Big risks in outsourcing engineering?

Frank Soto is a passionate advocate of engineering localism.

Australia is seeing major temptation in outsourcing engineering services to low labour cost countries. But the head of local engineering company Soto Consulting Group advocates the exact opposite, while practicing what he preaches.

Soto’s managing director Frank Soto says he understands the allure of outsourcing engineering designs and drawings to third world countries via the internet to save money, but warns of the hidden pitfalls that could be costly on large projects in bulk handling.

“As is the case with any cross continental business arrangement, there are always pros and cons,” he said.

“But in this case it involves engineering services so the consequences can be very damaging if the issue isn’t thought out properly.

“Whether the end client is a mining or energy company, food processor, bulk handling operator or any application where engineering is needed, the following considerations have to be at the forefront of decision making.”

  • Adherence to Australian Standards
  • Close working relationships v distant connection
  • Legacy value
  • Economic benefit and general business opportunities


Adherence to Australian Standards

An engineer trained, say, 22,000 kilometres away might not be fully conversant with relevant Australian Standards and this is where technical liabilities can arise.

“If a product, system or facility has a problem or even a catastrophic failure, any minor aspect of the project — such as a subcomponent — that is not engineered to the relevant Australian Standard can very easily be blamed for the problem,” said Mr Soto.

“This can be the most serious of issues because Australian engineering has very strict measures in place to ensure even the tiniest engineered component meets expectation, so everyone outsourcing to countries on other continents needs to beware of this.”


Close working relationships

Close collaboration is a priceless asset in engineering projects for all industries. While the internet has theoretically brought distant parties a lot closer, there is no substitute for actual physical availability of engineers on location when needed.

According to Mr Soto, this is absolutely priceless for clients as has been proven countless times by his firm.

“Speed, accuracy, competency and top return on investment benefit greatly from close working relationships between an engineering company and its clients,” said Mr Soto.

“We have proven this many times over the years, with one of the most compelling examples in recent times at BlueScope steel in Port Kembla after a huge fire destroyed a fibreglass stack in late 2014.

“We performed extensive advanced analysis and engineering to ensure BlueScope a six week turnaround for design, manufacture and installation.

“In no way could this have been achieved without a close, professional understanding built over time and we still claim that such an accurate and rapid turnaround is very unlikely from any other engineering company – anywhere in the world – because of that tight working relationship with the client.”


Legacy value

More often than not, smaller aspects of projects are being farmed out to low-cost-labour countries. As ongoing work with a client is the ultimate goal for any engineering company, questions are being asked as to whether it is worth the risk in Standards just to save small amounts of money with this outsourcing practice.

“One has to look at the overall legacy value engineering companies deliver for their clients,” said Mr Soto.

“Pretty much every project we do is not just for today, it is expected to be part of our society tomorrow and we always engage our own engineers to do those designs, those drawings and those plans rather than look to save a little money commissioning it to an anonymous engineer overseas.

“Our reputation rides on everything we do for our clients – that is a legacy value proposition and the risk posed by sourcing design from an individual unfamiliar with Australian engineering Standards is just too great because there is too much chance for negative impact on our client, therefore compromising the ongoing legacy value in the project.”


Economic benefit and general business opportunities

Many industries publicly declare the importance of ‘buying Australian’. Frank Soto, for one, is passionate about this issue.

“Australia can easily claim to have among the most educated and field-hardened engineering professionals in the world and I have always been vocal that our industries are best served working more closely with them,” said Mr Soto.

“The economic benefits are many: apart from the obvious in that it stimulates more work for our engineering companies, the closer working relationships with domestic firms will ultimately deliver more profitable outcomes through smarter planning and streamlined solutions so the general economy will be healthier for it.”

Contact: 02 4271 7755

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