Face to Face: Alan Cooper, Hewlett Construction

Hewlett Construction Ltd has chosen Oman as its first location

ANALYSIS, Business, Hewlett Construction Ltd, UK civil engineering company

UK civil engineering company Hewlett Construction Ltd has chosen Oman as its first location for an office in the Middle East. Now that it has completed its registration, managing director Alan Cooper tells Construction Week's Yamurai Zendera why the company chose the sultanate.

It was back in 2011 that Oman came to the attention of Hewlett MD Alan Cooper as a place where the firm could do business. He had taken a couple of business trips there to aid a client who was experiencing some management problems on a construction project in Salalah, and from what he was hearing from industry players there were opportunities to be had for Hewlett.

“I looked into it in a bit more depth and it seemed like a good place to launch ourselves in the Middle East,” says Cooper.

“There’s a lot of work, if anything, probably more than we expected in the last few months; it seems to be growing at the moment. We’re happy with the decision; we think it was the right decision at the time. It’s not as big a market as Saudi obviously and the UAE, but for a company our size it’s the right sort of market for us at the moment.”

Hewlett, established in 1987, is a medium-sized company in the UK, currently employing around 350 people. On its website it bills itself as having expertise across a range of civil engineering activities that include defence, highways, power and process, rail, renewable, residential and training.

But like many businesses headquartered in the troubled eurozone, it has seen work slow down.

From achieving a record turnover of £65m in 2008, revenue has flat-lined at around £40m in the last two years, and the workforce has been trimmed by nearly half in the last four to five years. “It’s [turnover] well short of where we used to or want to be,” says Cooper plainly.

At the moment the firm is awaiting the outcome of tender bids as it enters the crucial spring period, typically its busiest time of the year for work.

“It’s quite a key time, if we pick up all the schemes we’d like in the next two or three months then we’ll hit our targets, but if we don’t we could end up doing slightly less than last year which would be disappointing.”

Against this backdrop of uncertainty back home, the attraction of emerging markets like Oman to firms such as Hewlett becomes obvious.

In the UK the construction industry has faced tough years since the recession as government and the people cut back on spending. The Sultanate is in the middle of a multi-billion dollar five-year public spending plan - the attraction is obvious.

These appropriations include $2.59bn for the Al Batinah Expressway and $618m for five new hospitals in Muscat, Suwaiq, Salalah, Khasab and Dhalkout, state officials announced in January 2012.

Progress on these projects is now well under way. The government has also offered up the tenders for the first two stages of the Al Batinah Expressway, which is aimed at boosting tourism and other sectors by better connecting the region to the rest of the country. The final two stages of the project are estimated to be completed by 2015.

Furthermore, the IMF estimates Oman’s GDP in 2012 and 2013 will grow at about 5% and 4%, respectively. Similarly, the non-oil GDP is forecast to grow about 5% in 2012 and 2013, Moody’s Investors Service said in an August 2012 announcement.

Hewlett took the final decision to set up in Oman in February 2012. Cooper says his expectation was for the firm to be pulling in around OR50m ($128m) in turnover annually, by 2014 ideally, but 2015 or 2016 may now be more realistic given an unexpected six-month delay in the registration process. But crucially, how did he go about making forecasts for a new market?

“You have to be quite brave,” Cooper says bluntly. “That was always a challenge because until we got set up we never really knew [how much work we’d get], and even today it’s quite hard to predict how much work we’ll do each year.

I guess the fortunate thing is that the overhead is quite small and is likely to remain quite small. It’s not as though we need to have a certain level of turnover, we can grow it to suit the work available. But trying to predict how much work we’ll do each year is very hard.

What I’d like to get to is OR50m on size, which from our experience in the UK is a decent sized business that hasn’t got too many problems but at the same time is big enough to handle quite a lot of work.”

With Hewlett in essence playing six months catch up, Cooper says the firm is eager to secure its first contract. A general manager has been based at its Muscat office since November and it is set to bid for two to three tenders, which Cooper would only say are in the infrastructure sector.

“Some of them we will need joint venture partners for so we have got discussions going on with JV partners, one of whom is in Dubai. There’re a couple in Muscat as well, so it depends on the size and type of scheme as to which partner we speak with.

“We’d only look to be tendering for two at a time at the moment for the next few months. We’re focused quite intensely on those particular ones to make sure we have a good chance of winning them. After that we’d look to build a bigger team of estimating in Muscat so we can be bidding for more schemes.

“Generally in the UK we’ve carried out all different types of infrastructure that there is through rail, deep drainage, roads, bridges, tunnelling. There are not too many things that we can’t do but we’ll assess each one on its own merits.”

Cooper adds that opportunities in the sectors of oil and gas, power, and defence are also on his radar along with involvement in training initiatives. Building projects are not a major focus, however.

“We’re talking to defence people at the moment who don’t necessarily have to advertise through the same process; so these schemes may come on the back of a different route,” he says.

“And oil and gas schemes are not all government schemes – they don’t have to be advertised through the tender boards. So those are more of a question of waiting for the client when they’re ready to send out the documents.”

But surely as a new firm in Oman it will be important to differentiate itself from the competition in order to win work? On this Cooper says that apart from one or two major players there are surprisingly very few UK construction firms present in the country, particularly those like itself engaged in civils, so “most people are eager to see the UK being represented in Oman”.

He points out that due to the sophisticated and experienced nature of the UK construction market in which Hewlett has made its name it has developed unique skills that it hopes to leverage in Oman.

“We believe that we have a better management structure and that the staff and management resources we will bring have a better ability to manage a project and to deliver it on time and to the budget that the client wants.

We also have a strong safety culture in the business and that sometimes sounds like it might be expensive but in reality we’ve always found that by concentrating on doing things safely and using people that have been trained to carry out the schemes properly we can also do it to a better cost ratio; so those are the kinds of factors we think we can offer as advantages to the client.”

In the UK Hewlett uses its own labour force on projects but in Oman Cooper says the plan is to use sub contractors, from the local market. “The actual resources will probably be from a similar pool but the management of it is the important thing,” he says.

“We won’t just let it happen on its own, we’ll be strong in the way we manage the activities to make sure that they’re done safely and efficiently; so that’s where we get the edge.”

To this end Cooper says Hewlett’s Omani partner, who has a 30% stake in what is officially registered as Hewlett Construction LLC, has been very helpful in “knowing the right sub contractors and suppliers”.

In fact, he says choosing the correct local partner is one of the most crucial things to get right when entering the market.

“I’m very pleased that we did get it right because you hear some horror stories of people that have picked the wrong person or been persuaded to go with the wrong person who is maybe only interested in making a quick buck or whatever. But in our case we were introduced to him through our solicitors.”

If Oman turns out to be a success story for Hewlett, and you can tell from the conviction in Cooper’s voice that he intends that to be the case, the plan is to launch in other Middle East markets.

But what does its so far self-financed entry into Oman say about its ethos? Is it a firm that takes risks or one that treads cautiously? “We certainly don’t gamble too much,” says Cooper. “It’s important that we make decisions in a structured way. We’re very conscious about building a good reputation for a long-term presence in the Middle East.”

Hewlett projects in the UK Media City: The UK’s first purpose-built media city; an innovative and creative hub at Salford Quays in Manchester. Developed by a partnership of the Central Salford Urban Regeneration Company, Peel Holdings and Salford City Council, Media City is set to rival other such schemes emerging throughout the world. Hewlett’s scope of works included initial site works including cut and fill works for piling platforms, roads, drainage and services together with Section 278 works and accommodation.

Leeds Bradford International Airport: Hewlett’s contract with Leeds Bradford International Airport was for a new parking scheme that will further improve the airport’s parking facilities in line with its ongoing expansion plans. Hewlett also successfully completed a contract with the airport to provide an extension to the existing long stay parking provision.

Works for Scottish and Southern Energy Plc (SSE): The contract is to install, upgrade and subsequently maintain approximately 60km of stone tracks to enable construction of a replacement transmission line across 40 locations in the north of Scotland, in some of the UK's most challenging terrain. The contract forms part of the planned upgrade to the 220km transmission line between Beauly, near Inverness, and Denny, near Stirling.

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