Editor’s Note: As part of our ongoing industry leadership profiles, Mark Shaw, ENR Mountain States Bureau Chief, conducted the following interview with Alan J. Krause, president and CEO of MWH Global Inc., in the engineering firm’s Broomfield, Colo., headquarters on April 25. An edited version of this interview appeared in the May 14 issue of Engineering News-Record magazine.
ENR: Can you give us an update on the Panama Canal Expansion project, for which MWH is leading the design? Any lessons learned there yet?
Alan Krause: We are well through the design, about 80% of it, and on target, but the owners want it done by 2014, and we’ll be pushing that. The main issue is concrete production. There are 5 million cu yd of concrete on this job. We now have the production infrastructure in place and are into heavy production mode.
We may also have to do some re-sequencing of the gates to meet the schedule. They weigh 8 million lb each, so it’s going to be quite a task to get them from the manufacturer in Italy to Panama. There are almost no ships big enough to carry those lying flat and if you try to transport them upright, you’ve got the world’s largest steel sails. That will be an interesting problem to solve.
ENR: There has been a lot of news lately about international firms experiencing big ethical and legal issues, including bribes, bidding problems and subquality work. How does that impact the industry’s image abroad?
Krause: That’s one of the biggest challenges international companies face. The recession has driven price points down and risks up. We (at MWH) have a rigorous risk policy, but it’s not always a level playing field out there. Many countries don’t have the level of regulations and compliance they need. If we’re looking at doing business in a ‘red-zone’ country, we go beyond (our usual precautions) to protect ourselves.
ENR: How have those increased risk factors affected the international business climate?
Krause: Like all other firms, we try to define risk, manage it and insure against it, but owners became more resistant to adopting risk during the recession, so that complicates the equation. Companies that have taken on bigger risks just to grow or stay afloat are taking huge chances, rolling the dice. Today’s increased risk factors force you to choose very carefully where you work and who your clients are. Clients that are not business savvy often create risk issues.
We work in places that are on the fringes (of safety), but we have deliberately avoided battle zones around the world. We were not in Iraq or Afghanistan, unless the work could be done from outside those countries. We have been in Pakistan since 1950, but it is a very challenging place to work, with increased security risks.
ENR: Why did MWH stop working in Brazil, a country you’d done business in for decades?
Krause: We sold our operations there to a French company. Brazil presented several challenges, including the fact that it was very hard to get paid. Also, business ethics there were not conducive to us, including the social costs. You essentially buy employees for life—you have long-term obligations to employees, even those that work on a contract basis.
I think there’s a lot of naivety among companies (about the rush to do work in Brazil). There are huge infrastructure issues and lots of positives, but it’s not easy. To be successful there, you have to play the Brazilian game.
ENR: So what international markets look good to you?
Krause: We do mostly wet infrastructure, and only about 10% mining, but we are targeting more energy-related work, especially oil and gas. We want to grow more in Canada, maintain a strong presence in Latin America and increase our presence in Australia, especially on the West Coast.
Africa has a huge need for water projects, but where is the funding going to come from? We’ve been doing hydropower in Ethiopia for about 15 years, and we worked in South Africa until things slowed down after the World Cup—but any new push in Africa would have to be strategic and highly focused. The European market is not that big for us, but we will continue to be a big player in the UK (United Kingdom). We do not work in China.
ENR: What about India or other places in South America?
Krause: We have a large resource center in India, about 350 people, and another 350 in Peru, that allow us to integrate design tasks worldwide. We now have people working on designs 24 hours a day. Our drawings are on a world server and everything is linked. It’s mostly Revit-based, with a common accounting system to expedite billing.
ENR: So this offshoring is mostly to cut costs?
Krause: Cost is a factor, of course, but speed (of design) matters to many oil and gas clients as much as cost. And it’s not just to cut costs here. There are cost benefits to using an American workforce on Australian projects; it’s cheaper because of the difference in the value of currencies.
ENR: What’s your take on the state of infrastructure in the U.S.?
Krause: That’s all over the board, but what really hurts is not to have a coherent energy policy here. How do you justify investing billions in projects without a long-term energy policy? But I don’t see much hope for that any time soon.
One of our big markets, wastewater projects, will continue to be anemic until employment increases, the housing market stabilizes and more funding becomes available. P3s (public-private partnerships) may be an answer (to funding some infrastructure issues), but P3s are going to raise taxes or fees for users probably faster than a municipality would, so P3s may be an interim solution, at best. The real conundrum is what happens to the users/taxpayers until the funding mechanisms get sorted out.