The construction boss speaks to Gavin Davids about a variety of issues he sees hampering the growth and development of the industry
Earlier this summer, news broke that Binaa Dubai, a UAE company specialising in construction, had acquired a 90% stake in Dubai-headquartered contracting giant ALEC. While this may be something of a surprising development, given that ALEC has long been one of the major players in the UAE’s construction industry, a closer look reveals that the sale wasn’t a sudden decision.
Back in August 2016, Gulf News reported that Al Jaber Group, ALEC’s founder and former main shareholder, planned to raise up to $640 million in funds through the sale of its stake in the contractor, using other assets as collateral for a loan. This decision came about as the family-owned Abu Dhabi company looked to repay banks as it sought to restructure $1.6 billion of debt.
As a result, in June 2017 it was confirmed that a 90% stake in ALEC had been sold to Binaa Dubai for an undisclosed amount. Trussbridge, an independent financial advisory firm based in DIFC, was the sole financial advisor to ALEC’s shareholders during the deal.
In a statement on its website, Trussbridge said it had provided comprehensive financial advisory services to the ALEC shareholders, including advising them on strategic options, aligning their objectives, positioning the company, identifying potential buyers and leading negotiations with the buyer on behalf of the selling shareholders.
It’s clear then that this was a well thought-out and planned transaction, and this assumption is borne out when speaking to Kez Taylor, CEO of ALEC.
“We’re very excited by the acquisition,” he tells Big Project ME during an exclusive interview at ALEC’s headquarters in Dubai Marina. “For us at ALEC, it’s the perfect partner going into the future, and what we believe that we can do together is take our business from where it is today to much greater heights.”
“I think if you look at ALEC’s strategy, it’s very much centred around the strategy of Dubai, and I think we’re very well placed in terms of our offering and where we are as a business. Furthermore, I think we’re also very closely aligned to where our new partner is, and I think that we’re actually a very good fit for their overall strategy. We believe that we can add value to Dubai and the greater region.”
Given that ALEC is one of the most prominent contractors in the region, and certainly one of the busiest, it’s only natural to wonder how the acquisition will affect the company’s operations. With subsidiaries working in fields as diverse as MEP, fit-out, solar power and smart energy solutions, the group has a range of operations that could be affected by the acquisition.
Not so, says Taylor, who is quick to point out that the group will continue to operate independently.
“What we’re going to look for is value-adds on both sides. If we’ve got a value-add that makes sense, then obviously we must team up. One of our core values is innovation – we try and figure out how we can improve things, how we can make things better, where the new markets are going and where we should be going. We will always try and look to the future, to see where we should be positioning ourselves.”
The group’s upwards trajectory has continued in 2017 with several projects won including the construction contract for the $163 million Jumeirah Living Marina Gate project, which will be jointly executed by ALEC and subsidiaries ALEMCO and ALEC Fit-Out. Other major projects include the contract to build the Middle East’s largest private solar plant for Al Nabooda Automobiles, which will be carried out by ALEC Energy, and construction of the first of two planned data centres for Dubai Airports.
The variety of work won is a testament to the diversification of the business that Taylor has overseen, and he says there’s plenty more to come from the group.
“Both shareholders would like to see us grow the business with a quality order book. We’re in quite a strong position at the moment. We’ve got about $2.45 billion worth of work on hand and already secured. I think where we’d like to be is a business that turns over about $1.36 billion a year. If you look at the market in the UAE, it’s a market of about $32.6 billion, so it’s good to be participating in 4% to 5% of the market.”
To achieve that, the group is constantly evolving and improving, he says, explaining that as part of plans to grow over the coming years, he and the rest of ALEC’s leadership team have decided to invest considerable resources in developing training facilities and partnerships that will improve the overall efficiency and productivity of the company on its projects.
“We’ve just established a very good training facility within our yard. What we do is put 60 artisans through our training facility every week. In a month, that’s around 300 people going through. Also, from a tower crane point of view, what we’ve done as a business is align ourselves with Liebherr, while we’ve also aligned ourselves with Peri on the formwork side. We think we’ve gone for the best in class in terms of equipment that we utilise. We don’t go for the cheapest equipment, we go for what we deem to be the most reliable and the best performing,” Taylor asserts.
Another aspect he wants the company to focus on is MEP, pointing out that it is the heart and guts of a project. As such, he’s adamant that ALEC has to have the ability to influence or self-execute on the MEP side, which is why ALEMCO is a crucial aspect of the company’s plans. On the fit-out side, ALEC Fit-Out offers a lot of value to the company’s clients, allowing them to offer a great end product in a cost-effective manner, he says.
Although there is much a main contractor can do to influence its own success, it is ultimately judged by how it delivers its projects. For that to happen, all the links of the chain must be in sync with each other when it comes to fulfilling their duties during the delivery process. This is something Taylor is acutely aware of and is keen to address, both on ALEC projects and across the industry.
“You’ve got to have a design that functions, that works and that’s given to you in the sequence and time that you need to make a project successful. I’d say that’s where the biggest challenge lies at the moment – we actually have to make sure that the consultants are set up for success, in terms of the conditions, the fees and the way that they go about giving us a design.
“We put a lot of focus on design up front and also getting alignment between the entire team. We’ve worked really hard at putting a project strategy together, we’ve communicated that through to all the stakeholders [we work with] – the subcontractors, the consultants, the clients, the operators – everybody clearly understands what we need to do on a project to successfully execute it.”
While ALEC certainly puts a lot of effort into getting an alignment between the key players on a project, with the contractor even going to the extent of organising workshops with external experts to lead discussions about future trends and innovations, getting a group of people to act together in the best interests of the project remains a massive challenge.
“As simple as it may sound, people don’t [work together]. The project should take precedence over any individual needs or requirements, because ultimately, if you have a project that’s successful, then everyone that is a part of it is going to be successful,” he asserts.
“I think the problem is that the responsibilities aren’t clearly defined. If you’re a designer, then it must be clear that you’re doing the design. If you’re a client, then your responsibility is to ensure that your brief is clear and that the right people are employed, and that everyone is doing their job efficiently – and that everyone is paid on time. Those are the responsibilities of the client. If you’re going to employ somebody to do something, it should be that they’re compensated on time for the work that they do.”
Touching upon this topic leads Taylor to open up further about one of his particular concerns: the way contracts are structured in the construction industry. Not only are the terms and conditions onerous to contractors, he says, they also often have conflicting clauses, which leads to problems throughout the delivery process.
“People don’t really understand what their responsibility is, what you’re meant to be doing becomes a grey area. I think that needs to be cleared up. We need a clear brief, clear accountability and contracts that actually reflect that. A team must have a clear strategy and objective on a project to succeed.
“It sounds simple, but it very rarely happens. If you look at the major projects in this region – let’s say the projects over a billion US dollars – the majority of them don’t get finished on time, they don’t get finished within budget and they often end up in dispute, with disgruntled people within the project teams. We’ve got to figure out how we avoid that,” he stresses.
Another bugbear for the ALEC CEO is related to the design and planning process – the issue of shop drawings. Simply defined as a set of drawings produced by the contractor that outline and plan the installation of systems and units on a construction site, for Taylor they are becoming increasingly problematic for the contractor, due to misuse within the industry.
“One of the curses of our industry is shop drawings being used to develop the design. That’s not what shop drawings are meant to do. We’re meant to get a design that’s well thought out, everything has been included and it all works and functions properly. Then it’s given to us and we do a shop drawing, get it signed off and we can then construct.
“What tends to happen instead is that shop drawings get used to develop the design. We get an incomplete design, the shop drawing process then starts and we go through many iterations, losing time and putting a lot of energy and effort into trying to develop the thing to the point that people are satisfied with how it’s meant to look like. That’s got to change!
“The idea of a shop drawing really should be about putting it together so that you can go and fabricate. It’s putting the finer details to it. The shop drawing process shouldn’t be to develop and change the design to suit. That leads to inefficiency. If the design isn’t done properly in the first place, you go through all these changes and then you’ve got time lost, inefficiencies, and you’ve got a guy who should be doing it once now doing it four or five times. It’s a job that should take a day, but can take a month. When that happens on multiple fronts on a job, it leads to massive inefficiencies,” Taylor outlines.
“For us as a contractor, we have massive costs on a daily basis on a project. If we delay a big job on a project by even a day, then our fixed costs – not our direct costs – can be as much as half a million dirhams a day! The effort and energy that we should be putting into preventing those delays from occurring should be in place, but we’re just not getting it right.”
With the conversation drawing to a close, Kez Taylor returns to the topic of ALEC’s future, and despite the challenges and issues he sees in the industry, he’s keen to stress that he still sees a number of significant opportunities available to the group, particularly in the prefabrication sector.
“You’ve always got to be on the lookout for future trends and keep an eye on where things are going. I think from an expansion point of view, the construction process needs to move off-site a lot more. If you can sort out the design and manufacture it off-site, and then basically bring it together and connect it on-site, then you’ve got a very efficient model of putting things together.
“Basically, what we’re doing at the moment is trying to put everything together on-site, and it’s not fixed. It’s a bit like a painting, people are tweaking it all the time and we’re a part of that. It’s a creative process and we do understand that, but I think if you figure out what you want, pre-manufacture it and then figure out how you bring it all together and connect it on-site, I think that there’s a lot of opportunity in that field.”
An existing business unit that will see increased demand is ALEC Energy, Taylor says. With the strategy of Dubai moving ever more towards green building and energy efficiency, he predicts that the unit will see a lot of business in coming years.
“There’s massive opportunities there, and I think people need to become aware of the benefits of it. It doesn’t cost you much, and in terms of reducing energy consumption it does make a lot of sense. They [ALEC Energy] are doing well and they’ve got massive potential.”
With Smart4Power, the company’s other sustainable business unit, also growing its market share, especially in the retrofit space, Taylor says it’s increasingly apparent that specialist firms will have a larger role to play in the regional construction market. To that end, he asserts that designers must start working with specialist firms from an early stage, so as to ensure that a project gets the best equipment and systems installed.
“You end up with the best solution when you put a design team together with a specialist at an early stage, because very often the specialist is very aware of what works, what makes sense and what is viable. If you’ve got specialist groupings and you put them together with the design team from early on, you can then influence the design to make the right kind of decisions,” he explains.
“When you get that right, you’ll end up with a very good result. Often what happens is that design, construction and specialists work in isolation, which isn’t the right way to do it. What you should be doing is combining client, designer and specialist together at an early stage and figuring out what is the best way of doing things on a project.
“The way a traditional job works is that the designer works in isolation, puts out the tender, and the guys who are cheapest get the job. But actually, look at the value that could have been created. The design may not be as efficient as it could have been, it could have been a lot better and a lot more cost-effective. You’re missing out on all of those opportunities. The best thing to do is get everyone together early. That’s where the value is,” he emphasises in conclusion.