California-based Parsons has been involved in some of the biggest infrastructure projects in the Middle East. William Bodie, MEA Executive Vice President, tells Construction Business News how the company plans to stay one step ahead of the competition.
Parsons has a long history in the Middle East. Where did it all begin?
Parsons has had a continuous presence in the Middle East for more than 40 years but we delivered our first projects here more than 60 years ago. Our first projects in the region go all the way back to the 1950s, starting with a groundwater survey in 1953 in Kuwait that helped establish our future in overseas water projects. In 1958, Dhahran Airport in Saudi Arabia was Parsons’ first major airport project. We were the design-build architect and engineer on this award-winning facility. Our team featured sophisticated themes of well-known Arabic designs throughout the terminal.
What’s your main service offering in this part of the world?
Parsons is a technology-driven engineering services firm with experience in the engineering, construction, technical, and professional services industries. The corporation is a leader in many diversified markets with a focus on infrastructure, defense, security, and construction. Parsons delivers design/design-build, program/construction management, systems design/engineering, cyber/converged security, and other professional services packaged in innovative alternative delivery methods to government agencies, as well as to private industrial customers worldwide.
We provide a variety of services in the Middle East, ranging from project management, to studies, design, construction supervision, master planning, etc. We offer a comprehensive selection of services that cover every aspect of a program or project, including management, procurement, consulting, security, and alternative project delivery (APD). Our long history reflects our innovative solutions that take a project from inception and startup, through execution, testing, and closeout.
How have lower oil prices affected the construction sector over the past two years?
Hydrocarbon revenues contribute significantly to government budgets in MEA, which in turn fund most major infrastructure projects; so our customers’ planning parameters are highly impacted by fluctuations in oil and gas prices.
The GCC countries’ effort to diversify their economies away from a disproportionate dependence on oil and gas revenues and their focus on infrastructure development for tourism, trade, and finance presents opportunities for Parsons to provide solutions in multiple sectors that are not reliant on oil prices. We are equipped with the thinking and technology to support the GCC government’s diversification efforts, given our experience with a variety of services in many diversified markets such as transportation, leisure, housing, and security.
Several projects have already been put on hold; however, because of our extensive track record on major projects in the region, we have honed our value engineering offerings, so we can drill down on the services previously provided and identify savings for customers as they move forward on projects.
Other projects are proceeding more slowly as governments cut or stretch out capital spending.
The issue of delayed payments is more acute now; we are seeing day sales outstanding that go significantly beyond contractual terms and conditions that we sign up for and depending on the project, late payments can reach 2 to 3 times of the contractually mandated terms. However, Parsons has been in this region for decades, through many cycles in oil and gas markets, and we have performed throughout these cycles. We also are helping drive diversification by contributing to the aviation, land development, and tourism sectors.
How can companies navigate through this tricky period?
Delivering more performance, more innovation, and more schedule confidence per customer dollar spent. That is what we focus on and we do that with our people, processes, and technologies – we believe we have the best in all three.
Do you expect to see alternative funding mechanisms emerge as a result? For example PPP?
For decades, APD methods have been used outside of the Middle East, but historically it has not been a significant delivery model for infrastructure in the region. Middle East customers have begun to show interest in APD models given the recent uneasy economic environment across all oil exporting countries as they seek to find more efficient delivery of major infrastructure programs.
Although many fear that the construction market may slow down significantly due to the decrease in oil prices, there are significant international events, long-term plans, and social projects due to a growing population in the region. As such, the region is looking at alternative funding sources, tighter budgets, and the delivery models that are more efficient and save time. This is becoming more evident as the infrastructure projects such as highways and rail and transit are being bid as design-build (DB), and for the industrial market, water, wastewater, and power are being bid as design-build-operate (DBO), engineer-procure-construct, and public-private-partnerships (P3s).
There are rising expectations that the private sector will step in to fill the funding gap. In some areas where P3 projects have long been on their agendas, they may be accelerated because of tighter government spending. Private sector funding of capital projects would be of importance over the next few years, but weakening fiscal positions of Middle East governments may affect the private sector appetite for investing in the region. However, this is an opportunity rather than a time of challenge. After the enormous spending of the past few years, a slowdown in activity will give organizations the space to deal with a backlog of projects as well as to prioritize and look for process efficiencies.
Parsons’ design-build business in North America has been a success where Parsons has been the lead designer on more design-build projects than any of our competitors. Parsons’ strong resume as a design-builder and our employees’ extensive design-build experience well positions the company for the emerging design-build and APD markets in MEA.
What do you see as being the key challenge working in the region at the moment?
Infrastructure spending is being scrutinized heavily by government agencies, and low-price only contract awards are now becoming more frequent. While we always look for ways to field competitive cost structures, the environment today is that the lowest price is more important relative to everything else.
We can compete on price, however, we are not going to race to the bottom just to win work if we don’t think we can deliver the quality that is part of the reputation and brand value that Parsons enjoys in the region, and the reason why we have built market share.
Which markets and sectors present the best opportunities in the region right now?
Parsons has a strong market position in the UAE, Qatar, Oman and Saudi Arabia, where we have delivered landmark projects for aviation, roads and highways, bridges and tunnels, and land development. There is an opportunity to deliver core portfolio services (aviation, roads and highways, bridges and tunnels, etc.) to some of the relatively under-developed countries (such as Bahrain, Egypt, Kuwait, and Iraq) for Parsons. Similarly, there are a series of adjacent market lines new for Parsons in MEA that can be introduced in countries where we are already established. Water/wastewater, oil and gas development, infrastructure, buildings, ports and harbors, and defense and security are lines that we plan to introduce in established regions.
We foresee significant opportunities in smart cities and the smart infrastructure required by them. Parsons is currently working with the Smart Dubai Office on developing the Resilient Dubai Strategy. The strategy will enable the Smart City’s stakeholders (citizens, government, commerce, etc.) to continue receiving and providing services with no, or minimal, disruption as well as the ability to recover from disruption. This process requires a review of the adequacy of established physical security policies and processes and seamlessly integrates them with new policies and processes associated with security and resilience. Parsons has the people, processes, and technologies expertise to develop actionable resiliency strategies that can support the stakeholders of smart cities to advance their cities from smart cities to smart, secure, safe, and resilient cities.
Is Parsons involved in Expo Dubai 2020 or the FIFA World Cup in Qatar 2022?
Parsons was awarded the site-wide infrastructure design and construction supervision services contract for the Expo 2020 Dubai site and we have been working on it since 2015. We are also involved in several other projects that will contribute to providing the infrastructure required for Expo 2020.
We are also involved in developing some of the critical roads and rail infrastructure required by Qatar 2022, such as Doha Expressway, Doha Metro, and Qatar Long Distance Rail.
In the last 10 years alone, Parsons has completed more than 900 projects in the Middle East.
- Dubai Metro – world’s longest fully automated metro network, and first in the region.
- Etihad Rail Phase 1 – the region’s first freight rail project.
- Sorbonne University Abu Dhabi – one of world’s oldest universities, first French higher-education institution to move overseas.
- Yanbu Industrial City, Saudi Arabia – Parsons has participated as a consultant and construction manager in all phases of the city’s impressive development.
- Hamad International Airport, Doha – Parsons managed the construction of the concourses, lounges, automated people mover, and concessions.
- Palm Jumeirah Bridges and Palm Crescent Tunnel in Dubai – vital infrastructure for what now is probably one of the world’s most famous artificial islands.
- Sheikh Zayed Road – the UAE’s most famous road.
Parsons has around 200 active projects in the region. Major ones include:
- Abu Dhabi Airport Expansion Program, UAE. Since 2005, Parsons has been working for the Abu Dhabi Airports Company (ADAC), supporting them in delivering this major expansion program. The multibillion-dollar program was structured to quickly deliver improvements that meet immediate needs while preparing for anticipated growth.
- Lusail Development Project, Qatar. Parsons has been providing program and construction management services for Lusail Development since 2006. Lusail City extends across an area of 38 km² and includes four exclusive islands and 19 multipurpose residential, mixed use, entertainment, and commercial districts. It will include leisure spots, residential buildings, commercial towers, avenues, and public ports. The customer is Lusail Real Estate Development Company.
- Ministry of Housing Program, KSA. Parsons was awarded the first package released by the Saudi Arabian Ministry of Housing as part of a program to build 500,000 houses over the next few years. This initial package comprises 32 million m² of land area divided into 11 sites spread across the Kingdom. Each site covers a different area, ranging from 10 million m² in Dammam to 729,000 m² in Khamis Mushayt. The customer is the Ministry of Housing Saudi Arabia.