Merger is the Only Way Out

by shariff mohammed | Apr 15, 2018

Saleh M. Al-Jewair, Leading HR Consultant and Specialist in Contacting companies  affairs speaks to Saudi Commerce and Economic Review about the trends and challenges of the Kingdom's contracting sectors

How do you see the growth of construction and contracting sector in the Kingdom?

Frankly speaking, the contracting and construction sector is going through one of its best phases of development. Having said that, I must admit that it's happening because huge stimulation packages announced by the government. The business is huge and opportunities are ample, and we see stable growth in terms of volume of contracts. But there are few gray areas that need to be discussed,  in the Kingdom most of the big contracting companies are foreign companies and most of the local contracting companies are bidding for sub-contracting  and low cost projects. This is not a good sign as far as the Kingdom is concerned. When we say that overall growth is stable, we should not undermine that it’s not helping the local economy at large. Perhaps the growth formula adopted by the companies are not proactive.

What sort of formula you advice for the construction companies?

I think merging and competing with the big players is the only way out and it will boost the morale of many small contracting companies who are getting squeezed in the competition. Most of the small companies do not comply with pre-qualification criteria set by Saudi Aramco and SABIC. By merging ten to twenty small contracting companies and bidding for big projects would give them much better competitive edge and more return on investment. Since most of the companies are family owned, they are reluctant to do this considering the complexity involved in it. However, I always try to make the process as simple as possible, thus creating perfect platform for small and medium companies to grow at faster rate.

I think you are aware of the project delay in recent days, what would be your suggestion?

As I said earlier, proper and professional management of your manpower and project is the only solution for that. The complaint about manpower shortage can be solved by streamlining the recruitment process. All these days every one relied on some non-compliant labors, and now when government has put pressure to streamline, they are facing problems. No one can run any operations based on some unprofessional methods. Everyone should have proper methodology in place to recruitment and scheduling. You have to make sure that the projects are on track time and again. One cannot rely on managers for every things. The work should be distributed properly and it should be based on the skills, not based on the personal relationships.

Looking forward do you think small contracting companies would be ready for merger?

I think they will not have any other solution, there is huge competition even for small projects and most of these local contracting companies are trying to catch the lower hanging apples. So companies have to merge together to catch bigger contracts. I think there are many who are thinking on this line and preparing themselves to be get qualified in merger process. Though it might take some three to four years, but it will be the reality soon.

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