Large events with fixed dates mean projects have to move ahead
Reduced government spending in 2016 has dramatically reduced the opportunities available for contractors looking for new work in the region.
The problem that construction companies face is that, unlike the previous downturn that began in late 2008, this time few projects are being cancelled. In 2008, private sector developers were clearly unable to move ahead and cancelled projects as property prices fell by 40 per cent.
In 2016, the situation may still be frustrating, but it is quite different. This time around, most of the projects being targeted by firms are state-backed and while government budgets have been cut, the fundamental need for the vast majority of government projects remains.
The result is that although projects may not proceed this year, they are expected to be executed either when the oil price recovers, or an alternative source of funding is found.
There are two exceptions to this rule and they are Qatar and Dubai. Qatar is preparing to host footballs FIfa World Cup in 2022 and Dubai is preparing the host the Expo two years earlier in 2020. These two events are immovable deadlines and any projects that will support them have to be completed on time.
The best example of a single project benefitting from such a firm deadline is the Route 2020 extension to Dubai Metro that will connect to the Expo site in the Jebel Ali area. The tendering process for this multibillion-dollar project is a complex one as each of the five bids have included financing options, which means assessing which offer gives Dubai the best deal is a manifold process.
Were it not for the Expo, Dubai could have enjoyed the luxury of time when assessing the offers. Instead, it has to move fast, select a preferred bidder and award the contract as soon as possible. The Expo countdown clock keeps on ticking.