Warming up for the World Cup

07 February 2012

Opportunities for consultants, contractors and suppliers will increase as Qatar’s construction schemes boom ahead of the 2022 football tournament gets under way

Just over one year ago, Qatar was propelled on to the international stage when it won the right to host the 2022 World Cup. It now has just 10 years in which to build the $60bn-worth of infrastructure projects it committed to in the bid documents.

The company registration process can take upwards of six months before firms are legally able to bid

The small gas-rich peninsula is gearing up for a major projects boom in the coming decade and international firms the world over are hoping to play their part as consultants, contractors and suppliers. Many will be looking to win work for the first time in Qatar, either on their own or in joint ventures with local companies. The key to their success will be understanding their clients’ needs, pricing their bids attractively and selecting the best local partners.

The tournament is the world’s biggest sporting event, drawing 400,000 visitors to South Africa in 2010, when it was last held. Qatar expects to welcome at least this number when it plays host and the country must ready itself for the influx. It must be able to accommodate all the teams, fans and dignitaries during the month-long competition and ensure they can travel around the country with speed and ease.

Hotel rooms in Qatar

Fifa, football’s governing body, mandates that Qatar must have a minimum of 60,000 hotel rooms available for the World Cup. The bid committee has pledged to exceed this and provide about 90,000 rooms, mainly in four-star hotels. This will involve more than doubling current hotel room stock at an estimated cost of $12.4bn. The hotels will be built mainly in Al-Wakrah and the capital, Doha.

Qatar also needs to invest in venues to stage the tournament. It has said it will spend $4bn on building nine new stadiums and upgrading three existing ones. Each will hold at least 45,000 people and will be cooled to cope with Qatar’s summer heat. Construction of the 86,000-seat Lusail Iconic stadium, which will host the opening and final matches, is scheduled to begin in 2015, with completion expected in 2019.

To move thousands of visitors around the country, a $35bn rail network is planned. The transport system includes high-speed rail links, the Doha metro and light railways to reduce travelling times between Doha city centre and new residential developments at Lusail and West Bay. The metro project, which will comprise four lines and run 358 kilometres in total, is perhaps the most crucial. It will have 100 stations, of which 12 will serve World Cup stadiums.

Qatar has also committed to spending $20bn on building new roads and updating the existing network in order to ease congestion. Major projects include the $687m Lusail Expressway, the Doha Expressway, Dukhan Freeway and Doha Bay Crossing.

Major clients in Qatar

Source: MEED Projects

This represents a massive pipeline of projects to design, tender and execute in less than a decade. As the world’s largest liquefied natural gas producer, Qatar will have no problem financing the construction programme. But its history of lengthy tendering processes and project delays threatens its success. A further challenge comes from the fact that many of the schemes will require coordination between multiple government bodies and stakeholders.

Overseeing World Cup plans

To address this issue, the Supreme Committee for Qatar 2022 was set up in April 2011 under the presidency of Crown Prince Sheikh Tamim bin Hamad al-Thani to oversee preparations for hosting the tournament. Since then, Doha has moved to establish a Central Planning Office, which will act as a single coordinating body to oversee all major project work in Qatar, including the road, metro and other major infrastructure works.

In January, UK-based consultant Atkins was appointed by the Municipality & Urban Planning Ministry to support the setting up of the Central Planning Office. Atkins’ contract will run for three years and is worth about $108m. The deal involves consultants from Aktins, including the company’s Middle East chairman Keith Clarke, joining the planning office. Clarke told MEED last month that Atkins expected to have 100 people mobilised in government offices by mid-January.

Contractors and developers hoping to build the infrastructure face hurdles of their own. One major challenge will be arranging bond financing. When bidding for and undertaking construction work in Qatar, contractors need to provide several bonds, which can total up to 30 per cent of the value of the project. This may prove difficult for smaller or international firms with no track record in Qatar’s construction sector. When bidding for work in, contractors are required to provide bid bonds for about 5 per cent of the total value of a project. After the conclusion of a tender, clients ask the winning contractor to provide advance payment bonds, performance bonds and often retention bonds. Local banks will also be under pressure to ensure they have the capacity to support the construction sector and are able to make finance and bonds easily available ahead of scheduled deadlines.

There are three main factors that banks will take into consideration when offering finance to construction firms as bonds for projects. In addition to the size of the project under tender and the financial position of the company bidding for the work, banks will look at the track record of each construction firm within Qatar and the GCC. It is important that contractors have expertise in the work they are bidding on.

Naturally, Qatar is keen to see local firms benefit as much as possible from the construction boom and the various government bodies have their own procurement policies. For example, the Public Works Ministry (Ashghal) reserves projects up to QR100m ($27.5m) for local contractors. Schemes worth QR100m-200m can be undertaken by local contractors with sufficient technical and financial capabilities and by joint venture companies with local participation of not less than 51 per cent in the project company.

The same applies for projects above QR200m, but foreign companies are also allowed to participate in the tender. For contracts with foreign firms, a minimum of 30 per cent of the contract price must be used locally as procured works or materials.

Some contractors have been disappointed by the lack of project activity in Qatar since it won the right to host the event in December 2010. But this year is expected to be the start of a major construction boom, which will provide opportunities for consultants, contractors and materials suppliers. Although the stadiums will not take long to build, the rail projects have lengthy lead times so Qatar needs to pick up the pace. The establishment of the Central Planning Office is an indication that things are now starting to move forward. A further positive sign is the progress being made on the Doha Bay crossing, a project that has suffered from considerable delays due to design changes.

In January, Ashghal set a deadline of early February for requests for proposal for the project management of the Doha Bay Crossing, which comprises 12km of bridges and tunnels linking the Lusail development, West Bay and New Doha International airport. The scheme is a vital piece of infrastructure for the World Cup.

Development vision

International companies hoping to participate in Qatar’s projects boom need to start positioning themselves as of now. According to legal firms working in the region, the company registration process can take upwards of six months before contractors and consultancies are legally able to bid for work in Qatar.

Many of the projects that will support the World Cup event were already planned to be built as part of Qatar’s National Vision 2030 development plan, long before the country set its sights on hosting the tournament. The vision aims to transform the country away from its reliance on hydrocarbons revenues into a modern, knowledge-based economy.

Other countries in the GCC have scaled down or pushed back their visions for economic development in the wake of the global financial crisis. With the immovable deadline of the 2022 World Cup, by which time Qatar has to complete a vast amount of infrastructure projects or lose face internationally, its vision should remain on track. For the next decade at least, Qatar will be the focus of the GCC construction industry.

A MEED Subscription...

Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications