Despite much talk over the past few years about the introduction of long-term alliances between construction clients and contractors, partnering agreements remain rare in the region.
But with the Gulf’s construction boom putting the industry under enormous strain, overstretching resources and driving up costs, partnering agreements are increasing in popularity. So they should.
Such deals are born of necessity - the need to better understand and control costs. With rises in construction materials and labour prices, it has become almost impossible for contractors and clients to accurately estimate the cost of multi-billion-dollar projects.
By entering into long-term agreements with suppliers, developers can give certainty to producers, who can then plan accordingly - rather than having to wait for a contractor’s order several months later.
Many contractors are attempting to mitigate the risks inherent in the region’s overheating market by buying or launching their own supply divisions.
It is a strategy that works well currently. But it leaves them open to risk should the market stall in the future.
Leadership must come from the top, from the clients, governments and private sector alike, who must work with the supply chain to manage long-term supply and demand.
Special Report: Construction - The move to partnership -Index of all stories
Contractors: Controlling the supply chain
Companies are seeking to control costs by buying up suppliers
Megaprojects: Taking the partnership approach
Contractors in Saudi Arabia and Kuwait are preparing for some of the region’s biggest ever projects
Subcontracting: Services market heats up
Survey of the mechanical, electrical and plumbing firms reveals the market’s key companies
Marine projects: Specialists gain the upper hand
Offshore projects are on the increase and contractors are choosing work carefully
Plant: Tight market benefits locals
Equipment imports are accelerating but delays continue as manufacturers struggle to meet demand
Construction cost analysis: Project boom drives up costs
Material and labour cost rises show no sign of falling
Commentary: Rising Gulf construction costs are here to stay
There is little that contractors can do, other than ensure escalation clauses are included in contracts