The UAE's MEP sector is yet to meet growth expectations despite a rise in the number of contracts being put out to tender, according to BK Gulf’s general manager, Chris Barry.
Speaking at the fourth edition of the MEP UAE Conference, in a panel titled ‘Preparing for Positive Growth’, Barry noted that projections made last year of a 20% growth in the country’s MEP sector have yet to materialise.
“20% was sort of [touted] at the end of last year [in terms of] how the growth of the market would go,” said Barry. “What we’ve seen in the first [few] months of this year is an increase in the jobs being tendered, but those tenders have not become awards.”
He explained that converting tenders into awards tend to be a “long, drawn-out process” that involves protracted negotiations and discussions focussed on value engineering: “There has been a large number of tenders, but [growth-wise], I don’t think we’re anywhere near the 20%.”
Semco MEP’s vice president for general management, Subhash Pritmani, echoed Barry’s observation, not only calling the 20% predicted growth “a mirage” but also pointing out that while the figure is supposed to represent the UAE market, most projects are, in fact, mostly based in Dubai.
“In the other emirates, [the numbers are] negligible,” Pritmani said, adding that with cash flow continuing to be a major issue, MEP companies need to be more discerning when it comes to taking on work.
IN PICTURES: MEP UAE Conference 2018
“Sometimes in the excitement to take a job, MEP contractors […] land in difficulty,” he said. “This is the time to look at things in an objective manner [instead of] getting emotional."
Pritmani said it only takes one main contractor's mistakes to hurt the supply chain, “so at this point in time, every MEP contractor should be very careful”.
Describing the current cash flow situation in the industry as a “crisis in the MEP sector”, Azzam Messaykeh, chief executive officer of Faisal Jassim Group, said that transparency could help mitigate liquidity problems.
“In this time of transition, the most important thing is transparency,” said Messaykeh. “When you’re taking on a job, whether as an MEP contractor or supplier, it’s important to sit [with the rest of the team] and be transparent.
“If there is an issue, [talk about it] because the worst thing is when communication between the supplier and contractor stops.”
Faisal Jassim's Messaykeh urged MEP contractors to make sure that communication channels with developers and main contractors stay open during the duration of a project, emphasising that the execution of a job should be everyone’s focus, with payment being a given.
Raising a similar point, the managing director of Plafond, Dimitri Papakonstantinou, commented: “Cash should not even be something to discuss. We should be talking about how we can be better at what we do.”
Ideally, MEP contractors should not be expected to worry about the financing of a project, he said: “Clients should be financing their projects, because they are the ones developing them. We are just providing a service.”
Papakonstantinou, observing that there’s “a much simpler way of doing things”, revealed that even though his company has had no trouble when it comes to getting monthly payments for projects, it has “a lot of cash tied up in variations”.
“Going forward, there are [contract] clauses that we will request,” said Papakonstantinou. “[And] we’ll have to walk away from certain projects.”
James L Williams (JLW) Middle East, unlike other MEP companies operating in the UAE market, is having a good year, according to the firm’s chief operating officer, Ramy Boufarhat.
“I don’t think there’s a massive growth in the construction industry at the moment, but [the MEP] industry is getting smaller,” he explained. “There are some players that have [folded] or decided to leave this region.
“The market has become consolidated, so for us there is growth. We see what’s happening as positive – cash flow is positive.”
The decreasing number of players in the MEP contracting market is not the only reason behind JLW’s positive performance, said Boufarhat, revealing that the company has set up clauses in project contracts designed to protect the firm from payment-related issues.
He elaborated: “We have a clause in the contract [that allows us] to slow down due to lack of payment. If you don’t pay us, we slow down.”
JLW also includes a determination clause that helps the company escalate claims, said Boufarhat, adding: “We invite the entire MEP market to do the same.”