Faithful+Gould’s Spencer Wylie talks to Middle East Consultant about the move to PMOs in Saudi Arabia, and explains how his firm has aligned with the market.
With over 20 years of Middle East experience under its belt, Faithful+Gould (F+G) is an active participant in the region’s construction industry. The firm has offices and staff on the ground in Abu Dhabi, Doha, Dubai, Muscat, Jeddah, Riyadh and Al-Khobar, and is involved in sectors including hospitality, industry, property, retail and transport.
In recent years, Saudi Arabia has become one of the firm’s key markets in the region. As a result, F+G has invested heavily in its Saudi operations, having opened its first office in Riyadh in 2009. In 2010 and 2016, the consultancy opened additional offices in Jeddah and Al-Khobar and now has 160 staff in the Kingdom.
Over the years, the integrated project and programme management consultancy has worked on multiple prestigious projects, including the Aldara Medical Centre, Ambulatory Care Centre and Multi-Specialty Facility in Riyadh, The Avenues and Mall of Saudi shopping malls in Riyadh, and the King Abdulaziz International Airport in Jeddah.
Over the last few quarters, the firm has been busy aligning itself with the evolving Saudi market, which has included an addition to its headcount. Paul Sweeney was appointed head of Programme Management earlier this year, in line with the direction that the Saudi government is moving in.
“The last 12 months have been busy, and we had two major parts to the year. Early on we focused on consolidation around what we do as a business and how we continue to deliver service excellence, as well as the continued development of our staff. The second part of the year was around management of our existing client base, combined with a period of further growth,” explains Spencer Wylie, KSA country director at Faithful+Gould.
“As for the future, over the next 12 to 24 months we again predict a period of growth where we see a considerable pipeline of opportunities across several locations and sectors. Going forward, we shall continue to focus on working with existing clients and key new clients, with the goal of developing those relationships into generating revenue.”
As the Saudi market continues to develop, Wylie, who has been with the firm since 2014, expects growth to come from three main areas in the coming months.
“The government move towards programme management offices (PMOs) and the demand for services by KSA ministries, where the government has been mandated to have PMOs in place to deliver their pipeline of work and projects, is one work stream that we’re focusing on. The second is our core business, which is our leisure sector which covers hospitality, residential and retail development. We have a number of key projects within that sector that we shall continue to develop. The last is the movement towards mega mixed-use master-plans, which will either be governmental or privately-led developments across the whole country. Some of those projects include Pulse, Edge and Pristine.”
Current market realities within the Kingdom and beyond have no doubt acted as a catalyst for government authorities to draw up plans and call for PMOs, in an effort to diversify and strengthen the economy.
Wylie explains: “Authorities have unveiled Vision 2030 and the National Transformation Plan (NTP), which is now being revised to NTP 2.0. The Ministry of Planning and Economy through the National PMO (NPMO) is driving government entities to develop PMOs for governance, transparency and capacity-building. In needing to build capacity, the Kingdom is looking to international consultants to develop best practice tailored to the requirements of Saudi Arabia.”
“Furthermore, while developing PMOs, the government is reprioritising its project pipeline to align to the needs of the Kingdom. This, combined with establishing PMOs and looking to private sector finance and ownership of government entities through the National Privatisation Office, are core pillars of economic diversification. There is still a lack of regional liquidity, but the government is able to attract international funds through a variety of instruments, as seen with the recent bond issuances that have been four times or more over-subscribed.”
F+G has in fact been part of the drive towards PMO for some time and has worked directly with government bodies on the initiative.
“Probably two years ago now, we sat down with Saudi Arabia’s Minister of National Economy and Planning and we worked in collaboration to issue a royal decree – and that was the mandated PMO regulation. As that’s moved forward, the government has implemented that strategy and appointed international consultants. This will then start to cascade down to further PMOs and project management consultancies.”
F+G has significant PMO experience in the region, including with the Ministry of Public Works in Kuwait and the National Water Company in Saudi Arabia. As a result, the firm has been able to secure significant projects within the Kingdom.
“As a direct result of the experience we’ve gained delivering these services, we’ve been appointed to two new PMO offerings in the country. One is the roll-out of a fibre optic network across the whole of Saudi Arabia, which consists of multiple sites and multiple locations. The second is a mega mixed-use privately-led development with quasi-government backing across a significant plot of land, combining multiple asset types,” comments Wylie.
Although the move towards PMOs has begun, the Saudi market has yet to settle, he says. “The market is still in a period of flux and consolidation, with a level of uncertainty around what schemes are to move forward and when. We have seen contractor awards pick up this year from last, but that was from a low baseline. The government is clearly prioritising social infrastructure projects and schemes that can accelerate economic diversification within the Kingdom.”
“They are also looking at the value chain throughout the project lifecycle, to build capacity for delivery internally and reduce the dependence on imports. The period of consolidation and slowdown may continue for some months, as PMOs are set up and schemes reprioritised. But moving forward, with diversified funding sources it is hoped that the market will become more sustainable in the long term, with less peaks and troughs. We expect awards in KSA to be in the order of $27bn, although there is significant pressure on backlogs, with over $60bn being the regional shortfall to maintain the industry at the size it was.”
Another potential challenge to market stability comes in the form of changing legislation; however, Wylie reckons there will be benefits in the long run.
“I think continued changes in legislation will remain a challenge for any business operating in KSA. But change always presents opportunities, where the government’s move away from having to fully fund their programmes themselves will support their planned move toward public-private partnerships (PPP). They will align PPP models with key ministries and ensure that the private sector is coming in to help them fund and develop their key infrastructure.”
Vision 2030 and the National Transformation Plan for 2020 will remain key areas of focus for Saudi Arabia, and are expected to bring new large-scale projects to the market.
“Both of those documentations outline how the government is going to develop the country, and part of that is decentralisation from the traditional hubs such as Riyadh, Jeddah and the Eastern Province. So the plan is to continue to develop cities outside of the main cities, and that’s already starting to happen – there have already been announcements around an entertainment and sports city outside Riyadh, which is being developed by the Public Investment Fund (PIF). This trend will continue as these mega developments are announced into the market.”
F+G expects its order book to grow by 15% in 2018 on the back of new projects, but it has also been working on several key projects over the last few years.
“I touched on the mixed-use programme in Riyadh earlier, it’s a mega development by a private developer which includes all asset types. It will provide a significant destination within Riyadh and an enhancement to the services and social infrastructure that are already in the city. Our single biggest mainstay project, however, is the King Abdul Aziz International Airport in Jeddah. We’ve been working on that project for seven years, and that is transformational to the transportation hub in Jeddah, which will increase annual passenger capacity to 30 million during this first phase of work.
“That will in turn allow a significant increase in the number of religious tourists to that part of KSA. We’ve been integral to making sure that project gets finished. We’re also delivering cost and commercial services on a mega mall in Riyadh which includes significant leisure destination features, with an existing UAE client.”
Wylie is also proud of the fact that the majority of F+G’s new contracts in the Kingdom are from existing clients. He notes that the firm enjoys 80% repeat business, as a result of previous client relationships.
“It’s testament to our client-centricity that we service our clients not just in their typical home market, but that we look after them as they move beyond their core markets. We remain as their trusted advisors throughout.”
Looking ahead, Wylie is confident about business prospects in Saudi Arabia, and reckons his organisation is perfectly set up to capitalise on new opportunities.
“Over the last few months, we have put in place significant infrastructure to help support our future growth ambitions. The challenge will always be to maintain our forward momentum, but I believe we have both an excellent team and a stable business platform in place to positively react in the future.”