The local/UK Carillion Alawi has signed a letter of award with the Ministry of Health as the preferred bidder for the estimated RO122m ($317m) contract to design and build the New Sultan Qaboos Hospital in Salalah.

The contract will consist of a two stage design and build process. The initial design and mobilisation phase, which will be directly funded by the ministry, will commence immediately.

The second phase will commence in 2018 once the design has been completed, the contract executed and funding finalised.

Another letter of award is due to be signed shortly by Carillion Alawi, for a hospital in Khasab for the Ministry of Health.  The contract is on similar terms to those for the Salalah award and has an estimated value of RO61m to the joint venture.

Carillion says that both contracts are procured using lower risk procurement routes such as seeking support from UK Export Finance to secure project finance.

The company adds that it is looking at ways in which it can de-risk its operations in the Middle East, working with its partners in the region to secure the future of this business.

Carillion has been having financial difficulties. Its board said on 17 November that it expects to breach its financial covenants on 31 December 2017.

The company says this is due to a combination of factors including a slippage in the commencement date of a significant project in the Middle East.

In July, Carillion says that it is expecting losses in the Middle East and is provisioning £325m ($418m) to cover those costs.

The UK construction company says that it expects to provision a total of £845m, largely for four problem projects. In a briefing to analysts on 10 July it would not reveal which projects they were for commercial reasons, but it did confirm that three were in the UK and one is in the Middle East.

Qatar is one of the three Middle East markets that Carillion says it plans to exit. The other two are Saudi Arabia and Egypt. It has also sold 50 per cent of its interest in Carillion Alawi in Oman.