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
Construction
Dubai will increase its spending on infrastructure and construction projects by 43 per cent next year as it continues to prepare for Expo 2020 as well as invest in other ...
READ MORE
Saudi Arabia should be the GCC’s largest construction market
Riyadh has cut capital spending and few new projects outside oil and gas sectors have started in recent years Saudi Arabia should be the GCC’s largest construction market by far. Its ...
READ MORE
Dubai’s Expo 2020 pavilions offer opportunities for contractors
While the focus is on key infrastructure for the event, the 170-plus international participants present both opportunities and challenges Visitors to the UAE would be hard pressed to find anyone who ...
READ MORE
Sewerage network
Stormwater network will serve Expo and Dubai South developments in Jebel Ali area Dubai Municipality has awarded the joint venture of Austria’s Porr and Belgium’s Besix has been awarded the contract ...
READ MORE
Building Future Cities
  Why the Gulf is set to lead the world in urban planning development and management One of the most significant long-term trends around the world is the movement of the human ...
READ MORE
Neom city in Saudi Arabia
Economic cycles come and go, but the past few years will be remembered by the GCC construction sector as a period of intense difficulty as the region adjusted to the ...
READ MORE
Construction faces a step change under Industry 4.0
Construction must look to the manufacturing sector for lessons on digitalisation and automation as the focus shifts from bricks to bots The ‘fourth industrial revolution’ or Industry 4.0, and technologies such as ...
READ MORE
Transforming Construction: Lessons from Oil & Gas
  IMPARTING KNOWLEDGE: The region’s construction industry is in a state of revival and can learn valuable insights from its oil and gas counterpart With nearly $1.6tn-worth of major building and infrastructure ...
READ MORE
Dubai contract awards drop in 2018
Contractors and consultants say there are less new work opportunities when compared with previous years The total value of contract awards in Dubai during 2018 is due to register a significant ...
READ MORE
Planning for a year of transition in construction
The region’s construction sector is undergoing great change, as contractors shift their focus to exploring new sectors and geographies After five years of being propped up by projects in Dubai, the ...
READ MORE
Dubai to boost infrastructure spending by 43 per
Saudi Arabia should be the GCC’s largest construction
Dubai’s Expo 2020 pavilions offer opportunities for contractors
Joint venture wins Dubai tunnel construction deal
Building Future Cities
Shifting into a new cycle
Construction faces a step change under Industry 4.0
Transforming Construction: Lessons from Oil & Gas
Dubai contract awards drop in 2018
Planning for a year of transition in construction
28 November, 2017 | .By COLIN FOREMAN