International Intelligence: Middle East managers in demand

As projects grow in size and complexity the opportunities for consultants in the Middle East are increasing and the market is adapting to the new requirements.

Bernadette Ballantyne
14 May 2014

Twitter FacebookLinkedIn

Print

Topics 

International

Business

There have been significant changes in the Middle East since the construction boom of 2006 to 2008 where real estate development drove the construction sector to a peak. This time the market has much more sustainable drivers, transport and infrastructure. 

As the region recovers from the post credit crisis depression, contract awards are accelerating and firms are vying for position on the landmark projects that will guarantee long term returns in key markets.

“These are mega projects that stand out not only in the region but stand out globally,” says Steve Kay of Bechtel, currently project director for King Abdullah Project for Wa’ad Al Shamal City Development in the north of Saudi Arabia and formerly programme manager for Khalifa Port and Industrial Zone in Abu Dhabi, UAE.

More from Mott MacDonald

• 100 articles

Kay points to the enormous Riyadh Metro, plans for Dubai Expo 2020, and the stadiums for Qatar 2022. “They all require an expertise that is at the top end of what we deliver as an industry.”

Riyadh metro for example is perhaps the most ambitious metro project ever attempted. Six lines will be constructed simultaneously over five years through contracts worth over £13bn. These were awarded to three consortia, including one led by Bechtel, in July 2013. Doha metro too is now underway with the entire network being built at once, while at the same time Abu Dhabi, Kuwait, Jeddah, Medina and other major cities plan metro schemes too.

“They all require an expertise that is at the top end of what we deliver as an industry.”

For the project sponsors this creates a management challenge the likes of which many organisations have never really encountered. As a result clients are increasingly turning to the private sector to support the management of these programmes at a high level.

The format for this varies. Some are comfortable with undertaking the role internally, seeking consultancy support simply to increase the numbers on the management team. Conversely some developers and infrastructure delivery bodies seek to outsource all management activities. Some programme managers will also then be employed to prepare design and tender documents, manage each contract at a project level and perhaps also supervise construction. On other programmes external consultants are brought in at these different levels.

“There is no right or wrong way-it is often a tailor made solution,” says Kay who notes that there are some specific considerations that must be given to projects in the region. “Government structures are developing fast and the programme often has to change to meet those rapid developments. You can’t stay still, at a programme level it often looks very different when you have finished to how you started.”

Programme managers in demand

From a client perspective realisation of the benefits of using an external programme manager is increasing thanks to the success of some pathfinder schemes. Abu Dhabi Sewerage Services Company (ADSSC), for example used the programme management approach on its 41km deep sewer tunnel bringing in CH2M Hill to manage the programme. The AED 6bn ($1.6bn) scheme involves three major tunnelling contracts, a pumping station contract and two major packages for the 43km of connecting pipework  needed to transfer flows into the new tunnel.  The first two contracts are now complete with the others ongoing.

“One of the challenges that we had was convincing people that this was not an extra cost, that what it would bring to the contract would save us money,” explains Alan Thomson, managing director at ADSSC. “We brought the first two contracts in under budget which is a sign in itself that the programme management function was very successful for us.”

 Cost reimbursable v lump sum

This is welcome news for other clients looking to take the same approach. “The cost of using a programme manager is often dramatically outweighed by the savings created,” says Tim Evans, Middle East development director of consultant Mott MacDonald. On the management side the firm is particularly active in the oil and gas sector and says that clients here are among the most advanced when it comes to managing their project portfolios. Evans reports that these clients tend to use cost reimbursable forms of contract based on schedules of rates and an agreed organisational structure. This was also the approach taken by ADSSC which reports that it built up a lot of trust between the parties.

Other clients prefer to engage their managers under a lump sum arrangement, which can be attractive if the scope of work is clearly defined. The challenge is that this is not always the case with some firms asking for prices to be fixed before a lot of the key decisions are made about how the project is procured and how long it might take. What is more, that tender is sent out to a large number of bidders making for a highly competitive environment based on the acceptance of risk by the management company. This is something that firms report has been on the increase in the past 12-18 months.

Consultancy consolidation

At the same time the field of consultants has been getting smaller with consolidation being another side effect of the credit crisis.

“You see merger and acquisition activities for firms in engineering or construction who are trying to add expertise in planning and programme management or asset operation.  Ultimately that has created some larger companies that have a broader range of disciplines and that has naturally increased competition for the bigger projects or programmes,” observes Kay.

“It has strengthened those companies skills set and helped to give a stronger voice to the industry to explain what we do. Instead of a large number of small delivery companies there are more companies out there that can deliver total services and that helps the industry and increases competition.”

"Projects are very large and governments are taking multiple project approaches.”

Atkins acquisition of Singapore based project management firm Confluence in October 2013 was the latest merger. The firm promptly integrated Confluence into its cost management business Faithful+Gould, creating a larger project management and commercial services consultant. The move followed a line of other deals: US giant AECOM buying Davis Langdon, the URS takeover of Scott Wilson, Netherland’s based Arcadis buying cost consultant EC Harris and another American firm CH2M Hill acquiring the UK’s Halcrow.

“It is competitive,” agrees Tom Hasker, head of project management at Faithful+Gould.

“The field is becoming smaller and the volume of work is increasing. Projects are very large and governments are taking multiple project approaches.”

Also increasing is the scale of the opportunity, from rail and roads, to aviation, buildings and water infrastructure.  “Having to bring people in to a booming region is a happy challenge. It is a problem that we love to have,” says Kay.

More information

http://bechtel.com/Riyadh-Metro

http://www.fgould.com/middle-east/

https://www.mottmac.com/middle-east

http://en.adssc.ae/STEP/SitePages/Snappy.aspx