Vendor Selection: The Bay Bridge

Choosing the right vendor is never easy.  The California Department of Transportation’s recent woes with the $2 Bn updated suspension span segment that was overseen by the US construction firm Fluor and physically built by Shanghai Zhenhua Heavy Industry Co., Ltd. (“ZPMC”) illustrate some of the challenges in choosing your partner in long term projects.

It is not easy to figure out who to work with in these situations:

  • How do I know who can do this project if it has never been done before?
  • How do we contract with each other in the case we encounter unforeseen problems?
  • How does a customer run the vendor evaluation process to get the right outcome?

There aren’t any perfect answers.  In a perfect world, CDOT would circulate an RFP and there would be 50 companies who had built identical bridges with long track records that are easily audited.  The competition under this scenario would be dictated by price.  Unfortunately, classical economics don’t work here.  CDOT has a unique site with unique time and other needs.

To choose the right vendor they needed time to develop trust in the vendor.  With enough time and exposure, they would understand what the vendor can and cannot do.

Time would allow ZPMC to fully understand what CDOT’s needs really are and whether or not a relationship with Fluor could help them achieve their goals.  From ZPMC’s standpoint, signing up for a project where they can’t deliver doesn’t help their interests – it only creates an installation that can’t be supported.

Unfortunately, it doesn’t sound like there was enough time for all of the parties to truly understand what they were getting.  ZPMC hasn’t met the quality and reporting needs of the bridge.  Welding methods that were needed weren’t followed correctly.  CDOT may have gotten a deal on the bridge, but the service and maintenance costs will be far beyond their initial estimates.

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