Risk management and the giga-projects of the Middle East

What are the essential considerations for managing risks on giga-projects in the Middle East? A recent webinar brought together a panel of experts to discuss the strategies for success amidst ongoing global headwinds. Here are five takeaways.

‘These giga-projects are massive in scale’, explains Anil Sawhney FRICS, Head of Construction, Knowledge and Practice at RICS. ‘They will impact thousands of square miles, change regions, and transform many lives. NEOM, for example, is estimated to have an investment of over half a trillion dollars. Nine million residents are expected by 2045, and it will impact about 14 or 15 different sectors, including design and construction, education, tourism and many more’, he says. The key differentiator when it comes to giga-projects are the outcomes and transformation that are expected from these projects. It is important to consider how these benefits are realised and these outcomes are met, he states.

A huge dose of realism goes a long way

Amanda Clack FRICS, Partner and Regional CEO for EMEA, HKA, explains, ‘it’s about making sure that you’re working with the contractor. Having a good team around you is important, so that you can work together, but also challenge assumptions, so that you’re getting a project or programme that’s realistic. A huge dose of realism is needed in terms of setting the costs and programme at the outset’, she says.

Husam Gawish, Partner and Head of Operations for Saudi Arabia, HKA, agrees: ‘In Saudi we have giga-projects and mega-projects; these massive programmes that are done all at once, rather than phased out and delivered in stages. There is a lot of pressure on deadlines and schedules. What inevitably happens is contractors and employers are forced to accept a programme that everyone knows is not achievable from the get-go. This inevitably leads to delays and disputes later. Only strong collaboration from all the stakeholders right from the beginning can address this – the one team, one project, one success mentality.’

Professionalism and transparency underpin good risk management

‘Transparency is key’, explains Dele Oyekanmi FRICS, Senior Manager – Contracts & Commercial, NEOM.  ‘Part of our role as chartered surveyors is to give the client the information they need to understand what is right and correct, right from the beginning. It’s not what they want to hear, it’s what is going to be realistic and acceptable. If there’s an open door for transparency, honesty and ‘it is what it is’, that’s the way we’re going to achieve constructing these giga-projects.’   

Giga-projects are an opportunity to coach the next generation of leaders

Dele says, ‘In the Middle East we have quite a lot of hungry professionals from the local pool who want to get into various roles in construction industry. Professionals like us, who have been in the industry for more than 20 years, should be coaching local recruits and talent. We should be in the process of bringing more minds into the industry – ones that probably come with no construction background. That is the generation of tomorrow, and we must be realistic about who is going to take over from where we are today.’

Three things are needed in a giga-project team, explains Amanda. ‘Firstly, you want experts who can bring their experience and knowledge of what’s happened in the past. Secondly, you want bright professionals that bring that fresh perspective and new ways of doing things. Finally, you also want the best and brightest of the local talent pools that exist within country; those that understand the legacy and will benefit from the delivery, because they too will bring a unique perspective.’

Embracing digitalisation can win the war for talent

Dele explains that some resources ‘may not be physically here in the Middle East. We may have to reach out to other continents and countries abroad. With the new concept of hybrid working, people can work remotely and do it effectively,’ he says.

Amanda agrees: ‘The one thing giga-projects have is scale. These will be career-advancing, once in a lifetime projects to be involved in. What an exciting opportunity to talk about the next generation. Wouldn’t it be fantastic if we could find new ways of building mega-projects, or very large projects, on the back of having innovated and using the scale of giga-projects to do it. Vison 2030 and UAE’s masterplan for 2040 should provide the initiatives and ambition to drive that investment into digital information management. To focus on the training around capital projects and infrastructure using 4.0 and BIM. Countries like Saudi Arabia are trying to mandate the use of BIM on significant projects is an effective way to take things forward and leave a legacy around investment in BIM technology.’

Early stakeholder involvement avoids conflicts later

‘We want to achieve so much within a period of time, we forget the bigger picture’, says Dele. ‘We sometimes stay within our own mini-project and forget that we must rely on a lot of other additional stakeholders to get approvals. Whether that is finance from banks, approvals from local authorities or unexpected events like COVID. These risks are important because these put additional pressures on professionals. In a lot of projects that I’ve worked on, a lot of these pressures are looked at internally, and we need to have a look at what’s going on externally.’

‘There’s huge scope for employers in the Middle East to move away from the ingrained insistence on risk transfer to contractors and to think about risk profiling differently’ says Amanda Clack FRICS, Regional CEO, EMEA, at HKA. She explains there is ‘an opportunity to really embrace a more collaborative approach and improve those payment terms using standard forms of contract. To consider things like early contractor involvement and encouraging better coordination of technology around the design aspects to make sure conflicts are sorted out early on. Establishing dispute advisory boards at the outset is key. If we can get the basics right now, its definitely going to help smooth around aspects such as escalating tender prices and the market under capacity to supply’, she explains.

Husam says that ‘we’re seeing a lot more collaboration; the early involvement of contractors and making sure they are phased into the project and come in at an early stage. This is where we’re trying to head in Saudi with all these giga-projects.’  

‘Teamwork and culture have to be set at the top. In our war for talent, we need great leaders to come in and facilitate these incredibly large projects’, says Amanda. ‘My hope for the future is that we look back on this period and say that this was the moment when the game was changed in the way that we actually look at delivery.’

With multi-billion dollar investment requiring unprecedented concentrations of materials, time, and skills, the giga-projects of the Middle East naturally assume concentration risk. Seen as key steppingstones on the path to diversify away from oil and gas, the economic, technological and employment benefits that flow from these projects are expected to be substantial. Yet with never-before seen projects incorporating unconventional design and futuristic technologies, bespoke project processes, planning, engineering, and are required. In a region that has the world’s highest risk of cost overruns, how can project risk at this scale be effectively managed amidst on-going global headwinds? How can new technologies be effectively integrated? And what are the essential considerations for businesses wishing to manage risks in giga-projects of this scale and technological advancement?