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August 2016

The Final Frontier

How the Middle East is getting to grips with telematics

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Editor’s note News Market Report Contracts Cover Feature

27

The Middle East has become one of the world’s fastest growing markets for telematics

24 In Person

Colin Timmons, the new head of Al Naboodah Construction, on his ambitions for the company

30 In the Field

A look at the Palm Oasis Park in Dubai

34 Legal Viewpoint Heba Osman, Partner at Fenwick Elliott, on the risks of depending on Letters of Intent

40 Supplier News 42 Supplier Focus

30

construction business news me August 2016 3


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24 44 Building Materials 46 Take 10 Iconic football stadiums

52 Comment 54 Analysis

Why Saudi Arabia should take inspiration from South Africa in devising its renewable plan

58 Event Review 60 Save the Date 62 62 Editor’s Pick 4 construction business news me August 2016

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editor’s note

GEAR SHIFT Air quality. Road Safety. Fuel efficiency. These things concern everyone and improving their standards is something we can all get on board with. In fact, they concern those of us that live in the Middle East that much more because regulations of, say carbon emissions, still lag some way behind Europe. But of course, when things start moving here they tend to shift pretty quickly. All of these can be improved by the use of telematics in vehicles. Put simply, telematics is data. A system is installed in the vehicle which transmits real time data to the operator, allowing them to know what the vehicle is doing, where it is located, the vehicle’s condition and the driver’s behavior. But it’s the use of that data that is the key to unlocking the environmental, fuel consumption and road safety benefits that telematics can bring. The Middle East has been slow to see the benefits of a technology that allows commercial fleet operators to optimise fleet management. The data they send

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back can be used to train drivers to perform more safely and efficiently. But now the Roads and Transport Authority (RTA) is planning to make it mandatory for all vehicles over 12 tonnes to use telematics to allow them to improve road safety. And the introduction of stricter emissions regulations are less than a year away. From a fleet manager’s point of view, the obvious attraction is the savings they can make from cutting back on fuel consumption. Fuel has always been so cheap in this region that its cost rarely came into the equation. Not anymore. Times are changing and the rationalisation last year of fuel prices in the UAE is forcing a change in mindset. With fuel costs set to grow as oil prices gradually recover, not operating vehicles with telematics will soon no longer be an option. As we discover in this month’s cover feature, the benefits have begun to catch on in a big way. Now that the market has a taste for it there is hunger for the best technology.

Jason o'Connell Editor


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The Tower passes wind tunnel tests The Tower at Dubai Creek Harbour

Santiago Calatrava finalises design after structural strength is confirmed Advanced wind tunnel tests have confirmed the structural strength of the $1bn Tower at the heart of Emaar’s Dubai Creek Harbour development. With wind being a major challenge in the development of very tall buildings, these tests are crucial in defining the final height and design aspects of the tower. As well as the wind tunnel tests the building underwent a comprehensive range of seismic and local climate studies, Emaar said in a statement. Designed by Spanish architect Santiago Calatrava Valls, and located in the heart of the 6 sq km master-planned community, the tower will be around 100 metres taller the Burj Khalifa which stands at 828 metres high. The Tower will feature world-class observation decks, luxury accommodation and retail attractions across 18 usable floors at the top of the spire. Mohamed Alabbar, Chairman of Emaar Properties, said: “An ambitious project on a never-before scale and design, The Tower at Dubai Creek Harbour demands high-precision engineering across all its facets. “Pushing the boundaries in high-rise engineering even fur8 construction business news me August 2016

ther, The Tower’s wind tunnel tests are an industry-first of sorts, underlining our commitment to uphold the highest standards of safety.” Santiago Calatrava Valls said: “From the materials selection to the technology used, every aspect of The Tower has been designed and developed according to the strictest international safety standards. “The wind tunnel tests were an important component in the structural design stage, and we have deployed innovative engineering techniques to confirm the strength of the new icon.” Two leading independent agencies in the world carried out the wind tunnel testing on a scale model. Since the structure will be anchored to the ground with huge cables, some of these tests were developed for the first time in this field. To guarantee maximum stability, the design of The Tower also includes multiple damper systems and shock absorption systems, located at different points and heights. Emaar has unveiled plans for high-end residences in Dubai Creek Harbour including Dubai Creek Residences, Creekside 18, and Harbour Views homes in The Island District, a vibrant lifestyle hub enveloped by a 4.5 km boardwalk.


RTA hands out $2.8bn Dubai metro extension contract Dubai Metro

Dubai’s Roads and Transport Authority (RTA) has awarded a consortium of France's Alstom, Spain's Acciona, and Turkey's Gulermack a AED 10.6bn ($2.8bn) contract to extend the Dubai Metro up to the Expo 2020 site. The Expolink Consortium beat stiff competition from nine other ventures to win the huge contract in an international tendering process, said Mattar Al Tayer, Chairman of the Board of Executive Directors at RTA. Out of the 10, five were invited to submit technical and financial proposals and two shortlisted in the final stage.

"Construction works on the project would start in the final quarter of this year, and the trial run is expected to start in the last quarter of 2019. The official operation of the service is set to on 20 May, 2020, five months ahead of the opening of Expo 2020," Al Tayer said. Under the contract, Alstom will supply 50 trains (15 for the Route 2020 line, and 35 for the Dubai Metro) and also execute the electromechanical works. The Thales Group will provide the technological systems while Acciona and Gulermack will execute

the civil works component. Route 2020 will extend the Red Line of Dubai Metro from Nakheel Harbour and Tower station to the Expo 2020 site, located near Al Maktoum International Airport. The 15km route will have seven stations - 11.8 km a viaduct, and 3.2 km underground track - and will include a transfer station with the Red Line, Expo Station, three elevated stations, and two underground stations. The project will serve districts including the Gardens, Discovery Gardens, Al Furjan, Jumeirah Golf Estate and the Dubai Investment Park.

Emirati health and safety officers to be mandatory Construction facilities employing over 500 workers will soon be obliged to hire at least one Emirati Occupational Health and Safety Officer. The Ministry of Human Resources and Emiratisation said the new rule will come into force in 2017, according to UAE news agency WAM. Saqr bin Ghobash Saeed Ghobash, Minister of Human Resources and Emiratisation, said: "We will stop granting facilities with over 500 workers any further work permits, if they don’t hire at least one local occupational health and safety officer.”

The decision is part of the Emiratisation strategic plan to promote employment opportunities for locals in the private sector, he said. "The ministry aims to Emiratise the occupational health and safety profession following careful consideration of the sectors involved in the construction industry and major industrial enterprises where the possibilities were found to provide attractive and stable opportunities for Emirati job seekers." The minister called upon Emirati citizens to seek job opportunities available to them and to take advantage of the many training programmes organised by the ministry. construction business news me August 2016 9


NEWS

Al Jaber wins $100mn contract Al Jaber Building has clinched the AED370mn ($100.7mn) main construction contract for the Jawaher Saadiyat residential development on Saadiyat Island in Abu Dhabi. Tourism Development & Investment Company (TDIC), the master developer of major tourism, cultural and residential destinations in Abu Dhabi, said the project is on a 24-month delivery from mobilisation on site. H.E. Ali Majed Al Mansoori, TDIC’s Chairman of the Board, said: “TDIC TDIC and Al Jaber Building sign on the dotted line has already received much interest from investors for Jawaher due to its prime location overlooking the Saadiyat golf course and the sense of exclusivity it offers to residents. We are confident that once completed, it will drive demand for our real estate offerings on Saadiyat even further.” Al Jaber Building is no stranger to Saadiyat Island where it is also working on the Hidd Al Saadiyat residential development. H.E. Obaid Khaleefa Al Jaber Al Marri, Chairman of Al Jaber Group said: “Having previously developed more than 7,000 villas in numerous prestigious projects, Al Jaber Building is looking forward to join hands with TDIC to develop yet another great milestone.” Designed by DSA with interiors by Bishop Design, Jawaher Saadiyat will feature 83 units comprising 4 to 6 bedroom villas and 4-bedroom townhouses designed in a contemporary and modern style. TDIC has partnered with various banks to offer potential homeowners a range of attractive financial offers. These include Abu Dhabi Commercial Bank, National Bank of Abu Dhabi, Abu Dhabi Islamic Bank, Al Hilal Bank, Dubai Islamic Bank, Abu Dhabi Finance, Union National Bank Mashreq Bank and Standard Chartered Bank.

FNC to build $190mn housing project in Dubai South

Fujairah National Construction Company (FNC) will be the main contractor for the MAG 5 Boulevard, a residential housing project located in Dubai South adjacent to the Expo 2020 site and Dubai Parks. With a construction value estimated at AED 700mn ($190mn), the development will comprise of 1,172 residential units, alongside an array of retail, dining, leisure and entertainment options. The project will break ground this month with Phase 1 handover scheduled to commence in Q4 2018. Talal Moafaq Al Gaddah, CEO, MAG 5 PD, said: “FNC has an enviable portfolio for the delivery of premium real estate developments in the UAE. We are confident in their ability to bring MAG 5 Boulevard to the market within two years and in doing so, create the ultimate quality affordable living in one of the city’s most sought-after locations, Dubai South.”

ACC to build new Mashreq HQ Arabian Construction Company (ACC) will build a new headquarters in Downtown Dubai for Mashreq Bank which will leave its Deira home after almost 50 years. Construction of the 151-meter tower is set to commence in December of this year with the completion date penciled in for April 2019. Mashreq’s new HQ, designed as an L-shaped structure, with a square top crown, will be located on the Dubai Financial Centre Road in the Burj Khalifa District. The architect is Chica-

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go-based Skidmore Owings & Merrill, which also designed Burj Khalifa. The signing ceremony was attended by H.E. AbdulAziz Al Ghurair, CEO of Mashreq and Mr. Ghassan Mere-

hbi, Chairman of Arabian Construction Company. “ACC has once more had its impressive construction and development credentials recognized, by being granted this prestigious construction project,” said Merehbi. “We are delighted to be working with one of the best-known banking industry names in the Middle East and to be able to add the Mashreq Bank Headquarters to our portfolio of noteworthy projects across the UAE.”


KBW Investments unveils another partnership UAE-based KBW Investments and Greek engineering and consulting firm Salfo and Associates have signed an agreement that will see the two companies expand operations and collaborate on projects in the Middle East and Europe. The agreement, signed by KBW Investments (KBW) founder and Chairman HRH Prince Khaled bin Alwaleed bin Talal, and Ioannis Foteinos, CEO, Salfo and Associates SA (Salfo), is set to include large scale design and consultancy undertakings throughout the GCC alongside other emerging economies in the Middle East with plans for Europe. “The formation of this agreement with Salfo - a long-standing and influential Middle East stakeholder in the engineering and project management segments – serves multiple aims,” said Prince Khaled. “As a company based in Dubai, our multinational partnerships reflect the global nature of doing business from this Middle East hub. KBW is continuing to develop our portfolio across continents with a broad range of projects that vary in sector and size, and we are pleased to further build on this worldview with Salfo.” The KBW Investments portfolio currently includes Romanian

Arcadia Engineering with Middle East and Australian branches, in addition to an existing partnership with Progen Group, with Salfo serving to enhance the company’s overall strength in engineering and planning. Salfo has an extensive project roster of infrastructure and building developments in a multitude of arenas including rail and transport (traffic and roads), marine and airports, bridges and tunnels, as well as hotels, malls, sports complexes and public buildings.

Ritchie Bros. holds next Dubai auction from Sept 20 - 21 Heavy equipment auctioneer Ritchie Bros. will hold its next auction in Dubai’s Jebel Ali Freezone on September 20 & 21. Already hundreds of items have been added to the auction and many more will be added over the next weeks. This will be the third massive equipment auction the company holds in Dubai – the two earlier auctions, in March and May, featured over 4,000 equipment items and trucks. More than 1,800 bidders registered to bid at these two auctions to get a good deal on one or more pieces of equipment. The upcoming September auction will comprise a range of items, from big excavators and loaders to generator sets and attachments. Generally the lion’s share of equipment at Ritchie Bros. auctions are used items, but regularly unused items are included as well. Browsing through the Dubai auction inventory on the Ritchie Bros. website, one

will find a large quantity of unused and low hour items from premium brands, such as Caterpillar, Komatsu, Hamm and others. As with all Ritchie Bros. auctions, all the items are sold on the auction

days with no minimum bids or reserve prices. This ensures a fair and transparent auction where only the bidders set the prices. The highest bidder always wins the item, regardless of price.

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NEWS

Qatar sees ‘marked’ rise in construction risk profile Doha, Qatar

Qatar is among countries to see a marked rise in construction sector risk which has hit its highest level globally in almost three years, according to a new report. The worsening risk profile for Qatar reflects the deterioration in the country’s fiscal position owing to low prices for crude oil, and the subsequent negative impact this will have on infrastructure investment, Timetric said in its Q2 2016 Construction Risk Index (CRI). The index is designed to provide a standardized view of the underlying degree of country-level risk facing the construction sectors in 50 major

developed and emerging markets around the world. In total, 34 countries, in both developed and emerging markets, suffered a deterioration in their risk profiles in the Q2 update, Timetric said. “Although crude oil prices have recovered from dropping to below US$30 a barrel in January 2016, prices are still at low levels, and this continues to have a negative impact on the economies and construction industries in major oil-exporting countries, particularly those in the Middle East,” the report said. Qatar, the highest ranked GCC country, fell three places to 16th in the table.

The UAE fell two places to 22nd while there was no change for Saudi Arabia in 25th spot. The UK tumbled six places to 15th in the rankings, a result that follows the outcome of the UK’s referendum on EU membership in June. Sweden remains top-ranked, supported by strong economic growth, but its fast rising property market continues to prompt concerns of overheating, and the country’s risk score has risen by 1.5 points. The top four countries in the CRI, namely Sweden, Switzerland, the US and Singapore, all recorded an upturn in risk in the latest update.

Greenlight for two Zaha Hadid projects in Lusail Qatar has given the go ahead for a pair of buildings designed by the late British-Iraqi architect Zaha Hadid. The projects were commissioned by H.H. Sheikh Mohammed Bin Khalifa Al Thani’s Al Alfia Holding in 2013 as part of Lusail City’s masterplan. Zaha Hadid Architects (ZHA) will now develop the first project by 2020, a 70,000 sq m hotel with residential apartments in Lusail City’s Marina District. The second design commissioned by Al Alfia Holding will be built within the on¬going plan for future development of the city. Working with Arup Engineering and Atelier Ten, global leaders in environmental design and engineering, Hadid’s

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design for the 38 ¬storey first project was inspired by the structure of the Desert Hyacinth, a flowering plant native to the Arabian Gulf. The nine-¬pointed form of the building’s podium surrounds a central core defined by the interwoven fluid geometries of the hyacinth. “With truly inspirational public spaces and atrium, 120 unique residences and 200 hotel rooms of Zaha Hadid’s unmistakable signature, we celebrate her remarkable legacy and continue Lusail City’s commitment to creating the region’s most sustainable, interconnected community,” said H.H. Sheikh Mohammed Bin Khalifa Al Thani, Chairman of Al Alfia Holding.


Middle East helps drive Turner & Townsend to new heights

Al-Khodari and Sons dives into the red Saudi Arabian construction contractor Abdullah Abdul Mohsin al-Khodari and Sons slumped to a second quarter loss following a slowdown in the kingdom’s building sector. The firm was awarded new contracts worth just SAR 54mn ($14.4mn) in the second quarter, a sixth of the SAR 340mn booked in the corresponding period of 2015. On Tuesday Khodari reported a net loss of SAR 43.34mn ($11.6mn) for the three months to June 30 compared to a profit of SAR 34.86mn in the same period a year-earlier. Khodari posted a 37.4 percent drop in revenue, partly due to a lower contribution from newly awarded contracts. It also blamed a 10 percent rise in financial charges and a 43.7 percent drop in other income due to a decrease in sales of used equipment.

Nakheel sees steady first half Turner & Townsend increased Middle East turnover by a quarter and profits by nearly a third in the year ended 30 April 2016. The professional services consultancy’s strong performance in the region – which saw regional turnover grow by 24 percent to GBP 32.2m ($42.2mn) and operating profit climb 32 percent to GBP 5.1m – helped drive its global revenue to a record GBP 409m. Turner & Townsend Middle East Managing Director, Mike Collings, said: “Despite the abrupt fall in oil prices, this has been a very strong year for our Middle East operation. We saw significant growth in real estate and built momentum in infrastructure, with clients still demonstrating the

desire to invest in the region despite the low price of oil. “We built on our reputation for our full breadth of services this year, securing major real estate commissions and significant new wins with Unilever, Galeries Lafayette and the passenger terminal extension at Al Maktoum International Airport. Our aim in the year ahead is to increase our footprint with new offices in Saudi Arabia and continue to exceed our clients’ expectations as they invest in the region.” Turner & Townsend employs nearly 4,300 staff across 97 offices worldwide, and has now recorded six successive years of growth. Its profit after tax of GBP 30m has almost tripled in five years.

The Dubai-based developer Nakheel reported a 4% rise in first-half profits, according to a bourse statement. Earnings reached AED 2.95bn ($803mn) during the period compared to AED 2.83bn ($770mn) in the first half of 2015. The developer delivered over 1,177 units during the first six months of this year, with its retail, residential leasing and hospitality businesses all performing strongly. Nakheel opened Dragon Mart 2 and the first of a series of expansions at Ibn Battuta Mall, increasing the developer’s existing retail portfolio by 35% to 4.2 million sq ft. The company plans to hand over more residential units to customers during the second half of 2016, starting at Azure Residences on Palm Jumeirah, with handovers at Jumeriah Park, Jumeirah Islands, Al Furjan and Warsan Village to follow. construction business news me August 2016 13


MARKET REPORT

‘Perfect Storm’ on the horizon for GCC real estate market Management consultants A.T. Kearney predict a tough time ahead for the sector

A “perfect storm” is brewing in the UAE property market thanks to a combination of oversupply of projects and softening demand due to shifting market sentiment and lower oil prices, a new study shows. Management consultants A.T. Kearney say the supply of property developments in the country is four times higher than the value of developments completed in last 10 years. The study argues that actively probing for disruption, creating a value network and improved targeting of customer preferences is key to navigating the storm that lies ahead. “There is little evidence the real estate industry is preparing for the next market cycle. Developers need to probe for disruptive innovation beyond the traditional boundaries of their industry and beyond their known value chain,” said Federico Mariscotti, Vice President at A.T. Kearney. “For example developers can find solutions which offer both cost savings and efficient construction techniques by introducing commercially viable space construction alternatives that were developed during a competition for NASA.” Among the recommendations of the study is a re-orientation from a sequential value chain toward a value network - an 14 construction business news me August 2016

“There is little evidence the real estate industry is preparing for the next market cycle” ecosystem with new incentives and an appetite for innovation through collaboration. “The recommendations were based on over 20 interviews with architects and contractors that indicated that the current supply chain is inherently inefficient and drains value throughout the project lifecycle,” said Douglas Pickles, Director at A.T. Kearney. “This commonly accepted model leads to design changes on up to 40% of the project specs and delays of six months or longer. The future belongs to those developers who can tackle these inefficiencies by introducing innovation and increase up front collaboration within their supply chain.” With better governance and a new operating model, companies in the industry will become more resilient. The study

finds that further cost efficiencies are possible with increased differentiation and focus on end-customer preferences. “As customers become more savvy, our study shows that value can be captured by having a better understanding of their preferences,” said Mariscotti. “By establishing a value network, developers can collaborate on designs that place the customer at the heart of the project, driving increased customisation and profitability. “Advanced analytics enables an understanding of which features to customise and the trade-offs customers are willing to make and how much they will pay for them. This alone can improve the internal rate of return on investment by 10-25%, and create a pipeline of affordable housing projects,” he added. The study concludes that these opportunities pose significant challenges as they mandate a rewriting of the way business is done. Successfully adopting them will require a new mindset, new skills and new incentives. But according to A.T. Kearney there is hope, as other industries have shown it can happen successfully, and in the firm’s experience, companies most needing change are willing to make it happen.


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contracts

Dubai South hands out AED 1bn ($270mn) contracts near expo 2020 site

Dubai South has handed out contracts worth AED1bn ($272mn) for work on projects near the site of Expo 2020. Parsons Corporation and Atkins Global are among the industry leading companies to win infrastructure and design contracts mostly related to residential developments in the area. Studio International Architects, Al Nasr, Tristar Engineering & Construction and the US-based RNL Design were also awarded deals, according to a statement. Dubai South's Residential District in-

cludes schools, nurseries, hospitals, retail outlets, F&B options, a post office, swimming academy and a sports centre. The city will have around 10,000 residential units between villas, townhouses and apartments by 2020, housing an estimated 35,000 residents. The overall infrastructure development of the Residential District will be completed in phases. Work is already well underway by Al Nasr on the first section of the Residential District's infrastructure, which will be completed

by the fourth quarter of 2016. Al Nasr also clinched the deal to build the infrastructure in Dubai South's Logistics District as well. Tristar Engineering & Construction has been awarded the infrastructure construction for the remaining areas of phase one, with this phase scheduled to be completed by Q4, 2017. This will pave the way for over 40 developers to expedite their developments in Dubai South's Residential District. Atkins Global, Studio International Architects and RNL Design are contracted to oversee the masterplan and product design for the mixed-use development within the Residential District, which includes apartments, townhouses, schools, community facilities, entertainment, retail and hospitality. Parsons and Kele Constructions will build the first phase of Sakany Staff Village, accommodating 20,000 residents by 2020. UAE-based City Diamond Contracting was awarded a contract to build a multipurpose aerospace supply chain facility in Dubai South's Aviation District. Details of the project and other developments will be unveiled at Cityscape Global 2016, to be held in Dubai in September. Property sales are expected to begin in October 2016.

Aldar awards $109mn construction contracts for two projects Aldar Properties has awarded contracts of AED 440mn ($109mn) to National Projects and Construction LLC (NPC) for Nareel Island, its master planned island community, and for Al Merief, the distinctive community in Khalifa City. Set to be carried out over a 16-month period, the work on both developments commenced on the July 14 and covers infrastructure, utilities and public areas, in addi-

16 construction business news me August 2016

tion to associated marina works for Nareel Island. Talal Al Dhiyebi, Chief Development Officer, Aldar Properties PJSC, said he expects both projects to be completed 2017. Nareel Island is a premium highend villa development of 148 plots located on the coast in Al Bateen, spread over two islands. Aldar awarded the earthworks and marine works tender packages in October

2015 and is currently making steady progress on construction work. Reclamation work for the lagoon has also commenced, and dredging work on the southern island is complete. Al Merief combines Emirati traditions with modern amenities across its 283 land plots. All concept and preliminary designs as well as the detailed design phase were completed in 2015.


Around the region Qatar

KSA

Iraq

Kuwait

UAE

Barwa Real Estate awards INSHA $27.2mn Motor City deal

Zamil Steel wins $6.4mn factory contract

Drake & Scull bags $61mn EPC contract in Iraq

Hill wins $13mn contract for two hospitals in Kuwait

Nakheel and Empower pen $490mn district cooling deal

Qatar’s Barwa Real Estate has awarded INSHA Co with the construction contract to build the first phase of the Madinat Al Mawater (Motor City) project. The deal is worth QAR 99.85mn ($27.4mn) and has a construction duration of 12 months. Located on Rawdat Rashed Road, near the intersection with Salwa Road, Motor City is planned to be the primary destination for various services related to the sale, purchase, and maintenance of used vehicles in Qatar.

Zamil Steel Construction Co. (ZSCC) has won a contract worth SAR 24.3mn ($6.4mn) for the second phase of United Carton Industries Co’s (UCIC) new manufacturing facility in Al-Kharj in the central region of Saudi Arabia. The UCIC factory project is a fast-track, multicomponent undertaking with a challenging completion schedule. Zamil Steel Construction Co. caters to clients that require comprehensive solutions for industrial and commercial steel structures.

Drake & Scull International has clinched a AED 226mn ($61.5mn) EPC contract for a water injection project in Iraq, taking contract wins to AED 570mn so far this year. The Dubai-based firm will build the facility for Italian oil and gas company ENI at the Zubair oil field in Basra. Work on the project has started and is scheduled to complete in early 2018.

Hill International has received a letter of award from Health Assurance Hospitals Company (Dhaman) to provide project and construction management services for two new hospitals in Kuwait. The three-year contract has an estimated value of approximately KWD 3.9 mn ($13.1mn), the global specialist in managing construction risk announced. These projects entail the construction of two 300-bed secondary care hospitals, staff accommodation buildings and parking facilities located in Al Ahmadiand Al Jahra.

Emirates Central Cooling Systems Corporation (Empower) has signed a AED1.8bn ($490mn) contract with Nakheel to provide district cooling services to Jumeirah Village Circle and Jumeirah Village Triangle. The Dubai-based firm will build six cooling plants to provide 260,000 refrigeration tons (RT) for the 400 buildings in these locations. In a first phase Empower will produce 30,000 RT by the fourth quarter of this year, the company announced.


Cover Story

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The Final Frontier How the Middle East is getting to grips with telematics

T

he benefits of fitting vehicles with telematics have been slow to catch on in the Middle East but interest has been accelerating ever since the UAE decided to rationalise fuel prices in 2015. Fuel is likely to make up a gradually more significant component of the operating cost of a truck fleet and that has woken operators up to the fact that telematics can prevent those costs from spiraling out of control. Telematics is data, pure and simple. A system is installed in the vehicle which transmits through GPRS to the operator, allowing them to know what the vehicle is doing, where it is located, the vehicle’s condition and the driver’s behavior. But it’s the use of that data that is the key to unlocking the environmental and fuel consumption benefits that telematics can bring. “If you use telematics correctly, you know every time a driver presses the break peddle, if he presses the breaks too hard, if he steers erratically or if he’s speeding,” says Dr Richard Brown, Head of After Sales & Product Manage-

ment, MAN Truck & Bus Middle East and Africa. “The data is all there. Initially the main purpose is to train the operator to use the data that’s been provided, and when they’re trained and understand the system they will see the gaps in the driver’s knowledge that we can then focus on to train them to drive better. You can optimise routing, tire wear and load all through the understanding of the information provided.” Cost benefits Telematics has been widely used among fleet operators in Europe for around 15 years. Unsurprisingly, the Middle East is one of the last region’s to introduce it but the market has really begun to hot up in the last two years. “Every manufacturer is representing their own telematics offering to the market,” says Brown. “The uptake in the Middle East has certainly increased in the last 20 month where there’s a mind shift towards fuel consumption with the fuel prices changing. Two years ago, when we started talking to end users about telematics for the


Cover story

Data is sent back to the fleet manager to be processed

Middle East, the attitude was very much ‘fuel cost is not worth thinking about’.” Most manufacturers will now offer a telematics package with a new vehicle. Clients have the option of doing without or choosing from a range of packages from basic vehicle tracking to a far more complex system that provides all sorts of data. Systems can also be retrofitted and there are many third parties in the market offering their services too. There is, of course, an initial cost to install a telematics system and there’s an operating cost for the data transfer, however savings can quickly outweigh those costs. “From a business case that we’ve done with one operator, the telematics pays for itself in nine months through fuel savings in this region,” says Dr Brown. “That’s for both long distance vehicles and construction.” You might think that telematics might only be used for long distance vehicles but that isn’t the case. “I’ve had a lot of meetings in the last year and I was surprised how many construction machines are delivered from factory with telematics installed as standard” says Dr Brown. “It records vehicle health, operating hours, similar things to 20 construction business news me August 2016

what we do with vehicles. It’s also used for preventive maintenance. The system we provide can tell the user if the vehicle has enough kilometres to do the run that he wants before its next due service. If not, he can send it for service straight away and that reduces downtime.” The next generation of data capture will even predict component change requirements so the system can inform the owner that the vehicle needs to go to the workshop. Driver Training Telematics systems allow operators to provide their drivers with focused training. They can detect everything from improper gear shifting to excessive use of breaks, not using cruise control, not using the correct gear for the speed, excessive acceleration and using the break and accelerator at the same time. All of these things have a negative impact on fuel efficiency. MAN’s telematics system produces a driver scorecard rating them from A (the best) to G (problem driver). The cost savings, not to mention safety improvements, that can be made from improving a driver’s skills are significant.

“Normally we find drivers in the Middle East to be C-D category,” says Dr Brown. “If we train them from a D to a C we reduce cost of ownership by between three and five percent. If we train them from a D to an A that increases considerably above 10 percent. The data that you get back focuses the driver training.” Around 80 percent of fuel consumption saving comes from the driver but the remaining 20 percent comes from the operator or the fleet manager making sure the driver is going to the correct destination via the shortest route possible. Safety Safety works in the same way. Harsh steering and harsh breaking are the two focus points for improving safe driving. And though it hasn’t been done yet in the Middle East there is even the option to fit vehicles with forward and rear facing external and internal cameras to monitor the driver as well as road conditions, making it easier to determine the cause of an accident right away. “We’ve got one video of an incident that happened in the UK between a truck and a motorbike,” Dr Brown says. “The truck driver was sent to court but


The RTA will make it mandatory to have telematics on vehicles over 12 tonnes

they played the video and the case was thrown out because it wasn’t his fault, it was the biker’s fault.” There is greater and greater emphasis being placed on road safety in this region, especially in the UAE where the Roads and Transport Authority (RTA) is now planning to make it mandatory for all vehicles over 12 tonnes to have telematics systems, which will allow them to monitor every commercial vehicle on the road in real time. So does this provide opportunities for providers to retrofit existing vehicles with telematics systems? “We can retrofit and we can fit systems to almost any make of vehicle but we haven’t seen the full scope of the requirement yet from the RTA,” says Dr Brown. “If there’s a requirement that we haven’t engineered yet then we’d have to do some development. But if there’s one government body that’s starting to think that telematics can assist them in policing road safety, hopefully that’s the seed that starts to grow and spreads throughout the GCC. Dubai seems to be one step ahead of the rest of the region.” Despite its relatively recent introduction, uptake of telematics systems among

“Two years ago, when we started talking to end users about telematics for the Middle East, the attitude was very much ‘fuel cost is not worth thinking about’” fleet operators in this region has been swift and they are hungry for more. “Our initial intention in November last year was to introduce the simple system to this region, just to start the operators understanding what to do with the data,” says Dr Brown. “But by January we’d already reached where we thought we’d be in July by introducing additional modules. We’re now at the fourth module and we didn’t expect to be there until next year. The end users are asking us for more. At the moment our full package has seven modules but it’s always in development.” Emissions From an emissions point of view, it’s fair to say standards in the Gulf still lag someway behind Europe and elsewhere. Current legislation is a GSO (Gulf Standards

Organisation) regulation from 1986. But on July 1, 2017 all GCC countries will introduce a mandatory EURO 3 standard for all newly registered vehicles. That’s a quantum leap from where we are now which is around EURO 1.5. It’s clearly a big step in the right direction and will produce a significant reduction in emissions but Europe is now at EURO 6 so there is still a considerable gap. “Today, only the UAE could introduce a EURO norm higher than five because of the fuel quality which is as good as anywhere in Europe,” Dr Brown says. “But in general the cost of implementation of a higher EURO norm is huge because you’d have to change the quality of fuel and the vehicle technology is also totally different. The cost of the components is a lot higher so the initial cost of purchase is a lot higher and the Middle East has not reached a point where it will accept vehicles that cost significantly more.” However Dr Brown says he expects the region to move up the gears to higher EURO standards far quicker than happened in Europe. “They don’t intend to allow high polluting vehicles on the road much longer.” construction business news me August 2016 21


IN PERSON

“Other companies’ fall from grace is their issue not mine but I’m seeing that as a real opportunity to drive Al Naboodah forward and be the client’s first choice”

Great Expectations

Colin Timmons was suffering through a particularly nasty, brutish and long Edinburgh winter when he received a phone call from someone in Dubai, inviting him to head up Al Faraa General Contracting. Over the course of more than two decades, the construction veteran had come through the ranks with national construction contractors in the UK, working his way up to MD level with companies like Mace and Morgan Sindall on a wide range of projects. But with the UK at a standstill following heavy snowfall, the time seemed right to accept a new challenge in the sunny Gulf. Five and a half years later the Scot made the move to Al Naboodah Construction Group where, after a brief stint as COO, he replaced Steve Lever as CEO on July 1. Timmons spoke to Jason O’Connell about his experience in the Gulf and his big plans for Al Naboodah. 24 construction business news me August 2016


Al Naboodah is well known for its civil infrastructure

What was it like making the transition from the UK to the Gulf? I started here as General Manager of Al Faraa General Contracting with the aim of reshaping and growing the business by adopting a more UK mindset. Over a five-and-a-half-year period we tripled turnover by getting bigger and bigger jobs. The big change coming from the UK was the culture of the company and how to do business. The cost of labour, the ability of labour, the number of staff that you would have in comparison to a similar project in the UK, is like night and day. A lot of it was about learning and understanding the culture. Did you find people receptive to your changes? Yes I did. Al Faraa took a bit of reshaping and reorganising so that it worked well as a business. Prior to my time here contractors were having a great time making big money in the boom days. The crash came in 2008/09 and all of a sudden they weren’t hoovering up these big margins, where there was so much work and not enough contractors that you could pick and choose your job. In 2010 every contractor was looking to reshape their business to deal with the market moving forward so

“I was approached by Al Naboodah and my respect for them in the market place is second to none” that’s exactly what I did at Al Faraa. I brought some key individuals into the business and prepared it for what was ahead, which was a much leaner market place based on performance. You get jobs if you do them well and deliver on time and on budget. Then I was approached by Al Naboodah and my respect for them in the market place is second to none. I had five and a half years at Al Faraa of blood sweat and tears, working six days a week, 12 hours a day minimum. This opportunity has come as a result of the hard work and effort that went into the last few years. What sort of shape did you find Al Naboodah in when you arrived? It was a very different organisation from the one I’d just worked in. There was more of a UK influence here because Steve Lever, who was the CEO, and a lot of his senior staff were Brits with a good few South Africans, so the culture and the way they did busi-

ness was already more akin to the UK way. It’s family owned so the principals of working for the Miller Group in Edinburgh as a graduate are the same as working for the Al Naboodah family. The third generation of Al Naboodah’s are coming through the business and I work very closely with them. I joined as COO in March with a sort of outlined plan that, should I be the right person, then the current CEO would retire at an appropriate time. But there was nothing on paper that said this would happen, it was just an agreement of sorts. After 6-8 weeks in the business they probably felt I was the right person for the job. So I made the transition from COO to CEO officially on the July 1. Is this your first role as CEO? As a CEO yes but I’ve been running companies for a long time. Being GM at Al Faraa was a similar role with similar responsibilities. Being MD at Mace in Scotland was the same. The difference here is that it’s larger and more varied because we have a civil engineering division, a building division and an MEP division. Civil is the heart of the business and has been the strongest over the years. The job is about bringing them together and getting as much synergy as we can. construction business news me August 2016 25


IN PERSON

Al Naboodah’s new HQ in Al Awir, Dubai

Every job that you do has an element of civil, building and MEP, so we’re looking at integrating that service offering. We’re in a market where liquidity is under pressure as we know, so clients want their jobs delivered but they’re looking for better prices. One way to do that is for us to integrate and make our offering more efficient but that won’t happen overnight. In the UK contracting groups have been doing that for a long, long time, offering a client a design and build model where we do everything for you. That then extended to PPP which means bringing the finance and I think that’s going to come here in some shape or form. British companies are bringing UK trade finance and that tells me that clients, despite

“We don’t want to buy jobs just to be able to say we’ve done X billion this year but lost our shirt” their view a year ago that that approach wouldn’t work in the UAE, are now keen to look at different funding routes. Give me a snapshot of the company you’ve taken on. I’m relatively new in the market. When I came here all I heard was Arabtec as the superstar in construction. It’s like being in Britain and talking about Bal-

four Beatty or Sir Robert McAlpine. For me at this moment in time we’re every bit as good if not better than some of our competitors. Other companies’ fall from grace is their issue not mine but I’m seeing that as a real opportunity to drive Al Naboodah forward and be the client’s first choice. But that only works if you deliver. It’s about being out there and delivering jobs on time, on budget and building relationships. We want to keep close to existing clients and look to build on that relationship. That’s the key for us moving forward. Over the years Al Naboodah has done huge amounts of work at the airport, with the RTA on roads and bridges, so there’s a handful of key clients that I want to nurture relationships with.


In 2014 Al Naboodah relayed both runways at Dubai International Airport in just 84 days

what makes me proud and excited to come to a company like Al Naboodah. In building our biggest job is down in Nad al Sheba where we’ve built a huge indoor stadium for the RTA as well as all the car parking, roads, drainage, etc. It’ll touch a billion dirhams in value. We’ve got a big multi-use development down in Mankool that we’re doing for Rostamani. Our MEP division tends to work as a subcontractor, so probably 60 to 70 percent of their work is internal work for our civil and infrastructure divisions but they’ll also subcontract for our competitors like Khansaheb and Shapoorji.

What sort of projects are you working on right now? In civils we’re doing a parallel roads project for the RTA down by Business Bay, involving various bridges and interchanges. That’s a chunky project that will run on for another year and a half and is probably the single biggest project we’re doing in civils. That said we’re doing a big, big job at Midfield Terminal down in Abu Dhabi, building the tunnels for flyovers. We’ve got a number of smaller jobs for local residential developers in Dubai doing roads and infrastructure for their sites. We’ve worked at Dubai Airport for 20 years. We did the relaying of both runways in 2014 in 84 days, working 24/7 while keeping the airport live. That’s

What are your ambitions for the company? To be the contractor of choice. We outlined a plan with our shareholders to grow the business and we need to adhere to that to the best of our ability. Typically we want 10-15 percent growth year-on-year which is an aggressive target. But it’s got to be done in a controlled manner. In UK terms ‘turnover is vanity and profit’s sanity’. We don’t just want to buy jobs just to be able to say we’ve done X billion this year but lost our shirt. We want controlled growth in the right sectors with the right clients because there are liquidity challenges out there. We’re looking at more international business as well. For example, there are clients based here that are funding

projects in East Africa and other places so one of those – like DP World for example - might come along and ask us to price those jobs because they know us. We’re looking at international expansion in a very controlled way. The logic is to build around the success of a project. We’re not saying we want to be in this or that country and employ five new business managers and marketing guys and build offices. We’ll win a project and build around that. What sort of headwinds do you face in achieving those aims? The challenge is, will the market hold up? It’s ok saying we want to do X billion next year, but are the opportunities there? We believe they are. Is the funding there? We believe it is but the market’s got to remain fairly buoyant and this liquidity challenge is there. At the end of the day the banks call the shots for a contracting business or a developer or a sub-contractor. At the moment that is the constraint that might prevent our growth. If the UAE market dropped all of a sudden we would need to look at a strategy based on a bit of reshaping. What’s the strategy to compete in such a tight market? It’s to be more efficient and certainly to be consistent with performance. Build construction business news me August 2016 27


up relationships so you’re given opportunities because you’ve worked hard and developed that relationship that goes back over a period of time. Nine times out of ten the lowest bidder wins in this market. Certain jobs you’re not going to win because you’re not the cheapest so we’ve got to look and try and form relationships with clients that respect what delivery really means and have the wisdom to look further than just the cheapest price. Margins are tough for everyone. Bigger volume, lower margin is where every business is going. But amongst that there are gems where, if you get the right client and the right project and can add real value, you’ll get more margin from that. For example, if you can break into a niche market then you might be able to command more margin. So that’s about identifying the right clients to work with. And slowly we’re seeing clients coming and saying, do you want to do a two stage tender with us? Do you want to be involved early stage and help us develop our design? I think the mindset is coming here that no longer are we all sat at different sides of the table – client, contractor and consultant. We bring them all together and have one common goal which is the project. But you don’t see a lot of that here. Clients here are protected by consultants, which doesn’t always get the job done. 28 construction business news me August 2016

“We’ve got to think differently and ask how we can offer something better than our competitors” I guess that goes back quite a long way to a time when contractors were less scrupulous and didn’t have the skillsets or the quality to build jobs. So the client needed a consultant to control everything because the contractor wasn’t delivering well enough. Those days are gone. You’ve got to work with the contractor to get the best outcome. And subcontractors as well. Major British companies have partnering arrangements for all the main subcontractors - MEP, steel, cladding, etc. It’s not such a thing here. Why? Because they think they’re not getting the right price from their partner! It’s about making people understand that partnering can pay dividends. The job where you take on the cheapest contractor in town and they take on the cheapest sub-contractors can end up a disaster. It stops for a while and ends up in court and delayed and so the final price of the job to the client is much, much higher than at the start. Why not spend a little more at the outset and get the right people together and get them working collaboratively?

We’ve got to think differently and ask how we can offer something better than our competitors. Are construction disputes on the rise here? We don’t have any. I’ve got a Masters Degree in Construction Law and know all about dispute resolution but what I always say is that it’s dispute avoidance that we need to be good at. If it gets to the stage when you’re in a dispute nobody wins other than the lawyers! Has payment become an issue lately? Frequency of payments I would say. You still get paid but the consistency has just slipped. Not everywhere, but when I talk to our competitors they seem to sense the same thing, that budgets are under pressure, so just be cautious and try to plan for that. Are you expecting a better 2017? Well 2016 will be a good year for our business. Our turnover will be up on last year’s figure because we landed a number of key jobs and we’ve got a reasonable carry through until 2017. Now we’re starting to see the 2020 tenders come out and these jobs have to go, so there’s certainly more work coming. We want to grow and we’ll be judged on that growth.


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Project review

Greener Pastures Dubai plans to spend an incredible $1.6bn on urban greenery in the coming years. Construction Business News takes a look at Palm Oasis Park, one of the latest additions to the city’s landscape. Jason O’Connell writes.

S

ustainability has become one of the cornerstones of Dubai’s landscape architecture development and urban planning vision. Done correctly, landscape design has the ability to moderate extreme heat, recycle water, reduce energy use, lower carbon emissions, and attract people to urban areas. In the wake of Dubai's 2020 vision, the municipality had earmarked AED 6bn ($1.63bn) to develop a further 12,000 hectares of urban greenery, including nine public parks at a cost of AED 77mn to revamp the emirate into a “green paradise” in its preparation drive for the Expo. One such project is the recently completed Palm Oasis Park in Dubai,

30 construction business news me August 2016

“The climatic conditions play a significant role in the conceptualisation of any urban development” previously Al Nakheel Park, a AED 24mn project incorporating artificial lakes, a cafeteria, playgrounds for children, and a pergola with a Barasti among other things. In addition, the Palm Oasis Park brings together 39 varieties of date palm trees, carefully gathered from all the seven Emirates to be housed in one park, as well as 60 varieties of ornamental trees and shrubs. Air temperatures can be approximately 20 degrees cooler beneath tree canopies than in surrounding areas

- a relief for Dubai residents especially at this time – while various species of trees can also help improve air quality by removing dust and other particulates, as well as absorbing carbon dioxide. A further feature is the installation of over 200 solar lights to illuminate the 7.5 hectare park after dark, making it the first project of its kind in Dubai to depend entirely on solar energy. Challenges Developing a sustainable park is not without its challenges in a region where water is scarce and the heat rises to such searing levels, explains Adnan Nalwala, Executive Director, Akar Technical Services and Natural Stone. Capturing, cleaning and recycling water is therefore


1,240

Number of Palm trees in Palm Oasis Park

$6.53m Total cost of Palm Oasis Park

probably the biggest challenge to be addressed followed by planting because they help to absorb and clean water as well as to reduce dust and purify the air. “Sorting out the irrigation needs for these trees required a lot of planning and technological expertise to successfully translate sustainable landscaping ideas from the drawing board into reality, with minimal effort and expense,” says Nalwala. “In addition, irrigating an entire soft landscape from an underground tank buried in soil with special protection was another challenge and we succeeded by mobilizing 100T crane and 28 shovels (966) at a time. So that installation and back filling were done in tandem. It took approximately six

Adnan Nalwala, Executive Director, Akar Technical Services and Natural Stone

construction business news me August 2016 31


Project review

to seven months of planning to completely sort out the water and planting issues but only two months to execute these plans.” He stresses that people use open space in the Middle East very differently to how they would use it in India or Europe. “The climatic conditions play a significant role in the conceptualisation of any urban development.” But it’s not only the climate that differentiates landscaping challenges in the Middle East from those presented elsewhere, Nalwala says. “Cultural values are an integral part of the designing and landscaping process. If you don’t really understand people’s cultural values, you’ll get it wrong. The use of colours is very specific to cultures and what they mean, the shapes and forms of architecture, etc. “How one translates these ideas is actually more important than the technology deployed. The technologies have a function to perform, and don’t actually create value for a space. And if people won’t value it, then it will be wasted and neglected.” However he says innovation in the landscaping industry across Dubai has managed to dispel the myth that using sustainable solutions comes at a high price. “Today, government institutions wholeheartedly recognise that the initial costs are minimal whereas the annual returns are huge. In light of diminishing natural resources and rising consumption, the world is moving towards an era of smarter technology and launching horticultural and green projects are no longer considered fashion statements but more as an imperative,” he says. “For example a lot more clients have become more accepting of LED lighting, because they know that although the initial cost is more expensive than a halogen bulb, it will last for 10 years, whereas a halogen will pop in 2 years. So while LED bulbs are more expensive, in the long run, it’s environmentally safer and saves them energy.” 32 construction business news me August 2016


COMMENT

The Letter of Intent – A binding contract?

The use of LOIs as the basis for construction projects has mushroomed in the Gulf in rent years. However the practice carries a significant risk to the parties involved, who may end-up finding themselves in a legal predicament. Heba Osman, Partner, Fenwick Elliott LLP, writes.

I Heba Osman, Fenwick Elliot LLP 34 construction business news me August 2016

n many countries in the Gulf region, construction projects start with a hand shake followed by the issuance of a Letter of Intent (usually referred to as LOI) setting out some basic information about the project, the parties, type of works, payment, project duration and other terms. Typically, the LOI gets issued, along with a notice to commence the construction works, by the client and countersigned by the contractor to allow the project to start. The parties usually anticipate that a more detailed and final contract will be signed at a later stage. However in many instances a final contract does not get signed.

This might be due to the parties’ inability to reach an agreement on the final contract terms, or not having enough time to finalise the negotiations, or simply because the parties forgot. Whatever the reason, it is undeniable that using LOIs to commence construction projects has mushroomed in the Gulf region, particularly prior to the global financial crisis, and has significantly assisted parties to start projects a lot faster than if they had to wait for final contract negotiations to be completed. This practice, however, carries a significant risk to the parties who may end-up finding themselves in the


Abu Dhabi

unenviable position of not knowing their rights or obligations and trying to second-guess these rights through the ambits of the applicable law. This is, of course, in addition to the question of whether an LOI is binding or not in itself. In short, an LOI without the signing of a final agreement is pretty much similar to playing football in a major tournament without rules: the outcome of the game would then be determined based on the power of the players, not the rules. The question of whether the LOI is a binding contract or simply a promise to contract appears to be quite theoretical and of little value to many non-lawyers. In the legal realm this

is not the case, as the answer to this question will determine the rules of play and the type of remedies and/or damages available to the party relying on the LOI. In many jurisdictions around the world, LOIs are not considered binding agreements. In the UAE, Qatar and many other civil law jurisdictions, whether or not the LOI will be considered binding is based on the terms of the LOI itself and what is contained in the LOI. In order to determine whether an LOI is binding or not, one must turn to the provisions of the relevant law in each country and the requirements that the law sets for a document to be considered a binding contract. The position in the UAE and Qatar The UAE Civil Code does not specifically deal with LOIs nor does it contain any reference to LOIs. However, the Code determines that a contract is binding if it contains the parties’ agreement on the essential terms of the obligation that this contract covers as well as the parties’ agreement on other terms that the parties consider essential . The UAE Civil Code also allows the parties to stipulate in the LOI that further conditions will be agreed at a later date and to state that the LOI would not be binding if these terms are not agreed. Consequently, an LOI will

be binding if it contains the essential terms and does not contain a provision invalidating it if an agreement on remaining terms is not reached . The logical question now becomes: what are these essential terms exactly? These essential terms, from a legal perspective, can be summarised in the following points: • For any contract to be binding, there must be an acceptance matching the offer. LOIs are no exception if they were to be considered binding. Therefore, the LOI must show that there is an acceptance matching the offer. In simpler terms, the LOI terms must be accepted as they are rather than with amendments. Or if there are amendments, then these amendments must be accepted too. This is a general requirement for all contracts to be binding and must be satisfied for the LOI to be considered binding. • For construction contracts to be valid, the UAE Civil Code requires that construction contracts contain details of the project, its type, amount of works, how the works will be done, time for completion and price . Accordingly, and as the LOI is essentially a construction contract, it is essential that, at the very least, the LOI deals with all these points otherwise the LOI could be construction business news me August 2016 35


COMMENT

Dubai Marina

considered non-binding. • Other provisions that the parties consider essential. The conditions, of course, would differ from one project to another and would be determined by reference to correspondence exchanged between the parties prior to the signing of the LOI. In the writer’s view, these types of essential terms dictated by how the parties view them impose 36 construction business news me August 2016

the biggest problem in determining whether the LOI is binding or not due to the amount of correspondence usually exchanged between the parties from tender stage until the signing of the LOI. The Qatari Civil Code adopts a similar position to the UAE and requires that a contract contains all of the essential elements in order to be binding. If that contract (or LOI for

that matter) leaves certain elements for agreement at a later date but does not stipulate that the contract would not be binding unless agreement is reached on these elements, then the contract will be binding. This is essentially the same position as set out above in respect of the UAE law. Therefore, all that has been said in respect of the UAE remains valid for Qatar.


Checklist for a letter of intent • Full details of the project and the parties (including ensuring that the parties named on the LOIs would be the parties of the intended final contract); • Exact scope of works to be carried out by the contractor; • Duration of the works; • Contract price and payment method; • Other major and essential terms of the contract such as sub-contracting, insurance, bonds, defects liability period … etc. • A termination provision; • A provision regarding applicable law and dispute resolution method; • A list of terms that are yet to be agreed between the parties; • A reference to a standard form of contract or a specific contractual document to be adopted in case the final agreement is not reached or signed; • A statement that the LOI is binding until the date of signing the final agreement. How to ensure that the LOI is binding? While legal practitioners would generally advise against using LOIs because of the significant risk they carry, there are some points that the parties should consider incorporating into their LOI if they insist on using it. While not an exhaustive checklist, including the above list of points in an LOI is quite likely to reduce risk in the event that

no final contract is signed. LOIs can be a very useful tool for the fast-paced construction industry allowing projects to progress as fast as possible. However, any contract that is not fully prepared or negotiated will expose its parties to a risk that eventually translates into a loss of money of some sort. In a perfect world parties should not use LOIs, but since it has somehow become the norm in the

construction industry, parties are cautioned to ensure that the LOI they are signing covers as many of the possible terms that govern their contractual relationship in the event that no final agreement is signed. In other words, when agreeing an LOI parties should sign it with the mindset that it might be the only document governing their respective rights and obligations in case of a dispute. construction business news me August 2016 37


Advertorial

UAE Fire Safety Code for Facades Explained

A

luminium composite panels have become a sign of the flourishing building landscape of the UAE. Cladding systems primarily consist of the aluminium composite panels, substructure assembly, insulation and the concrete wall coating. A complete fire resistant cladding system is only possible if all these components are fire resistant. Even if one of the components is vulnerable to fire, it defeats the purpose of having a fire safe cladding solution. The cladding consists of a central core filled by LDPE sandwiched between two aluminium panels. The primary cause of fires spreading in recent incidents was the use of the highly flammable LDPE (low density polyethylene) core in the panel. The current fire code mandates the use of Euro Class B1 or ASTM E84 certified panels, which allows LDPE filled panels to pass tests. However, an equally disastrous role is played by other system components. The silicon used to seal the systems creates a vacuum tunnel effect for the spread of fire and the use of bitumen as a concrete coating on the wall and low density insulation also aid flame movement. This composition, common across cladding systems in the UAE, needs to be improved. As a participant in the building materials industry of the country, I had the opportunity to offer my thoughts on building fire safety to the technical committee at the UAE civil defence. Recent fire incidents in tower buildings have not halted the UAE growth juggernaut. If anything, they have strengthened the government’s determination to prevent more incidents by working towards a comprehensive fire and life safety code. At the general headquarters of Civil

38 construction business news me August 2016

Shaji Ul Mulk, chairperson, Mulk Holdings Defence - UAE, its team of fire safety experts are currently drafting a new and improved code of practice. Using a mineral core – such as magnesium hydroxide or aluminium tri hydrate - in place of the LDPE core is the most effective solution for improving the safety of cladding panels. The degree of these minerals positively determines the fire rating and building safety. It has been suggested that the current product requirement of Euro Fire class B1 rating is not sufficient for UAE cladding and it is time that Euro Class A2 be made mandatory. At Alubond usa, we are the first UAE based cladding manufacturer to produce A2 panels in the entire country. Moreover, we have halted production of all LDPE based panels. The new UAE fire code should make these initiatives mandatory for all cladding brands. When it comes to compliance, the NFPA 285 testing & certification is mentioned in the UAE civil defence

code. However, certain manufacturers overlook this owing to the cost and time associated with getting the product tested and certified. It is suggested that NFPA 285 is strictly enforced among all façade brands in UAE. Alubond usa has successfully passed NFPA 285 for its proposed cladding system configuration. Moving ahead, the use of silicon sealants in the cladding assembly should be replaced by an open joint ventilated sub structure backed with fire resistance and high density rockwool. The use of bitumen as surface coating on concrete walls should be restricted and the use of fire rated coating should be ensured for a complete fire safe cladding system. Project monitoring for the cladding system configuration on site needs to be implemented, starting with the new UAE fire code. And it is essential that new regulations include provisions for cost effective retro fitting solutions to mitigate against the threat of further fires among existing buildings. These new regulations mark the coming of age for the construction and building materials sector in UAE. However, its implementation is key to the success of the new code. We must ensure the spread of knowledge among installers and fabricators in order to avoid project delays, negative project cost implications and even stalling and cancellation of new buildings. We are conducting a series of seminars for fire consultants, fabricators, property owners and architects. A customer helpline and web support has been established to provide assistance to our partners in the building industry. We embrace these changes for a better and safer tomorrow and are confident that they will help make the UAE building materials industry, a global force to reckon with.


Kuwait

Qatar


SUPPLIER News

First Saudi-built Renault Truck rolls out of KAEC factory

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he first Renault Trucks built in Saudi Arabia have rolled off Arabian Vehicles & Trucks Industry’s new (AVI) assembly line in King Abdullah Economic City (KAEC). The C & K range models were put together by a number of Renaulttrained technicians, engineers, quality and logistics personnel from Bourgen-bresse, and a highly trained local AVI team. Lars-Erik Forsbergh, Renault Trucks Middle East President said: “Our fa-

cility in KAEC further cements our commitment of providing unrivalled transport solutions throughout the Middle East. “Through the support of our local importer Zahid Tractor and AVI we hope to continue to service the demanding construction, infrastructure and transport sectors in the region and set new standards in the region’s trucking industry.” Arabian Vehicles & Trucks Industry (AVI), is a joint venture between Zahid Tractor & ‎Heavy Machinery Co.

Ltd and Volvo Trucks Corporation, which owns Renault Trucks. The factory is one of the first in the world to produce both Volvo and Renault trucks on the same assembly line with the capacity to produce up to 4,000 vehicles annually. Primarly servicing the growing demands of the Saudi market, the factory will produce the full line up from Renault Trucks’ new range; the reliable and durable C Range for construction and long haul and the robust K Range for heavy construction.

Emerson introduces new flame detectors Emerson has release a new line of optical flame detectors designed to perform in the harshest environmental conditions and connect directly to alarm or automatic fire extinguishing systems. The Rosemount 975 incorporates a variety of flame detection technologies that provide optimal coverage for a wide range of process industries, including upstream oil and gas installations, chemical plants, and refineries. Multi-spectrum infrared sensor technology detects hydrocarbon fuel and gas fires as well as “invisible” hydrogen fires with wide area cov-

40 construction business news me August 2016

erage and strong false alarm immunity. Integrated ultraviolet and infrared sensor technology rapidly detects hydrocarbon-based fuel and gas fires, hydroxyl and hydrogen fires, as well as metal and inorganic fires with robust false alarm immunity. Approved to Safety Integrity Level (SIL) 2 (TÜV), the detectors are extremely durable and weather-resistant, and feature heated windows for operation in harsh weather conditions; broad operating temperature ranges from -55C to 85C; and multiple output options for maximum flexibility and compatibility.


Al-Futtaim and Blue Star pen exclusive aircon deal

Ducab supplies 3D printed Office of the Future

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l-Futtaim Technology for Buildings Energy Efficiency Services has signed an agreement with Blue Star, India’s leading air conditioning company, for exclusive distributorship of its air handling units, fan coil units, chillers and variable refrigerant flow (VRF) systems across the UAE. The agreement was recently signed by Dawood Bin Ozair, Senior Managing Director of Al-Futtaim Engineering and Technologies and Vir S Advani, Managing Director of Blue Star. “Through this association, we are in a position to provide innovative and cost- effective cooling solutions for various construction sectors including shopping malls, hotel buildings, and residential complexes as well as commercial towers,” said Dawood Bin Ozair. Blue Star’s Vir S Advani said: “With a rich experience spanning across seven decades, Blue Star’s products are backed by robust R&D and worldclass manufacturing, and Al-Futtaim’s well-entrenched network of consultants and contractors will ensure an extensive reach of our applied air conditioning solutions in the UAE market.”

Ducab is supplying the world’s first 3D printed office building with approximately 10km of cables and wires. The Office of the Future was recently launched by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai. The UAE-based manufacturer of cables and wires is connecting the Office of the Future with a wide range of cable products, including LPCB approved FlamBICC Fire Performance cables, TUFF DuFlex heat resistant flexible cables, and the Ducab Connect range of cable accessories that complement the latest technology showcased by the building. “Dubai has a strong vision for its future. As an Emirati company, Ducab is exceedingly proud to play a part in converting the vision to reality through the provision of UAE manufactured cables and powering projects that are shaping

the future for Dubai and for the UAE in general”, said Dr. Ahmed bin Hassan Al Shaikh, Chairman, Ducab. “The Office of the Future is an exceptional achievement and we congratulate His Highness Sheikh Mohammed on its completion, as it represents the progressive attitude that is driving our nation forward.” FlamBICC Fire Performance cables are proven to improve safety, reduce fire damages to buildings or equipment and provide extra time to escape in the case of a fire and the TUFF DuFlex heat resistant flexible cables operate in stringent temperature conditions ranging from -40 to 105 degrees Celsius. Ducab’s range of products have been used in many projects in the UAE, such as Abu Dhabi Airport’s Midfield Terminal Building, Emirates Nuclear Energy Corporation’s Al Barakah nuclear plants, Dubai Metro, and more.

construction business news me August 2016 41


Supplier interview

Protection against the elements

Hans Monsebakken, General Manager, UAE of Jotun Powder Coatings, on how its products prolong the lifespan of buildings and infrastructure. How long has Jotun been present in the Middle East? Jotun Powder Coatings has been present in the region since 1925. Prior to this, Jotun used to serve the market by importing the powder from Norway and Thailand. What is your main product offering to the construction sector? For the construction sector, the main products we offer are the Jotun Super Durable range and the Jotaguard. Specially formulated to endure the test of time and other elements, Jotun Super Durable is well-suited to withstand harsh levels of UV radiation, inconsistent degrees of humidity, temperature variations and other severe weather conditions. Supported by an extensive track record, Jotun Super Durable's weathering performance is in line with AAMA 2604 and is certified according to Qualicoat Class 2 and GSB Master Standards. The product is mainly applied on architectural aluminium and offers multiple colours, gloss levels and special effects to choose the finish that best encompasses the essence of an architect’s design. Designed to protect steel and reinforced concrete structures, Jotaguard RB is our advanced product that provides protection of buildings and infrastructure against corrosion caused by extreme weather conditions. Particularly in coastal environments and cold climates where de-icing with salts is required, Jotaguard RB prevents damage of the reinforced concrete that can impact the structural integrity of a building. By incorporat42 construction business news me August 2016

tun’s ability to offer new technology at regular intervals to meet the demands of design and protection. In which countries in the region are you seeing most business at the moment? At the moment, UAE, Qatar and Kuwait are the major growth markets. The reason for growth in each of these markets differs. For example, growth in the UAE is mainly due to architectural aluminium business, in Qatar it’s due to infrastructure development and in Kuwait thanks to growth in general industries. ing Jotaguard RB into initial specifications, the longevity of the structure is increased and significant financial loss is avoided in the future. Jotaguard RB is tested to ASTM A775 and is approved by a third-party laboratory. Fabrication and on-site handling of steel reinforcing bars coated with Jotaguard RB is covered by ASTM D3963 and ASTM A775. By following the appropriate standards and field handling techniques recommended by Epoxy Interest Group (EIG), damage to the bars is prevented and long-term protection is ensured. What kind of growth have you seen here in that time? Jotun was the first in the region to offer powder coating solutions and this has helped Jotun become a market leader. From a modest beginning of a few tons a month, the company has grown multiple times. This has been possible due to the continued growth of the industry in the region and Jo-

What is your most recent high profile project/ contract win? The recent projects that Jotun has completed are the Abu Dhabi Louvre Museum and the Habtoor City in Dubai, the Qatar Reservoir Project in Qatar, which will last for another two to three years and the Oil Pipeline Project in Egypt. Tell us about your latest product innovation for the construction sector and why buyers need it. Jotun recently launched the Aurora Collection, which provides an alternative to anodizing finish. Anodizing is a known finishing for the aluminium industry and requires a heavy usage of natural resources like water and gas. In addition, it requires the use of heavy metals such as chromium, nickel etc., which are hard to dispose. With the Aurora Collection, designers can now choose the same finish with minimal impact on environment.


Building Materials

Raimondi Cranes begins deliveries of new luffing crane “The LR213’s noteworthy aspects include impressive hoisting performance, flexibility, and easy maintenance”

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aimondi Cranes has launched a new addition to its existing luffing crane lineup and its largest to date. Ideal for the urban jobsite, the LR213 performs especially well in construction scenarios involving high rise buildings in close proximity, or areas with difficult to obtain flyover rights. Deliveries of the new crane have already commenced from the heritage crane manufacturer’s headquarters in Italy, fulfilling five pre-launch orders submitted by Raimondi agents across three continents. “The LR213’s noteworthy aspects include impressive hoisting performance, flexibility, and easy maintenance,” said Eng. Domenico Ciano, Technical Director, Raimondi Cranes. “Raimondi’s new luffing crane can lift the maximum load without reduction of capacity with the full jib of 55 meters. This not only increases loading capacity, but also increases speed and additional rope capacity. “There is flexibility in choice with

44 construction business news me August 2016

“All the safety mechanisms and electronic devices are located on the counterjib, hence easy access for technicians and operators alike. Further, contractors will appreciate that the LR213 has the capacity to carry 1,000 meters of rope on its drum allowing for a lifting capacity of 14 tonnes in four falls at a working height of 250 meters. This aspect influenced contractor Harina of Spain’s choice to employ three LR213s on its latest jobsite in Qatar, the JW Marriot Hotel West Bay which stands at height of 250 meters.” The largest luffing crane in the Raithe LR213 as two different new hoist- mondi range, the LR213 is available ing winches at 55 kW or 75 kW are with five different jib length configuavailable – specifically derations, from a maximum jib signed for luffing cranes length of 55 meters to a to have increased speed minimum jib length of paired with more con28 meters, that can all trol and more rope careach the maximum pacity at both power capacity of 14,000 kg. levels.” The max tip load Ciano adds that with 55 meter jib conmaximum jib the Raimondi luffing figuration is 2,250 kg. length LR213, with fast assemWith only one electrical bly and commissioning, cabinet installed on the is a result of solution-based cabin platform, prioritizing design. The crane’s new control jobsite safety without comprosystem and tie-rod will apmising on agility is guarpeal to contractors. anteed, as this facilitates “The crane is easy to quick installation and maintain, with hoisting cable connection. and luffing winches Paired with Raimondi’s mounted on the big new Deluxe R16 crane counterjib platform. cabin, the LR213 lufftonnes lifting An increased countering crane is an ideal injib surface is a result of vestment for contractors capacity the two lateral big service or crane rental companies platforms,” Ciano added. servicing urban jobsites.

55m

14


GCC façade market set to soar by 50 percent by 2024

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he pressure on the UAE and the rest of the GCC countries to focus on new low-energy architecture will increase over the next eight years as billions of dollars are ploughed into infrastructure development across the region, new research shows. According to a regional market study, spending on building exteriors will increase from $8bn this year to $12bn in 2024. Accounting for 41.8% of the overall façades market last year, Saudi Arabia alone is estimated to grow to $5.5bn by 2024, up from $3bn this year, the report says. Architects and developers need to prioritise lower heating and air conditioning costs to achieve energy efficiency, says the report which was commissioned by dmg events Middle East, Asia and Africa, organisers of the Windows, Doors and Façades trade exhibition launching in Dubai in September. The study says significant growth in the GCC facades market will stem from a big rise in the number of construction, refurbishment and renovation projects driven by tourism and major events like the 2019 World Athletics Championships in Doha, Expo 2020 Dubai and the 2022 FIFA World Cup. Issued by US-based market research and consulting specialists Grand View Research, it points to a major opportunity for architects, developers, and manufacturers who will assemble at Dubai World Trade Centre for the inaugural Windows, Doors & Façades event from 18-20 September. The study estimates increased spending on façades in the other Gulf countries between this year and 2024 as follows: UAE – $2bn to $3bn; Qatar – $1bn to $2bn; Kuwait – $603mn to $825nm; Oman – $434mn to $535mn; and Bahrain – $226mn to $305mn. “The key factor expected to drive the

façades industry is the need to lower heating and air conditioning cost and achieve greater energy-efficiency,” said Muhammed Kazi, Exhibition Director of Windows, Doors & Façades. “With massive development scheduled in the region, despite the decline in oil prices, there is now a big opportunity for architects and other design professionals in the GCC countries. This is especially the case in the UAE which is the region’s largest user of energy on a per capita basis, with

70 percent of primary energy usage through buildings, mainly due to airconditioning and lighting.” The Windows, Doors & Façades exhibition will showcase a wide range of products for optimising energy retention and management, which vary from embedding the use of plants into the design of buildings, using minimal sliding doors, automated layered glazed panels as well as digital, interactive façades, already popular in major cities around the world. construction business news me August 2016 45


TAKE 10

Iconic Football Stadiums

There are still six years to go until Qatar hosts the 2022 FIFA World Cup but work on the stadiums is well underway. The country is building nine brand new venues and renovating three more to provide a total of 12 stadiums at a cost of up to 10$bn. Capacities will range from around 40,000 to 86,000 for Lusail Stadium that will host the opening match and the final. In anticipation of the event we take a look at 10 of the most iconic stadiums in the world of football.

1

Wembley Stadium, London Tenant: England national football team Opened: 2007 Capacity: 90,000

More than just an iconic stadium, Wembley is considered the spiritual home of football. Originally built in 1923 as the Empire Stadium, it later hosted the 1948 Olympic Games, 1966 World Cup final, the final of Euro 96 and a total of five European Cup finals (now UEFA Champions League). The stadium, including its famous twin towers, was torn down in 2002 to make way for a brand new venue which opened in 2007 with a capacity of 90,000. Designed by HOK Sport and Foster and Partners, it includes a partially retractable roof and the 134-metre-high (440 ft) Wembley Arch. Mott MacDonald, Sinclair Knight & Merz and Aurecon were the structural engineers for the project which was built by Australian firm Multiplex at a cost of GBP798mn ($1.05bn). Primarily home to the England national football team, the FA Cup Final and semi-finals as well as the League Cup Final and divisional play offs are also played at Wembley. It hosted football matches during the London 2012 Olympic Games and is the venue for occasional sporting events such as rugby and American Football matches and non-sporting events such as concerts.

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2

Maracana, Rio de Janeiro Tenants: Flamengo, Fluminense Opened: 1950 Capacity: 79,000 The Maracana was built for the 1950 FIFA World Cup, in which Uruguay beat hosts Brazil 2–1 in a final famously attended by just under 200,000 spectators. Since then, it has mainly been used for football matches between the major clubs in Rio de Janeiro, including Flamengo, Fluminense, Botafogo and Vasco da Gama, as well as concerts and other sporting events. The Maracana has undergone a number of refurbishments over the years and most recently was partially rebuilt for the 2014 World Cup and hosted the final. It will also be the venue for the opening and closing ceremonies of the 2016 Summer Olympics and Paralympics.

3

Camp Nou, Barcelona Tenant: FC Barcelona Opened: 1957 Capacity: 99,000 Camp Nou (new field) has been home to FC Barcelona since its opening in 1957. With a capacity to seat just under 100,000 spectators it is one of the largest football stadiums in the world. Little in the way of significant refurbishment has been carried out on the venue since the 1982 FIFA World Cup when it hosted a number of games including the semi-final. Plans for a EUR 250mn ($275mn) Norman Foster designed upgrade were launched in 2007 but shelved following the financial crisis a year later. But the idea has been revived on an even grander scale and Barcelona now intends to splash EUR 600mn on a major refurbishment that will begin next year and finish in 2021 with a stadium that can seat 105,000 people.


TAKE 10

4

Estadio Azteca, Mexico City Tenant: Club America Opened: 1966 Capacity: 105,000

Regarded as one of the most famous and iconic football stadiums in the world, the Azteca stadium is the first to have hosted two FIFA World Cup Finals - in 1970 and 1986. It also hosted the 1986 quarter-final match between Argentina and England in which Diego Maradona scored two of the most famous goals in the history of the game - the "Hand of God goal" and the "Goal of the Century". Since its opening in 1966, the stadium has been the official home of the football team Club AmĂŠrica and the official national stadium of the Mexico national football team. With a capacity of 95,500, it is the largest stadium in Mexico and the third largest in the world.

5

Santiago Bernabeu, Madrid Tenant: Real Madrid CF Opened: 1947 Capacity: 85,454

The Santiago Bernabeu stadium is the home of Real Madrid, arguably the world’s most renowned football club with a record 11 European Cups under its belt including the 2016 event. Inaugurated in 1947, the stadium hosted the final of the 1982 FIFA World Cup in Spain and a total of four European Cup finals. Starting out with a capacity of 75,000, only a third of which were for seated spectators, the stadium was expanded in 1955 to a capacity of 125,000. The next big renovation took place ahead of the 1982 FIFA World Cup. Today, the Santiago Bernabeu once again has a capacity of 75,000 though now it can seat all of those comfortably. In January 2015 reports emerged that Real Madrid had sold the naming rights to Abu Dhabi investment group, Ipic and would rename the stadium Abu Dhabi Bernabeu in return for an investment substantial enough to carry out another large scale renovation of the ground. However little has been heard of that plan since.

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Stadio Giuseppe Meazza (San Siro), Milan Tenants: AC Milan and Internazionale Milano Opened: 19 Sept 1926 Capacity: 80,000

6

More commonly known as San Siro after the district of Milan where it is situated, the Stadio Giuseppe Mezza is the home of A.C. Milan and Internazionale, two of Italy’s biggest football clubs. Its all-seater capacity of 80,018 makes it one of the largest stadia in Europe, and the largest in Italy. In March 1980, the stadium was named in honour of Giuseppe Meazza, the two-time World Cup winner (1934, 1938) who played for Inter Milan and briefly for Milan in the 1920s, 1930s and 1940s. The San Siro hosted six games at the 1990 FIFA World Cup and three European Cup finals, in 1965, 1970 and 2001 and 2016. The stadium’s last major renovation came ahead of the 1990 World Cup when it became an all seater venue, with an extra tier being added to three sides of the stadium. This entailed the building of 11 concrete towers around the outside of the stadium. Four of these are located at the corners to support a roof which has distinctive protruding red girders.

Stade de France, Paris Tenant: French national football and rugby teams Opened: 1998 Capacity: 81,300

7

Estadio Alberto J. Armando (La Bombonera), Buenos Aires

8

Le Stade de France was built in the northern Paris neighbourhood of Saint Denis for the 1998 World Cup Final in France and was the venue for the final of the tournament in which the hosts overcame Brazil 3-0. The stadium also hosted the final of Euro 2016 this summer and has hosted two UEFA Champions League Finals. It is the home of the French national football and rugby teams but not to any club. Construction contractors Bouygues, Dumez and SGE broke ground in May 1995 and completed work in just 31 months. The total final cost of the project was around EUR 290mn ($320mn). The Stade de France has a movable stand which can be retracted to uncover part of the athletics track. The EUR 45mn roof has an area of six hectares and weighs 13,000 tons.

Tenant: Boca Juniors Opened: 1940 Capacity: 49,000 Located in the working class Buenos Aires neighbourhood of La Boca, “La Bombonera” (the chocolate or sweet box), as it is widely known due to its shape, with a vertical stand on one side of the pitch and three steep stands round the rest of the stadium, has a capacity of 49,000 and is home to Boca Juniors football club. The unusual shape of the stadium has led to it having excellent acoustics which accentuate the fanatical support of Boca fans nicknamed "La Doce" (The 12th man). Diego Maradona, who played for and supports Boca Juniors, has his own executive box at the stadium.

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TAKE 10

9

Old Trafford, Manchester Tenant: Manchester United Opened: 1910 Capacity: 76,000

Old Trafford has been home to Manchester United, England’s biggest and most successful football club, since 1910 although from 1941 to 1949 the club shared Maine Road with local rivals Manchester City as a result of Second World War bomb damage. The stadium originally had a capacity of 80,000 people but that had dwindled to 44,000 in the early nineties due to regulations governing all seater stadia. Since then the ground has been redeveloped in stages to a capacity of 76,000. Redevelopment of the single tiered south stand to produce an all-round bowl effect would create a stadium with a capacity close to 100,000, though there are no concrete plans to proceed with that any time soon. Old Trafford hosted the 2003 Champions League Final and regularly hosts important Rugby League matches.

Signal Iduna Park (Westfalenstadion), Dortmund Tenant: Borussia Dortmund Opened: 1974 Capacity: 81,000 Home to German Bundesliga side Borussia Dortmund, the Westfalenstadion is officially named Signal Iduna Park under a sponsorship arrangement with an insurance company of the same name. The stadium is one of the most famous football grounds in Europe thanks to its renowned atmosphere. It has a seated capacity of close to 66,000 rising to over 81,000 during league games thanks to rules allowing a proportion of fans to stand. Located on the southern terrace of the stadium is Dortmund's ‘Yellow Wall’, which is the largest free-standing grandstand in Europe with a capacity of 25,000.

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10


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COMMENT

Digitalisation Disruption Civil construction is ripe for an upending of its existing business model, argues Terry D. Bennett, Senior Industry Strategist for Civil Infrastructure at Autodesk.

“Full-scale digitalisation in nonresidential construction will lead to annual global cost savings of $0.7 trillion to $1.2 trillion in the engineering and construction phases”

I

Terry D. Bennett

nfrastructure design and construction is a tough business that impacts everyone’s lives and is under ever-increasing scrutiny. It’s complex and difficult, and it’s only getting more so. In today’s digital world, every infrastructure project— regardless of size—is coming into the everyday person’s living room, through social media and other channels, long before construction begins. The firms that work in this sector are constantly struggling with how to increase margins when their bottom line is affected by tactics like suicide bidding and the boom-and-bust cycle

52 construction business news me July 2016

and when investors are wary to invest in infrastructure due to risk of project cost-and-schedule overruns during construction. When coupled with the unproven performance of an unfinished infrastructure asset—such as a road, bridge, or water main—that will cost tens to hundreds of billions of dollars and impact as many as hundreds of millions of people, investment concerns are well-founded. With more than $218 trillion worth of existing infrastructure assets requiring care and upkeep in the world’s top 32 countries, the need to do things differently is critical. In fact, the cost of not repairing infrastructure is an issue that the American Society of Civil Engineers (ASCE) says could cause a $3.1 trillion loss in gross domestic product (PDF) by 2020 in the U.S. alone. The question becomes: “Are there solutions to drive better margins in infrastructure for designers, engineers, contractors, and owners?” The answer is yes. Defining Digitalisation Digitalisation includes using things like BIM modeling tools during engineering, planning, design, and construction efforts in the office. In the field, it involves robotics; giant 3D printers; and automated and GPS-equipped machinery such as excavators, bulldozers, and compactors linked to the 3D model. Then there are resources like drones, augmented reality, virtual reality, and 3D laser scanning used for reality capture to monitor construction progress.

McGraw Hill’s 2012 Smart Market Report, “The Business Value of BIM for Infrastructure” (PDF), noted that 67 percent of the BIM users surveyed reported a positive ROI with BIM— and in fact, it led to lower project risk and better predictability of project outcomes. That’s a good start, but change has to go well beyond design and into the construction handoff. What about starting in planning and going all the way into operations digitally, widening the impact and return? By increasing digitalisation and a value-engineering approach, there’s potential to save more money—with fewer change orders and schedule delays, for example—and increase margins for everyone while still delivering a better product more predictably and at a cheaper price. The rapid advancement of technology, and related convergence of connected devices into social-networking tools, is starting to have a major impact on planning, design, construction, and operations. These disruptive changes can seem scary and costly but can also dramatically change people’s personal and professional lives in ways they couldn’t imagine, creating many avenues of new opportunity. It’s All Connected This Era of Connection is about building applications that connect not only a community of people to a 3D model but also applications and systems to each other with the ability to pass information back and forth. This paradigm shift around the connected


Top view of highway interchange in Dubai, UAE

era of infrastructure—with cloud-based collaboration and interaction among people, digital models, and big-data analytics—will unearth insights to improve project predictability, longterm life-cycle understanding, quality, safety, and costs. The Boston Consulting Group recently released a report that says: “Full-scale digitalisation in nonresidential construction will lead to annual global cost savings of $0.7 trillion to $1.2 trillion (13 percent to 21 percent) in the engineering and construction phases and $0.3 trillion to $0.5 trillion (10 percent to 17 percent) in the operations phase.” Imagine taking even 4 to 5 percent of those savings and turning them into a firm’s margins. Everybody wins. Given the velocity of technology development today, infrastructure planners, designers, and contractors need to overcome their aversion to risk and new technology to avoid being blindsided by those who are willing to take advantage of digitalisation. If infrastructure executives don’t take time to understand and embrace these disruptive innovations and, more important, perform an internal audit of

their firms’ digital capability compared to the standard of technology now available, they may get passed over by the firms that do. Now that’s a risk to avoid in construction. A Boom for BIM So what does this mean for infrastructure engineering and construction execs? • A sustainable and predictable margin that reflects the level of skill and professionalism they bring to the table and the risk they take off that table. • A greater resiliency throughout the sector, affording insulation from the extremes of the boom-and-bust cycle and the inefficiencies and uncertainties imposed by discrete procurement (where constructionprocurement services are separated from other architectural or engineering services). • Agility to grow and transform to take advantage of new markets, relationships, and business opportunities; counter new competitors with a strong brand; and achieve these outcomes against a backdrop of restricted investment capital.

But a few things need to happen to get designers and contractors on a path to creating those higher margins. They need to be better connected with project teams that have different business interests, software, and IT systems. They need to have access to shared insight to help them make better decisions across the life cycle of infrastructure systems and assets. They need to create optimal designs for the lowest cost at the highest return, at a fraction of the time. And they need to integrate the iterative feedback loop of the design-makeuse process. As the construction industry moves forward into the Era of Connection, embracing collaboration among teams, processes, and systems and then translating BIM data to design, construct, and operate will become the norm. This focus on collaborating rather than competing on margins will bring better and more predictable end results, higher margins, and lower overall project costs. More important, it will benefit both the owners and consumers who operate and ultimately use the roads, bridges, and other vital infrastructure assets around the world. construction business news me July 2016 53


Analysis

Saudi generates much of its electricity using its vast oil reserves but its solar potential is outstanding

Lessons from

South Africa

A Comprehensive Renewable Energy Program for Saudi Arabia. By Stephen Jurgenson, Jason Parker and Fadil M. Bayyari of international law firm Winston & Strawn 54 construction business news me August 2016


Sheikh Mohammed bin Rashid Solar Park

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he Kingdom of Saudi Arabia recently issued its Vision 2030 plan along with the supplementing National Transformation Program 2020, which together set far-reaching goals to transform the Kingdom’s oildependent economy into one which is diverse, sustainable and at the crossroads of international trade. A significant target under Vision 2030 is the addition of 9.5 gigawatts (GW) of new renewable energy capacity, including 3,450 megawatts (MW) by 2020. A comprehensive renewable energy procurement program similar to South Africa’s Renewable Energy Independent Power Producer Procurement program (REIPPP) could act as a vehicle for the Kingdom to achieve Vision 2030’s renewable energy targets and its broader economic development and diversification goals. Perhaps coincidentally, Saudi’s renewable goals nearly mirror those of South Africa when it issued the first request for proposal (RFP) under REIPPP. In August 2011, the initial RFP sought 3,725 MW of renewable energy projects to be procured from the private sector over five rounds. At the time, South Africa had no history of large-scale renewable energy installations and a limited renewables industry. Nevertheless,

“A comprehensive renewable energy procurement program similar to South Africa’s Renewable Energy Independent Power Producer Procurement program (REIPPP) could act as a vehicle for the Kingdom to achieve Vision 2030’s renewable energy targets and its broader economic development and diversification goals” it procured nearly 4,000 MW in the first three bidding rounds alone. To date REIPPP has generated 92 new renewable IPPs across four bidding rounds – $12.7bn in investment committed for the construction of over 6,200 MW of capacity in onshore wind, solar PV and concentrated solar technologies. REIPPP was able to deliver megawatts to the grid quickly and the resulting competitive environment bore cost effective tariffs for South Africa. A feature which set REIPPP apart from other international examples of competitive bidding was the inclusion

of economic development requirements. The program mandated that committed projects meet minimum thresholds for black South African ownership and management, job creation, inclusion of local content, capacity development, and other commitments for socioeconomic development. Altogether the stringent economic development requirements jumpstarted the renewables sector, lured foreign investment and bolstered the capacity and experience of South African institutions. To the extent the Kingdom considers a comprehensive approach, design and implementation of a successful program could start with an analysis of South Africa’s REIPPP in order to adapt and enhance it for the Kingdom. For instance, the means to achieve REIPPPs economic development targets could be used in the Kingdom, but the targets themselves would not apply. Vision 2030 has targeted the creation of a vibrant renewable energy sector and local content targets, but otherwise the Kingdom would need to establish its own set of economic development objectives and measurable criteria. For example, the Kingdom’s program would have to take into account its current renewable sector capabilities. Requirements for local content for renewables equipment and materials may have the effect of increasing tariffs given the nascent status of Saudi’s renewable sector. Comparatively, gradual increases in local content across successive bid phases could encourage growth in local renewable sector capabilities without encumbering early stage bid competitiveness. Saudi Vision 2030 also aims to increase the contribution of small and medium enterprises to the Kingdom’s economy. South Africa had similar goals and used REIPPP to achieve them by limiting foreign ownership in project companies and by requiring minimum shareholdings by South African enterprises. The Development Bank of Southern Africa (DBSA) and the Industrial Development Corporation (IDC) assisted by providing loans and other forms of financing to South African enterprises to bolster their participaconstruction business news me August 2016 55


Analysis

tion. If Saudi were to institute similar requirements, it would need to determine whether or not small and medium Saudi enterprises would need financial or other forms of support to participate in the renewables program. If so, the Kingdom would then have to explore which entity would serve a function similar to that of DBSA and IDC. Under REIPPP the Rand denominated power purchase agreements (PPAs) made it uncompetitive for foreign commercial lenders to proRenewable vide long-term fundcapacity KSA ing. Thus a majority of the project debt under plans to add the program was providby 2030 ed by local South African commercial banks. Given the Kingdom’s currency peg and the fact that PPA tariffs are typically indexed to the US Dollar, one would expect foreign financiers to have a greater role under a renewables program in the Kingdom. Since local and foreign banks have each played a significant role in the Kingdom’s successful conventional IPPs, both are familiar and comfortable Investments with financing the enattracted by ergy sector and would likely contribute to the South Africa success of the Kingdom’s renewable program. Above all, the South African experience highlights that a well-designed, transparent and robust procurement process encourages private developer and lender participation. In the end a comprehensive renewables program would enhance Saudi’s institutional capacity, experience and knowledge in the renewable energy sector as well as spur a local renewables industry – all in addition to the primary goal of increasing renewable generation capacity. It is undoubtedly an exciting time for the Kingdom and renewable energy industry participants, one which we will continue to monitor with interest.

9.5GW

Saudi Arabia’s ACWA Power developed the 50MW Bokpoort CSP solar plant in South Africa

Wind Turbines in South Africa

$12.7bn “Altogether the stringent economic development requirements jumpstarted the renewables sector, lured foreign investment and bolstered the capacity and experience of South African institutions”

Cape Town, South Africa


11:00 - 21:00 Daily 25 - 27 September 2016

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Event review

In Hot Water

Viessmann and MESIA extol the virtues of solar water heaters at Dubai event. Solar hot water systems have proven to be a reliable and cost effective means of saving energy and can be adapted to a wide range of applications, from small household systems to larger systems for commercial buildings and industries. Given the abundant availability of solar resources, the technology is particularly well suited to this region. Viessmann Middle East along with MESIA (Middle East Solar Industries Association) organised a seminar recently in Dubai titled: Solar Water Heating Systems – Introduction, design considerations, project references and new developments. The event attracted engineers, designers, planners and other stakeholders looking to propose high quality solar water heating systems on their projects or just looking to update their knowledge in this area. Attendees also heard presentations from Value Addition – a specialist contractor - sharing their experiences working on solar water heating systems. “In the present equipment and energy price regime, a well-designed and well installed solar water heating system can be expected to pay itself back in 6 to 8 years,” says Aniket Erande, Product Manager, Viessmann. “This excludes any value associated with the positive environmental impact and other associated benefits of deploying solar water heating systems.” Viessmann manufactures the flat plate and vacuum tube collectors that form the key components of any solar water heating systems. The company has supplied solar thermal systems complete with collectors and matched components to residential developments, hotels, malls, hospitals and 58 construction business news me August 2016

“In the present equipment and energy price regime, a welldesigned and well installed solar water heating system can be expected to pay itself back in 6 to 8 years” industries in the GCC and the wider MENA region. Solar collectors absorb incident solar energy. The selective coating on the absorber ensure high collection rates and the absorbed energy is transferred to stored water via a heat exchanger. Depending on the application and the size of the system, this stored water can be hygienic hot water or in turn can be used to heat hygienic water. The system is controlled by means of a purpose built electronic controller. “Since the sun cannot be switched off and the hot water demand is not always in phase with resource availability, overheating in summer months has always posed a problem both to solar water heating system suppliers

and operators,” says Erande. “Mitigating measures include deploying dry coolers to reduce collector fluid temperature or then the less elegant measures requiring shading of collectors during periods of low demand. Both measures require additional energy and/or labour.” Viessmann used the seminar as an opportunity to showcase a breakthrough in solar collector technology. The new range of flat plate collectors with Thermprotect effectively means that the collector shuts down beyond a certain temperature thereby significantly reducing the risk of overheating. This is achieved by a patented vanadium based coating developed in house by the Viessmann R&D team.


21-24 November 2016 Dubai World Trade Centre EXHIBITION. DEMONSTRATION. EDUCATION.

THE LARGEST INFRASTRUCTURE & CONSTRUCTION MACHINERY EVENT IN THE MIDDLE EAST • Acquire new business and maintain existing clients by exhibiting at the largest infrastructure and construction machinery event in the Middle East • Stand out amongst your competitors with our tailored sponsorship opportunities • Save time by connecting with more than 32,500 current and potential clients over four days • Make use of multiple free marketing opportunities as soon as you join as an exhibitor Audited by:

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Speak to Firas on how to grow your business: Firas Abou Ltaif FirasAbouLtaif@dmgeventsme.com +971 (0) 4 445 3655

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SAVE THE DATE

Mark your calendar

Construction Business News ME picks the latest and most sought-after exhibitions, conferences and seminars coming up in the construction industry

Cityscape Global 2016

September 6-8, 2016 Dubai World Trade Center Cityscape Global 2016 is the largest and most influential real estate investment and development event for emerging markets globally. Bringing together investors, developers, government officials and real estate professionals, there is no better place to find investment opportunities and new business partners. Cityscape Global is taking place on 6 – 8 September 2016, at the Dubai World Trade Centre, UAE, with the conferences taking place on September 5 at the Conrad, Dubai.

Big 5 Kuwait

September 25-27, 2016 Kuwait International Fair Kuwait’s US$175bn construction industry continues to grow and is poised for increased project activity, in addition to the massive infrastructure and building projects underway and in the pipeline. This market growth was reflected in the success of The Big 5 Kuwait 2015, the largest in the event’s history with a total of 7,187 participants, including 200 exhibitors across 4,700 square metre, further underpinning the show as the main event of the year within the Kuwaiti Construction industry.

Saudi Build 2016

Dubai World Trade Centre

estate service providers to find investment opportunities, network and do business.

SAIE 2016 Bologna

October, 19-22, 2016 Bologna Exhibition Centre SAIE is an internationally renowned trade fair for the construction sector. The fair offers the possibility to see and compare the products of the industry´s leading companies. Moreover it as an innovation platform for the construction industry. Visitors can here in depth and comprehensive information on the latest developments, trends, services and products in various fields.

The Construction Summit

October 26, 2016 Dubai, TBC The Construction Summit, now in its second year, will be beneficial to those interested in the best practices of carrying out a successful project. The 2015 event gathered over 100 attendees that included government officials from RTA, DEWA, Dubai Municipality, TECOM as well as top-level management from the region’s best construction firms. The summit is open to top-level managers and decision-makers from companies specialized in architecture, engineering, design, manufacturing, software, facilities management, etc.

October 17-20, 2016 Riyadh, Saudi Arabia For over 30 years, Saudi Build has been Saudi Arabia’s largest construction trade exhibition, attracting thousands of international manufacturers, exporters and businessmen, as well as tens of thousands of regional engineers, importers and industry professionals to connect and engage with the latest technology that the Kingdom’s largest sector has to offer.

Bauma China

Cityscape Kuwait

December 12-15, 2016 Huda Ground, Gurgaon, Delhi BAUMA CONEXPO INDIA—the International Trade Fair for Construction Machinery, Building Material Machines, Mining Machines and Construction Vehicles—provides the construction industry in India with a professional platform for networking, investment and the exchange of ideas and information.

October 17-20, 2016 Kuwait International Fairgrounds Cityscape Kuwait is the premier international real estate investment event in the State of Kuwait and is a key meeting place for real estate developers, home buyers, private and institutional investors, architects, consultants and other real 60 construction business news me August 2016

November 22-25, 2016 Shanghai New International Expo Centre Bauma China, the International Trade Fair for Construction Machinery, Building Material Machines, Mining Machines and Construction Vehicles, takes place in Shanghai every two years and is Asia’s leading platform for experts in the sector.

Bauma Conexpo


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Editor's pick

Dubai’s big wheel takes shape Hub and spindle of world’s largest observation wheel lifted into place

C

onstruction of the world’s largest observation wheel passed a significant milestone last month when the giant structure’s centrepiece was lifted into place - an unprecedented undertaking in the engineering world, both in terms of process and scale. Too big to be transported by land, the hub and spindle of the wheel, named ‘Ain Dubai’ were manufactured and assembled in the UAE and shipped to Bluewaters Island next to Jumeirah Beach Residence, a Meraas development that will include entertainment, retail, residential and hospitality offerings. Two of the world’s largest cranes, each comprising a 180 metre-long boom and boasting a lifting capacity of over 3,000 tonnes each, set the piece in place on top of the 126 metre-high legs. The assembled hub and spindle is approximately 40 metres long and 20 metres high and weighs a massive 1,805 tonnes - equivalent to four A380 aircraft. The process of welding the spindle A-frames to the four legs will take approximately four weeks, and the cranes will continue holding the weight of the unit for the first two weeks of this operation. Delivered with fully-fitted internal and external platforms, cooling pipework, cable trays and access ladders, the hub will later be connected to the rim via 192 spoke cables, with the structure then resembling a gigantic bicycle wheel. At 210 metres, Ain Dubai will overtake the new High Roller in Las Vegas (167.6m) as the world's tallest such attraction. It will include 48 luxury capsules capable of holding 1,400 visitors. Design and construction of the observation wheel are being undertaken by Hyundai Contracting and Starneth Engineering.

62 construction business news me August 2016


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Construction Business News ME - August 2016  
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