Five Site Selection Recommendations for Mega Projects

by Josh Bays, on Jul 25, 2022 10:12:31 AM

Industrial mega projects have become widespread across the United States due to hyperactivity in key sectors such as electric vehicles, semiconductors, alternative fuels, and advanced materials. While there is not a formal definition for mega projects, generally speaking, these projects can require more than 500 acres, employ over 1,000 workers and require investments of more than $1 billion in capital. They can also consume over 100 megawatts of electricity and require advanced transportation infrastructure (e.g. rail, deep water ports, barge, access, etc.). Despite the rhetoric of an imminent recession, rising inflation, and geopolitical instability, mega project activity in the United States shows no signs of slowing down.

Shaped by our own experience working on mega projects, Site Selection Group, the largest independent site selection and economic incentives firm in the U.S., can offer companies evaluating a large industrial investment several recommendations that will yield a better location decision and decrease the time to open operations.

While not exhaustive, the following briefly summarizes five broad recommendations that address overlooked site selection factors:

1. Evaluate a state’s track record of providing meaningful workforce training and development resources.

The most significant challenge a mega project will face is ramping up its workforce. Given the market for good mega sites is relatively picked over (and economic development, utility companies, and rail providers are struggling to keep up with demand with their product development pace), large projects are being pushed further away from dense population centers. Therefore, mega projects need a strong plan to develop a workforce, rather than merely hire a workforce.

While it’s imperative to analyze workforce indicators that assess the current workforce pool, it may be more important to evaluate the critical infrastructure in place to develop a pipeline of talent over time. While most states have what sounds like a compelling workforce development “pitch,” not all are created equal. For mega projects, there are examples of states funding and organizing dedicated on-site training institutions. For example, states in the southeastern United States like South Carolina, Georgia, Alabama, and Tennessee have historically leveraged their workforce training ecosystems to provide this type of dedicated training to support growth in their automotive sectors.

2. Play a role in local housing policy and strategy to mitigate workforce risks.

Workforce data analytics in the site selection process can get very sophisticated. But more often than not in a hyperactive market, what separates a less risky workforce from an overly risky workforce comes down to fundamental demographics. And in evaluating fundamental demographics, a region’s age breakdown and growth statistics are the best indicators to consider. Because the latter is most influenced by net workforce migration, it is critical for a region to have a solid plan for how the housing market can accommodate the influx of talent needed to make a mega project successful long term. Additionally, it is not unrealistic for a mega project to be the catalyst for re-shaping local planning policies around future housing strategies. In other words, mega projects should have a careful eye on how they can play a role in shaping local housing, educational, and development policy.

3. Consider engaging your construction partner before a site is selected.

We’ve seen some recent mega projects get all the way through the site selection process without having their construction partner in tow. Often, this is because the project is moving too quickly for a company to have thoroughly evaluated and procured these services. Additionally (and significantly less compelling for mega projects), some companies believe these services should not be procured until a site has been selected so that local partners can be given priority.

If time allows, having your construction partner engaged in the evaluation of shortlisted sites can serve several very beneficial purposes. First, it allows your partner to start developing site-specific budgets more quickly (and identify cost items that can be mitigated through the negotiation of economic incentives). Secondly, it allows them to be engaged in permitting discussions and contribute their perspective in identifying any critical hurdles. Lastly, it gives them a head start to plan for resource mobilization, specifically their civil resources to begin required site preparation in earnest.

4. Carefully assess the generation plan of electric utilities.

Although not commonly discussed, the United States is in the initial stages of an energy crisis. That strong statement is shaped by candid interactions with the most senior economic development officials at the top electric utilities in the country. The exponentially increasing demand for cost-effective green electricity has put a strain on the grid, and increased supply to fully meet that demand is simply not realistic due to a variety of economic, timing, and political factors.

Therefore, it is imperative to understand the investments utilities are making in generation capacity and their source mix. Additionally, it is critical to understand how future investments will be funded and the impact that has on the cost to the industrial consumer.

5. Identify specific project pain points before making substantive economic incentive “asks”.

There is no doubt that economic incentives are very meaningful to mega projects, and they can often be the differentiator between a set of competitive semifinalist sites. Because of their appeal, as well as the breakneck speed in which many mega projects move, all too often companies start asking for economic incentives before critical site deficiencies are identified (and sometimes before a candidate site is even identified).

One of the most effective economic incentive negotiation strategies is calibrating an overall package to be comprised of programs that actually matter. Identifying those items that actually matter is often obvious to the experienced site selection professional, and the site selection professional often discovers hidden deficiencies during a thorough site selection process that can have an unfavorable financial impact on the project. Fine-tuning a package to mitigate these initially less-than-obvious deficiencies will likely have a significantly more positive impact on the project’s budget and timeline than blindly negotiating a package that on the surface appears to be the most generous.

Topics:Economic IncentivesEconomic DevelopmentSite Selection GroupSite Selection



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