By David Verner, Director of Energy Strategy, Gresham Smith
The topic of establishing new manufacturing operations in the United States is as broad as it is important. The breadth comes from the sheer number of variables involved: geopolitical considerations, regional economics, evolving regulatory frameworks, workforce availability and infrastructure capacity, to name just a few. Each factor will significantly affect your project’s risk profile, timeline and long-term viability.
Its importance lies in the role that reshoring key sectors like semiconductors, electric mobility, pharmaceuticals and other advanced manufacturing plays in global competitiveness and national economic development.
Establishing a new factory isn’t just about putting a building on a piece of land; it is a dynamic capital investment that requires labor strategy, regulatory compliance, long-term operational commitment and even geopolitical positioning. Missteps in the early phases, whether in regulatory navigation, team selection or site evaluation, can compound into massive cost overruns or operational bottlenecks down the line.
There are four key lessons that international investors and manufacturers should understand to ensure the success of their “Coming to America” venture:
- Understanding the U.S. regulatory environment.
- Distinguishing between site location strategy and technical evaluation.
- Assembling the right project team.
- Structuring contractual relationships that influence team behavior.
Addressing these items early and strategically can spell the difference between a smooth project and one fraught with delays and budget overruns.
Are We Playing Football or Futbol?
This question may seem meaningless or even humorous, but it holds an important message. The game called “football” is played all over the world, but the rules, field of play and even the shape of the ball are overwhelmingly different depending on where you play the game.
The same analogy applies when investing in manufacturing facilities across international borders. Whether you are coming from Europe, Asia or elsewhere, it’s critical to realize that the business environment, legal structures, technical standards and cultural expectations in the United States may look familiar on the surface but they can function quite differently in practice.
Within countries in the European Union, Japan or South Korea, regulatory approvals can be highly centralized and procedural. In contrast, in the U.S., while there are clear laws and codes, much of the enforcement and decision-making is decentralized and highly dependent on local authority discretion. Or compare project delivery models in China, where governmental control can push fast-tracked construction as a national priority, versus the U.S., where local community input and zoning boards have the power to delay or even block projects outright.
Just like you would not expect to take the rules of soccer or rugby and apply them on an American football field, you shouldn’t assume that successful development strategies in Germany or South Korea will translate identically to success in Georgia or Texas. The language might sound the same — including terms like “permit,” “stakeholder” and “design team” — but their function and meaning can be fundamentally different in a U.S. context.
One of the most significant hurdles for foreign investors new to the U.S. market is understanding the regulatory framework. Unlike many other countries, the U.S. operates with a more decentralized and reactive system, where compliance often hinges on post-event enforcement rather than preventative oversight.
The U.S. tends to be more risk-oriented and reactive. In other words, you may not be stopped from doing something up front, but if it violates a regulation, it will likely come back as a legal challenge, often in court.
The U.S. has decentralized oversight. While the federal government oversees issues like interstate commerce and environmental regulations, individual states hold considerable power over matters like taxation, labor laws and environmental enforcement. Local governments control land use, zoning, building codes and fire standards.
This multilayered governance means you will work most closely with local officials who will ultimately determine how your facility is built and operated. Consider that building and fire codes can vary not just by state, but by municipalities within a state. These differences should be included in your final site selection decision because they can significantly impact your factory’s layout, permit timelines and safety or environmental compliance plans.
Once you have selected your site, it is important to build early relationships with the various local Authorities Having Jurisdiction (AHJ). Educate them on your project, and be prepared to address questions or concerns.
Bats, Sinkholes and Ducks: Overlooked Site Selection Risks
These might sound like minor wildlife concerns, but I have seen all three cause serious setbacks in major projects. Despite the experience of many professional site selectors, these and other red flags are often missed or underestimated, leading to costly delays and operational risk.
For example, in the past five years, two multibillion-dollar projects I supported ran into last-minute regulatory issues due to two different bat species. These bat species are federally protected during breeding season and their presence triggers restricted tree removal windows. Because the bats were identified after the projects began, both sites were nearly subjected to a six-month construction moratorium. Only a fast-tracked response helped us break ground just in time.
Sinkholes, which indicate karst topography, can lead to costly foundations and serious site grading challenges. On a project for a four-phase, 5-million-sq.-ft. manufacturing campus, sinkholes were identified early, but the true cost of mitigation ended up being more than 10 times what was estimated. Had the risks been thoroughly understood, those costs could have been addressed during land purchase negotiations.
Disturbing wetlands beloved by ducks requires federal approval that is time-consuming, expensive and uncertain. It is best to avoid sites with wetlands, if possible. However, I have seen two different companies in the last two years purchase and move forward with sites that have large wetland areas. Both projects are currently on hold.
Not all sinkholes occur as dramatically as the one that swallowed a number of classic vehicles at the National Corvette Museum in Bowling Green, Kentucky, a decade ago. But their effect can sink a project’s timeline.
Photo courtesy of the National Corvette Museum
Why are these items missed? The root cause is a fundamental gap in the site selection process. Companies and most site selection professionals emphasize location strategy — analyzing logistics, labor markets and incentives — without balancing it with a technical evaluation focused on actual site conditions. Site selection should be conducted in two distinct phases.
- Location Strategy, conducted by executives, economists and logistic planners, identifies advantageous regions or states based on macroeconomic factors, market proximity or logistical advantages. The objective is to identify the best region or states.
- Technical evaluation is performed by your engineers and planners with the objective of choosing the best sites within the identified region. Technical evaluation will evaluate topography, subsurface conditions, environmental constraints, utility capacity and long-term viability for expansion. The objective is to determine which specific sites are best suited for your project.
Failing to separate these two steps, strategy and evaluation, often leads to premature land acquisition, where companies buy property with an excellent location but hidden liabilities. It is how you end up with protected wildlife on your build site, unstable soil under your cleanroom, or wetlands that put your timeline in limbo.
On a project for a four-phase, 5-million-sq.-ft. manufacturing campus, sinkholes were identified early, but the true cost of mitigation ended up being more than 10 times what was estimated.
By completing a full technical evaluation before final negotiations, you not only reduce risk and increase schedule confidence, but you also gain critical leverage at the bargaining table. You may be able to negotiate a lower purchase price or shift certain remediation responsibilities to the seller or local government.
Assemble the Right Team
Your team will be composed of many players including professionals (engineers, lawyers, accountants), builders, subcontractors and equipment suppliers. Each must bring relevant U.S. large capital project experience to the table.
For example, I have often seen clients ask their corporate lawyers to develop and lead contract negotiations for design and construction only to delay projects and generate confusion due to their unfamiliarity with U.S. design and construction law. Similarly, an equipment supplier unfamiliar with U.S. safety requirements might provide machinery with a CE (Conformite Europeenne) mark, not realizing that an NRTL (Nationally Recognized Testing Laboratory) listing is required in the U.S.
Graphic courtesy of Gresham Smith
Your team selections should be guided not by low cost, but with a view of total cost of ownership (TCO). For example, in an 8-year TCO model for a typical advanced manufacturing facility, design engineering fees often account for less than 0.5% of overall costs, while the general contractor’s overhead and profit might come in around 2%. These team members will make literally thousands of decisions on your behalf, impacting more than 95% of downstream costs. It is truly short-sighted to choose your team based on the lowest price. I recommend developing clear scopes of work, using qualification-based selection processes and then negotiating a fair price.
Football Is a Team Sport
Manufacturing projects are long-term efforts — lasting 2 to 5 years — and usually occur under extreme time and cost pressures. It is critical to cultivate trust within the team, because during times of friction (and those will come), mutual respect and cooperative processes are the glue that holds projects together.
Trust starts with the team selection process, how agreements are finalized and ultimately how contracts are structured. While there are many effective contractual models, from design-bid-build to integrated project delivery, the approach to team selection and negotiation sets the tone for the overall project. Keep in mind that the best agreements align interests.
Rather than start from rigid contractual templates, begin with open conversations. What are your shared goals? What does each party need to win? Once these are on the table, let your contract language reflect those mutual interests. A collaborative negotiation builds trust, improves communication and better aligns performance expectations. Follow this rule: deal first, contract language second.
Establishing a new factory in the U.S. offers tremendous opportunity — but only for those who understand the game being played. Keep in mind these four lessons outlined above:
- Understand the U.S. regulatory environment — are you playing football or futbol?
- Treat site selection as two distinct phases: location strategy and technical evaluation.
- Build your team based on qualifications and experience — not low price.
- Align project behavior through thoughtful, interest-based contracting.
When entering a new market, especially one as complex and dynamic as the U.S., these lessons can help you navigate the journey with fewer surprises — and much greater success.
David Verner, director of energy strategy at Gresham Smith, has more than three decades of experience working with international clients on major investments in diverse markets including energy storage, advanced manufacturing and automotive facilities. Most recently, he is providing executive leadership and oversight for multiple battery giga-factories ranging from a 2-GWh facility in a renovated existing building up to a 47-GWh, 4,300,00-sq.-ft. greenfield plant representing more than $4.5 billion in investment. David has spoken and written extensively about plant design, lean design and construction, site selection and other topics.