As Vision 2030, the 2029 Asian Winter Games, and Expo 2030 get closer, project stakeholders in KSA are adopting various measures to ensure timely delivery.
On 7 December 2023, global media reported that the KSA Finance Minister Mohammed Al-Jadaan had said that some Vision 2030 projects would be re-scheduled to allow further building of manufacturing capacity and resources. Certain projects are being prioritised and accelerated to meet the aggressive deadlines as the industry faces significant resource challenges to meet the unprecedented scale of the kingdom’s gigaprojects.
Inevitably, the re-scheduling and acceleration of existing project schedules may lead to supplementary agreements having to be concluded for projects to recover delays and participants having to find innovative ways of meeting ever-ambitious completion dates, particularly where infrastructure projects are interlinked.
With care, supplemental agreements can allow owners and contractors to reach their goals without ending up in acrimony and dispute.
Vision 2030: The moving baseline
At the outset of discussions, owners and contractors need to consider reaching an agreement on the project’s current status in terms of time and cost to provide an agreed baseline from which to negotiate the extent and effect of accelerative measures required.
Acceleration can be a complex concept, and there is often overwhelming pressure to reach a rapid agreement. Both parties should not underestimate the need for the management resources required to structure any plan, appropriate risk allocation, and technical and legal due diligence. The time taken to conclude agreements is often in tension with the programme, and a phased or interim approach may assist while issues are concluded. Parties need to be attuned to the art of the possible and not promise more than they can deliver and control. If negotiations take too long, the process can be self-defeating or have built-in obsolescence, placing the agreement that everyone has worked so hard to define on paper at risk.
Prevention is better than cure. In drafting contracts, parties may need to consider how they can regulate and specify the process for instructing and compensating acceleration, ensure contract mechanisms are followed, and avoid constructive acceleration disputes.
Both parties will benefit from near real-time visibility into the work’s progress and identification of the causes behind any current or potential future delays. Effective project and programme management to allow regular status checks on progress during negotiations will enable the development of an acceleration programme that aligns with the terms of the agreement that have been negotiated and agreed upon so that it remains relevant.
Unrealistic expectations
Disputes can also arise from unrealistic acceleration milestones. In any negotiation, each party may have differing priorities. An owner may be driven by a fixed deadline (e.g. a sporting event), financial covenants, or other imperative deadlines. A contractor may have different considerations. Issues can be complicated if one party considers the other may have contributed to and/or have responsibility and liability for delays to date. These competing priorities can sometimes result in agreements that are under immediate tension. Acceleration programmes need to include a clear delivery timeline and details of how resources will be obtained and deployed with clear lines of responsibility.
Any acceleration plan may benefit from considering issues that might arise, such as lower productivity caused by congested sites, extended working hours, and the need for increased supervision. Issues that need to be considered realistically are:
- Is there enough labour and engineering capacity, and where will it come from?
- Is there enough equipment and materials, and is the supply secured?
- Where will the equipment be sourced?
- What is the impact of cost inflation either generally or on specific materials?
Power imbalances
Acceleration agreements can fail or falter if either party exploits a power imbalance; for example, any change to a contractor would be counterproductive or costly to the owner, or conversely, the owner may face too much risk if the issue is not resolved.
Aspirations need to be realistic. One issue is the incentivisation of milestones, which leads to the deployment of additional resources.
However, if the milestone is not achieved, it often results in arguments over the costs of acceleration, limited recovery options, and the use of sliding scales or other mechanisms that avoid a simple yes-or-no outcome. It’s natural for parties to strive to get what they consider to be a good deal. However, the priority needs to be project delivery, which may require visible compromises from both sides.
Project governance is critical
Solid project governance is an essential element in ensuring sufficient information and visibility for both parties to work together and devise appropriate solutions to demanding schedules, which appropriately allocate risk for the unforeseen.
Reliable and timely reporting by project management, in conjunction with an incentivised supply chain, will give both parties a clear view of moving baselines and illuminate hidden pitfalls.
The best agreements and solutions may fail without a strong project culture of trust and clear communication, led by the leadership of both the employer and contractor organisations. This is especially true for many projects in the kingdom with fixed deadlines, where failure is not an option if the kingdom’s vision is to be realised.