As investments in the construction sector continue to grow in the GCC, the region has become a major driver of global change in the construction industry. In a seminar entitled ’The Future of EPC’, hosted by Deloitte Middle East and Freshfields Bruckhaus Deringer LLC in Dubai, the changing landscape of the engineering, procurement and construction (EPC) environment came under the spotlight.
Experts gathered to provide perspectives from the largest project owners and international contractors in the region, and recommendations for industry participants on what they can do to plan for success.
"Driven by continued global dependence on energy, and coupled with substantial needs in the region for world-class infrastructure and industry, the forecasted vast construction spend will create increasing demands on both project owners and contractors as they deliver these projects over the next five years," said Rizwan Shah, Managing Director, Corporate Finance, and Leader of Deloitte’s Capital Projects Advisory services practice for the Middle East.
As outlined by Deloitte experts at the event, EPC projects in the GCC are forecasted to increase in size and complexity, and project owners are now enhancing their own capabilities to execute their rapidly growing and expensive portfolios in a capitally efficient manner. Contractors are likewise seeking ways to grow their businesses while safeguarding their interests from technical, commercial and legal perspectives, from initiation to close-out. Achieving all three perspectives will mandate new requirements of contractors that are entrusted to deliver these large capital projects.
"With planned spend in the region of $100 billion each for the Saudi Arabia, UAE and Qatar markets, the EPC landscape is shifting. Now is the time for owners and contractors to understand what is achievable – with respect to their current capabilities – as we barrel towards an embedded culture of capital efficiency, transparency, accountability and continuous improvement," said Shah.
At the seminar, Deloitte experts highlighted the implications of advancements of EPC in the region, sharing that many large capital projects are exceeding budgets and surpassing deadlines. As a result, project owners are looking to "overhaul" their current project management and delivery structures to improve their delivery performance. This could impact:
• How projects are selected and endorsed, including making use of a comprehensive business case that considers all of the projects requirements, from inception and design through to commissioning and operation.
• Setting up projects for success by providing integrated and collaborative platforms with their contractors with the hopes of reviewing and analyzing electronic data as they transition from a reactive to a more proactive operating model.
• Their resourcing requirements that are needed to monitor an increasing number of projects procured through a variety of delivery strategies and contract types.
• Their selection of contracting strategies that suit the available details of project scope, specifications and risk structuring, while providing their contractors with appropriate incentives to perform.
• Investing in systems to assist in tracking and managing the projects’ status and performance baselines throughout the lifecycle of the project.
Erin Miller Rankin, Head of Construction, Freshfields Bruckhaus Deringer for the MENA region, said: "We are seeing many new trends emerging in the approach taken to contract regulations, particularly in respect to EPC. These trends are being driven by the on-going international effects resultant from the global economic crisis. Recent regional interest and international transparency reporting regimes apply very broadly to opportunities in the Middle East. Consequently, much greater attention is being paid to contractual risk allocation, using increasingly detailed and sophisticated contractual provisions to define that allocation. There is also an increased interest around maintaining closer oversight on materialization of risks and their consequences during the project delivery process."