Abu Dhabi construction stalls in second quarter

20 June 2011

Contractors are left waiting for decisions on major government-backed projects

The total value of construction and infrastructure contracts awarded in Abu Dhabi during the second quarter of this year has fallen by 81 per cent, leaving contractors waiting for awards on a series of major projects.

By the last week of June, just $843m of construction and infrastructure contracts had been awarded in the three months from April to June, down from $4.5bn in the previous quarter, according to data from regional projects tracker MEED Projects. Compared to the second quarter of last year, the total value of awards is down 76 per cent from $3.6bn.

Abu Dhabi construction and infrastructure awards 2008-11
YearQuarterValue ($ bn)
Source: MEED Projects

Contractors bidding for work in the emirate complain that although contracts are still being tendered, few are being awarded. “It is really frustrating at the moment,” says an international contractor. “We are bidding a lot, but very little seems to be awarded. I suppose that is the game we have to play now if we want to win work.”

Three of the longest running tenders are for a pumping station, the Louvre Museum and the Mafraq Ghweifat highway – all are government-funded projects.

Four contracting groups submitted bids for Abu Dhabi Sewerage Services Company’s (ADSSC) estimated AED2bn ($572m) pumping station in January 2010. Brazil’s Odebrecht is understood to be the frontrunner for the contract, but 18 months on no decision has been made (MEED 20:6:11).

Contractors submitted bids for the Louvre in November last year. Earlier this year the project client, the Tourism Development & Investment Company, shortlisted Australia’s Multiplex and a joint venture of the local/Australian Al-Habtoor Leighton Group with South Africa’s Murray & Roberts Contractors (Middle East) for the contract and an award was expected by March. Since then there has been no clear indication of when the award will take place, despite an agreement between Abu Dhabi and the French government that said the museum was expected to open in 2012 (MEED 30:5:11).

Contractors are also waiting for a decision of the Department of Transport’s (DoT) $3bn Mafraq-Ghweifat public-private partnership (PPP) highway. After submitting bids in December 2009, a consortium led by Austria’s Strabag was expected to be named as the preferred bidder for the scheme during the first quarter of this year, but since then the government has told bidders that the project is unlikely to proceed as a PPP and will be retendered (MEED 10:5:11).

An award was also expected on the Al-Ain hospital project, but that contract will now be retendered. The client, Abu Dhabi Health Services Company (Seha), selected the joint venture of the local Al-Shafar General Contracting and the local National Projects Construction (NPC) with Japan’s Shimizu Corporation for the estimated AED2.6bn ($708m) contract late last year (MEED 10:6:11).

The uncertainty is becoming an issue for the larger contracting companies that have hundreds of millions of dollars worth of bid bonds out in the market. Bid bonds are submitted by bidders to a client to guarantee that they will take the job on for the price they have quoted.

“We would really like to know what is going on,” says a local contractor. “We have long lists of submissions and all we seem to do is extend the validity of our bid bonds.”

With limited feedback from clients, it is not clear what has caused the abrupt slowdown in contract awards.

Contractors and consultants in Abu Dhabi say that the emirate’s Executive Council is meeting sporadically and that means approval for contracts on government-backed schemes is not being given. “Most of the major work is government or government-related,” says a UK-based consultant. “The government isn’t making decisions, and that is slowing the market down.”

One contractor says that the problem is made worse by the way major contracts are approved by the government. Projects are often only submitted to the emirate’s Executive Council  for approval once bids have been submitted, which means that is the council does not approve the project the bids are scrapped.

“Government departments don’t want to go to the Executive Council twice, so they go for approval once they have a preferred bidder, so they can get the project and the contract award awarded at the same time,” says the international contractor. “If the council does not approve the project, you’ve been wasting your time and money preparing a bid.”

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