, we have used our Best Value Source Selection (BVSS) process to award contracts with great success. In BVSS, the prospective offerors provide a technical proposal along with their pricing data. Award is made based on best value to the government considering more than just price. This method also lets us discuss possible pricing oversights with the contractors prior to award. With BVSS, we have very good competition (4–5 firms participating at a minimum), and good pricing relative to our estimates, along with fewer challenges during construction. We have awarded 14 contracts in Northern Italy over the past two years with BVSS, all of which were within 10% of our estimate. With NATO ICB in the same period, of 19 projects, we have had nine that exceeded our estimates by more than 10%. We also see a much lower change order rate in projects awarded with BVSS (less than 2% with BVSS compared to 6% with NATO ICB). This means a greater chance of maintaining the delivery schedule. With better initial pricing and less changes, we are, in fact, much more successful with on time project delivery.
• Build a partnering relationship with your contractors and share lessons learned while you are getting pricing data.
• Be especially attentive if you are communicating in a language different than your own.
Further, we looked at other places in the ICB process where we could increase communication with the construction contractors prior to award. We established pre-bid conference standard minutes to review common pitfalls in bidding (such as required QC and Safety staffing, adherence to quality control specifications, submittals of proper elevator systems, etc.). We also now validate all apparent low bidders' offers thoroughly, no matter where it was relative to the government estimate, to help discover possible errors in pricing.
• Communicate and learn.
• Find every opportunity to pass along lessons learned.
Designer/Construction KTR Interface
There are significant differences in the relationships between Italian construction contractors and designers compared to the United States. Italian Architect Engineering (A/E) firms produce a product we consider 80–90% complete. In U.S. government work we expect 100% designs. In most cases, the Italian A/E spends more time on site working final details of construction. Changes of structural materials or work methods are often done as the job progresses. Our system was not set up to handle this. Contract challenges arise when he learns we will only accept what is in the contract.
This caused a significant impact on contractors who did not understand our system at bid time. Either they were loosing an untenable amount of money and stopped work entirely, or they suffered through their first project with us, accepting losses, and adjusted their bid prices in later work. Politically, both of these outcomes proved challenging. In cases where work was stopped, we had to terminate the contracts for default. Obviously, a foreign government who defaults a local contractor in their home country gets attention. We have spent considerable time explaining the way we do business at various levels, from local to national. In the end, our defaults were supported, but not without political interest that cost us time.
The relationship between Italian contractors and U.S. based A/E's is even more challenging because of time and geographical differences. Many of our projects are designed by firms with home offices in the Norfolk, Virginia area. While the A/Es do have Italian consultants, the bulk of post construction award work is performed by the prime A/E 4000 miles and six time zones away. We have responded to some of these challenges by bringing the designer on site a few times during construction, but we still face the challenge of timeliness when responding to requests for information from the contractor.
• When in Rome, build the Coliseum, not thatched huts. In construction, know what materials and work skills are available to you.
• Adapt your processes to the local culture.
Since the Italian construction contractors were more used to seeing the designer face to face and we have limited Post Construction Award Services (PCAS) dollars, we have established recurring on-site submittal and RFI reviews at the 20% and 50% construction stages. This helps ensure the A/E is physically available on site, so that initial architectural and mechanical/electrical issues can be dealt with to keep the project on track.
To deal with the time difference and physical separation between our construction contractors and designers, we are in the initial stages of using a web-based solution to handle RFI management and response. Technology acceptance in Italy is behind the U. S., but we hope this will eventually improve accountability and speed as well.
• Use technology to your advantage.
Most international construction programs don't have base security as a key consideration. At Aviano, joint U.S. and Italian security procedures apply and require constant attention. Assuring we have a “non-threatening” work force inside our installation has always been high priority, but since September 11th, our concerns have tripled. Our current procedures ensure contractor personnel, along with their vehicles, equipment, and deliveries don't pose a threat to the operational mission.
To deal with this, we have a standing construction procedures working group to address, among other things, labor force security issues. We have installed high-tech solutions to closely screen the work force, process workers entry in a timely and secure manner, and keep our sites secure.
A very real impact on our construction program has been contractor complaints about increased security procedures. One immediate action following September 11th was to shut down all our job sites. That lasted for a number of weeks. Closing down job sites and restarting them is quite an endeavor and not without significant costs. Contractors have requested almost $5M in additional compensation because of work lost. Our response will undoubtedly be a mix of money and time.
The War Against Terrorism is long-term; therefore we must constantly balance our security response with our construction mandate.
• Act quickly to include security experts as part of your project planning team.
• Establish a rapid decision-making mechanism to deal with real time increases in security postures.
Our safety program presents its own cultural, bureaucratic and political risks. Although we in DoD have a very successful construction site safety program (our ratio of lost time accidents to labor hours times 200,000, the Industry standard measurement, is below 1.0), there have been challenges implementing it in foreign countries. Historically, Italy has had one of the highest construction site accident rates among EU nations, but in the last decade changes in Italian law have focused on safety. In spite of these positive factors, in 1999 we had a death on one of our construction sites, which increased scrutiny from local regulators, recently empowered to inspect and levy fines.
Our response was to face the challenge head-on. We met with Italian safety inspectors to establish a cooperative planned inspection schedule, and made all of our procedures available to them, so we could each benefit from the other's experience. The response to this has been great. Our local contractors are much more attentive when U.S. personnel point out needed corrections, as they understand it's much better to follow our advice than risk a fine or worse when Italian authorities inspect. Our safety inspectors and the local safety regulators have teamed to ensure the contractors know we mean business.
With increased cooperation; however, have come challenges. Italian safety directives are heavy on administrative procedures. The U.S. approach is heavy on practical aspects on the job sites. In the early stages this was a bone of contention, but by “partnering” we have worked out procedures acceptable to both.
• Learn the local rules. Each country has a different approach on safety and you need to know it.
• Partner, Partner, Partner with local regulators. They can enhance your safety program because local contractors respond to their authority (and fines).
For the trapper, delivering products (and individual survival) depended on preparation. They had to come ready with the basic skills: hunting, trapping, skinning, survival techniques (living off the land, tracking, etc.), tools (rifle, Bowie knife, etc.) and a clear objective of their mission. But, they also needed excellent awareness of the cultural, political and bureaucratic aspects of their task. They needed to know the turf, the folkways and mores of people in their area of operations, the facts about who owned (or thought they owned) the terrain, and the bureaucracies (explicit and implied) that “prevailed” in their territory.
“Situational awareness,” most of which was learned “on-the-job,” was the key to keeping their scalps. Ideally, someone mentored them as they entered the wilderness for the first time as young trappers.
In today's international project management, you too need to make “situational awareness” your modus operandi prior to entering the wilderness.
Prepare for the Assignment
• Read about the culture, history, bureaucracy, and politics well before you arrive at the job site.
• Talk to people who have been to the location and get a feel for the situation and the players.
• Learn something about the language. You may not have time to master it before you go, but you should know what the language(s) is/are, their basic form, and the alphabet. There is nothing worse than showing up in a place and not even having an idea what language is spoken there.
Once in Place—Lay Trap Lines Carefully
• Clearly understand your mission, objective, and task.
• Determine how the mission, objective, or task fits into the operating environment.
• If possible, hire a political advisor, either full- or part-time. Be careful here—advisors also have agendas …
• Meet all the players and keep note on their roles and agendas.
• Keep your eyes and ears open and your mouth closed. Many foreign cultures operate just that way. If you violate the mores of the culture you are operating in, you may kill your chances to make meaningful and productive relationships to help you in the job. You understand all of those things in your home culture, but they are different in other places.
• Keep working on language skills—you'll surprise yourself at how well you can do and how well you'll be accepted by the locals if you give it a try.
• Continue to tune your situational awareness throughout your assignment—Never become complacent to the cultural, political and bureaucratic signals.
Once you've started your assignment and laid your trap lines, it's critical that, like the best mountain men, you run them daily. If you don't, you're bound to find that someone else is grabbing your game.
Proceedings of the Project Management Institute Annual Seminars & Symposium
October 3–10, 2002 • San Antonio, Texas, USA