A new dawn for Saudi construction

20 February 2017

A steady flow of infrastructure work is the prize for the kingdom’s construction companies

Ever since Deputy Crown Prince Mohamed bin Salman al-Saud unveiled his ambitious Vision 2030 reform programme in April 2016, the region’s construction companies have been desperately waiting for the resurgence of the Saudi construction market.

Moreover, since oil prices began to fall in late 2014 there has been little for construction companies to be excited about in Saudi Arabia. At first new projects were put on hold, the most high profile at the time being the 11 football stadiums that were planned for various cities across the country.

Then came payment delays and ongoing projects grinding to a halt. Since then, even news that companies are being paid what was owed to them has been considered a step forward, when in reality it is merely a step to standstill.

That should all change with the appointment of US-based Bechtel to help set up and operate Riyadh’s National Project Management Organisation (NPMO).

The appointment is a crucial one because everything that Saudi Arabia wants to do with big infrastructure projects will be governed by this new body, and until the new body is fully established little will move forward.

Known as Mashroat, it will support Saudi government agencies to effectively deliver complex infrastructure projects, and help avoid the cost overruns and other ills of the past that often blighted projects in Saudi Arabia.

As the NPMO is set up, other ministries and government agencies can start proceeding with their own project plans, and that should at long last mean new work opportunities for a construction sector that has been starved of work in recent years.

Unlike the past when projects could be approved and fast tracked on a whim, contractors will still have to be patient. Mindful that is does not want to waste its capital expenditure, Riyadh will now want to make sure that any project it proceeds with is viable and that will take time.

While this may disappoint companies looking for quick wins in the short term, for the longer term it will mean a steady pipeline of projects that the construction industry can rely on. This may seem a little far-fetched in a region that is renowned for following the boom and bust of the oil market, but one company would disagree.

Bechtel has been working as the programme manager for the Royal Commission for Jubail and Yanbu since the mid-1970s and over the decades those sprawling industrial cities has produced a steady stream of infrastructure work for the construction sector – including the $11bn expansion of Jubail II between 2006 and 2016.

If the NPMO with Bechtel can get Saudi Arabia to produce a steady flow of infrastructure projects that contractors can rely on, then the new dawn for construction in the kingdom is one that should be very bright.

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