China State's MEP division on tackling financial issues

China State Construction Engineering Corporation’s MEP division works under the umbrella of its financially sound parent company 

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L to R: Chen Qingguang, acting general manager, MEP division, and Zhu Jianchao, VP, chief engineer. China State Construction Engineering Corporation Middle East (CSCEC ME).
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L to R: Chen Qingguang, acting general manager, MEP division, and Zhu Jianchao, VP, chief engineer. China State Construction Engineering Corporation Middle East (CSCEC ME).

There are several challenges to counter in the MEP sector, such as cash constraints,  contract disputes, low market fluidity and
tight deadlines and margins. 

The other major issue is when the MEP contractor is at the mercy of the main contractor, especially when it comes to claiming dues. The MEP division at China State Construction Engineering Corporation Middle East (CSCEC ME) does not face the latter trouble at all, as it carries out MEP works that are won by its parent company, thereby creating a certain sense of freedom
and security.
CSCEC ME has developed a dedicated team to provide a wider scope of construction and engineering services by setting up its own MEP services branch. 
Zhu Jianchao, VP, chief engineer, explains: “The good thing is that we do most of the jobs in-house. CSCEC ME is the main contractor, and we are the MEP division. We are not an independent company. Most of the projects we work on are won by our main contractor CSCEC ME. Only a few projects we carry out as a joint venture with other MEP contractors.”
This has been CSCEC ME’s strategy for a very long time. “We think this is the best model. Our MEP division can support our parent firm in construction. And thus we will be protected from the main contractor. Also, there is less risk for the main contractor. We are more like a service provider for the main contractor. Therefore, compared to other companies, we are different,” says Jianchao.
Jianchao says that the entire company works together right from the tendering stages, execution and handover. “We support the main contractor from the beginning to secure the job. Because there is an MEP division, the main contractor gets a good price for the job.”
CSCEC ME started operations in 2003 with work on Palm Jumeirah. Having executed globally some of the complex projects in various specialised disciplines such as airports, financial centres, super high-rise buildings, commercial and residential towers, major iconic architectural and steel structures, the company was used to operating in different territories.
CSCEC ME has four divisions: building, MEP, infrastructure and steel. Giving a percentage breakup of how jobs are distributed amongst these divisions, Jianchao says that the building and MEP divisions account for about 40%; infrastructure, 30-35%; and the remaining is steel.

Market and operations
With these four divisions in place, Jianchao says that the company is more active in the UAE and Kuwait. He says that they have registered a company in Saudi and hope to “be more aggressive in that country considering the recent positive changes taking place in the region”.
Talking about the regional growth of the MEP sector, Chen Qingguang, acting general manager, MEP division, says: “The growth has been increasing, from the end of last year. We have seen many tender invitations. There are a lot of opportunities in the market.”
Jianchao agrees by saying that “MEP is the most important part of a building”. He adds: “The market appears to be picking up. The situation will improve, especially with the government pushing the 10 year visa rule. Furthermore, the refurbishment market is growing and buildings need to be maintained.”
Summing up the projects completed in 2017, Qingguang says: “Last year, we completed around $136m (AED500m) worth of MEP projects.” The company completed two projects: Five hotel in Palm Jumeirah and Union Properties project in Motor City.
The current MEP project pipeline for CSCEC ME stands at $707m (AED2.6bn). He elaborated: “Out of the AED2.6bn, we have completed around AED800m. We have a total of 16 projects in hand. Hopefully, this year we get another AED1bn of new projects.”
Some of the MEP projects CSCEC ME is involved in are the DSO Silicon Park, ACT one ACT two apartments developed by Emaar, located in Business Bay downtown, three five star hotels at the Expo site, and the Abu Dhabi MTB project.

Execution
Jianchao says that their project pipeline is very healthy. He adds: “We are not too worried about securing jobs as we work together with the main contractor. When they secure the job, we secure the job. We have sufficient projects, but delivering, executing and making profit are key. We have to make profit in this market to sustain [our business]. We try to be at the forefront of this market by doing good engineering work.
“We have to improve our technical knowledge. For MEP, technical know-how is very important. Our advantage is that our parent company is very strong in the market. It has done a lot of mega projects and high-rise buildings. It has used automation and prefabrication. We have the advantage to bring that technology and combine it with the local market and with international standards. We foresee using more prefabrication and automation in the
coming years.”
The company at the moment focuses on engineering, procurement, labour management and technical knowledge. Qingguang explains that after 10 years of being in the market, there are two main issues to consider. One is the technical knowledge to adapt to changes/variations and the second is payment. “Our strategy is to enhance our technique. We are a Chinese company. Almost half of the projects in China are done by our company. We have a lot of experience in the construction industry. We bring Chinese and foreign staff to work together to formalise and develop our own technique, especially for technical solutions. Whenever there is a problem in a project, it is a technical problem.
“In addition, financially we are strong. We have good support from our main contractor.” Jianchao explains that even if there is some delay in payment or cash flow problems, the MEP division can still continue with its work.
During the financial crises of 2008, there was a client who delayed payment but CSCEC ME still completed the work, Qingguang remembers. He says: “We always complete our projects no matter what.”

 Labour strategy
CSCEC ME currently has around 300+ MEP engineers in Dubai and around 3,000 labourers. The company has a strategy of diversifying its labour group by including Chinese labourers. Qingguang says: “We have a big advantage. We use Chinese labourers along with labourers from other foreign countries. This approach is a lot different compared to other MEP companies. Other MEP companies use mostly Indians, Bangladeshis, Pakistanis, etc. We have 15%-25% Chinese labourers.” Qingguang says the advantage is that Chinese people are skilled and efficient and other labourers will learn some workmanship from the Chinese. However, the cost of Chinese labourers is more. “That’s why we restrict to 15%-25%; if the percentage is higher, the cost is more.”
Applying such a formula affords CSCEC ME to be more efficient in its work process. Also, foreign labourers can communicate better and they know the
market well,  Qingguang adds.
He concludes: “They should all work together and work with each other.”

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