21 deceMBer 2015
InsIght and analysIs for constructIon specIalIsts on topic
analysis
The importance of lifecycle cost modelling on a project
Evaluating design and build in the region
AVIATION EVOLUTION Airport design gets cleared for take off
BARBARA SACHA PRINCIPAL ENGINEER – MECHANICAL
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I AM WSP PARSONS BRINCKERHOFF
I AM ADDING VALUE IN BUILDING SERVICES DESIGN
CONTENTS
December 2015
04 04
On topic
09
news anD VIews frOm acrOss the mIDDLe east OnLIne news
CPI’s digital platform for construction news
09
12
On tOpIc
Why lifecycle cost modelling is an important part of cost consulting
12 12
In practice anaLysIs, InsIghts anD InterVIews
18
cOmpany VIsIt
26
Journeying through 50 years with AECOM and mapping the road ahead
18
anaLysIs
Assessing if the Middle East construction industry is ready to embrace design & build
22
eVent
Middle East Consultant reports from the Leaders in Design MENA summit
26
22
InsIght
32
Identifying the route airport design will take in the future
32 32
On site case stuDIes, OpInIOns anD snapshOts specIfy me
Jason Redgers explains why ground improvement is an important part of the construction process
34
q&a
Winston & Strawn discuss how Dubai's new PPP law will boost private sector investment
37
news
Dubai Parks and Resorts on target for 2016 opening
40
Last wOrD
Dr. Kamiran of Arcadis talks about Qatar as a built asset wealth world leader per capita
37 December 2015 Middle East Consultant 3
on ToPIC roundup
Online L AU N C H PA R T N E R
Middle East Consultant’s home on the web MOST POPULAR
EDITOR'S CHOICE
READERS' COMMENTS
1
Drake & Scull, Arabtec shares hit hard as Dubai market tumbles Shares in developers Emaar and Damac fell as the Dubai Financial Market index hit an 11-month low PHOTO GALLERIES
2
Dubai’s Arabtec reports heavy losses in ‘difficult regional market’ Contractor reports fourth consecutive period of losses, falling $257 million further into the red in the third quarter
Viceroy Dubai Jumeirah Village under construction A tour of the one-of-a-kind mixed-use project by SKAI Real Estate Development. See photo galleries at: meconstructionnews.com/photos
3
Al Habtoor Group ‘to sell its stake in HLG’ Dubai conglomerate to focus on its 100% owned assets, according to TV report
Name supplied, comment to story ‘Saudi recruitment slump: Construction job postings down 18%’
READER POLL
4
Top 10 Oman infrastructure projects Despite the decline in global oil prices, Oman is pressing ahead with several large projects
Will the Gulf construction sector step up executive recruitment in 2016?
39% 8%
5
Abu Dhabi’s Aldar to launch sale of Mayan units on Yas Island Prices start at $217,800 for a studio apartment; residences will be available to buyers of all nationalities
Saudi construction market has long-term strength The headline to your story ‘Saudi recruitment slump: Construction job postings down 18%’ was alarming at first glance. It was interesting to note that Monster.com had seen such a sharp decline in construction jobs advertised in the kingdom. But I don’t think one can read too much into this: While there may be a temporary decline in recruitment in Saudi Arabia, few can argue that the sheer scale of the country’s ambitions points to a stronger market in the long-term.
VIDEO
Dubai theme parks under construction A sneak peek at the Dubai Parks and Resorts development, which is due to open in October 2016. See videos at: meconstructionnews.com/videos
Yes: There will be more jobs created
Yes: People will move for better salaries
31% 22% No: The market will be stagnant
No: I expect layoffs
Log on for the latest from across the Middle East construction sector. Write to the editor at contact@meconstructionnews.com
4 Middle East Consultant December 2015
Editor’s note Group GROUP CHAIRMAN AND FOUNDER DOMINIC DE SOUSA GROUP CEO NADEEM HOOD
Paving The Future
N
ovember was one of the busiest but most exciting months for the construction industry in the UAE. I attended the Leaders in Design MENA summit, followed by the Dubai International Project Management Forum and The Big 5, and I'm happy to say that each event was an enriching experience. A prominent theme in this month's issue of Middle East Consultant is evolution and enhancing the experience of people. I had the best day out at AECOM in Abu Dhabi, where David Barwell revealed in conversation that the company has a lot of interesting projects focused on building communities. I found the framework and masterplan for the City of Jeddah quite intriguing, while other plans include the rolling out of 4,000 schools across Saudi Arabia, the Jeddah metro and Etihad Rail, all of which will surely transform the region. What's even more exciting is the way airports are evolving into mini cities! Besides having a lot more retail, hospitality and leisure offerings to look forward to inside the terminal, the idea of creating airport cities will definitely change the face of the aviation industry. Experts say it will improve commutes and stays for business travellers who are only in town for a day or so. Addtionally, it is likely to boost tourism, as it gives people a peek at what to expect from the main city if they do decide to come for a longer stay. Lastly, I am most excited about the Middle East Consultant Awards on the 6th of December. We've all been extensively planning this event through the year, and I want to thank each of you for sending in such spectacular nominations. I'm confident that this award show will create many wonderful memories and will become a staple event in the regional consultant’s calendar.
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6 Middle East Consultant December 2015
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09
COST CONSULTANCY Why lifecycle cost modelling should be considered while planning construction costs.
On topic O
COST CONSULTANCY
MONEY MATTERS Davina Munro speaks to cost consulting experts about the integration of lifecycle modelling when planning expenditure in the Middle East
n any construction project, cost management is essential to consider in order for the project to be bid for, documented and completed within a pre-agreed budget. Right from planning and design, through to construction and occupation, cost consulting ensures that a project remains on an economical track. But more often than not, cost consideration is not extended to the post-occupation phase, especially in the Middle East. With anecdotal evidence suggesting that for every unit of capital cost spent on the construction of a building, 10 units will be spent on maintenance and 100 units spent on staffing the business activity over a 30-year period, focusing on lifecycle costs is essential, says Craig Gibson, senior manager at Omnium, an American cost and contracts management firm based in Dubai. Lifecycle modelling takes into account the value and expense of a building over its entire lifespan, rather than the traditional approach of focusing only on capital costs. “Considering buildings are the largest and longest lasting assets that a company or individual is likely to own, lifecycle costs are inherently important. However, business models in such a fast-developing country like the UAE are still evolving and maturing, in line with other markets. More mature markets generally recognise the benefits of lifecycle costing more than embryonic markets, because the margins of profit are smaller,� says Gibson. With a great deal of expense sitting beyond the construction phase, lifecycle modelling helps predict costs of future physical asset replacement or refurbishment as well in a development. Chris Bond, director of Consultancy at Mace Macro International, a British strategic and tactical services management company based in Dubai, says that it is an essential part of determining December 2015 Middle East Consultant 9
on topic cost consultancy
Chris Bond, director of Consultancy at Mace Macro.
Ian Finlay, director at Hill International Middle East.
Craig Gibson, senior manager at Omnium International.
“Over a 25-30-year period, lifecycle costs can reach up to 75% of the initial capital costs of the building construction. Thus a focus on long-term costs, and how they are managed and recouped, is essential” the operational expenditure of a development when combined with the day-to-day facilities management costs. “Its is a tool that can be used by owners, users or managers to enable budget setting for the operational period, to plan for the substantial costs of future asset replacement, and in a multioccupancy building, to help determine the service charges. “Its effect is significant, as it is typically calculated over a 25- to 30-year operational period, when the majority of assets, excluding the building structure, will need to be replaced or refurbished. In fact, over this period, lifecycle costs can reach up to 75% of the initial capital costs of the building construction. Thus a focus on long-term costs, and how they are managed and recouped, is essential.” Naturally, this gives rise to the question of how much of unforeseen expenses can be avoided and how much can be saved by calculating the lifecycle costs of a project. Ian Finlay, a director at construction claims management firm, Hill International Middle East, says that this largely depends on how much time is available to study the alternatives, as cost savings can 10 Middle East Consultant December 2015
be obtained in the procurement, design, construction and operation phases of a project’s lifecycle. “By applying effective lifecycle modelling, a better appreciation of the costs over the lifetime of the project or building can be obtained. For instance, a review of design methodologies might possibly obtain small savings at the onset but could also possibly have very large savings over the lifetime of the project. “Similarly, methods of procurement for a project can have an effect on the immediate, short-term costs but also the consequential longterm costs. What we try to instill in stakeholders is that there's more than one way of doing this. By investing time in looking at alternatives, you can obtain some very real benefits.” As the methods and strategies of cost savings are many, employing an industrial professional is necessary to calculate a holistic percentage saving on a case-by-case method. Gibson believes that lifecycle modelling isn't so much driven by various prescribed formulas as it is by client needs. He says that there are three main factors that have to be considered: building lifespan and use, component life and discount rate.
"The building lifespan should be considered, because the methods of construction and the way the building is maintained will heavily impact the feasibility of its lifespan, as does the way the building is used. For example, there is little merit in including building components with long lifespans in situations where rapid change and modernisation are expected. "Likewise, component lifespan plays a critical role. Lifecycle costing is more concerned with how long the component will be retained than how long it will last. Owners and builders have a role to play in that by ensuring the components are correctly installed and maintained, as this will better arm them to assess the cost of their building, with an element of trust in the components not failing. "Finally, the selection of discount rate is also important, and this is probably governed by the financial status of the client." Gibson also explains that public sector owners are likely to get more favourable interest rates, and owners should also consider whether the finance is borrowed or comes from its own profits. Sustainability can largely influence cost saving and shares. Finlay explains that sustainability is a
on topic cost consultancy
very important factor because it has a key place in the operational phase of a project. “Where sustainable measures have been incorporated, annual costs for sustainability will improve with time, which in the case of a building may be a period of between 20 to 50 years. Benefits can be obtained in the overall project lifecycle by embracing and adopting sustainability approaches in a more holistic way. “Maintenance costs and utility costs could benefit from this, in areas such as recycling and reuse, the environmental rating of electrical and mechanical systems, and incorporating zero emission or green technologies. Introducing these novel systems into a building may have a high initial capital cost, but could actually translate into considerable cost savings over time." Bond adds that sustainability initiatives such as grey water recycling, condensate recovery and lighting system presence detectors, while increasing capital expenditure, provide a lifecycle cost saving. Additionally, under the LEED and Abu Dhabi Urban Planning Council Estidama Pearl Rating environmental assessment system, credits are available for undertaking a lifecycle cost assessment of a development or building. Value engineering has a role to play too, and its outputs have a direct impact on lifecycle costs. "Effective value engineering will inform both the capital expenditure and operational expenditure, and thus the lifecycle costs. In turn, lifecycle modelling feeds back into any value engineering exercise, identifying whether proposals for capital cost savings will actually have a long-term financial benefit," says Bond. Finlay adds that value engineering is not being adopted or used to its full potential in the UAE. Due to the rigid procurement methodologies currently employed in the region, he says that value engineering is restricted to the optimisation of design and construction costs, rather than being an integrated process to achieve dramatic
Lifecycle modelling helps predict costs of future physical asset replacement or refurbishment in a development.
improvements in overall cost, quality or service. “Value engineering in the context of a contractual framework should encourage innovation, creativity, new perspectives and principles, and the adoption of best practices. The types of contract forms that are in use in the UAE cannot realistically foster all of these objectives, and there is a tendency to shoe-horn a somewhat restricted form of value engineering without labouring on the true benefits that the process can provide. “Less adversarial forms of contract are particularly well suited to the use of value engineering. Such forms often go further and encourage the use of partnering approaches, adopting concepts such as ‘pain-share, gainshare’ and other methods of incentivisation. In this case, both of the contracting parties have a vested commercial interest in managing cost effectively, and ensuring that what's being built is being optimised in terms of that cost.” Lifecycle cost modelling does not come
“Introducing novel systems to your building, which may have a high initial capsule cost, could actually save you considerable costs over time through the utilisation period”
without its challenges, and the biggest is having to deal with things which are unknown and haven't happened yet. Gibson breaks it down, saying that these include a lack of data regarding maintenance costs, technological change, fashion changes, cost and value changes and policy changes. "Maintenance cost data is generally only collected for accounting purposes, and the way these costs are recorded can be at odds with how they would be useful in a lifecycle cost. Secondly, lifecycle costing ought to attempt to anticipate future trends in how society interacts with buildings. "Historically buildings were built to last, then loose-fit buildings came into fashion, followed by low-energy buildings and so on. Lastly, policy changes on behalf of the building owner can be difficult to predict. A common example in the UAE would be a building owner changing an apartment block into a hotel block." Despite the challenges and lifecost modelling being undervalued at times, cost consulting will always occupy an important role in the Middle East construction industry. Finlay says that there's a lot more about cost consultancy as a business model that can be used for the betterment of the industry and the region as a whole. While largely agreeing with this sentiment, Gibson concludes by saying that while lifecycle costing will pick up as the market matures, the industry in the Middle East isn't quite prepared to harness its value to its long-term business just yet. December 2015 Middle East Consultant 11
12 Middle East Consultant December 2015
IN PRACTICE aECoM
Company visit
ThE GolDEN YEARs of AECoM ME Consultant takes a trip down memory lane with AECOM and relives its last 50 years of glory in the region December 2015 Middle East Consultant 13
IN PRACTICE aecom
I
T’s bEEN 50 YEARs sINCE MulTI-DIsCIPlINARY
The UAE Graduate Programme is a twoyear course that prepares students with the professional and technical skills required in their careers.
consultant AECOM set up as a legal entity in the Middle East. Over the last five decades, the company has given the region many iconic structures, such as Ferrari World in Abu Dhabi. It is currently working on the Riyadh metro and Etihad Railway, which will be an integral part of the GCC's first integrated railway network. But the industry heavyweight we know today started from humble beginnings. Back in 1965, AECOM was nine different operating brands. Maunsell was the original company, which then acquired Cansult to become Cansult Maunsell, and so on. David Barwell, chief executive of India and the Middle East, reminisces with Middle East Consultant over the early days and talks about his role in pulling the company together. It was an interesting exercise, he says, because people didn't realise that they were all part of one family, and recalls one memory in particular that led to the rebranding of the nine entities as AECOM. “When I first got here where we went to present to a client and we had put together a team. We all had different business cards and the client asked if we were the same organisation! We went away, and for the next interview we printed all the same cards, and then the client gave us a thumbs-up because that was so much better. “The business has grown significantly since that time, and not just in the UAE but in Qatar and Saudi Arabia as well. We've also had long histories in countries like Oman where we've put in a lot of effort and are really starting to see some returns from there. Bahrain is doing well for us, so it's a sign that we've been able to reach out and expand our base from here in the UAE and broaden out.” Another key member of AECOM’s team, joining 37 years ago after his legacy company was acquired, is Riad Nashif, managing director of UAE and Oman. He says that he’s witnessed the company grow not only in terms of staff but also in terms of its offerings and services. “I've seen AECOM evolve from a single service offering,
14 Middle East Consultant December 2015
primarily in infrastructure, to a diverse service offering where clients do not need to go anywhere else if they choose to work with us. From planning to architecture to buildings to programme management, it’s all covered. Going forward we will continue this strategy. AECOM has been here for many years and it’s here to stay. The Middle East has been a strategic market for us and it will continue to be so for the foreseeable future.” In terms of AECOM’s philosophy for the region, Barwell says that as with any geographic location, the company’s priority is building a strong local business that is run and delivered by people focused on improving communities. “What’s really exciting about the Middle East and the development here is the maturity of the market and what it means to the social fabric around communities. For us, the goal is to operate in partnership with our clients and in partnership with the communities that they serve.” With its focus on people, AECOM also likes to motivate its employees to go the extra mile with their jobs. They do this through a delivery excellence programme, which according to Jack Crosby, vice president of Delivery Excellence in the Middle East, is all about driving a greater degree of consistency across the business. The programme looks to get everyone to understand and have a common interpretation of different elements of a job, in order to make sure that the client’s expectations are met on a project. “Delivery Excellence has a number of elements to it, and they're aimed at different parts of our business. Things like Deliver to Win, for instance, is an incentives programme that encourages our project managers to improve the financial performance of the projects – and if they do, a piece of that upside gets shared between the company and the project team, who are the people that made a difference.” Similarly, Crosby says that AECOM has a project manager alignment programme that trains them and teaches them to be ambassadors of their projects. “We want to make sure that we are encouraging them and that we’re giving them the necessary training and guidance. After all, the project managers are our ambassadors on each of those projects and we want to make sure that they have the necessary tools and guidance and support that they need to deliver our projects well. That's what Delivery Excellence is about.” Grooming young consultants is also on AECOM’s agenda. To ensure a constant flow of fresh talent, the company has started a UAE Graduate Programme structured over a two-year course. Goldie Bekin, manager, organisation and employee development, UAE & Oman, says the programme is specially designed to prepare graduates with the technical and professional skills required to embark on their professional career. “We've had about 100 graduates through it so far, and we've just enrolled another 29. Essentially, it looks at
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IN PRACTICE aECoM
JACK WooD Urban Planner Graduate, UAE
(Left to right) Riad Nashif, executive vice president, Middle East and managing director, UAE & Oman. David Barwell,chief executive, Middle & India. Goldie Bekin, manager, Organisation & Employee Development.
bridging the gap between university life and corporate life. We are looking to skill up our young professionals across the technical competences. “There's a technical component, a business skills component and a mentoring component, where each graduate is paired with a senior member of staff so that they get the knowledge, experience and skills from our senior employees. “We've also got the graduate committee, and they're essentially there to ensure that there's that additional support network, and the professional networking, which was launched this year.” AECOM also has a similar programme called Rise and Shine that targets female talent, and an e-learning platform called AECOM University which any employee can enrol in for training and online courses. Technology too takes centre stage in the way the company assists and communicates with its employees and clients. The company uses a variety of software packages to collaborate and understand data-rich 3D information, and is also starting to deploy tablet computers on-site in an attempt to aid inspectors in collecting and sharing site information. This allows faster and more intuitive means of communication than traditional spreadsheets, says Elizabeth Peters, associate director, BIM Centre Lead of UAE and Oman. “Behind the exciting immersive experiences we are starting to provide clients lies a large amount of work behind computer screens. We’re also starting to team up with technology suppliers to investigate the best way to specify and use point cloud data to understand existing conditions and ensure tolerances of project construction. We’re always trying to think of new ways to bring technology to the coal face of our project design and construction work.”
16 Middle East Consultant December 2015
"For the last year I have been part of the Graduate Committee, as the social and communications coordinator. This role has given me a fantastic opportunity to test my organisation and communication skills outside of my normal day-to-day role as a graduate urban planner. "It’s been an extremely busy year primarily focused around learning and development. There have been regular training workshops, online courses, site visits and social activities, all of which have contributed to both my professional and personal development. "The programme has been extremely beneficial. The structured training workshops really complement on-the-job learning, whilst the site visits have given me the opportunity to see first-hand upcoming developments such as the Midfield Terminal Complex. Being part of the Graduate Committee has allowed me to work closely with the UAE management team, and really influence the programme structure and the activities that it includes."
AECOM also employs augmented reality and virtual reality to effectively communicate concepts, ideas and solutions to its clients. In fact, Harold Dickenson, a graphic designer, believes this tool can even help reduce the time taken for development of a project. He says that by incorporating immersive technology,
IN PRACTICE aECoM
Augmented reality helps to effectively communicate concepts, ideas and solutions to clients.
Harold Dickenson, graphic designer, Middle East.
the company is finding interesting ways to help clients and stakeholders visualise design concepts. It also to allows them to be more involved in the process and to make more informed decisions. “Clients are becoming aware of this technology and they very much enjoy experiencing it. Meetings often come to a halt when clients see their 2D drawings pop off the page as 3D models. In one instance, stakeholders walked through a 3D concept of their tourist attraction, giving them greater understanding of the space – essentially experiencing their attraction before it is built.” Naturally, with so much focus centred around delivering a good project, AECOM has a healthy order book. Barwell says it is working on a number of key programmes that he is excited about, that are centred around communities. These include the masterplanning and framework for the City of Jeddah project and the pre-PMO for the Jeddah metro. AECOM is also working with the Tatweer Buildings Company in rolling out 4,000 schools across Saudi Arabia, some that are new and others entailing the rehabilitation of existing schools. Speaking about projects in Qatar and the UAE, Barwell says, “In Qatar, the Doha Port has been a great project for us and of course we're still working on that. It’s phasing currently, so we've been able to flood the port and take the first ship in earlier than what was anticipated. The orbital motorway project in Qatar is another stunning project, which has 90km of motorway which we are supervising and managing the contractors for."
Stakeholders can walk through a 3D concept of their project, giving them a greater understanding of it.
“Here in the UAE, I’m excited about the healthcare type of projects that we're working on. Also, the Midfield Terminal is a great project for which we are proud to be the construction management agency.” In terms of future projects, Barwell says AECOM is eyeing big opportunities in connection to Expo 2020. The company is also bidding for projects to do with the metro, as they are already working on the Etihad Rail, the Abu Dhabi metro and the extension of the Dubai metro. Though design and consulting services has been AECOM’s primary revenue driver, Barwell hints at broadening activity on the management services side. “I'm very optimistic, because we've got a great team in our management services business. We're seeing some strong stuff in the pipeline developing in that area." “Likewise, I think in the construction area, the response from our clients post the URS acquisition has been good. We've rolled out our integrated offering of design, build, finance and operate model, which has become a very interesting proposition for our clients.” As for interest in new markets and services, Barwell says that Iraq and Saudi Arabia will be the focus areas. “We have unfinished business in Saudi Arabia, and I think there's a great story to tell there. We've established an AECOM academy there as well and are committed to our nationalisation program with Aramco." “Iraq too has been on the radar although any big plans have been put on hold with all the unrest in the region. I think there are great opportunities for us in these key markets, just as there is here in the UAE," he concludes. December 2015 Middle East Consultant 17
18 Middle East Consultant December 2015
IN PRACTICE design & build
Analysis
D&B. ARE WE READY YET?
Middle East Consultant checks in with the construction industry to find out if design and build is being embraced in the Middle East
W
hilE ThE DEsign AnD BuilD mEThoD is widely
practiced in Western countries, the approach hasn’t been received with open arms in the Middle East. Given the infancy of this procurement model in the region, and with the industry still testing the water, experts agree that apprehension about quality control has perhaps been one of the biggest setbacks to adoption. But the reaction to the design and build model has been muted for other reasons. Mick Cairns, CEO at Black & White Engineering Middle East, says that while the firm has had two high-profile projects recently, this method has not picked up pace due to a low level of awareness and understanding, not only from the client side but also from contractors. “Perhaps the most significant difference between the regions is awareness and understanding of the design & build model, and this is perhaps due to the expertise of the contractors, who would normally be the proposer of this procurement model. There are only a handful of Western contractors in the Middle East who employ staff with the desired skill to manage a design and build team.” Agreeing with Cairns’ view about the shortage of contractors with the necessary skills, resources and ability to take on these kind of projects, is William Bennett, landscape architect at Dubai design consultancy firm desert INK. He adds that in order for this method of procurement to be chosen over the traditional approach, trust between the employer and the contractor is crucial. “You need to trust that the contractor will deliver what you are paying for. Since large-scale construction is a relatively new phenomenon here in the Middle East, there are fewer well-established working relationships between clients and contractors. “There are also less sophisticated building regulations
and legal mechanisms to ensure a certain standard is maintained, and therefore the safety net that is provided by these measures is somewhat absent, which makes clients sometimes reluctant to take the design and build route.” Despite the reservations about this procurement method, it has a number of advantages over the traditional route. Richard Stratton, managing director, MENA at Cundall, a UK multidisciplinary firm, believes that a design and build project should be less time-consuming and more cost-efficient. “If implemented properly, the benefits of the design and build method to a client should be faster project delivery and a value engineered solution based on an integrated design and construction team. What’s also great about this is that the risk rests with one entity and not multiple companies.” Agreeing on the one-stop shop advantage for project delivery with this method, Bennett also adds that without the complex inter-relationships of a client, architect and contractor triangle, there is a direct relationship between the party paying and the party with all of the expertise. He also cites the cost advantages of this route, saying that while every company has its own methods for pricing and there is no expectation of how much can be saved, you can expect most contractors to start by building the design costs into their construction budget. “With larger economies of scale and more efficient ways of working, the price can be reduced dramatically. We’ve recently completed a number of design and build contracts that were significantly lower than quotes our clients had received from designers with sub-contracted builders. “Another key benefit of D&B is that a good contractor will bring an immense amount of practical knowledge to a project, and this directly benefits the client in terms of build ability and cost savings. You also avoid the often expensive situations where an independent designer is coercing a December 2015 Middle East Consultant 19
IN PRACTICE design & build
Mick Cairns, CEO at Black & White Engineering Middle East.
William Bennett, landscape architect at desert INK.
reluctant contractor into over-complex solutions which are sometimes impractical,” Bennett adds. However, for the employer to reap the benefits of a functional and financially sound project, developing a detailed technical brief is essential. It must contain a robust set of employer’s requirements, otherwise quality and operational performance can be significantly compromised. Stratton suggests that employers should retain their consultant team to peer review the design and construction process. “The employer's requirements must be very robust in areas of quality, both materials and workmanship. In addition to this. there should be a stringent process for evaluating the D&B contractor's proposed sub-contractors, suppliers and design team. The greater the detail and transparency contained in the employers requirements, the easier it should be for the contractors to evaluate risk and ultimately price the project.” Bennett adds that they always make sure that that their clients know exactly what they will be getting, as well as what they won’t be getting. They do this because sometimes people expect a design and build contract to deliver everything, whereas it varies a lot depending on the abilities of that contractor. Transparency is therefore essential, and the key is ensuring a thorough understanding of the design and pricing by all parties. Bennett says that The Desert Group ensures that it
“There are only a handful of Western contractors in the Middle East who employ staff with the desired skill to manage a design & build team” 20 Middle East Consultant December 2015
Richard Stratton, managing director, MENA at Cundall.
provides a comprehensive list of materials and processes with a price tag attached. "A good example of this transparency arose on a recently completed D&B sales centre project, where the design drawing base provided differed from site conditions, resulting in the requirement for a significant additional quantity of materials. “The additional area was measured, and a variation raised based upon the established rates in the contract. Many clients fear that D&B contractors will hit them with an endless stream of inflated variation orders the minute that something unpredicted arises.” There are potential disadvantages to this method though, most revolving around the poor choice of contractor and unclear employer requirements. In fact, Bennett notes that problems faced when using low-calibre contractors include endless variation requests and poor quality design, which is only driven by cost-saving, he says, and not the end product. Placing the blame for delays upon sub-contractors is another problem, and lastly he says that a strong specification is crucial, as it leaves no room for the contractor to cut corners and use low-grade options to maximise profit. Despite the drawbacks and the lack of maturity of this model in the market, experts believe that design and build can still catch on. Cairns, for one, says he expects it to become more common in the next two to three years. Stratton elaborates: “There is definitely a place for it in the region, but it is important that the merits of the process are fully evaluated for each project at the outset, and that they align fully with the employer's project objectives, rather than being simply implemented to transfer risk." Bennett too is optimistic, adding that with the world and region moving faster every year, design and build will become more favoured by clients, and as trust levels grow between client and contractor, this form of working will inevitably become more common in the Middle East.
22 Middle East Consultant December 2015
IN PRACTICE leaders in design mena
Event
THE BUSINESS OF DESIGN Middle East Consultant attends the Leaders In Design MENA summit to find out what industry leaders have to say about where design is heading in the region.
a
S a plaTFOrm FOr THE mIDDlE EaST'S DESIGN
industry, the fifth Leaders in Design MENA summit took place over two days at the Ritz-Carlton JBR in Dubai. With over 200 industry leaders present, from architects and interior designers to developers, the conference touched upon issues like where sustainable design is heading and the latest trends in residential design. Kick-starting the summit was the first panel, 'Shaping the Future of Design', which discussed how trends in design are changing rapidly and how thinking out of the box can accelerate business. Guest speakers Sean Huang, design principal at KMD Architects, and Issam Ezzedine, chief architect at National Engineering Bureau, spoke about the latest trends in design, and spoke to the audience about what to anticipate in the future and how to adapt their practice to it. Speaking about the interaction of people and building space, Ezzedine said, “If you look at the concept of plazas in Europe and old town squares in the UAE, you will recognise that both have vital importance to social life and create a liveable space. The structure of these cities is as such that small narrow passageways connect to the plaza from different areas, just as it did in old Dubai.” Ezzedine also touched upon the different kinds of town squares like the closed square, dominated square, nuclear square, grouped squares and the amorphous square, and how they reflect and define the society living around them. The second discussion for the day tackled 'Trends in Healthcare Design', and how healthcare environment plays a vital role in the care and treatment of patients.
The panel – consisting of Francis Gallagher, principal and managing director at HKS; Ahmad Soueid, senior vice president at HDR; and Abhishek Gupta, senior associate at Stantec – explained that in order for a healthcare facility to reach its potential, it had to be designed in a multi-functional manner. Soueid pointed out that in order to do this, certain paradigms needed to be taken into consideration, such as demographics, advances in medical technology, information technology and data collection and construction. Comparing healthcare centres in the Middle East to the West, Soueid said, “Hospitals in the West are a lot more open, unlike the ones that you will find here in Dubai. Rooms are designed in a way to allow medical staff to be able to view patients easily from outside the room itself. In terms of size, however, rooms in the UAE are a lot bigger, to accommodate large families and guests who often come to visit patients in the hospital.” In addition, the panel highlighted the fact that properly designed healthcare facilities have numerous positive outcomes, ranging from an increase in staff productivity and efficiency to even speeding up the healing time of a patient. Gupta sees healthcare becoming more outpatientoriented and believes that the need for in-patient facilities will be limited to when patients need critical care. This, he says, will lead to lesser human intervention and more use of technology. “In terms of what to expect from healthcare design going forward, the amount of human intervention will decrease December 2015 Middle East Consultant 23
IN PRACTICE leaders in design mena
“If you look at the concept of plazas in Europe and old town squares in the UAE, you will recognise that both have vital importance to social life and create a liveable space” IssAm EzzEdInE, chIEf ArchItEct of nAtIonAl EngInEErIng BUrEAU
Roger Marien, senior consultant, Transport Hubs at Royal Haskoning DHV.
and technology will take on a more important role as hospitals will focus on enhancing outpatient facilities. I also see healthcare at home and healthcare homes for the elderly becoming prominent in the years to come.” After a short networking lunch, the next debate was about 'What Makes a Fit Out Contract Fit for Purpose'. Experts from fit out companies, such as Alan McCready, managing director at ISG Middle East, Paul Briers, project director at Summertown, and Jamal Mustafa, general manager at United Design International, discussed how a substantial amount of time, money and effort is being spent on the fit out of shops, restaurants and offices, to create a certain image for a brand. The panellists also highlighted how creating a certain environment can be conducive to sales and conducting business, and also shared how their practices were adapting to different circumstances. The last two discussions of the day centred on the evolution of office space and the future of sustainable design. With office space constantly changing, panellists Paul Dunn, director at CallisonRTKL, Elvira Muñoz, director at AECOM, and Firas Hnoosh, design director at BDP MENA, spoke about the latest trends in office design and the challenges ahead. Muñoz stressed on the fact that working environments have to become more meaningful. “Work is an activity, not a place. We should be designing for current activities and the future that we envision, which is the activities that need to
24 Middle East Consultant December 2015
take place in our new working environment.” The trio also agreed that corporations nowadays seek open and effective working spaces that increase communication between employees. With technology becoming integral to work spaces, interior designers need to adapt their designs to facilitate a conducive working environment. In terms of where she sees office space design heading, Muñoz said, “There has to be a good reason to go to the office. Since most of your tasks can be performed remotely, your space has to convey the company values, foster collaboration and teamwork, provide all the latest technologies and connections and provide a sense of belonging and trust.” Green design is a prerequisite for any construction conference, and the future of sustainable design was heavily discussed before shutting up shop for the day. The speakers pointed out that being green has become an indispensable consideration in the design process and is now a necessary practice among all firms of all sizes. The second day at the Leaders in Design MENA summit also resonated well with the audience, with panels focused on the business angle of design companies, the influence of culture and the future of hospitality. Two much-anticipated panels by all were 'Secrets Behind a Successful Design Firm in the MENA Region', and 'The View from the Board Room'. Both panels had big names from the design industry like Michael Fowler, MD at Aedas, and Bob Hope, CEO at SSH, speak about their journey over the years, the business practices they’ve implemented and the challenges they had to overcome while climbing the corporate ladder. The summit then moved on to other topics, like 'Cultural Diversity in Design' discussing the interaction between cultural heritage and contemporary design and how to preserve historical essence while developing high-quality living space. Other panels touched upon subjects like hotels of the future, designing effective restaurants, the effect of retail interior design on sales and trends in residential design. As a whole, the fifth Leaders in Design MENA summit provided valuable insight into the future of the Middle East design industry. Unlike other summits, it provided a highly interactive platform for industry professionals to address a number of concerns and find solutions on how to navigate the uncertainty that lies ahead.
IN PRACTICE AIrports
Insight
AVIATION EVOLUTION
Davina Munro speaks to aviation experts to find out where airport design will be cleared to take off to in the future
26 Middle East Consultant December 2015
IN PRACTICE airports
E
ver since the early 1900s, when the Wright brothers first successfully took flight, aviation has kept soaring to new heights. The concept of an airport has evolved from make-do barns into the mega structures that we know today.
BUT As ALwAys, ThE BOUNDARIEs Of AVIATION
design will not rest, so Middle East Consultant caught up with the experts to find out what aviation has in store for passengers. Jonathan Broadhead, development director of Planning and Development at Abu Dhabi Airports, feels that like any industry, the aviation industry has to reflect the constant and dynamic change that takes place in varied forms. "In today's day and age, we have a variety of different airline business models and aircraft types. Alliances of varying natures between airlines are increasing, and so are the sizes of aircraft themselves. Therefore, from an infrastructure perspective, we often have to adapt and modify airfields and some of our terminal facilities to cope with frequent change. "I think constantly improving technology is also a good thing, as it can help passengers navigate large complicated buildings and understand what's available for them from a retail perspective and where they need to go. Mobile technology puts a lot of information in a passenger's hand, and that's the evolving trend that we're seeing." In terms of the building itself, Omar Zaher, principal at Dubai-based IDP Engineering Consultancy, couldn't agree more about airports being complicated. In fact, in his experience, designing an airport is the most complex of all projects because of the number of stakeholders involved. "Airport design has evolved over the last decade and has become very different compared to before. Earlier, airports were just about moving from one location in the airport to another, but now it's about the experience. The designs of airports now encourage people to do a lot of activities. Irrespective of whether the person is travelling for business or pleasure, they're enjoying the whole experience of it," says Zaher. Passenger experience is heavily stressed in any international terminal these days. Many firmly believe that the whole travel and holiday experience starts right from
the moment you leave home and not just when you arrive at your destination. Therefore everything from infrastructure to retail, leisure and entertainment needs to be tailored to the traveller's needs. There are other benefits from a commercial standpoint, says Ibrahim Ibrahim, managing director at UK-based Portland Design Associates. As a massive contributor to nonaviation revenues at an airport, he says that the whole retail, leisure and hospitality experience is the key driver of change at an airport. In fact, the way operators such as Heinemann, Nuance and World Duty Free function at airports has also changed drastically, from being just traders to actually becoming known retail brands, he says. "No consumer that you ask would ever have told you that they shopped at a Heinemann store or in a Nuance store, as they probably weren't aware of the names of the stores. All they knew was that it was called Duty Free and they could buy brands there. "That is what's changing. Operators like them are now beginning to think about consumers and about communicating with them. Basically, they're starting to think like a retail brand and are also capturing data on customers to be able to offer them a better experience the next time as well." sO whAT shOULD wE ExPECT fROm ThE AIRPORTs Of ThE fUTURE?
In terms of design, Martin Bassett, director of Transportation and Infrastructure at WSP | Parsons Brinckerhoff, says the whole customer experience needs to be made quicker and more pleasant. Designs must be more passenger-centric, considering the need to seamlessly facilitate access to and from the airport facility, with multiple transport options, like integrated metro, light rail and bus stations. "The terminal design must enable highly efficient passenger processing through check-in, passport control, security and customs. This not only enhances the passenger December 2015 Middle East Consultant 27
IN PRACTICE airports
Ibrahim Ibrahim, managing director at Portland Design Associates.
David Green, principal at Perkins + Will.
experience but also acts to optimise terminal capacity. "It is also crucial that we innovate at time of design to ensure that lifecycle costs are optimised in support of viable investment models. This then facilitates high standards of construction, operational performance and enhancement over time." Technology too will play a bigger role, not only in terms of making large airports more navigable, as Broadhead points out, but also in terms of bringing retail to the passenger’sfingertips. Ibrahim agrees, saying that as retailers acknowledge that these travellers are not just normal shoppers at a mall, they will find a way to bring products to them by allowing them to order goods on their mobiles and have them delivered to them in the terminal itself. Another thought widely shared among airport design experts is to a give travellers a taste of the city they're in right at the airport itself. David Green, principal at UKbased Perkins + Will, notes Kuala Lumpur International Airport has a rainforest at its centre, and that although it's not massive, people look forward to this kind of amenity. Singapore's Changi Airport has loads for travellers to do inside the airport besides dining and retail, like a visit
“Earlier, airports were just about moving from one location in the airport to another, but now it's about the experience. The designs of airports now encourage people to do a lot of activities” 28 Middle East Consultant December 2015
Jonathan Broadhead, development director, Planning & Development at Abu Dhabi Airports.
to the Butterfly Garden, a tropical habitat for over 1,000 butterflies, and the cactus, sunflower and orchid gardens, all of which generate tourism too. Interestingly, Green points out that this experience need not be confined to inside the terminal. In fact, Perkins + Will is working on what it calls an airport city at Istanbul New Airport, currently under construction. This airport city or aerotropolis, the first of its kind, will be driven primarily by hospitality and will include hotels, retail, commercial office space, logistic centres, an expo and convention center, public space and metro and high-speed rail connections connecting to central Istanbul. "Many times, it's a thirty-minute drive or more to get downtown from an airport, unlike a train station, where you walk out the door and you're right in the city. What we've been tasked with in the Third Terminal project, is not just thinking about an airport city like a logistical place, but like a fully functioning city that is directly connected to the airport. So you can walk out the airport door and literally be in a part of Greater Istanbul. Be it a university, hospital, office buildings, all of this will be nearby so there's no disconnect between the airport and the surrounding city," Green says. These sort of airport cities will be especially useful for business travellers, who are probably only in the city for a couple of hours or days and don't have time to actually see the main city itself. Instead, it gives them a feel of what downtown is like without their having to wander too far away from the airport. Naturally, this kind of evolution has challenges. From a commercial standpoint, Ibrahim notes that there are three challenges – lack of space, the massive investment required and the complication of the process in terms of retail and food.
IN PRACTICE airports
Martin Bassett, director, Transportation & Infrastructure at WSP | Parsons Brinckerhoff.
Omar Zaher, principal at IDP Engineering Consultancy. C
Speaking about his experience working on Terminal 3 in Dubai, Zaher recalls that the constantly evolving design plan was a challenge, and delayed completion. "When it was first designed, it was a relatively traditional airport concourse, but Emirates Airlines requested quite a few amendments.
"No consumer that you ask would ever have told you that they shopped at a Heinemann store or in a Nuance store, as they probably weren't aware of their names. All they knew was that it was called Duty Free"
Retail, leisure and hospitality are massive contributors to nonaviation revenues at an airport.
30 Middle East Consultant December 2015
Adding all of that into the design was a challenge from the operator to us. Integrating even something like a spa may seem tiny, but requires a lot of planning and rearranging. It was a challenge, but we came through it well." Broadhead adds that the size of airport terminals is frequently debated too, as some feel making them very big makes the building far too complex for passengers to navigate. He says that although technology will help travellers find their way around, terminals need to be simple to get oriented in and pass through, thus making the experience as stress-free as possible. For Bassett, accommodating expansion of a facility within an existing, live airport environment can be quite tricky, especially when trying to do it without disrupting normal operations, as at Hamad International Airport. "Knowing the inevitable likelihood of this requirement for expansion, it is essential that the original design and first build incorporates the ability to seamlessly accommodate future construction logistics. This should be an incumbent part of any airport design brief,� he suggests. As we move forward, it's safe to say that passengers from any class of travel have a lot to look forward to as retail, leisure, entertainment and hospitality all blend further into the mix at airport terminals. Better still, with the concept of airport cities being introduced, travellers who don't have time to experience the main city can at least get a taste of the region through this new portal, which is sure to be a booster for tourism as well. As Broadhead puts it, an airport doesn't necessarily need to be bigger or more architecturally elaborate, but it does need to be a great place to pass through, experience and spend time in, as travellers depart, arrive or transfer on to their final destinations.
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on site MENARD VIBRO
Specify ME Menard Vibro's solutions are designed to save time and cost for both the foundation phase and the subsequent construction of a superstructure.
Take us through the importance of ground improvement in construction.
Ground improvement is a vital tool for the modern construction industry and Menard Vibro has been at the forefront of the arena since 1960. Ground improvement can be used in a variety of situations to replace, or as an alternative to, existing techniques. In this era of sustainability, waste reduction and value engineering, ground improvement is a tool that should be examined and used wherever appropriate. A careful examination is required of the soil you’re dealing with, keeping in mind the end requirement and timescales. Paying attention to these details helps significantly to draft a better contract with the client, his consultants and the project manager. Generally, the findings by the soil investigation company equip the team with enough information to make a realistic pre-design for pricing. The full design is completed by us after a detailed soil investigation and calibration area in conjunction with the consultants. Tell us about the solutions Menard Vibro provides.
Enhancing Terra Firma Jason Redgers tells ME Consultant about the importance of ground improvement in construction 32 Middle East Consultant December 2015
Menard Vibro is committed to excellence in providing innovative solutions to complex geotechnical problems based on providing a firm price, a reliable construction schedule and the appropriate guarantees to back up our professional confidence in the outcomes. We aim to achieve predictable performance of soil treatment. Our ground improvement solutions are applicable to commercial and residential buildings, industrial developments, transportation, port and airports, oil and gas facilities and storage tanks. There are numerous techniques commonly used in ground improvement in the region, such as vibrocompaction, stone columns (also known as vibroreplacement or vibrodisplacement), dynamic compaction, dynamic replacement, rapid impact compaction, pre-loading and PVD or Wick drainage systems. At Menard Vibro, we combine value engineering and innovative techniques to deliver practical and sustainable alternatives
on site MENARD VIBRO
to deep concrete foundations. Our solutions are designed to save time and cost, for both the foundation phase and the following construction of a superstructure.
Piles bypass the poor ground to transmit building loads to depth. Soil improvement treats that poor soil to remove the need for piles.
What are the different methods by which soil can be improved?
All soils can be improved and it will depend on your time and requirements. Methods of soil improvement can be divided into three categories. The first is mechanical modification or compaction of coarse grained materials. The second is reinforcement by inclusions and the third is hydraulic modification by consolidation of fine grained soils. This is the starting point of soil improvement, and once we evaluate the soil type, the water levels and the client requirements, we can move forward. Are the benefits of ground improvement misunderstood or not completely understood? Why?
One of the reasons ground improvement is not fully understood is often because of preconceived ideas and a previous lack of experience of the techniques. Often we realise that a lot of clients are unaware of the types of practices and concepts that are available and so this lack of knowledge makes them unable to make informed choices. Therefore there is a need for lots of guidance to help them understand the alternative potential solutions that Menard can provide. We do offer free seminars to assist with understanding and sharing of such knowledge. With the advancement of technology and software, people are beginning to understand that the loads transmitted to the ground can be supported by soil improvement techniques rather than the traditional dig and replace or piling systems. We all know learning never stops in life, and through continual professional development (CPD) and its application to our daily work, those benefits can be realised and savings can be made. Tell us about how value is added to the project through sustainability.
“At Menard Vibro, we combine value engineering and innovative techniques to deliver practical, sustainable alternatives to deep concrete foundations� Our most basic system of compaction means the materials are left in place. There is no digging of the fill and no import of fresh materials, which helps save the environment. Using limited amounts of stone on stone columns schemes can save on piling costs. Soil improvement can improve the quality of ground that you are building on and eliminate the need for piles, thereby saving concrete, steel, diesel and time with its associated environmental costs and impacts. At Menard Vibro, we have worked on projects from 100sqm to over 11 million sqm. For example, the King Abdullah University of Science and Technology in Saudi Arabia was due to be piled, but was behind schedule. We came on board and treated the site to allow 3m x 3m footings for 150kPa for 25mm
settlement over the entire site to be used, at any location, allowing flexibility and speed over piling. This saved a huge amount of time and costs and environmental impacts over piling. Another big ecological advantage of using soil improvement over piling is its effect on the land itself. Soil improvement leaves the material in place, where it can be locked in, or capped, or treated safely, whereas piling causes contaminated materials to be brought to the surface, which can be dangerous and hazardous. At Menard Vibro, we have our Soil Remediation teams to deal with contaminated land solutions as well as structural support. We can support you from concept to handover for all your foundation and sustainability needs, with local and worldwide support and experience. December 2015 Middle East Consultant 33
On Site Winston & straWn
Q&A
Stephen Jurgenson, partner, Kilian de Cintré, associate and Katharine Sonneborn, of counsel, are from the Dubai and London offices of Winston & Strawn.
New Dubai PPP law to boost private sector investment The Law applies to PPP projects originated by Dubai government agencies; however, power and water projects are excluded from its scope A strong relationship between the Dubai government and the private sector will be key to addressing the infrastructure needs of the emirate over the medium and long term. Dubai has introduced a new PPP law (the “Law”) to tap private sector funding and expertise for infrastructure projects. The Law came into force on 19 November 2015 and is expected to generate significant project activity and to attract substantial interest from foreign investors.
Offers will be evaluated by an internal committee formed by the government agency, with the project awarded to “the most feasible offer technically and financially”. It also allows bidding developers to form a consortium. Government agencies do not, however, need to follow a competitive tender process, and unsolicited PPP proposals are possible. WHAT ARE THE REQUIREMENTS FOR GOVERNMENT APPROVALS AND
WHICH PROJECTS DOES THE LAW APPLY TO?
LICENSING?
The Law applies to PPP projects originated by Dubai government agencies and subject to the general government budget. Power and water projects are, however, excluded from its scope and will remain governed by existing legislation. The Roads and Transport Authority was at the forefront of the Law, and its Union Oasis Project, a five-tower project above Union Square Metro Station, will be one of the first projects to use it. Dubai’s Expo 2020 will also offer numerous opportunities for the private sector, such as the 14.5km Metro Route 2020. The PPP model may well be used to procure such projects.
The Law sets out a sliding scale of requirements for government approvals by reference to total project costs incurred by the government agency:
WHAT WILL THE IMPACT OF THE LAW BE ON PROJECTS GOING FORWARD?
The Law indicates strong political support for PPP in Dubai, which is key to any successful PPP policy, with the aim of encouraging private sector participation in projects. The PPP model should allow the government to take advantage of private sector expertise and ease the financial burden and risks of capital-intensive projects on the government’s budget. WHAT IMPACT DOES THE LAW HAVE ON BIDDING PROCESSES?
The Law outlines a transparent bidding process. 34 Middle East Consultant December 2015
• Projects of up to $54 million must be approved by that agency’s director general. • Projects between $54 million and $136 million must be approved by the Department of Finance. • Projects in excess of $136 million must be approved by the Supreme Fiscal Committee. The Law specifies that the project company must be licensed to operate in Dubai and in most cases must be a special purpose vehicle. It does not specify whether the project company must be incorporated as a local entity under the requirements of the UAE commercial companies law or whether it can be established as a free zone entity. The Law does not relax requirements requiring local ownership of businesses established as limited liability companies (LLC), therefore it should be assumed that project companies incorporated as an LLC will have to comply with the so-called 51/49 rule, which prevents foreign investors from owning more than 49% of UAE companies. The Law also provides that the government agency may hold an interest in the project company.
On Site Winston & straWn
The new PPP model in Dubai should allow the government to take advantage of private sector expertise and ease the financial burden on the government's budget.
WHAT ARE THE STRUCTURAL CONSIDERATIONS?
The Law allows for a range of potential PPP structures. It provides that BOOT, DBO, lease and concession agreements may be used, together with any other structures approved by the Supreme Fiscal Committee. The relationship between the project company and the government agency will be governed by a partnership contract determining, among other matters, scope of works, ownership of
Stephen Jurgenson partner at Winston & Strawn.
assets, intellectual property rights, environmental requirements, termination rights, penalties, transfer and decommissioning of the project. The Law does not yet impose restrictions on finance sources, but it does expressly state that obligations under the financing arrangements will be borne by the project company alone. This is a positive feature and should allow international sponsors to combine multiple sources of finance such as commercial lenders and export credit agencies.
Kilian de Cintré associate at Winston & Strawn.
Finally, the Law provides that partnership contracts with government agencies can be entered into with a term of up to 30 years. This should allow the private sector to raise long-term finance and realise a return on its investment. CONCLUSION
This detailed and clear legislation offers the legal framework necessary for a successful PPP policy and is certainly a step forward towards addressing the infrastructure needs of Dubai in the future.
Katharine Sonneborn of counsel at Winston & Strawn.
December 2015 Middle East Consultant 35
On SitE SEan PEarSOn
Opinion
Sean Pearson is the assistant vice president of Construction, Middle East and North Africa at Liberty Specialty Markets.
Infrastructure projects – who is taking the risks?
Evaluation of contract between the principal and contractor is critical when understanding why amendments are made to established contracts As a lead reinsurer in the Middle East and North Africa region, Liberty Specialty Markets provides underwriting capacity on a number of large, complex infrastructure projects. In some respects, the MENA region lags behind Europe and the West in terms of the extent of its road and rail infrastructure. With the ever expanding sovereign wealth funds, there is sufficient liquidity to provide genuine solutions to inter-country travel to the region’s citizens. As a result, we are seeing a surge in projects put out to tender by local ministries and organisations. Many of these may never have procured a largescale infrastructure project before, it typically being the domain of the international contractor. Dealing with these contractors is often therefore a new experience, presenting different challenges for organisations more used to working with local contractors, and the requirements for awarding construction contracts are different. Unlike the procurement of a project that uses local contractors, the international contractor market is more familiar with construction contracts on the basis of internationally recognised standard contracts such as FIDIC or JCT. Increasingly, however, contracts are being awarded on amended versions of the standard contracts, which can introduce uncertainty. In many cases, we see these amendments ostensibly favouring the principal, such that a significant degree of the risk is transferred to the contractor. The standard construction contracts, constructed by legal experts following years of practice and precedent, are modified by a series of amendments, normally undertaken by the principal’s contracts team in an attempt to reduce risks that could affect the overall cost or schedule. While one can understand the reasons for doing this, as an insurer and a contractor, one should be 36 Middle East Consultant December 2015
aware of where the ultimate risk lies. A common example is with respect to unforeseen ground conditions, a key risk for any underground rail project. Best practice suggests that this risk should usually be borne by the principal, and that a contingency be built in, in addition to a contractor’s fixed price, for such an eventuality. Where amendments have been made, we may see this risk as being put solely on the shoulders of the contractor. The situation is exacerbated when a contractor has been awarded the EPC contract on the basis of a lump sum turnkey. Where, under the framework of a FIDIC Yellow Book contract, there would be a sharing of the risk – normally by the provision of a GBR – the amended versions often seek to place all this risk with the contractor: “You bid for the works and were awarded the contract, now complete the project.” In this scenario, the contractor may have little flexibility in their price, having built in a fixed price at tender stage, and the principal would now have them held to rights. The impact we see as insurers is the potential for degradation in project quality. Rather than lose money on the project, there is a risk that the contractor may offset project quality to ensure profit margins are maintained, avoiding causing liquidated damages to be triggered. From an insurer’s perspective, it is critical that we evaluate this contractual relationship between the principal and contractor and seek to understand the reasons behind making any amendments to an established contract, particularly in respect of risk allocation. In some cases these amendments are borne out of practicalities, but often they are the result of naivety. Where contract changes have been made for valid reasons, the implications of these changes need to be fully understood by all parties; otherwise, the original intention is lost. At a certain stage, we need to ask ourselves the question: At what point does a contract stop being an amended FIDIC contract and become something totally different?
on site roundup
Update Atkins reports 27% rise in Middle East profits UK-based Atkins says its Middle East business saw a strong performance in the first half, with operating profits up 27% to £11.3m ($17m) and a 14.1% increase in average staff count. The London-listed engineering consultant said its regional revenues rose by 23.8% to $180.9 million, up from $146.2 million in 2014, while its operating margins improved by 9.5%, a slight jump from the 9.3% registered last year. “Good progress continues on the design delivery for our major metro projects, including Riyadh Metro and Doha Metro Gold Line and Red Line South. Our reputation for delivery and innovation, and the relationships that we have built with contractors, positions us well for future metro opportunities in the region,” Atkins said in a recent results statement. Client decision-making has, however,
been slower than in previous years, due to increased uncertainty around property and infrastructure projects, Atkins noted. Despite this, it said longer-term needs to invest in infrastructure would continue to drive demand for its services. “Aside from our metro work in KSA, we are successfully supporting strategic programmes that are driving the Kingdom’s long-term economic growth and diversification, including our partnership with Bechtel to advise the Economic Cities Authority on the development of four new cities,” it said. Current Atkins projects include the Dubai Opera House, which is scheduled to be completed and opened in 2016. “In Qatar, we are working with the government towards meeting its National Vision 2030. The success of our advisory
work on the Central Planning Office has made an important contribution to the coordination of Qatar’s major transport infrastructure programmes. We continue to work on a significant framework to upgrade Doha’s roads and drainage system,” Atkins said.
December 2015 Middle East Consultant 37
on site roundup
Cumulative spending on the massive theme park project has touched $1.3 billion.
Dubai Parks anD resorts Project structure '73% comPlete' Dubai Parks and Resorts says 73% of the projectstructure works on its 25 million square foot Florida-style attraction is complete. The Dubai Financial Market-listed company, which is building three theme parks and a water park in the emirate, reported a $7.9 million loss in the third quarter of 2015, although it does not expect revenues until the attraction opens next year. Cumulative spending, including land acquisition, has touched $1.3 billion, an increase from the previous quarter’s $1 billion.
The attraction – set to include Legoland, Motiongate and Bollywood parks – is on course for completion in October, Dubai Parks and Resorts said. Around 11,000 workers and 34 contractors are currently working on-site to ensure deadlines are met. The company reported receiving 12 proposals from companies looking to take space in its planned 220,000 sq foot Riverland district shopping, dining and entertainment mall, accounting for 19% of the space. The park is
expecting 6.7 million ticketed visits at the end of its first full year of operation in 2017, producing expected revenues of $653.3 million. “We have reached a critical milestone in the construction of the region’s first integrated theme park resort and are now less than 12 months away from the official opening,” said Raed Al Nuami, chief executive of Dubai Parks and Resorts. “With construction of the individual parks progressing rapidly, you can now truly begin to appreciate the size and diversity of offerings at our resort.”
Architecture firm Perkins + Will acquires Portland Design Architecture firm Perkins + Will says it has acquired Portland Design Associates, a branding, retail strategy and design consultancy based in London but with a large presence in the Middle East. In a press release, the company reported that Portland will continue to maintain its own brand and operate as a separate entity. “Our clients will benefit from Portland’s consumer insights, creativity and strategic thinking, and Portland’s clients will benefit from Perkins+Will’s global reach and broad architectural, design and planning expertise,” said Phil Harrison, CEO and president of Perkins+Will. Portland is the latest creative services firm to join the Perkins+Will group of companies. The consultancy’s Middle East clients have included Dubai Duty Free and Sama Dubai. 38 Middle East Consultant December 2015
Portland Design, which has a presence in the Middle East, will maintain its own brand.
on site roundup
IDC will assist and support Tata Steel in obtaining national oil company approvals in the region.
India’s Tata Steel partners with IDC in the Middle East Indian steel giant Tata Steel has announced a partnership with International Development Company (IDC) to strengthen its presence in the Middle East. IDC will support and assist Tata Steel in obtaining national oil company approvals in the region, as the Indian firm looks to reduce the total cost of ownership for
its customers' projects. “Tata Steel, along with IDC, will introduce its supply capabilities to oil and gas companies in the region, providing them with an opportunity to work with a supplier who has an excellent track record of providing for offshore and onshore line pipe projects worldwide,” said Richard
Broughton, commercial manager for Energy and Power at Tata Steel. “Our investments over the last year are testament to our commitment to the industry and we will continue to assist customers by reducing the total cost of project ownership without compromising on quality,” Broughton added.
Hill International wins $78m Oman airports contract extension
Hill International has won a one-year contract extension worth $78m for work on Muscat International and Salalah airports in Oman, the US-headquartered construction consulting firm said. The contract, awarded by Oman’s Ministry of Transport and Communications
and the Public Authority for Civil Aviation, marks an extension of a three-year, $108.5 million contract awarded in 2012 to provide consulting engineering services for both airports. The expansion of Muscat International Airport, the largest airport in Oman, includes
a new terminal that will have a capacity of 12 million passengers annually. Salalah Airport’s expansion will include upgrading it from a domestic hub to one suitable for international flights. This will include building a new runway long enough to handle the Airbus A380 and a new terminal that will increase the airport’s capacity to one million passengers annually. Mohammed Al Rais, Middle East regional president for Hill International’s Project Management Group, said: “It is an honour to continue to serve the Ministry to help deliver these critical aviation projects. Upon completion, they will have an immediate positive impact on both business and tourism in the region.” December 2015 Middle East Consultant 39
On Site ArcAdis
Final word
Dr Kamiran Ibrahim is the managing director at Arcadis in Qatar.
Qatar emerges as a built asset wealth world leader per capita Qataris replace Singaporeans as the richest built asset population, with a built asset wealth of $198,000 per capita Qatar has become the world’s richest country per capita, measured by the value of its built environment, according to the latest Global Built Asset Wealth Index published by Arcadis, a leading global design & consultancy firm for natural and built assets. The Gulf state has become a global leader, toppling Singapore as the most asset-rich country per capita, with built assets of $198,000 for every citizen The index, which was compiled for Arcadis by the Centre for Economics and Business Research (Cebr), calculates the value of all the buildings and infrastructure that contribute to economic productivity in 32 countries which collectively make up 87% of global GDP. “The health and wealth of a nation can be measured in many different ways, and while factors such as GDP or employment have great value, a prosperous society is underpinned by a well-developed built environment that meets the needs of its people and economy,” said Alan Richell, head of Business Advisory in the Middle East at Arcadis. “Today, Qatar has the fastest growing construction industry in the GCC, rapidly expanding at an annual rate of 18%, and this is expected to continue for the next decade. This growth will be underpinned by a number of large investments in infrastructure programmes.” Qatar and Singapore stand comfortably ahead 40 Middle East Consultant December 2015
of the pack on built assets per capita, at $198,000 and $192,000. The countries near the top of this ranking are disproportionately made up of smaller nations, either by population or area, so the density of the built asset stock is much greater per resident. The UAE for example also came in high at number five, with a strong built asset per capita of $140,500, whereas Saudi Arabia has a smaller built asset stock per capita, at $107,000, with its built asset wealth spread among its large and growing population. Richell says “The 2022 FIFA World Cup and Qatar’s 2030 National Vision are driving huge infrastructure investments over the next ten years. These include plans for further investment in transport infrastructure, water and electricity in the next five years, by 2020. Qatar’s total built asset stock has grown 677% since 2000 and will continue to grow at double-digit levels for the foreseeable future.” Total built asset wealth globally now stands at an estimated $218 trillion, equivalent to $30,700 per person alive today. The stock of built assets is closely correlated with a nation’s economic output. On average, countries analysed have a built asset stock worth 2.9 times GDP. China now has a built asset wealth of $47.6 trillion, overtaking the US, which comes in second place with wealth of $36.8 trillion. On a regional basis, Saudi Arabia has a built asset wealth of $3.15 trillion, while the UAE and Qatar are at $1.33 trillion and $0.45 trillion. Concluding his thoughts, Richell says,“The Global Built Asset Wealth Index shows a dramatic shift of wealth to emerging economies. Saudi Arabia and the UAE will continue to climb due to their especially high rates of investment. Whilst still heavily dependent on oil and gas export, the GCC states have used resource revenues to make initial steps towards diversification of their economies in sectors such as tourism, financial services and education."
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