Procurement and supply chain
The Middle Eastern construction sector plays host to some of the world’s largest and most ambitious projects. In October 2023, leading provider of procurement and supply chain solutions, Jaggaer, noted that booming urban development, ambitious infrastructure projects and significant demand for real estate, continued to drive a thriving regional construction sector.
Our survey findings highlight the critical role that efficient procurement strategies and strong supply chain management play in successfully navigating the complexities of the UAE construction industry and underscores the importance of being adaptable to changing market dynamics and effectively mitigating potential supply chain risks.
Source: Turner & Townsend survey
Survey findings:
A notable shift was observed from our survey findings, with 25 percent of respondents indicating negotiated procurement routes as their most common experience, contrasting with our November 2022 report.
There was also a notable nine percent decline in respondents who cite design and build as their primary procurement route during the six months prior to taking the survey.
Consistent with our November 2022 findings, 16 percent of respondents identified two-stage procurement as their prominent method, showing only a marginal one percent decrease.
of survey participants reported experiencing single-stage procurement routes most frequently during the last six months of 2023, marking a three percent decrease from our November 2022 figures. This trend is in line with our earlier projections, indicating that single-stage procurement is likely to remain the predominant and preferred tendering method in the maturing UAE construction market, driven by competition.
Among respondents, 88 percent reported disruptions in supply chains during the last six months of 2023, with 22 percent of them characterising the disruptions as significant. So, whilst there is a 41 percent increase in overall perceived disruption when comparing to our November 2022 results, where 100 percent of survey respondents noted that they felt supply chains had been disrupted or significantly disrupted over the last six months prior, we did see a five percent decrease in respondents who said they felt supply chains had been ‘significantly’ impacted.
Source: Turner & Townsend survey
Despite a slight decrease, single-stage procurement remains the predominant method for the UAE construction industry, driven by competition and efficiency. While this isn’t necessarily surprising, it doesn’t give any insight into the changing nature of what a single stage tender now looks like. More recently we’re seeing a shift away from the single stage traditional lump sum fixed price approach, which places significant risk on the contractors during the pricing phase, to a single stage tender that is often heavy with provisional sums.
There has however been a noticeable shift towards negotiated procurement routes, suggesting a response to evolving market conditions or project complexities. Clients, particularly on large scale complex projects, are also seeking early contractor engagement, in some instances formalised through the use of a Pre-Construction Services Agreement (PCSA). Findings also indicate that the use of design and build procurement routes has declined significantly, indicating a potential change in project delivery preferences or client demands.
The usage of two-stage procurement remains relatively unchanged since our November 2022 report, reflecting a consistent preference among some respondents for this method, possibly due to its perceived advantages in managing risk, ensuring project quality, or facilitating contractor selection. Developers and contractors alike may find the two-stage process suitable for complex or large-scale projects where thorough planning, collaboration and risk management are essential.
Survey results suggest that supply chain disruptions continue to pose challenges, with 88 percent of respondents experiencing disruptions in the latter half of 2023 and as such, ongoing vigilance is necessary to ensure resilience.
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