Piling contractors are still feeling the strain of the economic slump
Without solid foundations, the construction industry sits on pretty shaky ground and a lack of funding for new projects means contractors charged with providing piling and foundation work themselves are on fairly unstable territory.
Since the construction industry slowdown during the latter half of 2008, piling and foundation work has all but ground to a halt in the UAE.
Work is still available, but the frantic level of activity prior to the slowdown has had an impact on the business, and caused many of the industry’s main players to tighten their belts in order to weather the current economic storm.
At the height of the construction boom in Dubai, more than 70 piling and foundations companies were operating in the emirate – but a drought in work has seen this number decline.
“Things are very quiet,” Mervin Fernandes, marketing manager for equipment specialists Hytec International, specialists in hydraulic construction equipment.
He says sales of construction machinery has remained constant, but the demand for piling rigs has dropped. “Nothing is moving and nothing has really changed since October 2008 when the industry went quiet.”
Hytec supplies both new and used piling rigs to contractors, but Fernandes said: “Both new and used markets are slow – there’s no movement of machinery and many contractors have stopped. Things have to change, but at this moment, we don’t know when that will happen.”
While funding is slowly trickling back into the construction industry, developers are reluctant to start new projects. Most money is being used to complete existing projects, not start new ones and, until that happens, piling and foundation contractors will continue to find it tough.
“The volume of work for the first two quarters of 2010 has certainly dropped,” said Shad Asif Khan, general manager of UAE specialists Keller Grundbau Gmbh.
“It seems it may pick up slightly in the third and fourth quarters – but still not enough in terms of the volume of
contractors out there looking for work.”
“The first part of the year was very difficult. We seemed to spend the whole time filling out papers and tenders, with very short closing dates, and not really having many of them convert into contracts. Decisions get delayed, or something else happens,” he said.
While the company has enough work to see it through tight times, Khan says some contracts aren't due to start until next year or even 2015.
A reduction in the availability of work has also led to other contract related pressures – not the least of which are time constraints and penalties that come from failing to meet deadlines.
“I thought that a recession would mean that everything would slow down and people would take time to do things at a reasonable pace – but the opposite is the case. Clients are squeezing contractors to get things done faster.
I don’t know whether it’s pressures from the banks, or where it’s coming from. I don’t understand the logic,” Khan said.
While other construction jobs can be solved by pouring manpower and machinery in to it, piling and foundation work often has physical constraints that limits the amount of work that can be done.
Restricted work sites often means that only one piling rig can be used, so contractors can’t simply throw men and machinery at a job to hit tight deadlines.
“Not every job is like the Palm Deira [with wide open spaces and room for several piling rigs]. Most are very restricted on space,” Kahn said.
Another area contractors are feeling pressure is in a lack of understanding from some clients over the amount of time it takes regulatory bodies to approve plans.
“I can’t blame regulatory bodies for that. They’re looking at something that’s been worked on for several months for the first time, and time needs to be given for this to happen.
We have to plan around this, but it’s unfair on contractors to be nailed for any delays that are out of their hands. Clients need to try and understand what is involved,” Khan said.
So far, Keller Grundbau has weathered the downturn without downsizing. Contracts in the petrol chemical industry in Abu Dhabi, and others throughout the UAE have kept the company bouyant and, with the promise of more work in the second half of 2010, Kahn says staff are taking holidays now in anticipation of a better few months ahead.
“At the moment, it’s just a matter of working out how to support the company and survive until then,” Khan said.
Piling profits in a tight industry
The profits from piling and foundation work come from selling concrete and steel at small mark-ups, with little room for movement. But, with the pressure mounting on businesses to ensure the company remains busy, some firms are operating on exceptionally thin margins.
“You get a sense of how smaller businesses are suffering from the kinds of prices they’re offering,” said Shad Asif Khan, Keller Grundbau Gmbh’s general manager said.
“We’re at a slight advantage in that we have a lot of experience, so tend to be shortlisted for contracts, but it’s still tough. Clients are really enjoying this time,” Khan said.