Embrace collaboration and tech for GCC mega-project success

19 January 2022 Consultancy-me.com 5 min. read

The GCC is currently witnessing growing activity in the real estate and construction sectors. As governments look to boost infrastructure plans and promote economic diversification, there is a lot of movement happening in the space of megadevelopments. Matthew Palmer, Managing Director at Alvarez & Marsal, outlines how collaboration and technology can help make mega-projects a success.

It has been estimated that there are $1 trillion worth of mega-projects being developed across the region: from malls with ski slopes to record-breaking towers, and projects devoted to sustainable living, there is a lot happening in this space.

Saudi Arabia, under the Vision 2030 plan, is making huge construction and infrastructure developments, with the aim to ultimately become a global tourism hub. The Kingdom has embarked on a journey to undertake a large-scale economic overhaul, which has seen both private and public sector companies focused on reforms.

Embrace collaboration and tech for GCC mega-project success

Neom (the Kingdom’s flagship project), the Red Sea Project, and Qiddiya (the capital of entertainment) are some of the key projects shaping the country’s tourism ambitions and helping to transform its landscape.

The United Arab Emirates (UAE) is also advancing at an unprecedented speed. Through the adoption of technologies and the right legislation, the nation has set the foundations to support future growth. Projects such as the Hatta Master Development Plan have become an integral part of the Dubai 2040 Urban Master Plan – which aims to transform Hatta into an attractive local and international destination for business, investment, and tourism – while Etihad Rail will run from Ghuweifat on the western border with Saudi Arabia to Fujairah on the UAE’s eastern coast.

Even before Covid-19, the construction ecosystem across the GCC had suffered from a challenging environment, driven by macroeconomic pressures, employer concentration, and predatory pricing – all of which culminated in the failure of major contracting companies in the region with the aftermath felt across the sector.

However, supportive government policies and a focus on infrastructure investment, as well as broader macroeconomic recovery, have catalyzed the sector of late – although companies must still contend with the remobilization of an expat workforce, cost inflation and stressed supply chains. To successfully and profitably navigate this new normal, contractors will need to evolve their tactics.

Pivot to recovery

The Covid-19 crisis accelerated disruption in the sector as well as the shift to a “new normal” in the construction ecosystem. Many executives are wrestling with the pandemic’s economic turmoil, while contractors face budget overruns and delays, shifts in demand and operating restrictions, and longer-term safe working procedures.

These are difficult and time-consuming challenges, but developers and contractors should work to balance short-term measures to survive through the crisis with medium-term measures to prepare for the eventual recovery.

As we enter 2022, the effects of the Covid-19 pandemic will continue to be felt across the GCC in all sectors, with construction continuing to be one of the most impacted. Stakeholders in the region need to collaborate and focus on how to maximize the opportunities which exist in a fairer contractual relationship. They must work pivot to recovery to be able to deliver the anticipated megadevelopment projects under a new normal to avoid the pitfalls of the past and thrive in this new and unprecedented landscape.

Historically, large infrastructure projects have typically required a multiyear horizon to payback their initial capital and deliver returns, with resulting value created from both direct income and indirect benefits. It is no different with today’s megaprojects.

From under-construction ports and railways to entire new cities, the ambition remains to attract, retain and grow investment, and with it create a compounding effect across multiple sectors downstream sectors such as education, healthcare and retail. All parties to infrastructure projects (sponsors, owners, contractors, lenders, operators, etc) need to work towards a common goal, and make balanced, informed and sustainable decisions to ensure project success.

Embracing new technology

As the operating dynamics of the construction sector across the GCC continues to evolve, the need to incorporate innovation at all levels of business has become imperative. Digital transformation techniques can go a long way in improving quality, cutting costs, enhancing safety, reducing risks and boosting profits. With increasing internet penetration and the rapid technological advancement in the region, it is a good time for construction companies to accelerate digital and technological transformation.

We can see there is an appetite for change as the construction industry looks to utilize a range of technologies, in addition to artificial intelligence, to help advance projects in the future. Technologies such as 3D printing, 5D BIM, augmented and virtual reality, blockchain, drones and internet of things all look set to revolutionize the sector, and are in varying states of adoptions across the region.

With the growth of the construction industry over the past few months, smart construction practices such as the use of digital technologies is particularly important as it will accelerate and automate the way we design, build and operate. During the transformation, executives must spend as much time, if not more, on operational change as they spend on technology.

This push towards digitalization has been on the top of the agenda for many governments and megadevelopments in line with government initiatives to create smarter and more sustainable cities. Smart cities need smart infrastructure, so this trend is only going to accelerate in the coming months.

This article by Matthew Palmer from Alvarez & Marsal was originally published in Construction Week.