Saudi Arabia to focus on efficiency amid controlled capital spending

05 November 2015

This year has been the worst year since 2008 for contract awards in the kingdom

  • Saudi Arabia will look at efficiency to save
  • PMO laws to provide a centralised framework for the kingdom to deliver projects more efficiently

Saudi Arabia’s projects market is unlikely to significantly slow down despite a tightening on capital expenditure, says David Clifton, regional development director at the UK’s Faithful + Gould.

“The introduction of project management office laws in the Kingdom are signs that the government is looking to press ahead with many of the major projects but with more efficiency,” Clifton said speaking at a media roundtable in Dubai on 4 November.

“A recent study suggested that 71 per cent of projects were delivered late with 52 per cent over budget in the kingdom”, says Clifton.

Speaking about the introduction of project management office laws in Saudi Arabia, CH2M’s Saudi Arabia country manager Amer Khan echoes Clifton’s views that the kingdom must find more efficient way to deliver projects in order for the government to continue pressing ahead with major schemes.

Clifton says that the kingdom is looking to establish more centralised methods of procurement and delivery to replicate models in other “more mature markets like the UK”.

“Although Saudi Arabia is quite centralised already, there are many government bodies working with their own agenda’s”, says Clifton.

MEED reported in mid-October that 2015 has been the worst year since 2008 for contract awards in the kingdom and the outlook in the short term is not promising for the region’s biggest market.

According to regional projects tracker MEED Projects, some $35bn-worth of deals were awarded in the kingdom between January and early October.

In October, the Finance Ministry told government bodies to stop any further contract awards for the rest of the year, which means the figure is unlikely to change much between now and the end of December.

That would mean a 28 per cent drop compared with the value of projects awarded last year and puts this year far below the average of $61bn over the previous six years.

The only major contract awarded since the finance ministry’s decision was in November when Spain’s Initec Energia signed a contract with the Saudi Electricity Company (SEC) to provide engineering, procurement and construction (EPC) services for the Duba integrated solar combined-cycle (ISCC) power plant. It is understood that this contract was awarded as it was already in the final stages before the ministry’s decision.

Learn more of Saudi Arabia’s infrastructure spending at Saudi Mega Projects Summit

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