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Can Saudi’s construction sector learn sustainable lessons from the UAE?

Those driving Saudi Arabia’s sustainable MEP and construction projects can benefit from the lessons of their UAE counterparts. Neha Bhatia reports

Large-scale projects are expected to boost the Middle East’s MEP market.
Large-scale projects are expected to boost the Middle East’s MEP market.

Last month, engineering giant Honeywell announced that it is collaborating with organisations such as Integrated Industrial Gases (IIG), Trane, and ASHRAE to supply the Saudi Arabian market with environment-friendly refrigerant solutions.

In a statement, Honeywell termed its collaboration as being “significant”, since cooling technologies are “a necessity in a country like Saudi Arabia, where the average summer temperature is 45°C, sometimes even reaching 54°C”.

Honeywell’s effort in the kingdom draws inspiration from Saudi Vision 2030, a national programme with far-reaching socio-economic ambitions, one of which is to reduce the country’s energy consumption and limit the environmental damage caused by greenhouse gases.

Honeywell’s sustainable push in the kingdom’s building sectors is a natural step forward for the company, which lists the Middle East as one of its “fastest growing markets” in the Europe, Middle East, and Africa region. It is likely – and perhaps, even necessary – that more companies will replicate Honeywell’s effort in 2017.

The kingdom looks set to emerge as a fruitful prospect for sustainable design, build, and operate (DBO) experts as Vision 2030 – directly and otherwise – propels the transition of Saudi’s economy away from petrodollars. For consultants, contractors, and product suppliers in the mechanical, electrical, and plumbing (MEP) segment, Saudi’s drive towards environment-consciousness represents an added growth opportunity in the country.

After all, the sparseness of sustainable influences in Saudi Arabia’s contemporary built environment is no secret. Both Riyadh and Jeddah ranked in the lower quartile of construction consultancy Arcadis’s Sustainable Cities Index 2016, published last September. The cities finished 76th and 81st place respectively in a list of 100 global cities.

Remarking on the list’s findings about the kingdom, Paul Souaid, managing director of Arcadis Saudi Arabia, said: “Whist the study indicates a number of areas for improvement, there are lots of positive elements within [...] Vision 2030 that should boost Jeddah and Riyadh’s future performance. Investment in new infrastructure will act as a catalyst for growth and make both cities an easier place to do business, whilst the drive to diversify the economy away from [...] hydrocarbons should deliver environmental benefits.

“There is a strong strategy in place [to boost sustainability in Saudi]. However, the challenge now will be to implement it effectively over the next decade, particularly in an economy that’s exhibiting slower growth,” Souaid added.

Some of Vision 2030’s goals may well drive growth in the Middle East’s MEP market, which according to research analysts at Technavio, will expand at “a compound annual growth rate (CAGR) of more than 10% by 2020”.

In its December 2016 report, MEP Services Market In Middle East 2016-2020, Technavio states that a significant portion of this growth will be led by the development of regional mega-projects, such as Saudi Arabia’s Jeddah Tower (pictured).

It adds: “Such mega-scale projects will drive the need for design, installation, operation, and maintenance of heating, ventilating, and air-conditioning (HVAC) in the Middle East, which [...] will increase the [need] for MEP services.

“In terms of geographical regions, Saudi Arabia will be the major revenue contributor through the period.

“The rapid infrastructural and real estate activities in Jeddah, and the growth of the residential sector in the commercial hub of Dammam – which is dominated by a number of standalone villas and apartment buildings – will bolster the market’s growth prospects in this region,” Technavio added.

Nevertheless, roadblocks are inherent to sustainability’s uptake in the regional building sector, and it is likely that Saudi Arabia’s MEP professionals will also encounter challenges in their endeavour to transform national construction practices. To overcome these obstacles, it may serve them well to observe their Emirati peers.

Dubai was named the Middle East’s most sustainable city in Arcadis’s Sustainable Cities Index 2016. At 52nd position on the list, Dubai led the regional pack of cities that meet Arcadis’s parameters, based on three pillars of sustainability – social, environmental, and economic.

Arcadis explained: “Dubai, like the other Middle East cities in the index, is partially constrained by its desert climate. However, the city has set targets to reduce CO2 emissions per GDP and the level of solid waste generated.

“Dubai has also launched an integrated energy action plan, which aims to reduce energy demand by 30% by 2030 and diversify its energy portfolio.”

Abu Dhabi was ranked 58th on the list, with both UAE cities leading the index’s Middle East rankings.

To be sure, the UAE’s MEP sector does face challenges, despite a relative uptick in national construction activity, as Rahul Duragkar, managing director of Emitech, told MEP Middle East last month: “The beginning of last year was very promising and we were expecting good growth, but the second half [...] was not so good.

“Projects were [available], but [...] at very tight margins, and we had to turn down a lot of [tenders]. We also lost a lot of projects because of competition.”

Pricing is a prominent obstacle that MEP leaders in the UAE frequently encounter, Dugarkar added: “In terms of the residential sector, most developers are focussing on affordable housing, which [lowers] per square-foot prices. But in terms of construction or MEP, there is very little we can do [to cut costs]. We cannot reduce the quality of the work or the services that we offer, so we’re now looking at industrial projects, or those where a design and build (D&B) approach is needed.”

Speaking as part of a panel at the MEP UAE Conference 2017, held in Dubai this May, Ghady Mouajes, export sales manager, at Advanced Plastic Industries (API), echoed Dugarkar’s views, adding:  “Being selective is the right thing to do.

“I always keep in mind that I have two constraints – time and effort – and we’re all limited by both factors. So investing the right amount of time and effort in a job is really important.

“To be selective, the factors that we rely on are the project’s size; its nature, and whether it is a project we are interested in; the impact we may have and the value we may add for our clients; and financial risks, as well as how to mitigate those.

“We have to choose wisely, because we do not have the capability to bid on everything,” Mouajes added.

In the same vein as Dugarkar’s suggestion, Holley Chant, executive director for corporate sustainability and commissioning at KEO International Consultants, pointed out that the D&B model can “enhance sustainability” by ensuring contractors are brought in at the early stages of a project’s design.

In response, KEO’s managing director for MEP engineering, Darrel Strobel, said: “D&B is not frequently used in the Middle East; however, interest around it is growing.

“It ultimately drives costs down, which is good from a client’s perspective. One of the negatives about D&B is that the client [loses] control of the project’s quality, and the contractor might be telling the designer to cut corners or use a cheaper product.

“Since [the latter] are employed by the contractor, they have to do it, which means that eventually, clients may not get their dream property,” Strobel added.

Indeed, dealing with the main contractor teams appears to be a significant challenge being faced by the UAE’s MEP community, with the latter now ramping up its efforts to ensure smooth contractor collaboration during a project’s construction phase.

Speaking at the MEP UAE Conference 2017, Subhash Pritmani, vice president and CEO of Al Sabbah Electromechanical Company (SEMCO MEP) – a member of Al Fara’a Group – added that the reputation of the contractor is also an important part of project selection.

He added: “A very important [factor], other than funding, is the track record of the main contractor.

“If the main contractor has a dodgy reputation, [then] what is your entitlement when the job is [nearing its] end? So you have to be really careful when it comes to choosing your main contractor.”

To contend with such concerns, George Berbari, CEO of DC Pro Engineering, offered a progressive suggestion – one that some within the UAE’s MEP industry would even term long overdue. 

“There are costs hidden in larger projects – in terms of [work] extension, for example – and prices may be cut in the same format,” Berbari explained.

“Main contractors have a syndicate, but we don’t have a syndicate for the MEP industry. I propose an MEP syndicate, where you can exchange information about contractors – such as who pays well and who doesn’t – and also share complaints about malpractices in the industry. Everybody is being driven to very low costs. A syndicate would be a solution to cope with these problems.”

Arcadis’s 2017 Middle East Construction Disputes Report, released this May, states that regional contract disputes are annually marking small, but noticeable declines (see box-out). While this is positive news for the region’s construction supply chain, how its lessons are adapted in key MEP markets such as Saudi Arabia – and even the UAE – remains to be seen.

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