Contract pricing key in Saudi's $585bn infra construction sector
Contractors may adopt a more competitive approach to win work in the growing market, Linesight leader says
Saudi Arabia's infrastructure construction market could see firms taking a more aggressive approach to tendering in order to secure contract wins and bolster their order books, a senior figure at consultancy Linesight said.
“The outlook for the construction market in Saudi has definitely improved, and opportunities do exist when you look at the number of projects at the tendering stage,” Ciaran McCormack, the firm’s regional director for the Middle East, told Construction Week.
“Against that backdrop, there will be significant challenges for contractors,” he added. “It is a good challenge, but it really comes down to how they are going to price these projects.”
McCormack was speaking on data provided to Construction Week by intelligence platform ProTenders, which indicates that the value of Saudi Arabia's active infrastructure sector – across the planning, design, tender, and construction phases – is $585.3bn (SAR2.2tn).
Excluding projects on hold, this figure represents 51% of the GCC’s total infrastructure project value of $1.14tn.
With this in mind, McCormack added: “When it comes to Saudi, you may see contractors taking a much more aggressive approach to tendering in order to secure the turnover. If their turnover is low, they will want to secure as much of that [work] as possible, and they may adopt a more competitive strategy.
This strategy, the consulting expert explained, could involve below-cost tendering, which he said could be a “real problem” as Saudi construction gathers pace.
“The market is certainly going to heat up – construction costs will rise and a contractor could be faced with a loss-making project, with the resulting difficulties that may arise thereafter,” he added.
His comments come amid concerts efforts by the Saudi Arabia to diversify the kingdom into a tourism and cultural destination. Saudi Arabia’s HH King Salman bin Abdulaziz Al Saud has recently announced projects worth several billion dollars across the kingdom, including more than 200 development projects announced in Al Jouf alone, as reported by Construction Week earlier this week.