Benefits of Economic Development Committees

Governor Luis Fortuño of Puerto Rico takes time to discuss the benefits of economic development committees with members of the media.Over the past seven years, Pratt and Whitney  has developed two Greenfield joint venture companies in Puerto Rico offering low-cost, near-shore engineering services and SAP software services for projects in the Americas. Customers for the two companies – Infotech Aerospace Services Inc. (a joint venture with India’s Infotech Enterprises Ltd.), and AXON Puerto Rico (a joint venture with HCL AXON of the United Kingdom) – include the parent organizations as well as Fortune 500 customers from the aerospace and defense industries and other commercial entities preferring same time zone, near-shore work performed by U.S. citizens.

Since 2003, Infotech Aerospace Services and Axon Puerto Rico have grown to 900 professional employees.
Both of these joint ventures were developed with help and influence from the Puerto Rico Industrial Development Company (PRIDCO), the primary economic development committee in Puerto Rico.

Perhaps the most compelling reason for the economic development committee relationship is in reducing the start up costs, cash, and risk of the joint ventures by integrating PRIDCO support. With the uncertainty that the current economic cycle has handed to the U.S. industrial base, it is now more important than ever to find solutions that maximize the value that low-cost, near-shore services generate.

The solution that Pratt and Whitney chose is to develop a partnership model that drives the customer and outsourcing firm into more of a strategic partnership than the more traditional business model, which has historically been used to absorb the peaks and valleys of the cyclical aerospace industry.

The model links the customer and supplier at a strategic level. This partnership results in a more integrated planning cycle, which, in turn, allows the outsource supplier to plan more efficiently and reduce costs and risks. Reduced costs result in increased value, which is passed along to the customer. The most recent Pratt and Whitney joint venture, AXON Puerto Rico, was developed within the customer, supplier, and PRIDCO partnership framework. AXON Puerto Rico delivers low-cost, high-capability SAP technical and functional resources to Pratt and Whitney and other AXON customers.

The use of the PRIDCO Economic Development organization and the integrated partnership model allowed for rapid selection of a 33,000ft2 AXON Puerto Rico facility, initial repair of that facility, and final leasehold improvements to the facility. The inclusion of cash grants within the partnership framework assured that the facility could be completed as an integrated design as opposed to building out a facility on an incremental basis as the company grows.

The integrated process, in turn, enables the reduction of high-energy use in elements such as lighting and heating, ventilating, and air conditioning. The design optimization resulted in a facility that is LEED-certifiable under the U.S. Green Building Code Leadership in Energy and Engineering Design standard. Additional benefits are seen in reducing permitting times and assuring that utilities are available.

Although the incentives and cash grants are highly desirable, they almost always come with significant penalties for missing contractual requirements. The partnership model ensures that the partner companies strategically integrate the joint venture growth into their planning cycles.

Pratt Whitney
East Hartford, CT
pw.utc.com

Axon
Surrey, England
hcl-axon.com