Following the news that manufacturing stoppages and halts on exports as a result of the Russia-Ukraine war are driving tender inflation in the Middle East’s construction sector;
Neha Bhatia, Construction & Infrastructure Editor at GlobalData’s MEED, comments:
“Project sponsors and construction contractors in the Middle East are feeling the painful consequences of the Russia-Ukraine war amid inflating commodity prices.
“With an estimated $3.2 trillion of projects in planning across the Middle East and North Africa (MENA) region, according to GlobalData’s MEED Projects, project owners must either award construction contracts at prevailing high prices or adopt delays on time-sensitive project programs.
“Awards may be able to proceed for bids submitted prior to the crisis, but in doing so clients might still expose themselves to variation orders and delivery delays during construction.
“Contractors face the same risks at the other end of the spectrum. Bid values are rising in concurrence with material price hikes, but increased price-based competition could further shrink the already thin margins recorded in the contracting sector. If clients choose to retender contracts or delay awards, it could weaken regional order books and risk jobs through 2023.
“The Russian operation will have a lasting impact on infrastructure development in the Middle East in 2022. At best, projects will face budget and delivery overruns in the short to medium term.
“The worst-case scenario would be for construction stakeholders to incur overheads that could further delay recovery after two years of a pandemic-linked slowdown and renewed price escalation. Clients and contractors must find ways to ensure the tendering decisions they take in this market climate will remain financially and logistically feasible through 2022.”
Photo by Kulturexpress, Release GlobalData, London, UK