Local suppliers in the Fjardaál construction phase

The American construction company Bechtel was the main contractor in the construction of the Fjardaál aluminum plant for Alcoa. During the construction phase local suppliers were chosen only when the local companies were the most cost-effective in free competition with other potential suppliers.

Meanwhile, many of the original tenders were of a size including demands to quality and price that local companies could rarely meet when faced with international competitors. For this reason, Alcoa and Bechtel chose to downscale a range of tenders, thus enabling local companies to bid on the contracts. Furthermore, potential suppliers were counseled by Alcoa and Bechtel as to how to live up to project demands. Every third month throughout the entire construction phase information meetings regarding possibilities and standards for local suppliers were held in several nearby towns.

Icelandic companies thus had opportunity to gain insight into the standards that they would have to comply with in order to get contracts from Alcoa – i.e. technical knowhow, quality management systems and environmental, health and safety demands. Alcoa also suggested the merger of the activities of smaller companies into larger business units that would be able to bid on larger contracts and on the other hand result in Alcoa not having to contract several small companies. Some local companies reacted to this by entering into a company structure, in which several small companies formed a mutual company, which would bid on contracts for Alcoa and Bechtel. This did not have a large impact in the construction phase as in the operational phase [See here].

Several local companies managed to adapt to the standards for suppliers in the construction phase and got contracts. These contracts did not have much to do with the construction itself, but were more in the line of support functions for the construction. Thus local companies got contracts regarding maintenance and repairs, electric installations and power grid, general labor, lift and car rent, catering, security, safety courses, cleaning and procurement.

Thus effort was made to include local content in contracts from Alcoa and Bechtel and local companies. This succeeded in some areas, while other areas – especially the construction itself – were completed primarily using foreign companies. It was essential, though, that local companies were included. This was also perceived by Alcoa as advantageous in the long run, as local companies consequently attained experience in supplying Alcoa in accord with the standards of the operational phase as well. 

Construction of the Alcoa Fjardaál smelter (Photo: Greenland Development)