Conrad Egbert talks to Thomas Barry of Arabtec about the challenge of securing resources in an overheated market.
Your hands must be full after winning the racecourse contract. Could you explain the earlier confusion over the contract win?
It’s a massive project and we’re delighted to have won it. The confusion was a basic case of the Malaysian press getting their story wrong. They announced that we won the project, when in fact we were still in discussions.
Do you have enough workers?
We are still recruiting. Even after hiring more workers, we still don’t have enough. We are targeting about 40,000 by the end of this year. But obviously the constraints are the availability of skilled labour, or sufficient labour in places like India, Bangladesh, Pakistan and China. There are also constraints with the Labour Ministry on the percentage of Indians you can hire, which is 70%. Once you go over that you pay a premium on the visas, so we try and stay within our limit.
With the ongoing labour shortage, where are you finding workers?
India, despite the shortages there, and Bangladesh. Not so much in Pakistan – the labour from there is mainly operatives and mechanics. We’ve got quite a strong workforce of Chinese at the moment.
Haven’t there been problems in the past with Chinese labourers?
We did have a few problems earlier on, but we managed to learn and improve how we work together. They’re more expensive but more productive. Communication is a problem, but we have interpreters and Chinese English-speaking supervisors or engineers. With Indian workers, we lose close to one or two months‘ efficiency because they need to get used to the building standards that we follow here. Whereas, the Chinese come trained, because in China they’re using the same techniques now.
Is the booming Indian economy affecting the labour situation?
Very much so. A lot of people are returning to India, as there are a lot of opportunities there now. The workers are not available in such numbers as before. Since the market is booming there, they can now get good salaries. So that has also caused problems in recruitment from India.
The Indian government may soon introduce a minimum wage for construction workers in the UAE – how will that affect you?
Generally, our people earn above the proposed minimum wage. Their basic pay, together with the fact that our people work two hours overtime every day, means they often make in excess of that.
So that wouldn’t cause a problem for your company then?
We would have to relate tendering and costing of projects to minimum wages, so yes, it will have an effect on the cost of building.
Do you think procuring a contract has much to do with client-contractor relationships?
Of course, it’s very important. Emaar repeat-orders time and time again because they’re satisfied with our ability to deliver the project on time and to a higher quality than they require. It’s the same with Dubai Properties.
There is a tendency now with clients to go with contractors who have performed for them before, as they know they will get the delivery and quality they require. They go to that contractor and will negotiate without a bid.
Do contracts allow for price escalations and other areas of dispute?
It hasn’t been the norm but I’m expecting it to be the norm in the future because clients are now recognising that to engage contractors they have to reduce their risk associated with rising material costs. Materials have escalated quite considerably over the past number of years and contractors are the ones who have suffered.
Do clients really care about what contractors think? And are contractors in a position to say ‘no’ to jobs?
Some clients do and recognise that they will have to care if they want contractors to work with them. Contractors are able to say ‘no’ now, as there’s so much work in the market. We have to turn down many jobs as the contractual clauses are not to our liking and there is too much risk. Nowadays, clients even find it difficult to get sufficient contractors to tender for a job and that is because there is so much work in the market.
Are the business challenges generally due to a lack of resources?
You’ve got to limit yourself to what work you can do with the resources available. In all contracts, there are penalty clauses. If you’re not finished by a certain date, you’re penalised. Another thing is the inability of subcontractors to perform. Due to the volume of work in the market, the biggest problem any of the main contractors have is securing subcontractors of sufficient standard to do the work. They’re spreading themselves far too thin and projects are suffering in delivery and quality.
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