Mistakes that make choosing the wrong contractor

Causal Study of Project Failure

Rasoul Hadadi Neyestanak *

The officially registered groups called private or public companies have provide the employers with services for many years. A company can be categorized in different ways in the world. The most important criterion for categorizing a company is its type of activity.

Then, we can mention company records, rating documents, licenses and standards, financial strength, product and service quality.

What we are trying to explain in this article is the false habit of recognizing and using the required services. The arrangement and use of services is different in developed countries. Furthermore, the percentage for the right selection of equipment, commission, and utilization of services beyond the employer's expectation will be considered as scheduled.

These parameters have been less important in current projects, and the important steps of the project, such as commissioning, can not be achieved, or even the project just benefit from a minimum of qualitative features.

The key question is why, with increasing the purchasing power and the choice of consulting and supervisory companies, such problems still persist.

If we ignore the project management and financial problems in this question and assume that these two major factors are correct, there will be another important influential issue that needs to be addressed.

If we take a look at the Persian Gulf sites, especially the UAE or European countries, we will notice that the second criterion for ranking companies, after the field of activity, is being an exclusive, distributor agency, or solution provider.

The field of activity of solution provider companies is usually extensive. They support a lot of brands and have comparative table of brands. These companies purchase directly from the manufacturer or brand agents, and often introduce their services with the terms such as “solution provider” and “implementation of projects as EPC (engineering, procurement, implementation and commissioning)”.

The solution provider companies carry out most projects in these countries.

These companies also choose a brand in accordance with the needs of the employer, the type of project, future needs, employer finance, the type of industry used and other items. A brand is evaluated by providing engineering documents such as the solution description, design criteria, LOM & LOP, implementation constraint, compliance with the Statement, operation manual, implementation timetable, training program, engineering design documentation, and general implementation.

The employer also examines several solution providers and finally selects the winner. Such companies have advantages over other exclusive agents, because they use their extensive experience gained through the cooperation with several brands and different systems to recognize the most important feature in the world, namely integration, and they can provide innovative and acceptable solutions using the standards of each system.

Even in very large projects, the solution provider company divides the project works into smaller parts, offering each part to a smaller solution provider company or a brand agent company, and employ them as contractor. In this case, as the main integrator, they will exchange information with consulting, supervisory, and employer groups.

The projects are often directly offered to the exclusive representation or product distributor company customarily. This leads to the following:

1. The exclusive agency masters the protocols and standards of its system. The biggest problem for employers has always been the integration with other systems in the projects. In addition, because of the lack of technical knowledge of systems by a few employers and consultants, the integration and even the implementation process are carried out in a non-systematic and incomplete way.
2. The exclusive agency is only responsible to give services within its own system and doesn’t go beyond this. Therefore, the employer doesn’t get into trouble in obtaining information and completing the systems.
3. The competition is focused on increasing sales and decreasing services, because of the sales report follow-up according to the balance sheet, the presence of an agent from a foreign manufacturer in home representative company, and the profit gained from the sales of goods by the representative.
4. Due to the fact that the solution provider companies are not welcomed by the employer in local market, such companies are turned into exclusive agencies, or dealers of equipment.
5. The assets of solution provider companies include its personnel and their experiences in working with different brands, but the assets of exclusive agencies are the brand of that company.
6. Solution provider companies are strong consultant for projects.
7. The solution provider companies are required to be professional researchers, attend international exhibition, follow the latest news on technology, and master the latest engineering solutions.
8. The projects carried out by solution provider companies enjoy higher advantages in implementation; and the employers are provided with longer period of guarantee and after-implementation services.
9. The solution provider companies should always meet the satisfaction of project engineering team including consultants, supervisors, and employers. Therefore, such companies depend on the employer because of the provision of services and not offering a specific product for a period.
10. Because of their dependence on equipment, the financial assets of brand agencies are higher than that of solution providers. Therefore, these two types of companies are dependent to each other. The projects carried out by solution provider companies are listed in brand projects and their sites.
11. The price of the services of solution provider companies has been 10 to 25 percent of the price of equipment. This price is economical if we take into account the provided services.
12. The solution provider companies are required always to follow a scientific standard in provision of engineering and commercial documents. Considering the type of services, the solution provider companies deliver the required documents to the customer according to an initial list, even without any need to the employer’s request. Such services are listed under expenses in representative companies and are not easy to offer.
13. Considering that the exclusive agencies are welcomed, many companies have requested to be a representative of reputable brands by accepting the required commitments. Sometimes by purchasing equipment from original equipment manufacturer (OEM), they produce a new brand, site, company, and shipment document. However, if a solution provider company is welcomed, the original company either became forced to open a new branch in that country, or offers a representation by accepting the required conditions.
14. The solution provider companies are themselves active in project as a consultant or second supervisor, and accept the risk of working with various products and their doing integration works.
15. The provision of inventive solutions is one of the main characteristics of solution provider companies.
16. The identification of solution provider companies out of their websites is easy. They work with various brands. They are formed from various departments and are active in all fields of engineering activities. However, they welcome the variety of solutions for several systems and any solution to solve the problems in other systems.

With regard to the mentioned points, it is expected that the employers have a specific view in selecting the contractor companies. Considering the enhancement of society’s level of knowledge, as well as the increase in employment of professional specialists, who have higher proficiency, the employers should try to reduce the number of dealers in various industries, and try to receive upgraded, innovative and credible services. It is under such conditions that the problem of unorganized situation of projects will be resolved and the ways for national development will be created.