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2018 Preview: GCC contractors are eager for change

Contractors operating in the UAE market talk to Construction Week about the challenges they faced in 2017, and reveal their expectations for 2018

ASGC was the contractor appointed to work on Dubais Etihad Museum.
ASGC was the contractor appointed to work on Dubais Etihad Museum.

Towards the end of November last year, the Expo 2020 Dubai organising team reported that $2.9bn (AED10.8bn) worth of construction contracts were awarded just in 2017 alone, while project research and intelligence provider, BNC Network, revealed a month prior that all expo-related projects in Dubai had reached a combined value of $33bn (AED121bn).

These figures not only reflect the scale of development underway in the UAE as it prepares for the event, but also support the industry’s confidence that 2018 will bring a healthy demand for contracting services.

Chief operating officer (COO) of the mechanical, electrical, and plumbing (MEP) division at China State Construction Engineering Corporation – Middle East, S Shetty, describes the expo as the “biggest opportunity” in a market that faces challenges related to project costs.

“2017 was not that good actually,” Shetty tells Construction Week. “To be frank, the [biggest issue] was cost. Many project owners had high requirements but the budget allocated didn’t cover [those requirements].”

He emphasises, however, that he is optimistic that 2018 will be better. “There are a lot of projects in the pipeline, and the expo is the biggest opportunity, since we are providing contracting for several projects.”

Naming another cost-related challenge faced by contractors in 2017, Kez Taylor, chief executive officer of ALEC, says: “It was a tough year for liquidity in the market.

“Delayed or late payments were common and this had a knock-on effect throughout the supply chain.”

Delayed payments, according to Taylor, affected sub-contractor performance, which in turn affected whole projects, resulting in a “tough life cycle”.

“There is currently a lack of very specialist sub-contractors in the market, especially on large-scale mega projects that ALEC is involved in, such as Dubai Hills Mall and One Za’abeel. This is a challenge when it comes to MEP and façade specialists, as there are very few companies with experience in delivering at the scale, quality, and in the tight deadlines required,” says Taylor.

Despite these issues, Taylor shares Shetty’s positive view of what market conditions are going to be like this year, noting: “[At ALEC], we expect market demand to remain steady [in 2018] for contracting services. With mega construction projects happening around Dubai, such as Expo 2020 and Dubai Creek Harbour, it will keep contractors busy throughout 2018.”

Buoyed by this enthusiasm for the UAE market, Taylor reveals that ALEC’s priorities for the year will focus on the development of its employees through programmes aimed at “upskilling” and boosting internal promotions.

“Our mentoring programmes, knowledge sharing, and learning and development will play key roles in 2018, to ensure staff retention.”

In terms of its approach to projects, ALEC’s chief says that the company is “always looking at ways to simplify construction and how it operates in this market”. He continues: “Defining and ensuring that people take on the job responsibilities that they have been contracted to do […] are key points we want to improve on within the industry in 2018.”

Meanwhile, ASGC, with its project portfolio that includes Dubai’s Etihad Museum and the Mohammed bin Rashid Library, is studying opportunities in Africa, with expansion among its priorities for 2018.

Speaking to Construction Week, Karim El Shennawy, the company’s business development manager, says: “We are now exploring projects in the African continent, [and] we have been approached by a few government clients to look into infrastructure projects, specifically in West Africa.

“In terms of sectors, historically we used to focus on residential and commercial sectors, but right now we have an equal percentage of projects across several sectors, including hospitality, industry, infrastructure, and healthcare. We intend to maintain this diversification in our portfolio.”

Like Taylor, El Shennawy is of the opinion that the UAE market experienced a shortage of qualified sub-contractors in 2017: “There was a surge in the number of projects in 2017.

“We saw several developments gaining momentum in the hospitality sector and in connection to Expo 2020. The process of awarding contracts was faster and the tendering periods were squeezed, so the momentum during 2017 was very good, and we expect the next two years to continue at the same pace, or maybe even faster.

“The increase in awards, however, put some pressure on resources and on qualified sub-contractors, so securing good sub-contractors that you can rely upon was a bit challenging.”

He notes that ASGC has been fortunate in this regard, since it has a number of sub-contractor subsidiaries that comprise part of its supply chain.

He concludes: “I believe that in the next two years, the pressure on resources and sub-contractors will continue, and there would probably be new challenges in terms of the supply of certain materials, but other than that, I don’t foresee [contractors] facing any critical or major challenge.”

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Construction Week - Issue 724
Jan 12, 2019