Engineering is a regulated profession in Canada. This is necessary to protect people and the environment. Engineering in Canada done by Canadian engineers complies with the regulations and ensures the safety of Canadians. But there is also a value proposition for *off-shoring Canadian engineering .

*Off-Shoring – the practice of basing some of a company’s processes or services overseas, so as to take advantage of lower costs.

Corporate goals are based on adding value for shareholders. Cutting costs is one way to do this. Not surprisingly, corporations off-shore services  including engineering services, IT services and financial and accounting services to name a few. One thing these services have in common is that a large portion of the work is done on a computer. This makes it easy to package up the work and send it out of the country. There are management fees and bonuses to pay of course and the process involves risk.

To determine the amount of a cost saving there needs to be a basis for comparison and this is the cost of the local services. For the cost savings to be real there needs to be a thriving local service otherwise it’s not off-shoring just importation of a service that is not available locally which would be the only option. Off-shoring is successful by exploiting local industry. Corporations cannot exploit and support local industry at the same time so  either the practice of off-shoring is not sustainable or local industry is not sustainable. The cost savings disappear when the local industry disappears.

Here is one perspective on how off-shoring is impacting the engineering services industry in Canada. Off-shoring is enabled by the numerous Trade Agreements that Canada has in place with other countries.

Engineering Services have been imported into Canada at a rate that has been steadily increasing for years (Source – Statcan CANSIM table 376-0033). This means that some engineering services are not available in Canada or that engineering services are imported to reduce costs. In fact Canadian engineering firms and Canadian corporations have been  off-shoring engineering work for years.

The cost saving for off-shore engineering services is substantial otherwise it wouldn’t be worth the time and effort to do the work in another country, side-lining Canadian engineers in the process. In my experience the cost of off-shore engineering services is 20 percent of the cost of Canadian engineering services. The biggest cost drivers for the engineering rate in Canada are wages and taxes – if the work is done off-shore these costs are largely avoided. Wages and taxes are paid in the countries where the work is done but the costs are a fraction of what is paid if the work is done in Canada. Interestingly  the purchasing power for a Canadian engineer is not all that much higher than her counterpart in India for example. Net result is that Canadian engineers are not cost competitive – how can they be?

Here is a quote from Jim Carr Canada’s Minister of National Resources taken from an interview with Chris Hall on CBC “The House” September 24, 2016 referring to his recent official visit to India.

” They( India) are graduating 550 thousand engineers per year” , ” the potential is enormous for Canada to transfer resources and technology to India”

There was no mention in the interview of how many Canadian engineering graduates there are per year or what their career prospects are( bleak due to off-shoring) but there is apparently enormous potential for engineers in India( due to off-shoring).

But cost is only half of a value proposition the other half is quality( quality also includes safety). While cost comparison is crystal clear comparing quality gets a little blurry.The value proposition must include engineering services of equal  or better quality than Canadian engineering services but at a lower cost. Before any work is off-shored quality must be evaluated and shown to be equal to that of the local service, this will be a stated requirement in an off-shore agreement. However, there is a conflict of interest at this point – managers who receive management fees and bonuses from cost savings are the same ones evaluating quality.  Is it any wonder that of the top 10 percent of income earners in the country, 65 percent are managers( Source – Thomas Piketty, Capital in the 21st Century)? And recent graduate engineers in Canada cannot find jobs? .

Quality evaluations of engineering services need to be done independently from project management or there is no value proposition.The quality of engineering services or lack thereof is evident only after a project is complete. Therefore is it important to look at quality first and cost second.

With most things in life there is a correlation between cost and quality – plastic surgery and dental implants for example. Higher quality costs more because there is more value and less risk. It’s the same with engineering services. If you’ve paid the lowest price without first considering merit and experience of the service provider you can be reasonably assured you haven’t received fair value and have assumed risk unknowingly.

Engineering work is easy to package and repackage and tender to the lowest bidders. Quality of work eventually delivered is questionable because there is little or no regulation of off-shore services. There is significant risk( potential disaster) involved with unregulated engineering services in addition to lost Canadian jobs.

Arguably there is value to corporations for off-shoring services as long as the quality part of the value proposition can be managed. Off-shoring is destructive to local industry and jobs – I don’t think there can be any argument about that.

 

 

 

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