Effective Partnering In-Country

By Michael Sedge, M.SAME

While venturing into the overseas market can be full of unforeseen obstacles, having the right local partners can make a global transition successful for U.S. contractors.

Thousands of U.S. government contractors plunge into the waters of the global market each year, only to discover they are cooler than anticipated.

While federal contracting procedures and policies are substantially the same as those found domestically, international contracts also include national and regional laws, local norms, and other qualifying requirements. Foreign languages, non-U.S. staffing, employee regulations, international currencies, business laws, and tax policies add further barriers.

Having the right in-country consultants is crucial. Locally registered architect and engineering firms are a good place to start. First, they have full understanding of host nation norms and codes since they work with them every day. They are current on zoning, permitting, fire protection, and environmental legislation. Second, a good “AE” works with many of a country’s top construction companies, which are potential subcontractors for any U.S. government prime.

Finding the right in-country partners and conducting advanced planning can help overcome obstacles to working internationally and make the transition a success.

Revised Approach

In many countries, like Germany, Italy, and Spain, foreign nations have begun to “take control” of projects that are designed and built on their land by U.S. government agencies. Historically, the U.S. government promised to help grow economies and provide work for local firms through these investments, but then agencies would award contracts to American companies to design facilities to U.S. specifications. They would bring in stateside contractors to build, then issue a contract to a U.S. firm to manage the work.
The new construction approach (often enforced by the host nation) is to bid to local firms, allow U.S. companies only if they are partnered with a registered host nation company, and restrict competition to firms that meet local construction requirements, or insert contract clauses that requires a fixed percentage of the work be performed by local subcontractors and laborers.

In Italy, for example, contractors for Naval Facilities Engineering Systems Command and the U.S. Army Corps of Engineers are required to possess SOA certification (Società Organismi di Attestazione). These certificates are issued by the Italian government based on past performance in various construction sectors and can only be obtained by firms legally registered and working in the country (or in some cases, the European Union). A company must document and demonstrate that they have successfully completed similar construction work in the past to obtain the SOA certificate.

Right Outlook

While U.S. firms should focus international efforts toward a specific country, they should also keep regional opportunities in mind. Several companies, for example, operate in Djibouti and then use that office as a hub for all African activities. Using a country-specific office with a regional focus provides for developing wider opportunities while reducing overall operational costs.

While navigating the global market can be difficult, and it is different, it is not impossible. No matter the specific goals are, strategic planning, research, and above all, the right local partners can identify the path to international success.

Steps to Success

Advanced planning and positioning are essential for any company hoping to succeed in the global market. During a recent presentation to military contractors, a speaker asked which two countries, according to the World Bank’s list of growing nations, offered the best investment opportunities out of Brazil, China, Ethiopia, Italy, Niger, and Paraguay. About half the audience selected Brazil and China.

In reality, at the time, gross domestic product indicated that Paraguay, with 13.6 percent, far outranked China (7.7 percent). The best option for international investment was Ethiopia (10.4 percent). This illustrates there is often a significant misperception among business leaders as to which are the best investment locations based on growth potential.

Small businesses, in particular, should look first at their core government customers domestically. What will their foreign footprint be in the next two, five, and 10 years? Based on those answers, consider the countries within those regions as potentially new business locations.

Once a country or two has been targeted, speak with the U.S. Chamber of Commerce, which can give information on foreign countries, setting up business operations, and contacts for the U.S. Embassy’s Economic and Commercial Office.

Michael Sedge, M.SAME, is President, The Sedge Group; msedge@thesedgegroup.com.

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