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
EXCLUSIVE: Firms prepare Dubai flying taxi bids
Selected consultant will undertake study and assist in launching tests and full operation of the service Consultancy firms are preparing to bid for the contract to undertake a feasibility study for ...
READ MORE
Dubai policy body recommends establishing PPP unit
A policy paper published by the Mohammed bin Rashid School of Government (MBRSG)  has recommended the establishment of a public-private partnership (PPP) unit within the government. “I think its introduction would ...
READ MORE
MEED and Mashreq renew partnership for third year
Partnership will grow to accommodate developments in sectors such as construction and energy MEED and Mashreq have announced the extension of their knowledge partnership for a third year. First established in 2017, ...
READ MORE
The UAE’s Construction Opportunity
Over the next three years an estimated $40bn worth of construction contracts will be awarded each year in the UAE as the country delivers its $800bn pipeline of major projects ...
READ MORE
UAE contractors should focus on what they can control
Firms need to rethink their approach to winning work as opportunities dry up The UAE’s contracting community was acutely affected by low liquidity in 2019. Opportunities to win new work are ...
READ MORE
Oman construction shows signs of recovery
An improvement in non-hydrocarbon GDP growth is benefiting the sultanate’s construction sector, with $2.4bn of contract awards so far this year and more expected in 2020 Oman’s construction market has endured ...
READ MORE
Removing waste from UAE construction
Insights on reducing waste and improving efficiency in construction in the UAE Waste is one of the biggest challenges facing UAE construction. Poor planning, lack of skills and unfair contracts combine ...
READ MORE
Slow recovery predicted for regional tourism
​​​​​​​Domestic tourism is propping up leisure hospitality in the short-term, but long-term recovery of international leisure and business travel will be a slow process Global tourism came to a halt in March ...
READ MORE
Pandemic quickens construction job cuts
The Covid-19 pandemic is accelerating lay-offs amid a low-oil price environment, but some employers are seeking alternatives Lay-off and redundancy activity has accelerated in the Middle East’s construction sector as it contends with ...
READ MORE
Regional construction dispute values drop
Average value of disputes declines compared with 2018 but causes of contention persist The value of construction disputes increased in the Middle East in 2019 even as the average time taken to ...
READ MORE
EXCLUSIVE: Firms prepare Dubai flying taxi bids
Dubai policy body recommends establishing PPP unit
MEED and Mashreq renew partnership for third year
The UAE’s Construction Opportunity
UAE contractors should focus on what they can
Oman construction shows signs of recovery
Removing waste from UAE construction
Slow recovery predicted for regional tourism
Pandemic quickens construction job cuts
Regional construction dispute values drop
28 November, 2017 | .By COLIN FOREMAN