Early Supplier Involvement (ESI) is becoming the preferred mechanism for many owners and contractors in order to create a better executed project. It can help architects know what’s feasible come design time, reduce on-site labor and logistic nightmares, increase construction speed, and deliver a consistent, high quality product.
A Fast-Growing Concept
The concept of early supplier involvement is steadily gaining traction in North America. However, during a recent trip to the Netherlands, CRH representatives – myself included – had the opportunity to explain the benefits and challenges to businesses who are just becoming familiar with the idea for the construction and infrastructure sectors.
During our time overseas, we met with Samuel Lotchouang Kouam, a graduate student at Delft University of Technology, to discuss the logistics of ESI for infrastructure projects. ESI can be beneficial on many types of projects, and large-scale infrastructure projects are ideal due to their complexity, scale, and the number of people impacted during design and construction.
Mr. Lotchouang Kouam was in the process of writing his graduate thesis on the topic, which is not yet as widespread in Europe and the Netherlands.
Following is a summary of the ESI process, including benefits and possible risks, that we discussed.
Initial Involvement
For infrastructure projects that follow the ESI concept, suppliers often approach the project owner first, interest them in a solution, and then demonstrate the benefits.
However, the stage at which suppliers can get involved depends on the complexity of the project. Depending on the project needs, suppliers can be involved prior to a tender being prepared where various options and potential solutions are discussed. Sometimes, these discussions are formal and require non-disclosure agreements. If the solution is to be submitted as a binding bid, then the products to be supplied must be guaranteed and are subject to the normal warranties and terms.
Other times, there is an informal sharing of ideas where no commitment from either side is made. In these cases, suppliers become involved when the work is tendered, and there is little or no real responsibility from either side. Contractors often wish to retain as much flexibility on price and solution until as late in the process as possible. Unfortunately, the most cost-effective solution is not always the best solution.
When the work is tendered, suppliers become more actively involved and they can propose engineering alternatives and help determine the feasibility of a project. In this arrangement, there is an agreement on the sharing of the benefits of the value-engineered solution.
Supplier Risk
When suppliers and manufacturers get involved early – especially in an informal arrangement – there are calculated risks.
For example, collaboration on ideas and solutions can be taken and be put out to bid to competitors. Also, suppliers can be limited to what they can offer. They want to use their own products that have been researched and tested. However, contractors who do commit to a supplier early in the process can benefit from the supplier’s extensive experience and R&D included in the solution.
Suppliers can experience challenges with satisfying all parties involved with a project as well.
The goal of the contractor and a project owner are often different. The owner has a building or piece of infrastructure that they want delivered that needs to meet numerous lifecycle requirements. They are often cost-conscious, tight on schedule, and want to include sustainable features. The responsibility of contractors, on the other hand, often ends after a limited warranty/guarantee period.
It is often impossible to satisfy both sides from the perspective of a supplier.
Trust and Long-Term Commitments
Having a large portfolio and a vast collection of capabilities can help develop a great reputation globally. Being able to discuss a strategy based on your company’s past experience with new clients can help ensure confidence in the supplier’s solutions.
However, the dedication and experience of the people and team is often what builds the most trust. It is the people that help with contract negotiations, economic high and low tides, value engineering, and innovative solutions.
Starting on a project early – years before a project is conceptualized – can help put the relationships and trust in place that make the practice of early supplier involvement a success.
Early involvement is important, but the value is lost if all parties don't work together to align their approach. Learn more about how owners and developers can benefit from having a manufacturer involved early.
