Construction Intelligence Report by Big Project Middle East

onstruction Intelligence Report In-depth analysis of the Middle Eastâ&#x20AC;&#x2122;s construction markets in 2016

CONTENTS

2016 Volume 2 Sector focus 04 Strategic capital planning in an era of constraint Coping with the changed economic landscape in the GCC

08 Infrastructure and Dubaiâ&#x20AC;&#x2122;s new PPP law What impact will the new PPP law have on construction?

On the Map

Why professional bodies matter to the industry

Tooling Up

Construction recruitment strategies in challenging times

Invested in Infrastructure

Examining the impact of increased infrastructure investment

Cautious Optimism

The construction equipment sector stays positive in 2016

Expert analysis 30

Focus on a sustainable future

Robert Jackson on the implications of the COP21 agreement

Hitting the target

Can Dubai can achieve its renewable energy goals?

Ready for Change

Saeed Alabbar on the opportunities in the ESCO market

40 Think Better Andy Morris discusses the art of creating thinking spaces 1

WELCOME

Time to think strategically

y all accounts 2015 was a challenging year for the construction industry, both globally and within the GCC, with concerns over falling oil prices driving uncertainty in the Gulf economies as governments look to reassess how and where they spend their money. While it is expected that major global events like the Expo 2020 and the Qatar World Cup 2022 will grab the headlines, there is a tremendous amount of change happening beneath the surface that is going to have a pivotal impact on the development of the region. The response to decreased oil revenues has meant an immediate reduction in budgets, part of a necessary rebalancing of the region’s fiscal position. In addition, governments have indicated that there is to be more prudence in the way they redistribute their funds, with greater justification needed for investment plans and a clear demonstration of deliverables. That is why the 2016 edition of the Construction Intelligence Report has brought together the leading voices from within the industry to share their thoughts, views and analysis on an intriguing year ahead. Covering everything from the new Private Public Partnership laws that have been introduced, to the impact of the COP21 agreement, this year’s report draws on the knowledge and experience of the best contractors, consultants, legal advisors and other associated experts in the region, as we look to prepare readers for the various changes that are certain to lie ahead.

CPI MEDIA GROUP Founder Dominic De SouSa GrouP Ceo naDeem HooD

EDITORIAL edItor GaVin DaViDS gavin.davids@cpimediagroup.com +971 4 375 5480 rePorter JeRuSHa SeQueiRa jerusha.sequeira@cpimediagroup.com +971 4 375 5477 onLIne edItor Ben FLanaGan ben.flanagan@cpimediagroup.com SuB edItor aeLReD DoYLe aelred.doyle@cpimediagroup.com

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The construction industry continues to be a bellwether for the region’s economies, and with governments’ aspirations closely tied to investment into major projects and infrastructure, the need for clear, accurate and current information is vital. As companies look to consolidate their key clients, and search for the right sectors of the industry to invest and focus on, the CiR provides the right kind of information that helps reinforce the decisions being made at the very highest level. Supplemented by exclusive content produced by the CPI Construction editorial team, the Construction Intelligence Report is required reading for those looking for information that will help them hone their own business strategies in an increasingly fluid marketplace. Finally, I would like to thank all our contributors for their time and contribution to this report. We wouldn’t have been able to do it without you.

Gavin Davids editor gavin.davids@cpimediagroup.com

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strategic planning

Regional governments are now focusing on projects that are considered to best stimulate shortterm economic outcomes.

Strategic capital planning in an era of fiscal constraint Steve Scott and Martin Cordwell, of CH2M Hill, outline how the changed economic landscape is impacting the GCC’s capital investment plans

he collapse in oil revenues since 2014 has fundamentally changed the economic landscape of the GCC region, with most governments looking to run fiscal deficits in the short term. This change is having a significant impact on how the region looks at its capital investment plans, resulting in the readjustment of projects and committed spend. But to maintain plans for growth and economic diversification, major spending programmes need to continue, and it is important that readjusting spend is managed in a strategic way. This feature looks at ways in which GCC countries can recalibrate their spending to better achieve their visions despite reduced investment capability – i.e. how to achieve more from less! The GCC region is facing a major investment dilemma. Governments that have been driving long-term economic diversification agendas, on the understanding that the most diversified economies are the most resilient, are now under shortterm pressure due to the deflation of global oil and gas prices. The inevitable reaction to this recent turn of events has been to critically review spending on ongoing projects such as infrastructure, and the modernisation of cities, with an eye toward projects that are considered to best stimulate

short-term economic outcomes. However, while some projects can clearly be seen as positive catalysts, the challenge for regional governments remains the ability to determine which projects they bring forward now will have the most beneficial impact on the population in the longer term. Delivering the national vision with less investment Response to reduced oil revenues and uncertainty in the financial markets has varied across the region. Immediate budget reductions have played a key role thus far, a necessary part of balancing the region’s fiscal position. Government communications also reveal increasing prudence over spending, requiring departments to provide greater justification for investment plans and clear demonstration of deliverables. This is a long overdue but welcome response. Less welcome, and more damaging to economic diversification, are prorata reductions across government departments based on seemingly little considered rationale. One outcome of the current fiscal conditions across the GCC countries is the emergence of a more competitive project funding landscape, where constraints on investment mean that internal projects need to compete with each other to secure investment. This is a significant move away

from the traditional free flow of capital where funding was relatively easy to secure; now governments are increasingly having to think in terms of value for money rather than pure cost. In moving forward, the key objective of government spending will be to ensure that investment is prioritised towards high-impact projects, defined as those which best help achieve its goals and objectives. Focus will also be towards projects that can be delivered effectively, thereby ensuring budgets can be managed in respect of both timing and scale. A key step to achieving this is the adoption of a strategic approach to capital planning. Historically, regional capital planning and budgeting has been governed by projectlevel processes. Government departments have compiled lists of the projects they wish to

By having to compete for funding, projects are increasingly having to think in terms of value for money rather than pure cost terms

implement and forwarded these as an effective budget for approval. This approach has often resulted in: • Capital budgets reflecting local agendas and not aligned to strategic policy (attempting to direct growth and diversification) • A wish-list approach to planning, resulting in overinflated budgets and difficulty in achieving spend • Reduced confidence in the ability of government departments to deliver what they have promised Strategic capital planning provides a medium-term planning horizon that bridges the gap between strategic level vision and the direct implementation of projects. If done correctly, strategic planning provides a coordinated programme of projects that clearly identifies what is worth doing, when, and at what cost, and thereby increases delivery certainty by setting out a clear direction for effort and resource, cost accountability and ownership. There are four fundamental principles behind a successful strategic capital planning process: 1. Challenge and review – Robust processes require an appropriate level of challenge and review in the decision-making process. These gateways provide key decision points in the planning process at which point information and projects are challenged 5

strategic planning

Projects that best achieve strategic and local objectives are being prioritised by GCC leaders.

and, if appropriate, rejected. 2. Clearly outlined responsibilities – It is essential, not optional, that the right part of the organisation be engaged to lead/support the process at the appropriate stage. 3. Flexibility – While the process needs to be robust, it must also be flexible. The process of developing a capital plan can be complex but ultimately must not constrict business leaders in making the right decisions to move forward. 4. Prioritisation – This is at the heart of good planning. A clear and transparent prioritisation matrix is required, to be able to justify project selection across a range of different asset classes. In our experience, where these principles are applied to the capital planning process the outcomes for organisations are significant. Transparency and governance in the decision-making process are improved, cross-departmental consensus is gained and the resulting programme of projects achieves the greatest benefits. The role of effective prioritisation within the overall capital planning process is critical. It is here that projects are aligned to best achieve the strategic and local objectives driving the leadership vision. Fundamentally, this means moving the process from a purely budgetary decision to one based on value for money – namely examination of the wider benefits sought from investment. The guiding principles behind prioritisation methodology are straightforward. Keep it simple – the easier it is to understand and use, the more people will actually use it. Make sure it integrates with and enhances the capital planning process – it should replace some existing processes rather than just add to them. Provide efficient and effective analysis – this should be 6

Tightening fiscal constraints in the GCC is having a significant impact on capital investment plans, resulting in a more competitive project funding landscape in support of decision-making, not making decisions itself. So why is project prioritisation so important? At government and department level, prioritisation is important for a number of reasons: • Governments and organisations often work across a diverse set of sectors and therefore need a consistent way to evaluate quite different projects alongside each other. • It enables them to focus spend and resources towards projects that best achieve their goals and objectives. • It aligns spend to strategy and provides value for money. • It supports a ‘challenge’ ethos in budgeting, providing robustness and transparency to decision-making. Prioritisation as a planning tool enables decision-makers to sort and rank long lists of capital projects, identifying what needs to be done rather than what would be liked to be done. The purpose, as some project officers fear, is not an exercise to eliminate or reject projects from capital plans; rather, it is a tool to support structured decision-making and reduce process subjectivity. Therefore,

central to any prioritisation methodology is the determination of what is important to an individual organisation, i.e. what are the priorities or drivers against which projects will be judged. We see two themes for prioritisation drivers. First is a series of internal organisational drivers determined by strategy, organisational remit and stakeholder requirements. Second are the external drivers to which organisations need to respond. Particularly in the government sector, where investment is aimed at economic development or societal advancement, the range of external drivers should be extensive and potentially include economic growth, poverty reduction, community cohesiveness and sustainability issues. The nature of, and balance between, drivers is organisationspecific. But to be effective, the number of drivers needs to be kept to a manageable level – the ch2m ‘5-D Model’ is based around a maximum of five core drivers under which most internal and external factors can be grouped. This provides a manageable framework around which to weight importance, and also provides scope for between 15 and 20 criteria to be developed to evaluate projects against. The core drivers we consider important are: 1. Vision and Objectives – Alignment to strategic objectives (internal and external) is a key part of any prioritisation approach. Developing criteria that challenge projects on their contribution to strategy and goals will help prioritise projects that provide the greatest contribution to strategy. 2. Broad Economic – All projects are governed by economic/ financial objectives, i.e. spend,

value for money, investment return. This driver captures these metrics but also provides scope to capture wider socioeconomic criteria that are more important to public sector projects. Key questions asked could include: What is the value for money created? Who are the beneficiaries? What are the community benefits? How many jobs are created? 3. Sustainability – Sustainability drives both public policy and corporate social responsibility and is an important consideration at many levels. Projects should be assessed against the positive impact they have on health, safety

strategic planning

and environment; in terms of the direct impact they have on environmental assets/eco-systems; and for a physical project, the credentials of the construction and operation of assets. 4. Risk & Criticality – A project’s dependencies are often constraints on its ability to progress. When prioritising, it is important to understand the key dependencies and how they are being managed (i.e. the risk of delayed delivery). Consideration needs to be given to a project’s criticality (in asset terms), whether project failure leads to wider asset failure or unsafe conditions, and whether it

is dependent on other projects. 5. Deliverability – A key objective is to prioritise projects in a good position to be delivered. The prioritisation process needs to look at the complexity of a project, whether there are factors (such as stakeholder agreements, approvals, etc.) which are necessary for progress, and indeed whether a project can realistically be delivered to time and budget (in order to provide budget certainty). Once projects are prioritised, the application of project costs and timescales can provide value-for-money benchmarks and begin to shape an overall

programme of capital expenditure across a medium term of, say, five years. From the perspective of economic appraisal, projects should looked at in terms of a ‘basket’ of outcomes, or the value that a level of investment will create for the nation – not simply a cost consideration wherein what is trying to be achieved at its core is largely ignored. Conclusion Tightening fiscal constraints is having a significant impact on capital investment plans, resulting in a more competitive project funding landscape. By having to

compete for funding, projects are increasingly having to think in terms of value for money rather than pure cost terms. Through implementation of strategic capital planning processes, the robust prioritisation and appraisal of projects, GCC governments can balance medium-term fiscal constraints with significant project outcomes while still progressing efficiently toward wider goals of economic advancement through diversification, thus increasing confidence in the government and facilitating private sector investment. 7

private public partnerships

The new PPP law is designed to kickstart PPPs in Dubai.

private public partnerships

Infrastructure and Dubai’s new PPP law The new Dubai Public Private Partnership Law may change the procurement of PPP projects in Dubai. What is the potential impact on the construction sector?

n 20 September last year, Dubai passed a new publicprivate partnership (PPP) law, Law No. 22 of 2015 (New PPP Law), which entered into force on 19 November. The new PPP law is designed to help kick-start PPPs in Dubai, which to date have been limited to Dubai’s fledgling independent water and power project (IWPP) programme. The law provides a framework for government agencies to enter into partnership contracts with private sector companies to carry out PPP projects in Dubai. Kuwait’s new PPP law, which came into force in March of last year, has successfully rebooted Kuwait’s ambitious PPP programme. The hope is that the new PPP law will have a similar effect in Dubai and that the city’s infrastructure can be developed through finance and expertise from the private sector. Indeed, the strength of the relationship between the Dubai government and the private sector will play a significant role in determining whether the emirate meets its ambitious long-term infrastructure development plans. It is theoretically possible that many PPP-style projects could have been undertaken prior to the introduction of the new PPP

law, as there were very few legal restrictions on such projects which could not be dealt with through appropriate contractual drafting. However, since the bidding process for PPP projects is expensive and time-consuming, developers were generally unwilling to invest resources in a region where there are only occasional PPP deals and limited opportunities to win projects. The potential influx of PPP projects brought about by the law makes Dubai far more attractive to private sector developers. Dubai’s Roads and Transport Authority (RTA) has played a significant role in the development of the new PPP law and seems likely to carry out a significant proportion of its future projects on a PPP basis. Indeed, the RTA recently announced that it will develop the Union Oasis Station as a PPP, one of the first projects to use the new law. It will be interesting to see which other government departments also embrace PPP initiatives in the coming years. The new PPP law has numerous stated objectives, including to transfer knowledge and expertise from the private sector to government agencies, to train and develop agency employees on the management and operation of projects, and

more generally to promote emiratisation. It also sets out to encourage private sector investment in development projects and enable the government to implement strategic projects more efficiently and effectively. The law also aims to ease the financial burden on the government budget and change the nature of the government’s role on some infrastructure projects, from one of implementation and direct management to one of making policy and regulating quality control. Application of the new PPP law The new PPP law has a very broad application and does not contain significant project or industry detail; nor does it contain a detailed position on project documents at this stage. We expect these to come in time with the implementing regulations. What we do know now is that the new PPP law applies to all PPP contracts with government agencies (including the Free Zone authorities), except those covered by the Dubai Government Contracts Law and projects that fall within the IWPP law. The IWPP law exception means that the new PPP law does not apply to public

private public partnerships

Private sector companies can make PPP proposals to the relevant government agencies under the new PPP law.

Alternative contract structures A build-operate-transfer (BOT) model is the same as a BOOT, except that the project company does not own the facility, so assigns a usufruct right over the facility to the government agency on expiry of the term. A model where the project company builds and commissions the facility; ownership is then transferred to the government agency and the project company continues to operate the project for a set period; A model where there is a transfer of the project’s benefit from the government agency to the project company to enable the project company to commercially use and operate the facility for an agreed period; and Any other method approved by the Supreme Fiscal Committee. 10

or private bodies conducting activities related to electricity generation or the water sector. From this, we can deduce that while the new PPP law will govern a whole manner of different PPP projects in a range of sectors, it is likely to be principally used in the development of social and transport infrastructure such as roads, railways, schools and hospitals. It is also interesting to note that under the new PPP law, private sector companies can make PPP proposals to the relevant government agency; the process does not have to be initiated by the public sector. This provides a significant opportunity for forward-thinking industries and companies who recognise a social need to band together to present solutions to government, addressing problems before they become major shortages; schools are a prime example of this. Overall, this can help stimulate private sector innovation and entrepreneurial endeavour. The new PPP law allows PPP projects to be in the form of a classic build-own-operatetransfer (BOOT) model, whereby the project company receives a concession from the government agency to finance, construct and operate the facility for a set period until ownership is transferred back to the government agency on the expiry of the term set out in the partnership contract. Interestingly, however, the new law also provides for structures other than BOOTs (see box). DoF and government agencies The Department of Finance (DoF) has a significant role to play under the new PPP law. Among a range of responsibilities, it is tasked with setting general policy for the

organisation of PPP projects. It is also required to provide assistance to government agencies as they prepare and develop partnership initiatives. Furthermore, the DoF has to prepare a general guide setting out rules and procedures to be followed by government agencies entering into partnership contracts. It has the additional responsibility of helping to provide an appropriate environment for investment in PPPs and promoting this inside and outside of Dubai. For a proposed project, the relevant government agency is required to conduct feasibility studies from an economic, financial, technical and social perspective, and to establish criteria for the selection of a partner for the project. The “relevant agency” under the new PPP law is responsible for the procurement process, which must include pre-qualification and proposal phases, and oversees the implementation of the project company’s obligations under the partnership contract. Within each government agency, a partnership committee will be set up to carry out the work of the agency in relation to PPP projects. The New PPP Law sets out various principles of selection to be considered by the government agency when selecting a partner for a PPP project, to ensure a decision is made fairly and that the most appropriate partner is selected from the bidders. The focus here is on transparency and ensuring that the selection is in the public interest. PPP projects are to be awarded on the basis of the most feasible technical and financial offer. The body that has the power to approve partnership projects is determined by the value of the project. If the total cost to be borne by the government agency for

the partnership contract does not exceed $54.5 million, the Director General of the government agency will have the power to approve the project. If the total cost to be borne by the government agency for the partnership contract is between $54.5 million and $136 million, the authority to approve rests with the DoF. Finally, if the total cost to be borne by the government agency for the partnership contract exceeds AED 500m, the Supreme Fiscal Committee is the competent authority. The project company In addition to the successful bidder forming an SPV for the project, the government agency may elect to participate in the project, subject to the project company being established as a limited liability company. Alternatively, if appropriate, the successful bidder may implement the project using an existing company, subject to DoF consent. This latter option may

private public partnerships

not be practical from a financing perspective, however, as lenders will expect robust security over the project, including the vehicle being used as the project company. The project contract The government agency and the successful bidder must enter into a partnership contract, which sets out how the project is to be implemented and the obligations between the parties. The new PPP law contains a number of standard requirements for these partnership contracts, largely typical provisions relating to scope of works to be undertaken by the project company, ownership of assets, liability, insurance and division of project risks. However, there are a number of noteworthy requirements. For one, the maximum period of partnership contracts is 30 years from the contract signing or the date specified by the partnership committee, unless the Supreme Fiscal Committee

agrees to a longer period. The Partnership Committee also has the power to amend partnership contracts in the public interest. This gives the Partnership Committee a broad unilateral right to amend partnership contracts. Appropriate contractual safeguards will need to be considered for the private sector partner and project lenders. Partnership contracts can also be amended as a result of emergency circumstances, although it is unclear exactly how this provision will work in practice. The project company is not permitted to enter into subcontracts without the written consent of the government agency. While limiting, this may be overcome by the government agency effectively pre-agreeing to a level of subcontracting by way of a suitable clause in the partnership contract, or through the principal subcontractors being participants in the project company up front.

Construction impact The new PPP law is a positive development for Dubai and forms a good basis for PPPs in the emirate. It demonstrates to the private sector that Dubai is open for business in relation to PPPs and will be actively seeking private sector investment. This is a particularly good sign for the construction industry, which has had its struggles regionally since the global financial crisis in 2008. We expect there to be increasing opportunities in the near future for engagement between government and the private sector, particularly companies with the potential to deliver PPP projects, as both sides look to see how the law can be implemented for mutual benefit. This will include engagement with sponsors, operators and, significantly, construction contractors. The impact of the new PPP law will be greatest in the area of social and transport infrastructure, so contractors skilled in its delivery will

be keeping a close watch for opportunities. With the government’s open support and encouragement for innovation and entrepreneurship captured in the new PPP law, construction contractors should be analysing current and future demand in social and transport infrastructure and identifying strategic partners that they can work with to bring the project to the government, before the government even recognises the need. The wider construction industry, as it looks to explore opportunities off the back of the new PPP law, may also consider the opportunity this type of project offers to adopt different risk and return profiles. Traditionally, construction companies tend to operate on thin margins spread over high turnover volumes. This sort of opportunity is still (broadly) available in PPP structures for the contractor that chooses to participate at the subcontract level only. However, other contractors may choose to adopt a more aggressive risk/return profile by also participating at the project company level. This presents the chance to seize a long-term equity return at a higher level than the return on capital usually available in traditional structures – along with the prospect of ‘turning’ that equity in a sale to a third-party investor later. In many other jurisdictions around the world, contractors have made the most of this opportunity to round out their business models. The advent of the PPP law in Dubai therefore presents the opportunity to do this in one of the region’s most vibrant construction markets, and is likely to encourage contractors to once again focus on projects brought to market here. 11

professional bodies

Construction companies will be hardpressed to find the right candidates, given the demand and volume in the GCC market.

On the Map Andrew Robertson, president, Middle East region for the CIOB, on the value of professional bodies to the GCC construction industry

s the world in general adopts and adapts to the many forms of information technology that seem to develop on an almost daily basis, we sometimes encounter circumstances that can only really be described as enigmatic. These generally consist of matters that cling more to tradition and custom than to efficiency and appropriateness. The result is normally and in many ways predictably unsatisfactory. One such matter that affects every employer in every part of the economy is the matter of educational equivalence. Here in the Middle East, due to the attractiveness of the economic environment here in the oil-rich (not so much now due to the crash in the oil price) GCC, we have potential employees arriving from every corner of the globe. These economic migrants respond to the need and demand for labour, and once again I will qualify this and restrict the referencing to built environment and construction. As more than 80% of the non-oil & gas GDP is created through construction activity, this is an excellent place to look at the issue. The position faced by most employers is one that resembles a

visitor arriving in a new town and not knowing how to get where they want to go. They are faced with CVs that contain alleged degrees from universities apparently situated in every possible town, city and country across the globe. How on earth does an employer establish equivalence between these various centres of excellence? The circumstance is partially relieved through the obligatory accreditation process insisted upon by the regionâ&#x20AC;&#x2122;s immigration system; however, this accreditation process is subject to the same vagaries as the actual qualification, as the accrediting authority already recognises the issuing entity. What all of these procedures fail to do is create an opportunity for the prospective employer to establish and understand the relevance of the proffered degree or other educational certificate. Can we really expect the prospective employer to be able to determine and differentiate between, for instance, a degree issued by a university in Outer Mongolia and one issued by Cambridge University? The only thing the two have in common is that they are both referred to as degrees. What is not identifiable from either is what the graduate actually had to achieve to be 13

professional bodies

Membership of professional bodies tells employers that candidates are maintaining a currency as far as their qualifications are concerned.

awarded the degree, how long the graduate studied for, the nature of the course material and how demanding it was, the minimum standard acceptable to the examining board, and so on. What we can be sure of is that they are all different.

At the end of the day, what is the real use of such qualifications to a prospective employer? They donâ&#x20AC;&#x2122;t have an equivalent to Google Maps to navigate their way through the myriad of degree documents arriving on their desk. So what options

are available to the employer? They could adopt the lotto option and take a lucky dip and employ someone, in the hope that they have made the right decision and that the new employee turns out to be a success. Not an option that anyone would consider

viable, because such a decision more often than not results in an unacceptable cost for the employer. Any employee is only there to add value to the business; the challenge faced by employers is that of making an informed decision to ensure that the new employee is an asset to the business and not a threat to its success. Even if the employer is informed and has a universal grasp of every degree offered by every university and college throughout the world, they are potentially faced with another conundrum. What if the degree submitted by a prospective candidate was awarded 20 years ago? What is the employer intended to establish from that? It certainly indicates that the candidate once upon a time sat an examination in a specific subject and was considered at that time to be suitably competent to be awarded a confirming degree. What use can the employer make of such information, as it does not tell the employer what the candidate has done about maintaining the required level of training and development? Of course, we have also to consider the position of any prospective employee. How can they make certain that their application for a new role is considered appropriately, how can the prospective employees project themselves and demonstrate unequivocally that they are qualified to undertake the advertised role, that they are experienced in the required activity, that they have made a conscious and dedicated effort to stay current on all industry relevant issues and developments, and that they can be engaged with a relative amount of certainty that their appointment will be successful as far as the prospective employer is concerned?

professional bodies

Both predicaments are linked and share common concerns. So what is to be done? Professional qualifications are the key. A number of very substantial and venerable professional bodies represent the disciplines within the construction sector of the economy. Here of course we are not referring to internet bodies that issue membership to whoever pays their $50; we are referring to professional bodies that have been in existence for more than 100 years. These professional bodies allow membership to people who satisfy the rigorous entrance examination requirements and have demonstrated by actual attendance that they are committed to continued professional development. Membership of these professional bodies tells employers

that you are maintaining a currency as far as your qualifications are concerned. Professional bodies that are empowered to offer chartered membership are even more of a source of reliable reference for both employer and employee, and are by their very nature at the forefront of increasing the professionalism of the industry. As the structures delivered by the industry become increasingly complex and technically challenging, as they get higher than ever, as they become by necessity more eco-friendly, as the need for buildings that enhance the quality of life increases, construction employers have to engage proven, current and relevantly qualified people to actually deliver these projects. How does the prospective employee ensure that they are recognised as being that person?

Any employee is only there to add value to the business; the challenge faced by employers is that of making an informed decision to ensure that the new employee is an asset to the business and not a threat to its success

The answer can be found in seeing and recognising that the Chartered Institute of Building is the employerâ&#x20AC;&#x2122;s and employeeâ&#x20AC;&#x2122;s equivalent to Google Maps. The CIOB shows you the way to success, the desired destination of both parties. Through its CPD delivery to its members across the world, through its proactive engagement with employers via the CIOB Training Partnership programme, through the constant and contributive engagement with governments, colleges and universities, the CIOB remains at the forefront of construction. If as an employer you want to engage the best possible employees, and if you intend to make a success of your career in the construction industry, your best option is to recognise what the CIOB actually means to you. 15

RECRUITMENT

67% of survey respondents from the construction industry have said that they’ll be looking to hire in 2016.

Tooling Up Davina Munro speaks to experts in construction recruitment about their strategy for weathering the impending bad economic climate and their outlook on the year ahead

s the world readies itself for a tricky year, industries globally are taking every measure to ensure that costs are in check, staff is streamlined and the right talent is retained. Low oil prices in 2015 took a toll on a lot of industries, especially the construction sector, which in terms of recruitment was more or less stagnant, barring a few bright spells. With the impending storm in 2016, most recruitment agencies believe that in order to weather it, the construction sector must play its cards right. Recruiting the right candidates has never been more crucial, especially in the Middle East, where developers, contractors and consultants constantly battle to have the best on board to help them roll out projects in a timely and efficient manner. According to the MENA Job Survey Index by Bayt.com, 67% of respondents in the construction industry say they will either be definitely hiring or probably hiring in 2016. In terms of educational and academic qualifications, candidates with engineering degrees are the most sought-after at 68%, followed by business management degree candidates at 28% and commerce degree holders at 20%.

Consultancies who have to tool up for big projects face a challenge, but Suhail Masri, VP of Sales, Bayt.com, says successful human resources departments know that being prepared is far more complex than mere recruitment budgets. They encourage clients to focus on attracting the right talent by building a company’s brand, posting jobs online, perfecting hiring practices, compensating fairly and networking. “The best way to source candidates from a vast pool of talent is by putting up ads on job sites such as ours, with a good description and character sketch of the type of employee you want to hire. If you’re looking to tool up fast, a CV Search allows you to search for both active and passive candidates, and you can even filter down applications to your specification. “Next, while screening CVs, always check for relevancy and special achievements. Being prepared with a set of questions for every candidates also goes a long way. “In terms of salaries, while it isn’t everything professionals look for, it is still an important factor in their acceptance or rejection of your job offer. Having said that, it’s advisable to pay your employees 17

RECRUITMENT

according to the market rate. Lastly, networking is crucial for employers who are trying to land the perfect candidates for their companies, so make it a strategic habit.” Another recruiter, Eamon Cassidy, regional manager at ICP Gulf, says that in his experience, there is massive competition for high-calibre candidates in the Gulf. In fact, more often than not there is a limited amount of time to find these people, due to the nature of projects out here. One strategy they use to handle this is to maintain a large database and network of highly skilled professional candidates across the region. This allows them to guarantee clients a suitable candidates for roles in a very short turnaround time. “Every company is different, so we tend to learn as much as possible about our client and then 18

Many companies are letting go of staff due to the lack of new projects and lack of liquid capital. I believe we will see a change from 2017 onwards, and the outlook is generally good for the medium to long term

pair the candidates up to suit. Obviously education, previous experience and amount of time in the Gulf are important, but we also look for strong personalities and character traits, which are crucial in the current climate. “Candidates that are solid, hardworking individuals, and have a direct, honest approach, as well as coming across sharp and professional, are the most attractive to prospective employers.” AECOM is a large conglomerate, and Mark Farrer, director of Human Resources, UAE and Oman, says the strategy as a company is to have a dedicated internal recruitment team assigned to all major projects. He says this strategic approach ensures a prepared pipeline of candidates for any available role, which enables them to kick-start projects effectively.

“We draw our candidates either externally or from our 85,000-strong global employee base. Whilst we obviously look for candidates that meet all of the fundamental selection criteria, relevant qualifications and previous experience, we equally seek those individuals with the right team fit, who have the aptitude, attitude and culture fit that aligns with that of AECOM.” But what are the current skill gaps in the market, and where is demand trending? Cassidy says that as demand for labour increases, finding technically skilled employees and experienced management becomes quite a task. High-calibre senior management is always in demand, and competition between firms for the best talent in the market is extremely tough. This is because director level and top management executives will play a key role in the delivery of projects, especially over the next decade in the Gulf, therefore making it a priority for leading firms to get the right people. Corroborating Cassidy’s views and adding his own, Farrer points out that in terms of skill gaps, there are shortages in a few specialist transportation areas, most notably in some of the rail specialities. “As for where the highest demand lies, the civil infrastructure sector has been the centre of attraction, with projects linked to Expo 2020 and major transportation projects leading the way. However, an increase in demand has also been seen in the renewable energy and sustainability sectors.” Masri agrees that when it comes to the construction industry, the Expo and new upcoming projects like smart cities are creating gaps, because the skills required are new. They are not taught at

RECRUITMENT

Candidates for jobs in the regional construction industry need to be wellversed in current best practices and innovators in these areas.

the majority of universities, and not many people have much experience either. This, he says, means employers need to train employees and rotate them into different departments in order to bridge the skills gap. Indeed, the workforce entering the market needs to improve and become more aligned with the skills needed. Farrer stresses the need to ensure that today’s professionals, and those in higher education, are well versed in current best practices and are innovators in these areas, which he says is key to satisfying future clients and end-user demands. This gives rise to the scope for professional and tertiary education providers to capitalise

on these trends by collaborating with employers. Masri advises them to start by focusing on the soft skills gap in the Middle East, such as a candidate’s communication skills and ability to speak both Arabic and English. “These are qualities that 66% of employers look for, followed by being a cooperative and flexible team player at 52%, and an impressive personality and demeanour at 48%. As for existing employees, companies should focus on professionals acquiring new skills via a combination of on-the-job experience, formal internal and external training provided by the company, and by shadowing and observing others. “Research done by Bayt

says that by combining these strategies, as well as motivating and encouraging employees, the training process can become a seamless and quick process which every industry can benefit from.” There will be plenty of challenges as well. Cassidy says that as an agency, the main challenge will be maintaining relationships built over the last decade. The firm will look to adapt the business to a tougher environment and diversify in the market. AECOM is continuing to pipeline potential candidates, says Farrer, to prepare for any changes in the market. Additionally, it is enhancing internal career pathways and global mobility activities to provide enhanced

career opportunities for employees and effectively use its global talent. “Many companies are letting go of staff due to the lack of new projects and lack of liquid capital. I believe we will see a change from 2017 onwards, and the outlook is generally good for the medium to long term,” predicts Cassidy. “I believe that with major events such as Expo 2020 and the Qatar World Cup getting closer, we will finally see the effects of those events on the recruitment front in 2017. “I feel that the Gulf will be a very exciting place to be for the next five to ten years overall, once we overcome this current climate, and feel very optimistic about the market here,” he concludes.

TransporT InfrasTrucTure

The GCC’s combined roads, rail and maritime investment will be $422bn over the next five years.

Invested in Infrastructure Examining the impact of increased focus on infrastructure construction projects on regional economies and construction industries

he regional infrastructure market is expected to see tremendously increased activity over the coming years as GCC governments look to increase budgetary allocations in order to boost job creation, economic growth and diversification, despite the slump in oil prices. Back in August 2015, a Ventures Onsite report estimated that the region’s sovereign wealth funds had $291 trillion between them, highlighting their capabilities when it came to investing in infrastructure projects, even with budget deficits brought on by low oil prices. These infrastructure projects are also expected to provide much-needed job creation and economic stimulation, leading to an upward trend in the GCC infrastructure construction market in coming years, for a few reasons: • Population growth – The GCC population is forecast to grow from 35 million to 60 million by 2050, which translates into the growth of infrastructure construction activities. • The pan-Gulf railway network – Expected to be operational by 2022, the GCC pan-Gulf railway network runs for 2,177km and connects the six countries of the region. It is 20

• •

•

expected to encourage travel and increase trade in the region, while also helping on the logistics side to really diversify their non-oil economies. Integration of rail and metro projects Intensified investments – Roads and railway projects in the GCC have been witnessing unprecedented investment, accounting for the largest share of government spending. The GCC’s combined rail, road and maritime projects will be worth an estimated $422 billion over the next five years. Airport spending – Airports are expected to expand massively by 2020, due to increasing passengers and cargo traffic driven by strong tourism growth and mega events such as the 2022 World Cup in Qatar and Dubai Expo 2020. Starting from 2015, it has been interesting to see that governments in the GCC have been increasingly willing to embrace private sector investment to safeguard their wide array of existing and planned infrastructure projects. The Ventures Onsite report says it expects this trend to continue for a few years. Some examples are: Kuwait plans to finance half of the capital expenditure under

TransporT InfrasTrucTure

its new development plan through the public-private partnership (PPP) model. • Dubai has passed a new law that encourages PPPs to fund new infrastructure projects. • A key element of Bahrain’s Vision 2030 is for the private sector to be the engine of growth for infrastructure projects. Imad Nassereddine, regional transport solutions director for Mouchel Middle East, points out that the Gulf area has seen unprecedented growth in the development of transport infrastructure, with roads, rail, ports and airports all receiving significant investment. “Large capital expenditures in Qatar, the UAE and KSA have been the main business story around the world when reporting about the GCC. The expansion of the transport system, with its highways, rail network, ports and airports, promoted growth in various business sectors, provided jobs for the local workforce, helped in expanding the logistics capabilities and contributed to the national vision of economic diversification and the move away from relying on the oil and petrochemical industries,” explains Nassereddine in an email interview. “For example, the development of Khalifa Port in Abu Dhabi now provides the UAE capital with one of the largest container ports in the world. This will promote it as an economic 22

GCC infrastructure sector contractor awards in 2015

UAE

12%

Saudi Arabia

31%

Qatar

28%

Kuwait

18%

Oman

10%

Bahrain

Source: Ventures Onsite Projects Database

gateway that will increase imports and exports, as well as helping to advance the planned development of the industrial zone, which is expected to produce higher local investment and ultimately decrease the reliance on imports in the long term.” An anonymous source at a leading international infrastructure contractor adds that the “recent, unprecedented infrastructure programmes” will be as important to the regional economies as they are to the construction industries. “It is no coincidence that the countries which have led on transport infrastructure investment, and crucially those that have successfully executed these projects, are leading on

economic growth, diversification and opportunity creation.” A good example of this is the integrated rail network in the GCC. Once complete, it is expected to bring major transformation to the region, as it will help ease trading across regional borders. Studies have reported that with Etihad Rail providing both freight and passenger services, it is likely to bring a number of benefits, including a lower cost of transportation for cargo and faster and safer journeys for passengers, compared to highway travel. Saudi Arabia’s strong growth last year can be attributed to the government’s investment in major infrastructure projects, including the upgrade of the Kingdom’s railway network. KSA, Qatar and the UAE are the big spenders and market leaders among GCC countries on infrastructure projects, with a total planned investment of $106 billion for rail projects alone. In fact, the UAE and Saudi Arabia are the only two countries in the GCC in line with the schedule to complete their rail networks by 2018, the original deadline for the pan-Gulf network. Another major area of investment has been aviation, Imad Nassereddine says. With many GCC countries focusing on the air travel industry, to diversify their economies and find other revenue generators, investment in the sector reflects new development strategies by these governments. “Qatar has just completed

Hamad International Airport, Dubai has recently opened Maktoum Airport and Abu Dhabi is now finalising the construction of its Midfield Terminal Building at Abu Dhabi International Airport. All of these reflect new economic development strategies by these governments to establish these airports as aviation hubs for the ever increasing number of passengers passing through the region. The impact of such a strategy is reflected in the large investments in the hospitality and tourism industries, where many hotels are being built to attract and retain visitors, which then has a direct and positive effect on the local economy,” he highlights. The source from the international contractor adds: “The pace of payback in infrastructure investment can vary – and notably skill in integrating technical and economic urban planning is important in this – but overall, it is

TransporT InfrasTrucTure

The aviation sector has seen a large amount of investment by regional governments.

undeniable that the most successful economic growth stories are all intrinsically linked to successfully implemented transportation infrastructure investment.” “It is unfortunate that there are still some corners of the Middle East, including in the GCC, where transportation problems are holding back economic growth, sometimes chronically and sometimes in the most basic of ways, but it seems that there are now enough local case studies for comparison that overcoming the blockages has become a very high priority for governments, even amidst the current revenue crunch,” the source points out, adding that often the solutions to the transportation problems in the region are well known, and have been for many years, but that while planning and design

impetus is present, funding clarity and skilful execution is lacking. “In terms of impact on the construction industry, infrastructure is, physically and metaphorically, the backbone of the region – different countries may have different themes of peripheral construction activity, and even different drivers, be it commercial real estate in Dubai, social services in Saudi Arabia, the 2022 World Cup in Qatar, tourism in Oman, social stability in Egypt – but the common thread through all of these markets is major core infrastructure development.” This has led to some fundamental shifts in business models in the region, with traditional building-focused firms diversifying into core infrastructure (HLG and Khansaheb in Dubai, for example). In addition,

major international firms and conglomerates are committing to large infrastructure schemes (Siemens, FCC, Bechtel, Samsung and Ansaldo in Riyadh), while new international players are entering the regional market (such as the four Chinese-led consortia that bid on the first phase of Oman Rail tenders). “The recent infrastructure investment programmes have helped to create a significant new marketplace in the world. To note, there is an onus on those managing policy and commercial behaviours in government to manage this developing supply chain in a way that obtains sustainable long-term value for the market – infrastructure development is a priority in many competing developing markets too, and the global supply chain is increasingly

GCC Infrastructure Construction Contractor Awards, 2014-2015 (in $ million) Source: Ventures Onsite Projects Database

2014

2015

841

600

21,264

20,000

16,553 14,800

14,935

15,000 9,781 10,000

6,040

6,530

9,781

5,000

2,135

UAE

KSA

Qatar

Kuwait

2,135

Oman

Bahrain

fickle,” says the source. Nassereddine adds that the work done over the last few years in the region has resulted in a number of benefits to the regional industry, with local contractors working with large international players to deliver aggressive construction schedules. “This has allowed local contractors to grow and expand by partnering. In Abu Dhabi, local contractors are now looking to compete for projects in Qatar and Saudi Arabia. Contractors have learnt to be flexible and organised to cope with a challenging marketplace, and most importantly, the ever-changing scope of work and time constraints. “With the world becoming accessible to many people from all over the world, multinationals have to work with each other and deliver on major schemes and projects. In Dubai and Abu Dhabi, for example, people come from many different cultures with many languages, work together on many construction sites and deliver these projects. “There is a lot to learn from these experiences, and other parts of the world are only now just starting to experiment,” the man from Mouchel concludes.

equipment outlook

Many construction equipment and heavy vehicle OEMs and dealers fared quite well in 2015, figures show.

equipment outlook

Cautious optimism Although positive about growth prospects, the construction equipment sector is braced for a slowdown in 2016, Jerusha Sequiera finds

gainst the bleak backdrop of continued low oil prices, 2015 certainly came with its fair share of uncertainty for the GCC construction industry, particularly towards the end of the year. Despite the doom and gloom surrounding oil,

many construction equipment and heavy vehicle OEMs and dealers mostly fared well in 2015, reporting a slowdown only in the last few months of the year. Among them is Doosan Infracore Construction Equipment (DICE), which owns the iconic Bobcat equipment brand.

“For Doosan, the year was very good,” says Gaby Rhayem, regional director – Middle East and North Africa at DICE. “Saudi Arabia continued to lead the market, but we have started to see some good signs also from the UAE and Qatar. Oman was very good as well, so overall, we did great in the GCC.”

equipment outlook

Although the impact of the oil decline started to show in the last two months of 2015, the Bobcat and Doosan heavy equipment brands both performed well. The market is growing in Saudi Arabia, Qatar and the UAE for all types of machinery, including skid-steer loaders, telehandlers and mini-excavators. 2015 was a good year in the GCC for Ritchie Bros. Auctioneers, which had record attendance at all its Dubai auctions for the year, says Karl Werner, managing director for the Middle East, India and Africa. “We enjoy doing business here in the GCC, and it’s been very positive for us and for our customers as well.” Ritchie Bros held a threeday auction in December 2015 which saw a turnout of over 940 registered bidders and a 26

We’re sourcing a lot of buyers out of Africa. There’s big demand, and we’re using that to balance out lower demand in the GCC. We’re focusing marketing dollars in Africa and Asia to bring buyers here to help support pricing

total of 2,245 lots sold. Although the uncertainty in the market is undeniable – on account of oil and geopolitical turmoil in the wider Middle East – the auctioneer makes up for it by leveraging its ability to attract buyers from worldwide. Demand for construction equipment has been fairly consistent; however, global economic factors are beginning to have a noticeable impact, Werner notes. Mining machinery in particular has been affected by the global slump in the industry. “It definitely takes more effort to market those items and to actually sell them.” UAE growth Equipment and vehicle dealerships based in the UAE also reported a good year, noting that the quarrying and

infrastructure segments showed the most promise going forward. For Genavco – the UAE dealer for brands like Isuzu, Liebherr, JLG, Wirtgen and Vogele – 2015 was a particularly good year, and it outperformed its results from 2014. The company enjoyed strong performance across all three of its verticals – automotive, equipment and lubricants – says Asif Khan, general manager (plant and equipment). Like Rhayem, Khan says the last two months of 2015 were slow, indicating a not-too-sunny outlook for 2016. However, he remains positive for 2016 given that the UAE plans to continue infrastructure spending unabated – Dubai alone has earmarked AED 16.6 billion ($4.5 billion) for infrastructure, transport and economic development. Despite the government’s

equipment outlook

Although a lot of projects have been announced, not all have received the mobilisation order.

ambitious plans, Khan admits ground realities may be different from headlines in the media. “Although a lot of projects were announced in 2015, not all have gotten the mobilisation order. So our clients, who are mainly contractors, get the work order but they don’t get an advance to move or initiate their work.” In many instances, customers purchased machines which went on to collect dust for several months before being deployed. Because of the continued focus on infrastructure project spending, however, road construction equipment sales have been steady. “Even in bad times, our performance has been very good. The government kept on pumping in money into infrastructure development and roadworks, so there has not been a steep decline.” Genavco has been associated with nearly all road projects in the UAE, Khan adds confidently. The company sells road construction equipment primarily under three brands: Wirtgene, Vogele and Hamm. In the UAE, the Northern Emirates have proven quite promising for growth, Khan adds, and Genavco has been supplying scores of machines to projects in Umm Al Quwain, Ras Al Khaimah and Fujairah. “Companies that used to operate at a very small scale now have been investing a lot. They have bought a lot of machines, and are now being awarded contracts. The federal government is spending money in those areas.” The quarry segment in the Northern Emirates has also been performing well, with Genavco seeing significant growth in the stationary and mobile quarry plant segments. Parts supply and after-sales

services for the Northern Emirates are carried out from the firm’s Sharjah branch. Graham Turner, CEO at Al Ghandi Auto, also notes the rising demand from quarry applications, particularly as infrastructure projects kick off in the Emirates and Qatar. “Qatar is taking most of its raw material from Fujairah,” he says, adding that demand from Qatar kick-started a lot of the UAE’s heavy haulage industry a couple of years ago. Upcoming projects like Expo 2020 in Dubai mean the UAE is set to be a large customer over the next few years as well for Saeed Mohammed Al Ghandi

& Sons (SMAG), the dealer for Iveco commercial vehicles. “The market obviously can still be volatile, and the effects of 2009 haven’t totally worn off. But we’re now seeing a build-up towards 2020, so it’s a little bit of a roller coaster. Hence it’s important to us that we have a big range of products, and we’re consistent with our service and our growth and training programmes.” Anticipating future growth, SMAG has new sites being developed in the Northern Emirates, to be closer to its customers. “In Fujairah, there’s going to be growth in different types of quarries, a lot of freight

movement and so on, so we’re moving towards where the customer’s going to be based.” Business outside the GCC Apart from the lucrative GCC markets, many construction industry players are keenly eyeing opportunities in African nations. UAE-based bodybuilder Bion Industrial, which manufactures tipper and trailer bodies, announced at the PMV Live exhibition last year that it had begun penetrating the African market by exploring opportunities in Nigeria and Kenya. Ritchie Bros. has also been recording a lot of activity in

equipment outlook

Operator safety is a high priority for customers in the Gulf region, manufacturers say.

African markets, which are managed from its Dubai office. The auctions held in March and December last year had a good deal of equipment from eastern and southern Africa, Werner says. “We’re sourcing a lot of buyers out of Africa. There’s big demand, and we’re using that to balance out lower demand in the GCC. We’re focusing marketing dollars in Africa and Asia to bring buyers here to help support pricing.” Meanwhile, Rhayem notes that the North African markets have come with their fair share of challenges for DICE in 2015. While business in Tunisia, for instance, was very positive initially, the bus bombing incident in November led to a major slowdown in the tourism and construction

industries. There was bad news in other markets too. “Algeria was a big disaster this year,” Rhayem says, noting that restrictions imposed by the government on the import of wheeled goods has drastically affected the entry of equipment into the country. “The result is that nobody shipped a single machine or car or truck to Algeria for the last seven-eight months.” Egypt, on the other hand, proved to be a strong market for the company, with Bobcat and Doosan machines operating at the Suez Canal expansion project. However, foreign exchange issues have put a damper on business in the country, on account of the difficulty in obtaining US dollars. “We are paid in dollars, [but] if you want dollars in

Egypt, it’s very difficult.” Closer to home, all eyes are on Iran, a market where business has been non-existent or complicated for many companies, on account of international sanctions and recent geopolitical tensions brewing. “Everybody is waiting to know what’s going on with Iran,” Rhayem says. “We have a partner in Iran, but we stopped business with them since 2010. It’s not easy for us, we are an American company.” The Iranian market is potentially very lucrative, and commercial vehicle giant Daimler recently disclosed that it is preparing to re-enter the market, holding talks with potential partners. “We intend to re-open a representative office in the country as soon as possible,” says

Roland Schneider, president and CEO of Daimler Commercial Vehicles in the MENA region. “This will certainly be taken up considering the persistent sanctions regime and further export control regulations after the implementation of the nuclear agreement. Against this background, we currently conduct individual transactions.” What lies ahead In terms of trends in the world of construction equipment, operator comfort is high on the agenda. The region’s hot and humid climate mean that more and more customers are interested in air-conditioned cabins, Rhayem says. Last year, Bobcat introduced its S450 skid steer loader into the region for

equipment outlook

the first time, giving customers the option of an AC cab, which is finding favour with an increasing number of customers. Safety is also becoming a high priority, and the recent crane collapse in Makkah has only emphasised the need for job-site security further, he adds. Turner also emphasises the focus on safety, particularly at the regulatory level. “We’re seeing lots of government initiatives through testing stages, through safety programmes and so on, so it’s a chance for all the companies here to invest in the future.” Moreover, concepts such as total cost of ownership, durability and fuel efficiency are becoming more and more popular around the region, he notes. In keeping with current

There are existing projects that will have to go on and so there will be a rush in the construction machinery industry towards these projects. The bottom line is that everyone will have to be lean and mean

market realities, and cognisant that 2016 may not be a strong year for growth, some manufacturers plan to introduce new products to offset potential revenue declines. “We are in a region very dependent on the price of oil. We need to start to think differently and think out of the box,” Rhayem says, noting that DICE will look at launching new products in the market if business drops. “We will introduce new machines under the Bobcat and Doosan Portable Power brands.” Another equipment manufacturer, Hitachi Construction Machinery Middle East, also maintains cautious but positive expectations for the year ahead and will look at enhancing its line-up. “I would term the outlook for 2016 as conservative

at best,” says Piet van Bakergem, general manager at Hitachi CM Middle East. “There are existing projects that will have to go on and so there will be a rush in the construction machinery industry towards these projects. The bottom line is that everyone will have to be lean and mean.” Van Bakergem expects cost-cutting in the construction industry, which is likely to affect the machinery sector. However, he believes the manufacturer will be able to weather the storm. “Hitachi CM will be launching several new products in the region in 2016,” he says. “We believe the time is right, as the prevailing emphasis on safety will work to our advantage. Despite the grim forecasts, I remain optimistic.”

sustainability

Robert Jackson

Focus on a sustainable future Robert Jackson, RICS regional director for Middle East and North Africa, says the COP21 agreement will have far-reaching implications for the region

s the dust settles on the 21st Conference of the Parties (COP21) in Paris, and the magnitude of the agreement is understood, thoughts and good intentions must turn into actions and the built environment sector needs to now play its part. With over 40% of the world’s carbon emissions coming from the built environment, change has to happen, and soon. RICS was privileged to attend COP21 and engage with over 195 governments and industry leaders on how we can support efforts to combat climate change. World leaders were asked to commit to a low-carbon, resilient and sustainable future which limits global warming to below 2°C. During the event, RICS participated in the first ever Buildings Day to address the demonstrable impact buildings are having on the environment. Success can only be achieved through collective action, and the first meeting of the Global Alliance for Buildings and Construction brought together governments, potential funders and other stakeholders in the

building and construction sectors to discuss the challenge facing the industry. “COP21 is all about commitments for governments as they finalise a climate deal. We want to support these efforts by making our own commitment

Dubai was the first government in the world to commit to adopting International Property Measurement Standards, recognising the significant benefits it brings in terms of market transparency and comparability in real estate

to influence our members, their clients and the wider built environment. The commitments we make will have an impact well beyond COP21 and they must be central to our sector’s response to the challenges posed by climate change,” says Sean Tompkins, RICS CEO. Importance of International Standards Commitments made in an international climate agreement such as COP21 require mechanisms to measure and monitor progress. Metrics for energy use and carbon emissions from buildings require consistent and professional measurement of building floor space and the material needed to construct the building. RICS is playing a key role in developing International Property Measurement Standards (IPMS) to measure floor space, and International Construction Measurement Standards (ICMS) to measure the materials needed to construct low-emission buildings. Our collaborative work with regional governments on raising awareness and enforcing these International

Standards is crucial to attaining these targets and thus enabling consistent global benchmarking of building performance from a tangible metrics perspective. International Property Measurement Standards (IPMS) Property measurement standards differ drastically around the world. Research shows that the variation in current standards could lead to the same building having reported floor spaces which vary by as much as 24%. In an interconnected global marketplace, this inconsistency leads to confusion and risk for all property owners, occupiers and investors, especially those that operate across borders. Fundamentally, it makes analysing property portfolios incredibly difficult. From an environmental performance perspective, metrics of carbon emissions per sqm of building are only relevant if we can then compare like for like, which is possible if a consistent floor space measurement standard is used. More than 70 professional and standards bodies, including RICS, make up the IPMS Coalition, and with the support

sustainability

Standards are crucial to attaining sustainability targets and enabling consistent global benchmarking of building performance.

of key influencers such as the World Bank and IMF, the Coalition is establishing a common standard for measuring property (all asset classes), thus enhancing transparency and comparability in real estate. RICS has been working with Middle Eastern governments, relevant associations, advisory companies, real estate developers, owners and managers plus corporate occupiers, to ensure the new standards will be fit for purpose in local markets. The IPMS initiative is receiving huge

support regionally and globally. Dubai was the first government in the world to commit to adopting IPMS, recognising the significant benefits it brings in terms of market transparency and confidence for all stakeholders. Ajmanâ&#x20AC;&#x2122;s government has also committed to supporting and adopting IPMS, and the Saudi Arabian government is actively engaging with stakeholders to support their recent efforts to implement the adoption of real estate International Valuation Standards (IVS).

International Construction Measurement Standards (ICMS) Similar to the problems described above concerning inconsistencies in measuring building size and floor space, the standards used to calculate the cost of construction projects also differ markedly throughout the world. In simple terms, the line items which make up the project cost total differ depending on where the project is being carried out. This makes it difficult to understand and compare project costs between

markets. It also compromises our ability to interpret the social, economic and environmental footprint of a construction project on a consistent basis. Formed in 2014, the ICMS Coalition totals more than 30 professional and standards bodies from around the world. It is developing and implementing the first international standard for measuring construction costs (ICMS). It will enhance transparency and help to de-risk investment in construction projects. 31

sustainability

The sustainable legacy will last beyond Expo 2020, says Robert Jackson.

Supporting sustainable practices RICS supports the region’s adoption of sustainable practices in the land, real estate and construction sectors, and encourages businesses to act more responsibly. RICS has an obligation to its members, firms and their clients to consider the economic, environmental and social impact of the built environment sector’s business and investment decisions. 32

RICS has been working closely and partnering the United Nations Global Compact on a unique resource that enables firms in the sector to actively engage in responsible business practice by approaching their commercial activities in a financially, environmentally and socially sustainable manner. ‘Advancing Responsible Business Practices in Land, Construction, Real Estate Use and Investment’ draws on views and

insights from businesses large and small, and from a crosssection of related sectors across the world. The project is ongoing but has already released a toolkit to help guide businesses in what to focus on and how to measure relevant metrics. The guide focuses on ten key principles in the areas of human rights, labour, environment and anti-corruption. In January 2015, the Dubai Government hosted the final consultation session for this

resource, testament to the commitment of the region to ensuring the sustainable future of the Middle East. Sustainability in action Many assume the landscape of the Middle East, heavily reliant on vehicle transportation and energy-hungry structures, will only add to the growing issue of climate change. The region, however, is undergoing rapid change in its approach

sustainability

Harum quatur re, officia volo quaectempos niminum as seni sitatate nis prorates cuscia auta nia

to sustainability. In 2020, the focus will be on Dubai as it hosts the World Expo – the first to be held in the Middle East, North Africa and South Asia (MENASA). Showcasing the region’s success in pioneering new paths of development and innovation, the event will focus on three themes: Mobility, Sustainability and Opportunity. With the UAE governments committing to providing 7% of the region’s energy from clean sources by 2020, two solarpowered plants have recently been given the go-ahead in the UAE. The Mohammad bin Rashid Al Maktoum Solar Park in Dubai will be the largest single-site solar project in the

world and will be operational in April 2017. In addition to these planned projects, other developments which embrace a more sustainable vision and a commitment to reducing the impact of carbon emissions include: • Msheireb Downtown: The world’s first sustainable downtown regeneration project, in Doha, Qatar • Masdar: Billed as “the world’s most sustainable eco-city” in Abu Dhabi, it also hosts the global headquarters of the International Renewable Energy Agency (IRENA) The Gulf Cooperation Countries are known for doing things bigger and better, and

With the UAE governments committing to providing 7% of the region’s energy from clean sources by 2020, two solarpowered plants have recently been given the goahead in the UAE

delivering on ambitious goals. The region’s commitment to a sustainable environment is no exception. The sustainable legacy will extend far beyond 2020 and the World Expo in Dubai, and will undoubtedly act as a catalyst to accelerate the positive change we are seeing across the wider region. The regional focus on sustainability, and the drive for improved transparency and ethical working practices, together with the adoption of international measurement standards, ensures consistent benchmarking against the rest of the world and demonstrates the tangible results of focusing on a sustainable future.

Solar power

Claudio Palmieri

Hitting the target Dubai has set itself ambitious goals for the use of renewable energy, says Claudio Palmieri, CEO of CLS Energy Consultants. Can it achieve them?

s a result of the recent COP21 conference in Paris, all major countries, including China and the US, have pledged to significantly increase renewable energy targets in an attempt to stay below a 2�C average global temperature increase, in a bid to avoid dangerous climate change. One of the most ambitious targets has been set by Dubai. Aiming to become a global clean energy leader, His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, launched the Dubai Clean Energy Strategy, which sets a target of 75% clean energy by 2050, far surpassing the clean energy targets of climate-conscious nations such as Germany. What makes this even more impressive is the fact that Dubai has made the commitment at a time when the existing operational renewable energy installed base is providing less than 1% of its current energy demand. Dubai has only 35 years to provide an increase of almost 75% in clean energy generation

capacity while the economy is growing. Access Power, a leading developer specialising in PV solar IPPs, estimates that in the build-up to Expo 2020 Dubai power demand will grow by 4-6% annually, which means peak power demand could reach 9.6 GW by 2020. The clean energy target set under the Dubai Clean Energy Strategy is very ambitious and requires a complete transformation of the power sector, as well as the way electrical energy is used by businesses and ordinary citizens. Dubai is no stranger to ambition and has a good track record in delivering on its promises, but how can a small energy-hungry emirate with one of the highest per capita energy consumption rates in the world become a global clean leader within 35 years? To achieve its ambitious targets, Dubai has to address important key elements in a comprehensive strategy. Power and water subsidies are top of the list. For decades, all GCC countries provided citizens with heavily subsidised cheap electricity and water. The problem with that is that low electricity prices don’t offer a commercially

viable business case for private investment in renewable energy and energy efficiency, compared with local electricity rates. Another argument against subsidised electricity rates is that cheap electricity doesn’t provide much incentive to be energy-efficient. Dubai has been reducing subsidies for electricity for some time, and has announced that fuel, electricity and water will be subsidy-free by the end of 2016. Removing all subsidies will provide a much better business

Estimates suggest that Dubai can reduce its annual energy demand by more than 40% just by improving the energy efficiency of buildings and industrial processes with the latest technology

case for private investment in renewable energy and in energy efficiency, to reduce utility bills. In addition, the recent award by DEWA of the 200MW expansion of Mohammed Bin Rashid Al Maktoum Solar Park to ACWA Power for the landmark tariff of $5.84 / kWh is a major breakthrough for the solar PV industry. DEWA has launched the Shams Dubai programme, which allows roof owners to install PV solar systems on available roof space to produce electricity in a net metering scheme set to encourage private investment in renewable energy. The Dubai Clean Energy Strategy includes a plan to install PV solar systems on all available roof space in Dubai. Combined with DEWA’s utilityscale solar programme, Dubai is already working towards achieving its renewable energy targets. The emirate will need to find other alternative clean energy resources too. Even though the geographic location and climate in Dubai clearly make PV solar the most cost-effective renewable energy solution today, Dubai’s Clean Energy Strategy requires an energy mix that can support the grid at times when

Solar power

Dubai has to tap into all available clean energy resources, such as energy from waste, biomass, biogas, wind power and geothermal.

sun is not abundantly available. Dubai further has to tap into all available clean energy resources, such as energy from waste, biomass, biogas, wind power and geothermal, to achieve its targets. Dubai Municipality already has a number of initiatives in place to develop existing biogas and energy from waste resources. The instantaneous nature of renewable energy resources such as PV solar and wind is a real challenge for grid operators, who have to provide reliable, uninterrupted service to customers. This requires utilities to provide either peaking power generation

or sufficient energy storage capacity to support the grid during weather-related incidents. As a rule of thumb, a state-ofthe-art grid can accept around 20% renewable energy share before additional peak power generation; otherwise, energy storage capacity is required. Estimates suggest that Dubai can reduce its annual energy demand by more than 40% just by improving the energy efficiency of buildings and industrial processes with the latest technology. Again, the biggest motivator is energy cost. By removing subsidies from fuel and electricity rates, private investment in energy

efficiency measures becomes economically viable, especially in the industrial and commercial sector, where available waste resources alone could provide an additional 100MW in reliable base load power generation capacity, at zero fuel cost. More important, however, is energy efficiency in the private and commercial real estate sector; according to estimates by the Emirates Green Building Council, energy savings up to 70% could be achieved. The government of Dubai recognises the importance of energy efficiency and has already implemented a number of initiatives as part of

its demand side management programme designed to improve overall energy efficiency and reduce power demand. The successful implementation of the Dubai Clean Energy Strategy and its 75% clean energy target will be a tough challenge for DEWA and other Dubai government agencies, but it can be achieved providing all key elements are addressed. The fact that the emirate has already started to work towards its Clean Energy Strategy before its official announcement at the COP21 is a sign that Dubai is on track to make good on its promise to become a global clean energy leader.

EnErgy ConsErvation

Saeed Alabbar

Ready for change Saeed Alabbar of AESG explains how changing attitudes to energy conservation are opening up new opportunities in the ESCO market

nergy conservation in the built environment has become a hot button topic in the construction industry over the last couple of years, with consultants, contractors, owners and developers all looking at how they can incorporate efficiency and green technology into their buildings and designs. When it comes to the GCC region, this change in attitude is perhaps most strongly seen in the UAE, where the municipalities of Abu Dhabi and Dubai have enforced their own green building codes and regulations to encourage the construction industry to get onside with energy conservation. Following the success of the COP21, the UN Framework on Climate Change (UNFCCC) agreement signed in Paris last year, the likelihood of green building and sustainability initiatives in the Middle East being fast-tracked into law is increasingly high. Last year, the Dubai Land Department began offering financial incentives to the city’s residents to buy and sell energy-saving products for their homes, as part of a larger drive to drastically reduce energy

use across the emirate, which has one of the largest carbon footprints in the world. Furthermore, in January 2016 the Dubai Supreme Council of Energy signed an MoU with Dubai Land Department to form the foundation for further cooperation in energy demandside management and to draw an energy-intensity map of Dubai. Ahmed Butti Al Muhairbi, secretary general of the Dubai Supreme Council of Energy, explained at the time that the

It’s driven from a financial perspective now. Solar energy is now at a point where it’s costcompetitive against conventional technologies, and that’s really where the driver is

MoU will allow the exchange of knowledge and raise awareness in the community about conserving energy and water. Saeed Alabbar, director at Alabbar Energy and Sustainability Group, points out that the change in attitude towards sustainability and green building is simply a reflection of global trends. He highlights the COP21 as a major factor in this evolution, and explains how the UAE is already on its way to being a global leader in energy conservation in the built environment. As head of the UAE-based consultancy that specialises in solving complex challenges in sustainable urban development, Alabbar is probably one of the best placed individuals in the region to comment on the increased emphasis on managed consumption of energy and demand-side reductions, and the efforts of ESCOs to gain a foothold in the GCC. How prepared is the UAE when it comes to energy conservation in the built environment? The built environment consumes about 80% of the electricity

in the UAE. Consequently, it has a fairly high percentage of the carbon footprint resulting from the built environment. But there are a lot of initiatives in place to tackle that. Within Dubai and Abu Dhabi, there’s of course the new regulations for construction – Dubai has the Green Building regulations, while there’s Estidama in Abu Dhabi, and obviously the Dubai Supreme Council energy framework for existing buildings [retrofits] – that’s really driving the market as well. For us as AESG, we’re doing a lot of work with new construction projects, both on the government side and in the private sector. We’ve done a number of buildings in Masdar City, which is looking to be about 50% below business as usual when it comes to energy consumption, as are a number of other projects in Dubai, which are looking to be on the same line as that. In the existing building sector, we’re doing a fair amount of work there as well. There’s a lot of energy auditing and energy retrofit projects taking place in Dubai and Abu Dhabi, as well as some in Qatar as well. So yes, energy conservation in

EnErgy ConsErvation

Abu Dhabi and Dubai have introduced a number of initiatives to encourage green building.

EnErgy ConsErvation

Contractors are now taking an active interest in green building techniques and methods.

the built environment is definitely taking hold and moving forward. How can government bodies and authorities work with the private sector to help move forward the discussion about energy conservation in the built environment? Has AESG been approached to help formulate guidelines and regulations? Definitely! A lot of government departments do a lot of stakeholder consultation with regards to new policies and ideas for new policies. For example, the Supreme Council of Energy have had a number of public stakeholder sessions – which we participated in – regarding new regulations for district cooling, new regulations for building retrofit. So we definitely see that from the government’s side there’s a strong drive to engage with the private sector on new regulations, and we definitely participate in that. The push is still on the existing building side. We have a strong set of regulations for existing construction projects, that is, new buildings. That’s very controlled and regulated, but I think for existing buildings, it’s a much more complicated subject to tackle. These are buildings that have people living and working in them, and to try and get changes made to them [is difficult] as there’s different challenges in place, rather than just technical challenges. I think the push is definitely still on that, and it certainly needs to be continued, because all the building owners and clients need to come to the table and be engaged so that we can all move forwards. It’s moving in the right direction, and the government has put in place the right framework for this to happen. Now it’s up to the private sector to really take hold of that and maximise 38

on the opportunities available from this unique framework that we have in place. How open is the construction industry to the change in mindset? Have you been approached by contractors looking to improve the way they operate when it comes to energy conservation in the built environment? I think it’s definitely happening now. We see a number of contractors coming to us and asking how they can incorporate renewable energy into our own buildings and accommodation complexes. It’s driven from a financial perspective now. Solar energy is now at a point where it’s costcompetitive against conventional technologies, and that’s really where the driver is. We’ve seen the initiative this year from DEWA, with the rooftop solar initiatives to encourage people to connect rooftop PVs to their houses or buildings. I think

The challenge of implementing ESCO projects is the awareness side of it and having the building owners and clients aware of how the process works, because it’s not a standard process, nor does it involve standard contracts

that will really take hold and move things forward again. All the technological aspects are already there and in place. It’s really just a case now of making people aware of these technologies and making them aware that they’re more costeffective to implement. From there, it’ll take hold, and I think that as that happens, it’ll be a very fast process. It’ll almost be a snowball effect, where once people realise that “Yes, it makes financial sense to install rooftop PVs, it’ll save us money”, then it will move forward very quickly. The MEP industry [is another major driver of change]. For the good MEP consultants and contractors, energy efficiency is ingrained in what they do. They’re designing and installing energy-consuming equipment, that’s the core of their work, so they tend to be very knowledgeable about energysaving techniques and approaches, and of course they’re driven by the clients or the regulations. I haven’t seen any issues with them getting up to speed with the requirements or regulations or anything like that. I think the MEP industry is moving forwards in the right way, but there’s always room for improvement. As one of the first Energy Saving Companies (ESCOs) in the region, AESG has had a particularly good 2015, given your recent expansion and development, but how do you view the ESCO market as a whole? AESG has definitely had a very good year. We’ve added a number of new service lines to what we do, particularly with the commissioning management work that we’re doing – the government advisory projects,

the energy management side as well. I think 2015 was a very good year for us, and we’re definitely going to be building on that. We see that globally, after the COP21 talks in Paris, France, there’s global governance [on sustainability] and countries are pushing for it and looking to decarbonise their economies. We feel that next year, we’ll continue to be a strategic partner to the UAE and the region and look to enable countries in this region to achieve their goals, in line with global objectives for sustainability. Globally, every country is on board with the climate change

EnErgy ConsErvation

agreement, and even without that, the UAE has pushed itself forward to really position itself as a global leader in green economy and sustainable development. The leadership in the UAE has been remarkable in that sense. All the initiatives that are being pushed forward are sustainability focused, and I think that in 2016, we’ll continue to see that and it’ll continue to take hold. At the moment, almost every building that we look at, whether we’re tendering or working on it, within the requirements – particularly if it’s a government project – there’s very high

sustainability aspirations. They’re not just looking to comply, they’re looking to see how far they can push the boundaries. That will continue in 2016, and I think for all companies that have sustainability ingrained in what they do, it’ll be beneficial for them and for the region. What opportunities do you see for ESCO firms in the market? The ESCO framework only really came into play within the last two years or so. It’s still in its early stages, but it’s also developing very quickly. There’s a lot of ESCO

companies setting up, and I’ve personally been in touch with a few to provide some guidance in terms of how they work in the market here and that sort of thing. There’s also a lot of international ESCO companies that are setting up operations in Dubai to get involved in the market, so it’s definitely growing and we’re starting to see the first projects implemented. Clients and ESCOs are starting to see the financial savings from these projects, and that really does accelerate the market. With any new concept, it always needs those first projects

to go through and be a success, so that people get a level of comfort with this approach. Now that we’ve reached that stage, I definitely think it’s going to be picking up a lot quicker. The challenge of implementing ESCO projects is the awareness side of it and having the building owners and clients aware of how the process works, because it’s not a standard process, nor does it involve standard contracts. So definitely, the awareness side is one of the bigger challenges, and that’s why I think one of the big milestones is seeing one of these projects go forward. 39

Design

Andy Morris

Think better Andy Morris, sales director – Middle East, Steelcase, discusses neuroscience and the art of creating spaces that help employees think

indings reveal that the average worker is interrupted or distracted every three minutes and that it takes people 23 minutes to get back into the flow of their work when returning to a task after being interrupted. Attention meltdowns have a negative effect on productivity, engagement, wellbeing and overall working performance. Despite this, most organisations do not understand the value of employee focus and do not design offices that mitigate stimulus-driven, non-volitional attention (i.e., one’s response to a sudden motion or a loud noise), or offices that prolong workers’ stay in goal-driven, controlled attention (i.e., focused reading). The way companies work and offices are designed need to be transformed, taking into consideration the ebb and flow of workers‘ attention and the growing need to support mobile and collaborative work, promote a healthy and desirable work environment, create a culture that attracts and retains top talent, and make better use of technology. Having identified three brain modes – focus, regeneration 40

and inspiration, and activation – Steelcase researchers and designers believe that distinct behaviours, office design and settings are needed to help workers better manage the ebb and flow of their attention. Design workplaces that help people better focus their attention: Deep focus requires avoiding the unwelcome external and internal distractions that often accompany an open-plan office. Workers should be given the option to select their environment, such as a fully enclosed or a semi-enclosed space, and to control the external stimuli which affect the ability to focus – lights (daylight, fluorescent lighting or lights to illuminate personal content), noise levels (quiet versus busy environments), sightlines and adjacencies (the use of blinds or boundaries to eliminate visual distractions), and even temperature (adjusting for uncomfortably warm or freezing settings). Research by the company reveals that 66% of people can concentrate easily in the workplace, while only 58% can concentrate in teams without being interrupted. A poll by Steelcase, for the Middle East,

points to 35% of workers not being able to concentrate at work, citing loud conversations (16%), talkative colleagues (15%) and email overload (15%) as the primary distractors. Silence, privacy and fresh air are the top three preferred conditions required for concentration. Design offices with collaborative spaces for regeneration and inspiration: Though collaborative spaces can serve as areas of focus for teamwork, as in the case of meetings and conference rooms, it is important to recognise the need for informal meeting spaces and the opportunity to give our brains a rest. This requires the creation of a social zone – an on-site third place – that supports collegial relationships and relaxed conversation, providing access to food and beverages and ideally fresh air (or at least a view). An office café or coffee bar provokes serendipitous encounters, an informal lounge setting encourages relaxed postures and invigorating and inspiring exchanges, and access to an outdoor area and fresh air provides a much-needed break from air conditioning. 55% of

respondents in the Middle East poll say work-related pressure causes them to feel stressed and overwhelmed at work, yet 59% say their offices do not offer areas for relaxation and rejuvenation. Design offices that nurture wellbeing through activation: Physical activity stimulates the brain, and workers should be encouraged to move around, seek productivity and inspiration through other means than sitting behind a desk, and take care of their bodies. The Middle East poll, however, reveals that 29% of respondents do not have the opportunity to move around their workspace or change posture. The key to designing an office that helps employees think better, that optimises individual, team and organisational performance, is creating an ecosystem of interconnected and interdependent spaces. These spaces should offer workers freedom of choice and control over their environment; provide areas for focus, regeneration and inspiration, and activation; and support physical, cognitive and emotional wellbeing.