BrazilProjects in the Middle East face the worst delays, says HKA
A large number of major construction projects globally routinely face serious overruns in costs and delivery. Total claims exceed $91 billion in value and the cumulative overruns mean projects are running around 876 years late. The MENA region sees the largest amount of overrun, with 82% of projects off schedule, according to HKA research.
The main reason for the rising trend in project issues in the MENA reason is the huge increase in project activity (particularly mega projects) and the demand for fast-track execution.
Fast-track projects, initiating before complete preparatory designs are in place, can lead to compounding design issues down the road. Key causes include scope changes, late design information issuance, and contractors working with incomplete designs.
HKA – a global consulting firm with six offices in the Middle East – highlights that some contractors tend to also overlook the impact of skilled labour shortages when estimating project execution timelines. All in all, the huge amount of disputed costs can amount to more than a third of the average project’s capital expenditure.
“Modern megaprojects are increasingly complex, but the cruel conundrum for the global construction and engineering industry is that these most common causes of claims and disputes are highly predictable and largely within the control of the contracting parties,” said Renny Borhan, partner and CEO at HKA.
Requests for extensions of time also indicate a serious problem with deadlines in the construction industry. Projects are prolonging their planned schedules by over two-thirds (67%) on average.
For its analysis, HKA analysed over 1,800 projects in 106 countries with a combined capital expenditure value (CAPEX) of $2.2 trillion. The Middle East project portfolio assessed spanned 400+ projects in 12 countries, with an average CAPEX value of $1.6 billion.
There has, however, been positive progress in dispute resolution processes in Dubai and Abu Dhabi, with mature arbitration systems comparable to international counterparts. Despite that, the MENA region as a whole still suffers some of the world’s worst project delays, with an average delay of 82%, surpassing the United States, Europe, Asia, and Oceania. Africa is the only continent with worse performance.
“The tougher economic context has intensified the uncertainty and risks facing infrastructure and capital projects. It is essential that the construction and engineering industry delves into the root causes of the most prevalent claims and disputes, and applies the lessons to current and future projects,” said Toby Hunt, partner at HKA.
Applying best practices for risk management, project delivery and cost control can help project owners and financial backers save “huge amounts of money in the process”, noted HKA’s research.
HKA has extensive experience in the landscape – the firm advises on best practice around project delivery, and when things regrettably do spiral out of control, with resolving issues. In the Middle East, the firm is one of the top players in this segment.
Meanwhile, a recent report from Boston Consulting Group highlighted that embedding sustainability principles at the design stage of projects coupled with implementing best practices could help significantly drive down carbon emission footprints at zero to no cost.
