Tendering in 2017 reflects tightening margins for developers and contractors

The-Tower-at-Dubai-Creek-Harbour

The tenders for The Tower and the shopping mall at Dubai Creek Harbour evoke memories of 2004, when contractors competed for the deals to build what would become Burj Khalifa and Dubai Mall in the Downtown district.

The similarities are striking. Both projects are being developed by Emaar and they involve building the world’s largest shopping mall and the world’s tallest tower.

It is also understood that, as with Burj Khalifa and Dubai Mall, Emaar does not want to award the same contractor both deals.

In 2004, there was more competition. For Burj Khalifa, the tenderers were:

  • Al-Habtoor Engineering Enterprises (local)/Murray & Roberts Contractors (South Africa)/Takenaka Corporation (Japan)
  • Nasa Multiplex (local/Australia)/Ascon (local)
  • Bel Hasa Six Construct (local/Belgium)/Samsung Corporation (South Korea)/Arabtec (local)
  • Al-Naboodah Laing O’ Rourke (local/UK)/Hip Hing (Hong Kong)
  • Dutco Balfour Beatty (local/UK)/Consolidated Contractors International Company (CCC; Lebanon)/Paul Y ITC Construction Holdings (Hong Kong)
  • Grocon (Australia)/Dubai Civil Engineering (local)
  • Taisei Corporation (Japan)/Arabian Construction Company (ACC; Lebanon)/IJM (Malaysia)

For Dubai Mall, the tenderers were:

  • Dutco Balfour Beatty/CCC
  • Grocon/DCE
  • Al-Habtoor/Murray & Roberts
  • Bel Hasa Six Construct/Orascom Construction Industries (Egypt)
  • Nasa Multiplex/Al-Futtaim Carillion (local/UK)

Both contracts were tendered once, with awards due by the end of 2004. By the end of the year, all three were let.

Contrast that with the mall and tower at Dubai Creek Harbour and the lists are more limited, and the tenders more prolonged.

For The Tower, it is understood the potential bidders include: ACC; Belgium’s Besix with South Korea’s Samsung C&T; Beijing-based China State Construction Engineering Corporation (CSCEC); and US-based Tishman.

For the mall, it is understood three teams are competing: a joint venture of the local Alec, ACC and Dutco Balfour Beatty; CSCEC; and a team of CCC, India’s Shapoorji Pallonji, and South Korea’s Ssangyong.

The tower was first tendered in late 2016, before a pre-construction agreement was signed with Besix/Samsung. Fresh prices were then sought over the summer, and now fresh bids have been sought. The mall first came out to tender in mid-October, with a closing date of 17 December.

The shorter lists and back and forth nature of the tender process this time around highlights the tighter margins that both developers and contractors have to work with, while still trying to deliver world-class landmark projects.

Although developers can still sell properties in Dubai in 2017, the market is no longer white hot like it was in 2004, and instead of double-digit growth every year, property prices have declined for 12 consecutive quarters. This means developers’ budgets for delivering schemes are now squeezed, and if tenders come in above the expected budget, the contract either has to be retendered, value-engineered or more dramatically downsized.

At the same time, contractors’ margins have also been squeezed, leaving little room for contingencies should something go wrong, and on record-breaking projects such as tall towers and large malls, the magnitude of those potential risks now exceeds the appetite of many contractors. 

Related Posts
Dubai moves with contract award on new metro extension project
A consultancy team has been selected to work on extensions to the Red and Green lines A team comprising UK-based Atkins and Grimshaw, US-based Parsons and France’s Egis has been awarded the study and ...
READ MORE
Etihad Rail completes stage 2 design
Etihad Rail unveils new strategy and brand identity following budget approval and completion of stage 2 network design Abu Dhabi-based Etihad Rail has completed the network design for stage 2 of the 1,200-kilometre ...
READ MORE
Social infrastructure to remain a priority in 2021
Governments across the region are moving ahead with projects that will improve the living standards of their local populations Social infrastructure projects will be an important source of work for contractors ...
READ MORE
Waste management in construction
Various stages in an asset’s lifecycle present the potential for waste generation which need to be minimised from the outset of the project Click here to download the infographic Waste is ...
READ MORE
The region’s project pendulum swings
Government-led projects will be the focus for construction across the region in 2019 while public-private partnership schemes remain in vogue The region’s construction market over the past five years has been ...
READ MORE
Private sector essential to delivering GCC’s $121bn social infrastructure projects
Increasing the role of the private sector can help alleviate pressure on state-led funding, while allowing more room for innovation in project delivery, says Mashreq Bank More than $121bn ...
READ MORE
Dubai Construction is still a Market for International Players
Infrastructure offers the most opportunities as local firms dominate building market. Tendering activity in Dubai this summer has shown that the emirate still offers opportunities for international contractors, albeit on a ...
READ MORE
UAE leads as global economy restarts
Dubai and Abu Dhabi are taking leading roles as countries start to emerge from lockdowns The second half of 2020 will be crucial for the global economy as countries begin to ...
READ MORE
Removing barriers in the value chain
The construction supply chain can greatly benefit from the application of supply chain management As the oil economies of the Gulf continue their rapid transition from growth driven by state-backed capital ...
READ MORE
Middle East remains primary focus for UK Export Finance
Regional buyers are being taken to the UK to meet potential suppliers The Middle East remains a primary focus for UK Export Finance (UKEF) says Simon Penney, Her Majesty’s Trade Commissioner ...
READ MORE
Dubai moves with contract award on new metro
Etihad Rail completes stage 2 design
Social infrastructure to remain a priority in 2021
Waste management in construction
The region’s project pendulum swings
Private sector essential to delivering GCC’s $121bn social
Dubai Construction is still a Market for International
UAE leads as global economy restarts
Removing barriers in the value chain
Middle East remains primary focus for UK Export
28 November, 2017 | .By COLIN FOREMAN