The construction market landscape in Saudi Arabia is changing rapidly and contractors need to be more fit, agile and resilient to adapt to new market conditions, says Nasser al-Shawaf, director and executive board member of Riyadh-based Al-Bawani Holding Company.
Al-Shawaf explains that changes in the market were sparked by the announcement of the kingdom’s ambitious Vision 2030, which led to an overhaul of funding strategies to finance both infrastructure development and a generation of megaprojects and gigaprojects, such as the $500bn Neom future city, the Red Sea Project, Amaala and Qiddiya entertainment city project.
“To realise this vision, many changes had to take place, most notably to reduce the dependence on oil revenue and government spending,” says Al-Shawaf. “So to transform the economy, the government had to push to come up with different revenue streams.”
The diversification agenda makes greater use of private sector finance through privatisations and public-private partnerships. But the change in project funding has brought a huge shift in attitudes to spending, and a new type of client is emerging.
“So really the market has changed from a very traditional, relatively simple form of contracts and spending to highly sophisticated clients that are very demanding,” says Al-Shawaf.
“There are very stringent conditions and you need to be much more aware of what you are getting into,” he says. “You need much more commercial expertise in-house. Risk management has taken centre stage now.”
To meet the demands of this new generation of clients, stakeholders are being increasingly pushed to deliver projects more efficiently, so it is essential for industry players to address the main causes of cost and time overruns.
HKA’s integrated research programme, CRUX – which looks at the causes of disputes and claims on construction and engineering projects – found that of the 78 Saudi Arabian projects surveyed, an average of 86.3 per cent extra time was claimed on the original contract duration, and the average cost claimed was $88.4m.
Haroon Niazi, partner and head of Middle East for international dispute avoidance and resolution firm HKA, says the most common causes of disputes and claims are changes made to the project scope by either the client or the contractor, late issuance of design information, access to site, late approvals and contract interpretation issues.
Clearly, if these issues can be resolved, there is the potential to make enormous savings.
Catherine Joshi, technical director at HKA, says that to see improved efficiency, it is vital to introduce robust project protocols at an early stage.
“That starts from the very beginning of the design phase,” says Joshi, “with a clearly defined scope of work for both the designers and the contractors.”
She says the protocols should include communication methods as well as the handling of design information.
“Even though in huge projects there are going to be changes, if the scope is clearly defined from the start, you have a reference point to go back to,” says Joshi.
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