Multinational Contractors Research Articles

Assessing the risk of profit shifting among the suppliers to Danish municipalities

PurposeAn increasing number of Danish municipalities wish to minimize tax avoidance due to profit shifting in their public procurement. To facilitate this effort, this study aims to develop a firm-level indicator to assess the potential risk of profit shifting (PS-risk) from Danish subsidiaries of multinational corporations to subsidiaries in low-tax jurisdictions.Design/methodology/approachDrawing from previous research, PS-risk is assumed to depend on the maximum difference in the effective corporate tax rate between the Danish subsidiary and other subsidiaries under the global ultimate owner, in conjunction with the tax regulations relevant to profit shifting. The top 400 contractors in Danish municipalities from 2017 to 2019 are identified and their relative PS-risk is estimated by combining information about corporate ownership structure with country-specific information on corporate tax rates, tax regulations and profit shifting from three independent data sets.FindingsThe PS-risk estimates are highly significantly positively correlated across the data sets and show that 17%–23% of the total procurement sum of the Danish municipalities has been spent on contracts with corporations having a medium to high PS-risk. On average, PS-risk is highest for large non-Scandinavian multinational contractors in sectors such as construction, health and information processing.Social implicationsDanish public procurers may use the indicator to screen potential suppliers and, if procurement regulations permit, to ensure high-PS-risk bidders document their tax practices.Originality/valueThe PS-risk indicator is novel, and to the best of the authors’ knowledge, the analysis provides the first estimate of PS-risk in Danish public procurement.

Revoking the Exercised Termination of the Construction Contract: Implications and Lessons Learned

The decision to terminate the main construction contract by a project owner is a serious task that is normally approached with a great deal of caution and made almost invariably after seeking the appropriate legal advice. However, it is not a rare case that affected contractors find themselves in a position of attempting to have the exercised contract termination amicably revoked and the resumption of work on site reinstated. Whether such attempts eventually fail or succeed, major ramifications are likely to surface in administrating the propagation of the impacts of both main contract termination and its subsequent revocation on the subcontracts of the lower-tier project participants, i.e., subcontractors. This paper tackles this exact case, which involves the actions taken by the general contractor toward the subcontracts’ works, first upon the termination of the main contract becoming effective and then upon having this owner’s exercised termination successfully revoked. The methodology involved a number of steps. First, an analysis of the legal perspective on how the termination of the construction contract becomes effectively in place is carried out, using (1) a case law review of numerous industry-reported cases involving contract termination, and (2) a review of standard forms contracts. Second, an investigation of the viability and requirements for the possible annulment of contract termination, as stipulated under civil and common laws, is performed. Last, the details of a recent multinational contractor–subcontractor dispute are thoroughly studied, and lessons learned concerning the prevailed irreparable harm are deduced. The outcomes of the work shall be of value to project owners when deciding to revoke their exercised termination and to general contractors when deciding on the effective actions toward the subcontracts’ works when such a revoking action becomes effective.

Analyzing the Influence of Knowledge-Based Strategies of Chinese Multinational Contractors on the Performance of the Construction Industry in Southern African Countries

Analyzing the Influence of Knowledge-Based Strategies of Chinese Multinational Contractors on the Performance of the Construction Industry in Southern African Countries

Organisational Strategies for Competitive Advantage in the Construction Industry: Chinese Dominance in Southern Africa

Chinese enterprises are presently dominating various sectors of businesses abroad, offering a wide range of low to high-end quality products and services. The construction sector in Africa is now being dominated by Chinese multinational contractor companies, who find in Africa their next preferable market to grow. The available literature on the field has serious gaps in explaining which organisational strategies increase the competitive advantage and the market dominance of Chinese multinational contractors, especially in the Southern African region. This research aims to uncover the organisational strategies, implemented by Chinese multinational contractors operating in the Southern African region, who have paved the way and consolidated their success in the region. Through a mixed methods process, qualitative and quantitative data are obtained. The construction markets of the Southern African region are analysed (environmental analysis) and the main multinational Chinese contractors are identified, through a literature review and organisational analysis. Several organisational strategies are shortlisted and, finally, through an online questionnaire, the opinions of the participants to rank the organisational strategies previously identified in terms of contribution to the actual success, copying capability, etc., are carried out. The findings revealed that the capability to offer a lower price for construction services, the easy access to loans and funds from the organisation's home government and the capability to trade debt for local resources, such as wood, land and minerals are the organisational strategies that mostly contributed to the recent Chinese contractor dominance in the Southern African construction market.

Multinational contracting and the eclectic paradigm of internationalization

Purpose The purpose of this paper is to present a novel version of Dunning’s eclectic paradigm of internationalisation (OLI framework) to explain both inbound and outbound Foreign Direct Investment (FDI) in multinational contracting. Design/methodology/approach The OLI factors and hypothesis are significantly developed to address a weakness in the OLI framework in its application to settings, such as multinational contracting, with extreme heterogeneity arising from extreme location specificity. Findings These developments advance Dunning’s seminal contribution and bring this to life in construction research that has barely applied the framework and, when doing so, has focused only on outbound FDI by multinational contractors (MCs). Research limitations/implications The power of the OLI framework is increased on explaining and predicting FDI in contexts that exhibit extreme heterogeneity associated with extreme location specificity. Furthermore, the operationalisation of key theories representing the framework’s OLI factors is made far more precise. Practical implications Engineering, construction and architectural managers, can now more reliably apply the OLI framework both in MCs’ outbound FDI decisions and in governments’ decisions to attract new MCs – or inbound FDI. Originality/value A significant advance is made in the OLI framework in settings with extreme location specificity, along with the operationalisation of key theories associated with the OLI factors, including the first steps to operationalise Coase’s Nobel prize-winning transaction cost thesis.

Theracos becomes increasingly reliant on contract manufacturing as its drug advances

Although it has its roots in India, Piramal Pharma Solutions has over time turned itself into a multinational contractor with facilities on several continents. Of the company’s 13 manufacturing sites and labs worldwide, five are in Europe and North America, allowing customers flexibility in deciding where they want their drugs to be made. Albert Collinson, CEO of the Massachusetts-based drug development firm Theracos, has come to know Piramal well. As Theracos’s lead compound, bexagliflozin, progressed over the years—it’s currently being tested in Phase III clinical trials—the small company entrusted Piramal with an increasing amount of work. The contractor now takes care of the drug candidate at several sites around the world. As a result, Collinson has the contact information of multiple Piramal managers in his mobile phone. “We have an extensive relationship with Piramal,” Collinson says. Having different Piramal managers in different countries involved in handling parts of bexagliflozin’s manufacturing

Understanding the relationships between environmental management practices and financial performances of multinational construction firms

Growing attention to environmental protection has triggered drastic changes in the corporate practices of construction firms. Several studies have shown that multinational contractors have been relatively proactive in environmental management. However, the financial outcomes of environmental practices are not fully comprehended. Based on information disclosed through environmental reporting, this study examines the relationship between environmental management practices and the financial performance of multinational construction firms. The sample of construction firms is drawn from the Engineering News-Record (ENR) Top International Contractor list. Content analysis was used to extract and measure the degree of proactivity, and stepwise regression was adopted to screen for practices associated with financial performance. The results highlight the advantages and limitations of environmental management practices disclosed in environmental reporting and explore the impacts such practices have on financial performance. Among the environmental practices, pollution abatement on-site has significant impacts on firm short and long-term financial performances of multinational construction firms.

FCPA Sanctions: Too Big to Debar?

The Foreign Corrupt Practices Act (FCPA) criminalizes bribery of foreign government officials; the frequency of enforcement actions and severity of fines levied against corporations under the FCPA have significantly increased in the last few years. There is an ongoing problem, however, with the sanctions for FCPA violations: enforcement authorities (DOJ and SEC) and contracting officials have limited themselves to fines, civil penalties, and occasional imprisonment of individual violators. Debarment from future federal government contracts, even temporarily, is an unused sanction for FCPA violations, even though Congress provided for this punishment by statute. Debarment offers a far more potent deterrent than fines and penalties, as multinational contractors that conduct business with the U.S. are much less likely to view the sanction as merely a cost of doing business. If ridding foreign markets of corruption truly is a top priority of the U.S., it seems both unfair and imprudent for federal agencies to continue awarding lucrative, multibillion-dollar contracts to firms recently prosecuted for fraudulently obtaining such contracts overseas. Enforcement officials shy away from debarring entities that violate the FCPA due to the short-term inconvenience of an agency’s inability to transact business with its favorite contractor, its inability to demand favorable bids from contractors when the field of potential bidders has thinned, the resulting job loss, and the risk of overdeterring companies that might otherwise pursue lucrative opportunities in emerging markets. This is the big to problem – the federal government is too dependent on a particular set of large, private-sector corporations for equipment and services. In addition to the virtual immunity from debarment enjoyed by these firms when they violate the FCPA, the fines imposed for engaging in foreign corrupt practices comprise a tiny fraction of the potential revenue generated by lucrative contracts with the U.S. and foreign states. When discounted by the low probability of detection, these sanctions are far too low to deter unlawful activity. Debarment would deter potential wrongdoers and incapacitate actual offenders. The deterrent would induce more firms to comply with the law, which would allow the “too big to debar” problem to diminish over time. To help illuminate these concerns and lend support to the thesis, this Article will examine the third largest FCPA-related enforcement action to date: the BAE Systems case. On March 1, 2010, BAE Systems paid approximately $400 million in fines for its corrupt practices abroad. In the year that followed however, the federal government awarded BAE contracts in excess of $6 billion dollars. The U.S.’s refusal to debar BAE because of the potential “collateral consequences” provides a case study on the benefits and drawbacks of deterring foreign corruption through suspension and debarment. This Article concludes that the U.S. must begin to diversify its portfolio of federal contractors so that prosecutors may leverage the legitimate threat of suspension and debarment to more effectively deter foreign corruption.

Leishmaniasis in an Era of Conflict in the Middle East

Leishmaniasis is endemic in the Middle East, and both cutaneous and visceral forms are reported from the region ranging from the Levant to Afghanistan. The potential and proven phlebotomine sand fly vectors and reservoir hosts of the Leishmaniases species in Afghanistan, Iran, Iraq, Israel, Jordan, Lebanon, Saudi Arabia, Syria, Turkey, and Yemen are described. This region has seen a movement of populations across the area, due to both military and civilian strife. Refugees, armed forces, and multi-national contractors are particularly at risk to acquire this disease. There has been an upsurge in Leishmaniasis research, especially as new foci are exposed and the need to protect the naïve populations moving into endemic areas becomes a public health priority. New sand fly vectors and animal reservoirs have been discovered while novel control methods are being evaluated. Modern molecular techniques are now being used more routinely and revealing some unusual findings. The aim of this review is to collate the most recent data on the burden of the disease, diagnostic applications, eco-epidemiology of vectors, and reservoir hosts, and how the control projects have been developing in the Middle East.

Innovation in clean-room construction: a case study of co-operation between firms

This study examines partnering between a large client, multinational contractors and specialist suppliers, and local subcontractors involved in a project to construct clean room facilities. An ethnographic approach is used, which demonstrates the changing attitudes, values and the new working arrangements that emerged. The social bond of a ‘construction challenge’ was the basis of trust and sharing risk in a ‘quasi-fixed network’. In place of formal contracts, ongoing bargaining and continuous negotiation took place. However, the client was seen to dominate the construction process. Shared workspaces or ‘liminal zones’, betwixt and between firms, were created to allow collaboration. These are argued to be a practical organizational approach to sharing information and co-ordinating inter-firm activities. Among trades, agreements were struck to exchange training and apprenticeships for allowing foreign specialists and equipment to be imported by the high-purity gas supplier. Liminal zones appear to function as on-the-job classrooms for rapidly training workers in unfamiliar construction techniques and systems.

Political Risks in International Construction

Political risk identification, measurement, and management are key to successful international construction contracting. Multinational contractors are particularly sensitive to quick, unexpected change in the political environment that affects principal cash‐flow elements of their projects. Traditional political risk analysis used by manufacturing or heavy industrial firms for capital investment decisions does not adequately address contracting risks. An alternate approach is presented to fill this important gap. Essential to this treatment is the identification of the primary political source risks and their impacts on project cash‐flow elements. Recognition and planning, rather than gambling, is emphasized as a contractor's best approach to successful international construction.