Face to face: Nathan Hanns, ALEMCO
Nathan Hanns, general manager of ALEMCO, is looking forward to an upturn in business in a more stable MEP market
ALEMCO, the mechanical, electrical, and plumbing (MEP) division of ALEC, is feeling positive as it looks forward to an upturn in business later in the year. Nathan Hanns, general manager, concedes that 2017 may be soft for the most part, but says work will start on significant projects in Q4, and carry the company forward for the next two years.
“I think we’re quite positive about the outlook for the market,” Hanns says. “We believe it’s going to be slow through the first three quarters, picking up towards the end [of 2017]. So next year – [and in] 2019 – you’re going to see a lot of developments moving for the whole business.”
Much of that work will be in support of ALEC and projects it has either secured, or contracts it is busy negotiating on and closing. “They have picked up a number of key developments; those are in the early stages and will be picking up towards the third quarter from an MEP perspective,” says Hanns.
Established in Dubai in 1999, ALEC is a multi-disciplinary construction group with operations in Abu Dhabi, Oman, and Qatar. The company has worked on projects as diverse as schools, residential buildings, airports, and hotels, and recently secured a contract to build a data centre at Dubai International Airport. Established in 2006, ALEMCO is the contractor’s MEP division. The work in its pipeline is diverse, and includes infrastructure projects, freehold developments, and commercial buildings.
ALEMCO’s current and recent portfolio of work includes Select Group’s The Residences, a twin-tower development at Dubai Marina; Meraas’s Bvlgari Resort Hotel at Jumeirah Bay Island; and the Wahat Al Karama memorial park in Abu Dhabi. The projects show ALEMCO’s ability to deal with diverse challenges, including finishing to an extremely high standard in the case of the Bvlgari Resort Hotel, and a highly accelerated work schedule in the case of the memorial park.
“We are in the final stages of the delivery of Meraas’s Bvlgari project, which is quite a challenging project with a very high level of finishing,” explains Hanns. “That will be a wonderful project when it is complete, and it is in the final stages at the moment.
“We had a very fast track and successful run on the memorial park in Abu Dhabi with Miral and ALEC. It was an extremely intense delivery process, with [a maximum of] five to six months to get that delivered. It required a good working relationship to get that done in such a short space of time.”
While ALEC’s focus has very much been on premium projects, it operates in a regional market that has often been seen as price driven. Hanns senses some shifts in attitude, while stressing that the market remains price sensitive.
“Clients’ attitudes are changing, but price still remains a very important part of the process,” he explains. “There are certain time constraints in any delivery mechanism, and clients are perceiving that there is a shortage of MEP resources in the market to deliver the level of projects that are in the pipeline at this stage. There is definitely a focus on getting the right contractors, the right party to the table, but price remains a key driver in that process.” Hanns senses that better relationships between contractors and clients will allow for more honest discussions about what can be done for a certain budget. “I would say going forward into the future, there’s what could be considered a better working relationship to obtain the budgets on projects, closer working relationships between clients and the contractors to develop those budgets, and making sure they’re the right budget for the right performance,” he says.
Other long-standing challenges in the regional market include prolongation and variation, and how they can be dealt with. “The variation process on a contract can be quite time consuming and, as a contractor, you have to carry out the variation, but you don’t necessarily get that variation approved in the shortest possible time,” says Hanns, “So, on projects with large variation and prolongation, it’s very difficult to maintain a financially positive perspective.” Challenges with variation and prolongation tend to be greater on fast-track and speed-to-delivery projects, he adds.
Problems with the integrity of parts and supplies, as highlighted by the recent debate over counterfeit and fake steel, are less of an issue for ALEMCO because of the nature of the projects it is working on. “We have been fortunate enough to work on quite prestigious projects with high-quality specifications, and the selection of the process probably cuts a lot of that out,” Hanns explains. “I know in the market that there is a problem with counterfeit materials and, as a business, we try to use the reputable supply chain. We don’t see a lot of that [fakes and counterfeiting] with the projects we work on.”
ALEMCO has sought to keep its staffing levels very much in line with its workload. This has been eased by the company’s ability to avoid large fluctuations in turnover that may require a sudden increase or decrease in manpower.
“As a contractor, you don’t have this never-ending tap of human resource available, and your resource is kept in line with the revenue you’re working to,” explains Hanns.
“We maintain key staff. We keep a pretty stable resource in house. We also maintain a pretty stable turnover. The only problem is when you fluctuate up or down on turnover. But we’ve been fortunate that we’ve maintained a pretty stable turnover in the last four to five years.”
Hanns, who has been in the region for more than a decade, experienced the downturn of 2008 when projects shut down overnight. He feels that “some of us” have learned from that experience, by restructuring and thus being in a better position in the last five years to maintain stable revenue and returns.
Elaborating, he says: “One thing is to get your price point right. It’s to know the clients and what the project requirements are. If you know the project requirements and you’ve got a working relationship with the client, you’ll know how to price the project.
“In the past, because of the price-driven processes that tendering has gone through, often the prices have been [...] substantially lower than they should have been from the contractor’s side – for the delivery aspect of the project and the scope and scale of a project.”
Going forward, the UAE has green building codes in place, and they are being incorporated into the majority of new designs. Hanns also senses a drive to retrofit buildings, with government entities leading the way.
“The regulations relate to selection of equipment, the efficiency that the equipment is being operated to, the efficiencies of the building itself, the water side of the building, and reclamation of grey water,” he says. “There’s definitely a focus on achieving less of an energy footprint for buildings.”
Within the ALEC group of companies, there is ALEC Energy, which focusses on solar. Last October, the company signed an agreement with Al Nabooda Automobiles to build a 6.8MW, grid-connected rooftop plant at the company’s body and paint shop. Another ALEC division, Smart4Power, focusses on auditing existing buildings and proposing solutions to make them more energy efficient.
So are clients telling ALEMCO they want solar panels and solar water heaters on the roofs of their buildings? “They are, to a certain extent,” Hanns answers. “Some of the costs of the new technologies [...] are not quite at the level where they can be incorporated into the smaller projects. The larger projects definitely; the smaller projects are more difficult, but we see a drive from the developers, as well as private owners, to incorporate as much as possible into their buildings.”
Recent months have seen reports of MEP contractors either exiting the market or temporarily closing their order books. Does this make life any easier for ALEMCO? “Well, as soon as someone exits left, often someone enters right,” Hanns comments. “Where there’s a market and there’s availability of construction projects, there will always be new challenges and new parties.
“In the market over the last three years, there has been a lot of restructuring of existing businesses, and those are going to have a better operating perspective in the future on projects. It’s always challenging to operate in a tendered market,” he adds.
For its part, ALEMCO does bid individually on projects, but it largely works with ALEC’s main contracting division. “As a group of companies, we’ve performed well on projects and it’s difficult to replicate that in an open market if you don’t have the relationships. We do work with other main contractors; it will be on a project-by-project basis, and it will have to be the right project.”
ALEMCO’s success over the last decade was recognised at the MEP Middle East Awards in 2016, when an independent panel of judges gave it two key awards. Hanns was named MEP Executive of the Year, and Severin Tenim collected the Young Engineer of the Year Award.
Hanns says retention of key staff, an engaged management team, and a commitment to quality lie behind ALEMCO’s success. He concludes: “We take it personally and we want to achieve the best results on every project. As an individual, I’ve been in the construction industry for 20 years and, as much [we have grown], we’re a construction company. The nuts and bolts, and the cables in the building, are where our success lies, and it’s key for our management to be involved in projects. We try to get round to all of them and see what’s happening on the jobs. There’s a learning experience on every project that you work on.”