Tag Archives: USA business news

Tender Of The Year? Bidding Opens For US-Mexican Border Wall

Tuesday 4th April marks the deadline for companies to submit papers detailing their proposals to build the Trump Administration’s “big, beautiful, powerful” Mexican border wall. But will the massive construction project ever win the funding it needs?

US Customs and Border Protection has issued two 130-page RFPs, offering a glimpse into the Trump Administration’s vision for the 2,000km barrier designed to stop illegal immigration and cut off drug-smuggling routes. More than 1,100 kilometres of the border has already been fenced, but the existing walls are nowhere near as imposing as those detailed in the RFPs.

The RFPs indicate a massive construction project, with specifications including:

  • A 9-meter-high reinforced concrete barrier, extending 2 meters underground to prevent tunnelling.
  • A similar barrier made from durable, see-through material.
  • The wall must be “cost-effective to build and repair”.
  • The barrier must be “physically imposing” and capable of resisting almost any attack by “sledgehammer, car jack, pickaxe, chisel, battery-operated impact tools, battery-operated cutting tools [or] oxy/acetylene torch for a minimum of one hour.”
  • At the same time, the wall must be “aesthetically pleasing”, reflecting Trump’s campaign promise of a “beautiful wall”. Reports note that this requirement only applies to the North-facing side of the wall.
  • Features to prevent anyone from scaling the barrier or attaching grappling hooks to its summit.
  • Incorporation of electronically controlled gates for vehicles and pedestrians.

Customs and Border Protection intends to award multiple contracts based on responses to its request statement. The selection process begins with an initial elimination round, after which the contestants will submit more detailed technical proposals. After a second round of eliminations, finalists will gather in San Diego, California to construct a small-scale “mock-up” of their wall design. Sledgehammer-wielding government representatives will then “test and evaluate the anti-destruct characteristics” of the designs before awarding contracts.

What will the wall cost?

During his presidential campaign, Trump estimated that construction would cost $12 billion, citing his personal involvement as a factor in driving costs down. Republican House Speaker Paul Ryan has estimated $15 billion, while a US Department of Homeland Security internal report indicated the wall would cost as much as $21.6 billion and take over three years to build. A preliminary version of the president’s budget for fiscal 2018, beginning in October, includes $2.6 billion for the first phase of construction.

While the RFPs appear to require a highly-visible and physically imposing barrier, some companies have proposed hi-tech solutions to border security that could provide a 90% saving to the government. Examples include having two chain-link fences with a “no man’s land” in between and intrusion detection systems in place. Other invisible or “virtual” wall proposals would use AI software to analyse satellite and surveillance imagery and alert border guards to area where activity is detected.

An alternative idea for a physical barrier put forward by a Florida architecture firm is to use shipping containers as the building blocks for the wall. This could be a cost-effective and sustainable solution, particularly as the U.S. has a surplus of shipping containers due to the slowdown in global commerce.

Will the Mexican border wall ever be funded?

While Donald Trump famously promised his voters that “Mexico will pay” for the border wall, the Mexican Government has repeatedly stated that it would not do so. The Trump administration is yet to reveal how it would compel Mexico to pay. The budget request for $2.6 billion to begin construction was seized upon last week by Graco Ramirez, the leader of Mexico’s national governors’ association, who claimed this proves that U.S. taxpayers will foot the entire bill.

The proposal is likely to face fierce opposition in Congress, where Democrats and fiscally-conservative Republicans are expected to block expenditure on this scale, particularly if estimates blow out to $21.6 billion.

Who will build it?

Ironically, although Trump may be unable to make Mexico pay for the wall, he could end up paying Mexican businesses to do the work. A report by Quartz found that “of the roughly 700 firms that have expressed interest in building prototypes for the wall, about 10% are Hispanic-owned” or based in Mexico. However, the Mexican government has warned Mexican businesses that it would “not be in their best interests” to participate in the construction of the wall, while the Catholic archdiocese of Mexico issued an opinion that participating would be “immoral” and those involved “should be considered traitors to the homeland”. The considerable political pressure notably caused Mexico’s largest cement firm, Cemex, to announce that it would not be providing quotes for the vast amount of cement the project would require.

As far as U.S. construction firms go, few of the large, multinational corporations that would actually have the capacity to carry out the $21 billion project have indicated interest, presumably due to public opposition to the wall and the difficult path through Congress to funding it. Meanwhile, state representatives and lawmakers are putting in place boycott measures such as California’s “Resist the Wall Act”, essentially a divestment campaign to ensure no Californian money goes towards building the wall.

In other news procurement news this week…

Shocking lack of digital transformation strategies in procurement organisations

  • The Hackett Group’s 2017 Procurement Key Issues research has discovered that nearly 85% of procurement organisations believe digital transformation will fundamentally change the way they deliver services over the next 3-5 years.
  • Despite this, only 32% currently have a formal digital strategy in place, and only 25% have the resources and competencies in place to meet the digital transformation challenge.
  • The research gathered data from executives across 180+ large companies globally, with an annual revenue of $1 billion or greater. Areas expected to grow most dramatically are the use of cloud-based applications, advanced analytics, cognitive computing and robotic process automation.

U.S. Treasury Secretary Steven Mnuchin says robot job displacement “50 to 100” years away

  • In an interview with Axios last week, Mnuchin said the concern about artificial intelligence taking over human jobs is “not even on our radar screen”. When pressed, Mnuchin estimated that concern might be warranted in “50 to 100 more years”.
  • This estimate is significantly out of touch with machine learning experts, who are increasingly vocal about the imminent “national emergency” that will see up to 50% of jobs at risk due to advances in automation.
  • Mnuchin’s apparent disinterest in the AI jobs crisis could be due to an inability to “think the unthinkable” – a phenomenon introduced by Professor Nik Gowing at Procurious’ Big Ideas Summit. It may also reflect Mnuchin’s falling into line with politicised assertions that foreign workers and cheap pay, rather than automation, are responsible for job losses in former factory towns over the past decade.

Read more at Business Insider.

U.K.’s Crown Commercial Service slammed by Public Accounts Committee

  • The U.K.’s Crown Commercial Service (CSS) was set up in 2014 to centralise all purchasing, eliminate duplicate and act as a single entity for central government procurement. It replaced the Government Procurement Service and was expected to manage £13 billion spend across 17 departments.
  • However, a recent report by the Public Accounts Committee (PAC) found that the CCS has only managed £2.5 billion spend across 7 departments, with PAC Chair Meg Hillier calling the results “a dismal showing that calls into questions exactly how willing government departments are to accept the authority of the Cabinet Office in this area”.
  • A CCS spokesperson has responded to the report, saying: “”With an experienced senior leadership team now in place, we are confident in our ability to deliver even greater value for the taxpayer moving forwards through the centralised procurement of common goods and services.”

Read more at Computer Weekly.

Investor Confidence & Debt – A Study in Trans-Atlantic Contrasts

It’s a time of contrasting fortunes for trans-Atlantic businesses, as high investor confidence is matched by high debt.

Investor Confidence

Trans-atlantic businesses are always going to see some contrasting fortunes, given the diverse nature of the market environments. However, two new reports published this week suggest that these contrasting fortunes may have more impact than usual.

Despite a period of ongoing uncertainty in the UK, a new study has shown that investor confidence in UK SMEs remains high. Over 50 per cent of UK investors have stated they will support SMEs through private investment, even as confidence drops in shares, bonds and property.

However, in the US, another report suggests that companies are failing to maximise favourable conditions to lower their debt levels. A lack of improvement in supplier payments, and inventory management, has left overall working capital performance at its lowest level since 2008.

UK SME Investor Confidence

Despite the uncertainty surrounding financial markets and a variety of investment products, the majority of British investors are resoundingly confident in the country’s SMEs as an investment vehicle.

The research was commissioned by private equity house, IW Capital, and crowdfunding specialist Crowdfinders, and surveyed 1,000 UK investors. The survey revealed that over half (52 per cent) of investors said they would support the UK’s small and medium-sized enterprises through private investment channels in the wake of the referendum vote.

This equates to over 12.9 million potential investors for UK SMEs, and comes at a time where investor confidence in traditional assets, such as shares, Government bonds, and property, has dropped significantly.

The Lloyds Bank Investor Sentiment Index has helped to demonstrate the impact of the post-Brexit economic climate on investor confidence levels across the UK.

In mid-July 2016, the Index fell to its lowest level since it was launched in March 2013. Property (down by 35.3 per cent), government bonds (down 15.5 per cent) and UK shares (down 21.7 per cent) all experienced notable declines in investor sentiment.

Young Investors on the Rise

Encouragingly, 70 per cent of the younger age bracket of investors – 18-34 year olds – said they will consider investing in SMEs post Brexit.

Furthermore, the highest proportion of investors in a regional comparison who would back SMEs post Brexit was based in London. A significant 68 per cent of investors in the capital said they would support small businesses through private investment.

Luke Davis, CEO of IW Capital and Co-founder of Crowdfinders, commented on the report’s findings. “Following Brexit, Britain has been in a state of limbo, with consumers and investors unsure how the economic landscape will change over the coming months and years.

“What we can take from this research is that there is a silver lining from a business perspective as our nation’s investors are willing to support SMEs in the wake of Brexit, something that cannot be said for other investment classes.

“In times of economic uncertainty, ensuring support for the nation’s private sector – particularly the SMEs who make up 99.9% of all private businesses – is of paramount importance.”

US Companies Taking on Debt

Across the Atlantic, the situation was less positive. According to a survey from REL, a division of The Hackett Group, large US companies have increased debt levels, rather than improve working capital performance.

The survey looks at the performance of 1,000 of the largest public companies in the U.S. during 2015. It saw corporate debt rising significantly for the seventh consecutive year, as a result of low interest rates. Debt was up 9.3 per cent in 2015, the equivalent of $413 billion.

Since 2009, the total debt position of the companies in the survey has increased by over 58 per cent.

Working capital performance worsened, with a deterioration of 2.4 days or 7 percent in Cash Conversion Cycle (CCC). It is now at 35.6 days, the worst since before the 2008 financial crisis. These figures suggest major inefficiencies in managing their collections, payables, and inventory processes.

The working capital improvement opportunity of companies in the survey now stands at over $1 trillion, or 6 percent of the U.S. GDP. However, this can only be achieved by the companies equalling the performance of industry leaders.

Oil and Gas Performance 

A significant factor in this year’s overall results were the continuing low oil prices. This caused oil and gas companies to increase reserves, dramatically worsening both inventory and overall working capital performance, and dragging down the performance of the entire survey group.

Commenting on the results, Hackett Group Senior Director Craig Bailey stated, “Once again, low interest rates gave companies a perfect excuse to ignore the hard work of optimising receivables, payables, and inventory. This leaves over a trillion dollars unnecessarily tied up in operations. Instead of doing the hard work of transformation, most simply leveraged their future with more loans.”

Hackett Group Director, Ben Michael, added, “Eventually, interest rates will rise again, and there are signs this may happen soon. Then many companies may find themselves in dire straits, after seven years of growing debt and worsening working capital performance. Smart companies are getting out ahead of the curve now, and starting making the changes they need to squeeze unnecessary cash out of these key areas.”

You can access the full report, and results analysis, plus findings for European companies, on The Hackett Group website.

Want to have your say on these reports? Let us know your thoughts on these two surveys by commenting below. 

Away from the world of investor confidence and company debt, we’ve tracked down the key headlines in the procurement world.

NATO IT Division to “Splurge” on Defence Procurement
  • NATO’s Communication and Information Agency (NCI) has announced it will award €3 billion (US$3.3 billion) worth of cyber, air and missile defence contracts.
  • This is the first time since 2009 that NATO has increased expenditure. 
  • Proposals include a €2.5 billion satellite communications contract, advanced software procurement, and further strengthening of NATO’s air defences.
  • The spending increase comes at a time of scrutiny into NATO finances.

Read more at The Register

Nuclear Supply Chain Collaboration
  • Nuclear supply chain organisations from the US and Canada have signed a memorandum of understanding on cooperation this week.
  • The MoU will help to facilitate collaboration and innovation among nuclear suppliers and research organisations in both countries.
  • Focus areas include the development and deployment of advanced reactors and small modular reactors, job-creation and combating climate change.
  • The agreement comes ahead  of the major annual summit for utilities procurement professionals, who are due to gather in September for ISM’s UPMG2016 conference.

Read more at World Nuclear News

Aerospace Supply Chains Under Pressure
  • Boeing and Airbus supply chains were in the spotlight at the Farnborough air show, as pressure grows on both companies to deliver record numbers of aircraft.
  • This is putting increased pressure on already stretched suppliers, and is leading to concerns about supplier treatment.
  • Suppliers are expected to sign long-term supply agreements, promising both regular price reductions, and accepting unlimited liability should something go wrong, or face losing business.
  • It also comes at a time when Boeing have started delaying payments to some suppliers by up to a month.

Read more at the Financial Times

New UK Nuclear Power Plant in Doubt
  • A project to build a new nuclear reactor at Hinkley Point has been put on hold by the UK Government.
  • Despite EDF directors voting to proceed, the Government has delayed a decision until a further review in the Autumn.
  • The project cost is estimated at £18 billion, but could rise to £30 billion when further subsidies are paid.
  • Much of the debate centres on the guaranteed price for electricity produced by the plant being over double of current electricity prices.

Read more at The Guardian