Analysis

Why is project management undervalued in the Middle East?

Some companies are unaware about the value project managers can bring, experts say

PHOTO: Good project management can bring benefits in risk, time and cost. Credit: Shutterstock

In today’s chaotic global economy, every company is looking to stay ahead of the curve, and the competition to outdo each other is fierce. In the Middle East, in terms of monetary value output, the construction industry records the second-largest production activity for the economy after oil. In Saudi Arabia alone, over 1,500 projects worth $1.5 trillion have been planned or are in construction, and over 100 mega-projects are in the pre-contract phase, valued at $600 billion.

But despite the massive opportunity, many projects still lose a substantial amount of money due to delays caused by the lack of proper management right from the initial stage. The value of project management as a discipline is not thoroughly understood the way it is in Western countries, and thus is can be overlooked and seen as an unnecessary expense, experts say.

“According to a 2014 PwC survey, where 130 projects were surveyed in the GCC, it was found that 90% of the projects were delayed – 44% by more than six months – 71% of projects were over budget, and more than 60% of them were more than their initial budget,” says David Clifton of Faithful + Gould.

“I think the statistics themselves are quite damaging to the industry as a whole, especially if you don’t have 95% of the projects delivered on time. Now why would you look at project management as a functionality? Well, the two or three core functions of project management are to manage time, cost and quality. The time and cost bit is clearly not being handled effectively.”

“We’ve also got issues in understanding the value in our markets here. We typically have not been necessarily selective on the value add, which ends up with the cheapest labour. This affects the markets and diminishes the emphasis towards innovation, and the ability to bring something new to the party is also typically stifled by having a procurement system that is often only focused on the price.”

This lack of understanding is found not only among small and medium developers but among a few of the large players as well, and this lack of understanding builds many misconceptions along the way, says construction veteran Akram Ogaily, senior vice president of Hill International’s TCT Group.

“Misconception, especially on the part of the developer, is why project management is undervalued in the Middle East. Firstly, they think that they’re saving money. They perhaps don’t understand what project management really is. Though the market here has been using project managers for the last 10 years, there are still companies who are unaware about the value that project managers can add, and this is one of the issues we are facing,” says Ogaily.

“The main issue is the culture and the market. People sometimes forget that the construction market in the West developed for hundreds of years. When you go to the United States, you’ll realise that they have, over a long period of time, built a system where everyone from the client to the design to contractor to labourer have knowledge of the value of project management.”

“In the Middle East, we jumped from riding camels to using electronic devices and communication and then building iconic buildings – that happened in a short span of time. The rush from traditional buildings, materials and cities to a Westernised way of things was very quick, and this is why it’s not fully understood.”

Intangibility is perhaps another roadblock that causes confusion and misconception, says Andrew Turner, senior project manager at Hepher Project Management. “I think it’s because project management has not been recognised as a separate discipline here like an architect or an engineer or quantity surveyor, and that may be because you don’t actually produce anything.”

“There’s an output to the others, such as designs, etc. Traditionally, because there’s no tangible output, local clients and sometimes even sophisticated clients tend to think that they should pay for something they see, as opposed to a service that is needed to make those people produce things. They can’t get their head around what we actually produce, so it’s very hard for them to say what the right price is and what the wrong price is.“

Aijaz Ahmed, managing director at De Leeuw Middle East, agrees that tangibility plays a role. “I think people misunderstand the value of project managers because they don’t see it. They’re not mature enough as a company to see it. The way lawyers handle your legal problems and a chartered accountant would handle your finances, project managers will handle your projects.”

So what is the value add of project management, and when does it become particularly hard to ignore?

Clifton says, “The value of effective project management is to be able to establish the essential processes, the essential procedures and the best way of doing this work, to bring more surety around the cost, the time and quality, as well as delivering what the client sets out to achieve, whether he be an internal resource or an external resource.”

“Also, being able to effectively communicate the risk of the project being not delivered or failing in some manner, and being able to ensure that the asset is effectively handed to the client in a state that is managed to the expectation. The client’s interest should be represented effectively.

“The value also comes from the earlier engagement within the development of the scheme. The earlier there is involvement, the more effective project management is to that project or programme, because you can make much greater impacts on the costs and in the time of development. You can also help the client better with restorations.”

Ahmed says that project management is particularly hard to ignore on projects that are time bound. “If you have a fast-track project, you really can’t afford to do that without a project manager on board. Secondly, complex projects such as mixed-use projects can’t be done without project managers.”

“Another vital value that project managers add is identifying risk and how to mitigate the risk. We quite often look at the long-need items of procurement which could risk completion of the project, which clients may miss out on if they don’t have a project manager on the job.

“In the construction of hotels and hospitals, I have in fact witnessed one construction of a hospital where construction of the building was started and there was no equipment supply for the hospital, because they hadn’t decided on it yet. These are the type of things the client will lose money on.”

To effectively see the value that project management brings, choosing the right person for the job is key. Clients should opt for third-party project managements firms over multi-disciplinary firms or contractors who provide project management as an additional service.

“It is the wisest thing for a client to appoint a third-party project manager who is independent of any contractor and consultant, if they want the real value of project managers. The reason why project managers are appointed in the first place is because you want to ensure that a project is delivered on time and with the highest standard of quality.

“Now, if you have a project manager from an architect’s side, he’s going to cover up all the shortcomings of the architects and designers; likewise, if you take a project manager from a contractor’s side, he’s going to do the same. What you want is an independent project management company standing there and telling you what is right and wrong and what should be paid for and what not to pay for. You cannot get this if you appoint an architect cum project manager or a contractor cum project manager.”

Ogaily nods in agreement and advises, “The value add by project managers is not always value if the client does not choose the right project manager. In the market, because of how it was 10 years ago, design consultants add management service to their scope, quantity surveyors add project management to their scope as well, so suddenly everyone is a project manager.”

“Most contractors also have project management and construction management arms. So you have to detach your positions where conflict of interest might occur to purely consultancy services, to ensure that you get the value add on project management.”

The biggest challenge remains misconception, but regions like the UAE are very receptive of this discipline, and understanding in other areas of the GCC is picking up pace as well. Clifton says, “I think on the very large schemes where there’s like a programme of operation, Saudi has bought into the fact that it’s required. Qatar understands that too. But the leader by far is the UAE, in understanding the value and where it’s best applied.”

“The clients are a lot more experienced and are a lot more internationally conscious of where good things have been done, and where good things can be learnt and made better. Even on the governmental level, they understand the need for project management offices, they understand the need for programme management on these large, complex schemes. They understand the value added if the project management is done effectively.”

Turner says, “Most of the UAE, Saudi Arabia, Iraq and Algeria in my personal experience is receptive, and I would say Abu Dhabi has been most difficult. Abu Dhabi seems like the least accepting. If you go to places like Algeria and Iraq where it’s very unsophisticated, people are usually keen and eager to learn. So if they’re told that a project manager is coming in, they’re excited and they’re keen to learn.”

Educating the client through workshops and seminars is the only way that project management will get recognised and valued going forward. Many project management firms are initiating such activities themselves, to educate clients in the region and expand their services as well.

Ogaily recalls, “In Iraq, when we first spoke about project management in 2010, we first had to ensure that the people understood what it is. We had lecturing in workshops, seminars at different universities, etc for eight months for education and awareness. In my assessment, that was definitely needed as a first step. We had the knowledge, but we needed to deal with people who didn’t know what project management was, so we needed to educate them about it.”

“I initially started with a small portion of project management. One of the things was the evaluation of contractors’ bids for one week. At first it was for one project, then two projects, and then it grew, and then we did a big project. The first client we had in Iraq was the Ministry of Youth and Sport, where we built a stadium.”

All in all, with the market in the GCC maturing and project management firms making more efforts to spread awareness, the discipline will become more accepted and appreciated. And with large events like Expo 2020 and the 2022 World Cup in Qatar around the corner, the future of project management in the region will turn even more promising.

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