Urban rail projects will have to wait

31 May 2017

Saudi Arabia expects to finalise its PPP law by end of the year

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Saudi Arabia is understood to be considering setting up a single structure to control the delivery of its planned and unawarded public transport projects, which include multibillion-dollar rail and bus network schemes in the cities of Mecca, Jeddah, Medina and Dammam.

It is not clear if this entails the creation of a super project management office (PMO) comprising representatives from each project’s PMO, or if there will only be one PMO attached to the Transport Ministry that will coordinate the procurement activities for all schemes.

More importantly, it remains unclear if the procurement of these projects will eventually come under the remit of the national project management office (PMO) once it comes into place.

It must be noted that each of these schemes was planned independently much before oil prices started to decline. Similar to the under-construction Riyadh Metro, the plan was for these schemes to be funded fully by the state while ownership will stay with the municipal government.

With government funds running low, it has been announced that all these schemes will proceed under the public-private partnership (PPP) model.

This means establishing a central procurement and management entity is a logical move from an operational efficiency perspective.

Such a move, however, is not expected to come without challenges. It has to be considered that the municipalities in Saudi Arabia enjoy a de-facto autonomous status, which could complicate plans to bring these schemes to a national or federal framework.

In addition, it is understood the Saudi government expects to release a privatisation roadmap for its transport sector before the end of the year, the same timeline for the expected approval of its PPP law.

This could mean there is likely to be little movement in terms of actual contract awards between now and the end of the year, except for the award of the bus package in Mecca.

And even if the PPP law is approved before the year is out, it does not guarantee immediate project awards, as can be seen in Kuwait and Dubai, both of which already have a PPP law in place.

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