Building a Production Facility in China

In mid-June 2009, RightSite visited the site of Spirax Sarco's new facility in Shanghai shortly after it had broken ground to find out more about the challenges of launching a new production facility in China. Now, more than seven months later, we check in with the progress on the new factory and distribution centre in Caohejing Pujiang High-Tech Industrial Zone and get the inside story on how to complete a project on schedule in China.

RightSite: It has been more than seven months since we visited your new facility. How has the project been going so far?

Watts: Its going great. The project is well under way and the daily routine is very active and varied. Its fantastic to see what was once an idea, a drawing and a rendering, actually coming out the ground before your eyes.

RightSite: What is the project's expected completion date? How different is this from your original completion date?

Watts: I reckon mid April 2010 will see the completion of the General Contract. This will be about 4 weeks delayed from the original schedule. But this delay was caused by us changing the foundation design and dock levelers to increase operating efficiency and some really bad weather over the summer months.

RightSite: What stage are you at now?

Watts: All civil work, HVAC and mechanical installation are complete. The roofs are sealed and about 60% of the cladding is on. I mapped out some key milestones in the project for those who want to know more details:

• Groundbreaking was 8th May

• Piling and backfilling: this was completed by July 12th

• Steel structure: acceptance of the workshop was acknowledged by QCS on November 3rd, 2009

• Roof installation: the roofs on all buildings were enclosed by January 3rd, 2010

• HVAC M&E: This has been completed except for the part related to decoration, but there has been no delay on such works

• Power Connection: the incoming cable was connected by January 15th, 2010

• Start of Cladding: Cladding started by November 10th, 2009 with work on a mock-up. There was some delay on the installation related to quality of installation but no impact on the critical path of the project.

• Interior Decoration: Fitting out the interior of the buildings started on January 15th, 2010

RightSite: What is the next stage in the project?

Watts: The next step will be to fully enclose the building with the cladding to enable the detailing of the interior. Some areas are enclosed and the interior fit out has already started in these areas. From here on, this part of the project will be relatively fast as the interior can be lit and worked on for longer hours with no impact from the weather or daylight. We are seeking a very high standard of interior and are using one of the best interior design companies and interior contractors in Shanghai.

The project also includes a top-notch access and security system, PA system, AV system and installation of our own production equipment. So all of these areas will be integrating over the coming weeks. All of this follows months and years of planning and preparation.

RightSite: Can you give us a rough estimate of the time required for completing each stage of a project such as yours?

Watts: Of course, you can expect there to be a great deal of variation from one project to the next, but I would recommend starting out with a plan that looks something like this:

• Planning and Design - 1 year

• Site selection - 3 months (concurrent with Planning)

• Bidding and partner (project manager, etc) selection - 2 months

• Government permits - 6 months

• Actual construction - 10 months

• Installation of management systems - 4 weeks

RightSite: What advice would you offer, based on your own experience, to other companies building production and distribution facilities in China?

Watts: There are so many potential pitfalls and the whole process is not for the faint-hearted! Assuming you have good backing from your parent company and a good boss, then the Number One point is to establish an excellent project team of partners. This would include the industrial zone, the local design institute, the project management company, the specialist designers, the general contractor and the representative from the government Quality Supervision Bureau.

Its also important to maintain control over subcontractor selection and suppliers through the whole process. This is the second factory I have built for my employer in China and the early stages are very critical to ensure you capture all of your functional requirements into the designs. What happens on site will be a direct reflection of how well you did all the above.

In addition, you need to maintain a strong position on site and to understand the whole process of contract integration which refers to the management of subcontractors on site. Some subcontractors are within the general contract scope and some are not. Very complex.

RightSite: How about your relationship with Caohejing Hi-Tech Park? Has the park's administration been able to help you in overcoming any obstacles?

Watts: We have enjoyed a long term relationship with Caohejing since 1995 when Spirax Sarco landed its WFOE in China. Caohejing have provided me with excellent support over the years on our original site and now again with our new location. The Zone played an important role in our planning acceptance and will also support our final approvals to enable occupation.

RightSite: We notice that Spirax Sarco is using a third party project management company (SIP) to assist with this project. Does this mean that you, as project manager, get to play a lot of golf?

Watts: Its true that the MD of SIP has an office overlooking the golf course. I had a look out the window but I have to say that so far I have not had the time to play!

RightSite: What about your relationship with the project management company. How do you make sure that they have the project on time and on budget?

Watts: SIP have been involved in the project since the early stages of concept design. Over this period I have developed an excellent relationship with them and my site team are like my company staff. Its important that they are very familiar with all details of the project and having their involvement from the beginning has enabled this knowledge database to be built up. I am lucky that my employer allowed me to temporarily step out of my day job as Operations Manager to devote 100% of my time on this project. The site team won the SIP Site Safety Award for 2009 which was a real boost.

The time and cost are all tied up in the general contract. The general contract needs to be very robust. We are using a FIDIC (International Federation of Consulting Engineers) style that has been customized for the project and weighs about 30kg. For cost variations outside the contract we have a transparent process with the general contractor. SIP perform the quantity surveying service and its all finally negotiated within my site team before any construction. This is managed on an ongoing basis and will save lots of hassle at the contract completion.

David Watts is the Project Manager in charge of Spirax Sarco's Flying Tiger project to build the company's China headquarters. To find out more about Sprirax Sarco please visit http://www.spiraxsarco.com/, or you may contact David directly at DavidWatts(at)CN.SpiraxSarco.com