This year has been a record-breaking one for Saudi Arabia’s construction sector. With three months still to go before the end of 2013, there has been nearly $42bn-worth of building and infrastructure contracts awarded in the kingdom.

The impressive sum – almost three times the $17bn that was awarded in 2012 and about $13bn more than the 2011 figure – is the most ever awarded in the country in one year, according to regional projects tracker MEED Projects.

The year started on a high when in early January the Interior Ministry finally awarded the local ABV Rock a deal to build a multibillion-dollar medical city in Riyadh. Contractors had submitted bids for the project in August 2011.

The news of the award ended what was for many construction companies a frustrating 2012, blighted by slow decision-making from client organisations, with just $17bn of new contract awards.

Government clients

Many of the delayed projects were government schemes, and the Interior Ministry – the kingdom’s most active construction client, with $12bn-worth of tenders in late 2010 and early 2011 – starting to award deals again was just the tonic for firms looking to secure new work in Saudi Arabia.

The ministry did not disappoint. In April, the local Al-Arrab Contracting and Al-Rashid Trading & Contracting were awarded contracts for the fourth phase of the King Abdullah Project security programme. At about the same time, Saudi Binladin Group was awarded the construction deal for the third phase.

While the Interior Ministry has been the most active client for tendering in previous years, in 2013 the most active client for awards has been Arriyadh Development Authority (ADA). The ADA has dominated the Saudi construction market this year because of one project: the Riyadh Metro. In late July, it awarded contracts to three consortiums totalling more than $22bn – 52 per cent of the total value of awards so far this year.

Without those deals, there would have been only $20bn of awards to date, putting it on par with 2011, which saw $24bn of awards in the first nine months and $29bn for the full year. The spike in awards due to the Riyadh metro scheme may not be a one-off event as other cities in the kingdom are planning their own metro and urban rail projects, albeit smaller in scale.

Companies are expected to be invited to bid this year for contracts for the Mecca Metro, which will comprise four rail lines, 88 stations and more than 180 kilometres of track, and forms a major part of a new $16.5bn transport plan for the holy city.

Meanwhile, Jeddah Metro Company was expected to release request for proposals for three different packages for its planned rail network by the end of September. The packages cover architecture and design, pre-project management, and project management roles.

In Medina, a joint venture of Lebanon’s Khatib & Alami and Turkey’s Istanbul Ulasim was commissioned in May to complete the early design work for a metro network that will link the city’s airport to the Prophet’s Mosque.

Other transport projects are expected to create new opportunities for contractors. In May, the General Authority for Civil Aviation (GACA) awarded the joint venture of Turkey’s TAV and Al-Arrab Contracting an estimated $400m deal to build the new Terminal 5 building at King Khalid International Airport in Riyadh.

Gaca is also prequalifying firms for the contract to expand the existing Terminals 3 and 4 at the airport. The design-and-build deal will involve the expansion of Terminal 3 and the currently unused Terminal 4, as well as additional landside facilities and concourses. The work will also involve building aircraft aprons and stands, airport systems installations and new utilities and services.

In June, Gaca received bids from 17 groups for the contract to build the new King Abdullah bin Abdulaziz airport in Jizan, and bids are due to be submitted in November for Abha airport, which is being developed along with other regional airports in Al-Baha, Qassim and Al-Jouf.

Housing projects

Apart from transport, housing is the other main sector that is expected to create new project opportunities, as the kingdom turns to the private sector to overcome its worsening housing shortage. In 2011, it was estimated that Saudi Arabia would need 1.1 million new homes over the five-year period leading up to 2015.

Responding to the problem, King Abdullah bin Abdulaziz al-Saud announced in 2011 that the government would build 500,000 of those homes directly. To do that, he created a Housing Ministry to oversee the plans, which were expected to cost $70bn to build.

Little has happened since then and the Housing Ministry now plans to allow private sector developers to build the new homes. For this plan to work, the kingdom needs a functioning mortgage market. After more than a decade of debate and discussion, the legislation was finally approved in July 2012 by the Council of Ministers and is now being developed into a functioning law governing mortgages.

Once that happens, there should be plenty of opportunities for contractors to win new work in Saudi Arabia and, unlike the market of today, it will be dominated by private firms rather than government-controlled clients.