Hill International Vice President Jeffrey M. Peragallo remembers well when, just three years ago, he was on “the other side of the desk.” Until 2013, Peragallo had spent 16 years at pharmaceutical giant Merck, where he was in charge of procurement, hiring firms like Hill.
Three years ago, he left Merck to join Hill, working out of its New York City office and traveling the globe to grow the firm’s presence in the life science sector.
The transition from one side of the desk to the other was a relatively easy one, Peragallo said, because he had known and worked with Hill professionals for all of his 16 years at Merck. Hill has been providing staff augmentation and other outsourced consulting services to Merck for capital projects throughout the world for the past 18 continuous years.
“I do appreciate my client’s position, and can relate. I was the guy sitting across the desk trying to poke holes in suppliers’ sales pitches. Now, I’m the one with the pitch,” he said. “But, having that experience helps me understand what life science companies want.”
Recently, Peragallo was one of the first executives at Hill to be tasked with developing business in a specific market sector across borders and around the globe, as opposed to developing business regionally.
The Hill professionals on assignment with Merck have assumed a broad array of responsibilities in varied aspects of construction, from concept and design through construction and closeout. Staff includes contract administrators, material and equipment purchasing analysts, expeditors, project controls specialists, claims analysts, and construction contract auditors, among others.
“Today, Hill’s professionals are responsible for executing our client’s procurement strategy in the Americas, Europe and Asia, and continue to grow as our client expands into new markets. Our projects range from small renovations and retrofits within live GMP operations to new greenfield construction of full-scale sterile facilities with project values ranging upwards of $450 million,” Peragallo said.
Hill’s partnership with Merck has enabled Merck to:
• Realize savings that exceed Hill’s fees--sometimes in excess of 20 times the fee.
• Realize cost reductions on average of 7 percent on Hill assignments, as measured against the client’s metrics for value and cost efficiency.
• Procure superior goods and services from vetted suppliers.
• Assist with selecting the project delivery method that offers the greatest procurement benefit and the least risk, based on Hill’s recommendations.
• Reduce the size of Merck’s in-house procurement staff, providing Merck with as many as 40 to as few as 12 staff members.
• Focus on strategic planning and sourcing initiatives.
• Optimize the effectiveness of Merck’s capital plan.
• Verify compliance with internal policies and procedures.
Peragallo has been touting Hill’s services—and high caliber of its professionals—to other pharmaceutical companies, as well as key firms in the broader life science market, including Bristol-Myers Squibb, Johnson & Johnson, Teva Pharmaceuticals, Novartis, Amgen and Genentech.
“This sector covers more than just pharmaceutical clients. Beyond the top-tier firms there are a large number of diverse companies that supply the industry from generic manufacturers to contract manufacturing operations. The life science core industry also includes medicine manufacturing, electro-medical apparatus manufacturing, medical equipment and supplies manufacturing, biological, chemical and Research and Development,” he explained. “Pharmaceutical clients typically talk with suppliers that service the life science industry.”
“The capital management trend in this sector clearly shows that major manufacturing companies are moving to leveraging/outsourcing their project management requirements, with a number of other companies moving to a hybrid execution model of a combination of internal and external resource providing the management,” Peragallo continued. “Their investments cover an assortment of different type of projects within the life science field, which requires a diverse variety of specialists to support their execution. Although the varying facilities require specific specialists to execute the design, they all are required to follow the applicable regulations of the governing bodies, such as the U.S. Food and Drug Administration, or the European Union authorities.
“Life science firms are growing, with capital projects planned all over the world, and they’ll be spending a tremendous amount of capital over the next few years,” he said. “At the same time, firms are realizing that construction is not their core business. Their engineering and construction staffs are getting smaller and smaller. So, construction is going up while staffing is going down, which creates a perfect opportunity for us.”
The life science industry is expected to grow by $320 billion to $1.4 trillion in product sales through 2018, Peragallo said.
While the northeastern United States has long been a hub for life sciences firms, the markets is growing throughout the world. “The middle class is growing in many areas of the world, especially in emerging markets, and more people can afford to purchase pharmaceuticals. Also, the population in general is getting larger and older, creating more of a demand than ever for pharmaceuticals,” Peragallo said. “This result is a global need for new factories and the infrastructure needed to supply this growing demand.”
And, since the clients are private and/or non-governmental agencies, vying for work with them is easier and more streamlined. There also is far less competition. “We’re often competing against fewer firms,” Peragallo said. “I like odds of one in four versus one in twenty-five.”
Clients and prospective clients alike are impressed with Hill’s successful track record with Merck. They also like the fact that, because of its global presence, it can provide staff just about anywhere. “When we put a map in front of them, and show that we’re every place they are, sometimes even in the same city, they really appreciate that,” Peragallo said.
Outsourcing will continue to rise, Peragallo said, as life science firms streamline their construction operations to maximize efficiency and profit, and keep pace with growing competition. “Cost-cutting is pervasive among life science firms, as margins continue to get tighter due to competition,” he said.
Life science firms also are growing through mergers and acquisitions, which also presents opportunities. After a period of slowdown, during which planned capital projects get a fresh look by a new management team, firms usually move ahead quickly, wanting to complete new or renovated office, data centers, labs, infrastructure and manufacturing facilities quickly and cost efficiently.
“Once the [planned] projects are assessed and given the green light, they need to go,” Peragallo said.
New projects will be especially prevalent in emerging markets such as Latin America and Asia. “Even with the global economic slowdown, we’ll still see growth in places like Central and Eastern Europe, Brazil, Singapore, Malaysia and other parts of Southeast Asia, as well as China and India, over the next several years, again driven by a growing middle class and the that many governments require life science companies to manufacture in-country the products they sell there,” Peragallo said.
Even life science strongholds, such as North America, Western Europe and Japan will continue to grow, as their populations age and the demand for treatment of myriad cancers and chronic conditions correspondingly increases.
Regardless of location, clients like the expertise that Hill provides. “We are developing a proven record of success, with relevant local experience provided by highly experienced teams who are full-time Hill employees—not independent contractors,” Peragallo said. “And, since we function as pure owner’s representatives, there are no conflicts of interest. We aren’t providing the ‘at-risk’ CM, construction or design services that create those conflicts of interest.
Peragallo’s focus is life sciences, operating within Hill’s newly established Global Strategic Clients (GSC) Group led by Senior Vice President Vince D’Ambrosio. The GSC Group’s mission is to win new private-sector work nationally and internationally from major U.S.-based Fortune 500 companies. In addition to the life sciences initiative, the GSC group’s primary market sectors include technology and finance, energy and industrial, retail, hospitality, and REITS and real estate developers. Peragallo is quick to credit Hill’s existing outsourced teams, led by Senior Contract Administrator Tim Collins, its Proposals and Graphics Department, led by Senior Vice President Elizabeth J. Zipf, and Hill’s Global Recruiting Department led by Senior Vice President Gregg Metzinger. “Timely, global, on-point recruiting is key to expanding our business,” says Peragallo. “Thanks to Gregg Metzinger (Hill Senior Vice President of Global Recruiting and Staff Augmentation) and his staff, we can respond to virtually any need anywhere,” he said. “And, we can respond in a way that’s timely, with properly vetted professionals, with a high quality of service that fits in seamlessly with the client and its unique needs.”
Peragallo admits that he isn’t always comfortable “on the other side of the desk.”
“My expertise was procurement, not business development. But, I liked the Hill model and saw that it works well. I got to work with Hill people and saw first-hand the level of service they’ve been providing for almost two decades. It’s the great job they’re doing, day in and day out, that makes this such a great thing to sell.”
Although business development is a major part of his role within the GSC Group, Peragallo is also responsible for operational delivery, which keeps him close to Hill’s clients and their on-going, changing requirements.
by Tricia M. McCunney