Ashburn, VA (Vocus/PRWEB ) January 7, 2010 -- Western companies are actively investing in China to take advantage of its domestic market size and a lower cost manufacturing base. A persistent common belief is that processing facilities can be built in China at a cost that is 30 to 50 percent cheaper than if they were built in the United States or Europe.
IPA has authored several studies on China projects
A recent IPA study by Independent Project Analysis, Inc (IPA) found that this premise is wrong. Using data from over 120 capital projects executed by 37 American and European companies in China, IPA evaluated project performance based on scope-for-scope comparisons between projects in China and their “twins” on the U.S. Gulf Coast (USGC).
The study found that the costs for processing plants in China executed by Western owners are actually just 10 to 30 percent cheaper when they are designed to meet Western quality, operability, and safety standards and are resourced to protect the owner company’s intellectual property. Moreover, the IPA study found that the costs to execute capital projects in China have been on the rise over the last several years, outpacing the rate of increase in the United States and Europe.
Independent Project Analysis, Inc. (IPA) concluded that many Western companies do not have a clear understanding of the practices necessary to successfully execute projects in China in the most cost- and schedule-efficient manner. Many projects are plagued by high costs and cost growth, long execution schedules and schedule slip, and major operability issues. In fact, almost 50 percent of the projects executed in China could be considered failures.
IPA highlighted a number of practices that lead to better project outcomes, including the use of local content, procurement practices, and contracting strategies for working with Chinese design institutes and construction companies. The IPA study also quantified the cost and schedule impact of the efforts by Western companies to protect intellectual property for their projects.
The study is part of IPA’s continuing effort to help companies improve capital project effectiveness in China. IPA has been collecting data on capital project performance since the late 1990s and has authored several studies on China. A current effort is under way to assess performance of China site-based small capital projects in order to provide a basis for businesses and plant managers to improve performance in maintaining and improving their company’s Chinese assets.
About IPA
Since its founding by Edward Merrow in 1987, IPA has rapidly evolved into the preeminent consultancy in project evaluation and in project system benchmarking, and has become the industry leader in quantitative analysis of project management systems. Our staff of about 140 project and research analysis professionals at seven offices on five continents serves hundreds of clients. The largest oil companies, chemical producers, pharmaceutical companies, minerals and mining companies, and consumer products manufacturers enhance their capital productivity using IPA's Project Evaluation System (PES®) and project system benchmarking services. Further information can be found at http://www.ipaglobal.com.