Three Pitfalls for Contractors to Look Out for in 2019
By Karim Helal- Founder and CEO, ProTenders
Looking back, 2018 was a mixed year for the GCC construction market. On one hand, the demand from regional events and government-led initiatives, in particular Dubai’s Expo 2020, Saudi’s Vision 2030 and Kuwait’s five-year development plan have helped to bring stability to the supply chain. On the other hand, the usual challenges of delayed payments, under capitalization, inadequate planning and the rising costs of raw materials in combination with oil volatility will almost have certainly been front and centre issues for many construction stakeholders throughout much of last year.
With that being said, 2019 is now upon us and, certainly, the macroeconomic outlook is positive. According to the International Monetary Fund’s (IMF) Regional Economic Outlook, the GCC is expected to grow by 3%, up 0.6% from 2018 and considerably better than the 0.4% contraction witnessed in 2017. In addition, oil analysts anticipate a recovery in the price of oil, particularly in the first six months, suggesting an increase in market confidence and therefore a better start to the year than 12 months ago. Certainly, the ups and downs of the past four years have helped to shape a different approach for contractors in the market, and with it a variety of pitfalls which should be avoided.
- Don’t be cheap
While the outlook is generally positive for 2019, a contraction in projects and financing in 2018 caused a shift in the market dynamic that saw contracts being awarded to the lowest bidder, as opposed to the best solution, generally at the cost of the contractors’ profit margin. As many construction professionals will tell you, not only does this make for a highly stressful way to work, it also leaves little room for error, meaning any project delays or changes you could leave you with a variety of problems.
As a positive outcome, innovative new financing mechanisms have emerged in the past year and thanks to the increasing involvement of both international and local banks, the project finance gap, which was reported at one stage to be $270 billion, has started to close. The support of this financing has not only helped to keep the project pipeline moving, but also led to a renewed sentiment of the region’s original macro development goals of building sustainable quality, meaning contractors are best placed to provide a high-quality solution over a bid that focuses on the lowest cost.
- Avoid living in the past
Acknowledged as one of the most stagnant sectors worldwide for the adoption of new technology, the last few years have seen the beginning of a regional embrace of digital and a variety of innovations and programs that have helped not only to make the construction process simpler, but furthermore save time and money. The adoption of software such as BIM, which not only helps to reduce waste and increase efficiency is still only used on 10% of all construction projects in the Middle East, however, its application on projects including the Louvre and Abu Dhabi’s Midfield Terminal represent excellent case studies of how it is an invaluable tool. Other innovations include the use of cost management software and the application of smart sensors and drones, each of which have helped to make marked improvements to the sector, particularly for contractors. Given the speed of adoption, and using the international markets as an example, ignoring the benefits of proven technology will be a serious pitfall for all construction stakeholders in the coming years.
- Don’t think ignorance is always bliss
Stop relying only on existing business relationships or word-of-mouth to win new projects. Similarly, in addition to the point above, construction intelligence has come a long way in recent years. In a ProTenders survey conducted in Q4 2018, over 25% of 356 construction professionals responsible for sales and marketing indicated that their teams are either currently investing or planning to invest in project intelligence solutions in 2019 to help win new business.