Downbeat market in 2016 triggering price competition among contractors and consultants
Qatar stormed onto the world stage in December 2010 when it won the right to host the 2022 Fifa World Cup.
Six years later, the prices of oil and gas have declined considerably causing the country to incur its first budget deficit in years. It also expects to continue running a deficit over the next three years, while Doha says it will be spending an average of $500m a week on infrastructure and other World-Cup related projects and providing support to the Saudi-led military offensive in Yemen.
Despite these challenges, it is unlikely the country will disappoint the 2022 Fifa World Cup organisers and visitors.
Qatars 2017 state budget, based on a $45 a barrel oil price, indicated plans to award QR46.1bn ($12.7bn) worth of new construction and transportation projects, QR8.5bn for 2022 World Cup schemes, QR5.8bn for the education and health sectors, and QR6.8bn for other sectors.
Until then, however, it has to put up with major frustration from several segments of its society: the traffic gridlock due to the construction of the Doha Metro, new roads and other major real-estate development projects is reminiscent of Dubai in 2007 and 2008 when the Dubai Metro and other iconic developments were under construction. This has an inevitable impact on residents productivity as well as quality of life.
Pointedly, the value of contracts awarded in Qatar in 2016 halved compared to the previous year as only the most critical projects related to the delivery of the World Cup got awarded. This shock is now driving price competition among consultants and contractors alike. Some are understood to be offering below-cost pricing to win new projects due to fears of thinning work pipeline.
|Year||Value of contracts awarded ($m)|
|Source: MEED Projects|
One consultant tells MEED low price bidding will have major repercussions in the execution of these projects. Indeed some international contractors may now be looking for ways to get out of it, especially if the planned contract awards do not materialise this year. The prevalence of uncertainty in nearly every major market globally, however, will mean the rest will stay, perhaps begrudgingly, until the global economic situation improves.