Outsourcing production work is becoming an increasingly popular strategy for many mechanical, electrical, and plumbing (MEP) firms. While it provides many advantages such as lower financial risk, access to specialized skills, and faster project timelines, it also comes with its own set of challenges. We will review the most common advantages and challenges in this post and provide mitigation measures to overcome them.

Advantages of Outsourcing

Lower Financial Risk – Although labor rates are generally higher for outsourced production work, the opportunity cost of hiring, training, and retaining new employees is far greater than this premium. There is also the advantage of being able to predetermine the scope for a project, which makes it easier for the firm to hold the third party accountable and ensure they are receiving the scope of work outlined in the production services agreement.

Access to Specialized Skills – When an MEP firm decides to outsource production, it opens the door to a wide pool of specialized talent, including designers and consultants with experience in specific industries or technologies. This additional expertise can be particularly advantageous to a firm that is trying to break into a new industry or technology. Having an expert on staff, even temporarily, would dramatically steepen the learning curve of a firm’s current employees.

Faster Project Timelines – Leveraging a third party allows firms to allocate resources more efficiently and produce a higher volume of work in a shorter time. The current market for design work is incredibly demanding from a cost, quality, and schedule perspective. When coupled with the labor shortages handicapping the architecture and engineering industry, firms are more strained now than ever before. Outsourcing production is one way a firm can alleviate some of this mounting pressure.

Challenges of Outsourcing

Quality Control – Probably the most significant challenge of outsourcing is the potential for lower-quality work, which can lead to cumbersome QA/QC processes and inefficiencies. In short, the firm is no better off than they were before hiring the third party. To combat this challenge, firms should carefully vet production partners – at a minimum, reviewing their portfolio, references, and qualifications. Furthermore, firms should ensure there is contractual language allowing them to end the relationship and recoup fees from the third party if standards continue to not be met.

Communication – Communication is the most common reason partnerships break down, period. Even if the third party is local, it’s paramount that firms establish clear communication protocols, including scheduled check-ins, meetings, and progress updates in the production agreement. If the third party is located outside the MEP firm’s native country, these protocols should be vetted by an expert who has experience working with other firms in the third party’s locale.

Intellectual Property – When an MEP firm’s work is given to any third party, the inherent risk of intellectual property theft or data breaches comes to life. Similarly, to communication protocols, it’s essential that firms draft production agreements exhaustively detailing ownership and protection of intellectual property. Robust data security measures, such as encryption and secure file sharing, also need to be implemented to protect against data breaches.

Conclusion

Although hiring a third party involves inherent and unavoidable risks, outsourcing production work can bring many measurable and immeasurable benefits for MEP firms. As the market continues to demand higher performance from design, engineering, and construction teams, the conversation around outsourcing is evolving from “Should we hire a production firm” to “Who is the best production partner.” We have a wealth of experience at ATG and can provide your firm with the help it needs to continue growing and tackling more complex projects.

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