Qatar is investing in its future and efficient planning, logistics and execution are critical, states BEN HUGHES, as he lists all the upcoming construction opportunities in the nation.
Qatar, a relatively young and developing country, has embarked on a transformational path to become the first Arab nation to host one of the most high-profile sporting events in the world. There is no doubt that this is acting as an infrastructure development accelerator and is expected to have a huge impact across the city.
Projects on the go
Doha plans a massive investment in the development of infrastructure. The city is undertaking a huge number of mega projects, from stadiums to a transport master plan that involves a new port and an airport, the expansion of the road system and a high-speed rail and metro networks. Many of these projects are being tendered and awarded, creating huge opportunities for regional and international businesses.
The bulk of spend is likely to be set on transport projects, including the US$ 30 billion national rail programme, comprising Doha metro, Lusail Light Rail Transit serving the entire new planned city of Lusail, and the long distance rail network that plans to connect Qatar railway with the planned GCC railway network.
Some US$ 20 billion worth of road projects are undertaken by the Public Works Authority (Ashghal), which is upgrading or building freeways, expressways and arterial roads, along with about 240 major interchanges and 360 bridges. The US$ 8 billion budget for Hamad Airport´s expansion plans, to be completed in 2019, will increase its annual capacity from 30 million to 53 million passengers a year. Ports too will figure strongly, headed by the US$ 7.4 billion Hamad Port development.
Construction projects under execution with higher budgets are Lusail City owned by Qatari Diar and budgeted at US$ 45 billion. Lusail City´s 19 districts will encompass not only new residential, commercial, hospitality, and retail opportunities, but a complete array of community needs, complete with schools, mosques, medical facilities, sports, entertainment and shopping centers. Other mixed-use developments under execution are Barwa Al-Khor development that will offer 24,000 residential units accommodating 60,000 people, as well as hotels, office spaces, schools and leisure infrastructure. The Pearl Qatar owned by United Development Company (UDC) is budgeted at US$ 7 billion. The development is located on a 4 million sq m artificial island divided into districts and expected to accommodate more than 40,000 residents.
Investment spending is likely to pick up by 2016 and beyond with the implementation of several major projects leading up to the World Cup event, and according to IMF, Qatari government´s budget is likely to face a budget deficit in 2016. As liquidity tightens, there will be an increasing need to look at alternative ways to finance infrastructure turning to the private sector to support its growth plans. The use of public-private partnership (PPP) schemes could help implement planned large-scale infrastructure projects. By using this structure, the liquid local bank market can provide the required funding to the project sponsors. Qatar is already using PPP structures in its water and power sector projects, but is yet to expand the model to other industries.
A key challenge for the effective implementation and delivery of PPP schemes will be finding some form of fast track dispute resolution process that works well. PPP schemes are different from that of a standard project due to the longevity of the relationship. So it is essential that at the government - special purpose vehicle (SPV) level, a healthy working relationship is maintained. At the SPV - contractor level, timely delivery is essential in order for the asset to start generating revenue. So disputes need to be resolved quickly and this could be achieved through the use alternative dispute resolution (ADR) techniques, such as adjudication and others. Unfortunately, the Q-Construct scheme, Qatar´s previous attempt at implementing adjudication, never came to fruition. The responsibility for adopting ADR is therefore likely to be at the SPV - contractor level.
In terms of PPP scheme related disputes, there should be a reduction in the progress payment disputes as the SPV will most likely not be receiving any payments until such time as the asset is operational. There should be a reduction in disputes related to variations but those, which do occur may be larger, and more complex, as a result of the fact that the government instructed change can have a much more significant financial impact under PPP arrangements, especially if it results in a critical delay to the operational date. There can be consortia internal disputes where there are culpable delays, resulting in financial loss, which neither party will wish to bear responsibility for. PPPs can also result in disputes related to the unitary payments, and to issues such as fitness for purpose or failure to comply with service level agreements.
A perfect plan
Qatar will be doing so much in a short span of time, and therefore efficient planning, logistics and execution are critical. But will this major investment and transformation deliver sustainable infrastructure beyond the World Cup tournament? What will be needed afterwards for a small population? Qatar is investing in its future, and should design the sporting and social infrastructure needed in the long-term for the country and its citizens.
Efficiency must be seen as an essential component in delivering the range and depth of projects that Qatar has to deliver. This extends to optimising the design in respect to the use of hard wearing, sustainable and low-maintenance materials, through to ensuring energy-efficiency of the built assets, serviceable buildings with sufficient social infrastructure components and a clear legacy strategy that ensures longer term use for the citizens of Qatar. But design efficiency is only the start of it.
Optimising the delivery of the projects will also be critical. A recent statistic observed that most of the world´s tunneling equipments are in Qatar to help deliver the metro project. Imagine this being replicated across the supply chain, including cranes, towers, scaffolding, pre-cast concrete, etc - there is a significant amount of the world´s contractors operating in the state all at the same time, which in itself will put pressure on Qatar´s existing infrastructure.
But this is a logistical issue that can be resolved easily. What is not easily resolved are the more adversarial ways of contracting that are based on lowest price tendering, poor project controls and governance, and continually ´seeking more for less´ from the supply chain. The adoption of international best practice controls in executing these projects will be critical to the success of Qatar´s development plans over the coming months and years as many international contractors may not be used to the nuances of contracting in this region. Moreover, if such challenging practices remain commonplace, many of these contractors will struggle to justify the cost versus benefit argument to their shareholders to motivate continuing participation in the market.