Vendor Selection: What Works

The Bay Bridge’s Newest Section

The California DOT’s selection of a partnership with Fluor and Shanghai Zhenhua Heavy Industry Co., Ltd. (“ZPMC”) to build the new section of the Bay Bridge hasn’t gone well.  It isn’t easy to chose the right partner for a unique project, there are some standard steps CDOT likely followed prior to picking the Fluor-ZPMC partnership.

Site Visits

I assume that CDOT personnel spent plenty of time in Shanghai with ZPMC and their partners, Fluor.  Getting to know a business at their site, reviewing their quality systems and developing relationships with their people are the best way to understand if they could really deliver what was needed for the bridge.

Partnership Audit

How long have Fluor and CDOT worked together?  Who are the key personnel?  How well do they know each other?  Do they have personal relationships outside of the office?  These are tough things to understand and this would usually be considered outside of the boundary of a standard investigation of a vendor, but with a project like this and a partnership with the dynamics of Fluor and ZPMC, it would be essential to understand what the dynamics really are when buying from this group.

Most Favored Nations Clause

A most-favored nations clause usually states that, “what we agree to here will be the best type of terms we agree to with any customer; and if not, we will offer any better terms that are offered.”  For most customers, this is a concern about price – they don’t want to pay top dollar for a system that they find out was sold to someone else for less.  However, this can be extended to items like service response times, quality yields, etc.  Even if it isn’t agreed to, by asking for it CDOT would trigger serious conversations from their vendor – the kinds of terms that Fluor and ZPMC granted to Greater Gabbard on their wind farm would have gone a long way to making CDOT whole for the pain of the faulty welding.

Capability Review

weldsZPMC wasn’t capable of performing the welding needed by CDOT in the volume that was required by the project.  A basic capability review of the vendor would likely have uncovered this.  Further, the welds were to have been tracked in quality systems that weren’t up to par.  A systematic review of the methods needed would have uncovered the weaknesses experienced by both the wind farm and bridge construction projects.  Asking someone, “can you do this welding with the right quality?” will get the answer that passes the question.  Spending several weeks on site and reviewing their current welding and quality recording projects would get a real understanding of what they are currently doing.

A Second Project

Neither the wind farm group nor CDOT will likely work with ZPMC ever again – and in this situation they lose a lot of their leverage.  The potential for a second project would bring ZPMC and Fluor back to the table to address the problems that they’ve had so far.  In fact, it may be the possibility of future wind farm projects that keeps the North Shore engagement on fairer economic terms (these projects may be fundamentally a better fit for ZPMC’s capabilities).  Fluor likely has more incentive since they are most likely to be looking at additional, similar projects.

Conclusion

There are many ways to understand if a vendor’s capabilities will really deliver what you need.  The true costs of bad vendor selection for these kinds of custom projects are far beyond the costs of more diligence on the part of the buyer.  CDOT will spend money for decades repairing this work when it would have been much cheaper to choose the vendor more carefully in the first place.

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