Philippe Dessoy talks to Big Project ME about why the Dubai construction market is about to get tougher
As in many professions you are largely as good as you last job. The problem in lean times is that you have to also be a good as your next one. In good times quality contractors such as Sixco can point to their achievements and their quality matrix.
And in Sixco’s case these are many and impressive. They have been involved in most of the iconic projects in the region. These include the Grand Mosque in Abu Dhabi, Burj Khalifa, the Corniche in Abu Dhabi, and many others.
You’d think that a reputation like that would get them into every tender bid and it mostly does. But in these troubled times they are forced to compete with smaller companies prepared to drop their prices for turnover work.
Sixco is a Belgian Group and Six Construct is their name in the Gulf. The company came to the region in 1966 and their first job was the development of the Corniche in Abu Dhabi.
The general manager of Sixco, Philippe Dessoy, spends some time explaining how the contractor market has changed. He is an affable man, with an easy confidence. The sort of man you’d want to buy infrastructure from. He graduated as a civil engineer from Brussels University in Belgium in 1983. In 1989, he got his first job at the Besix Group in the Belgian head office as a civil estimator for the international markets. He moved to Dubai in September 1992 to be in charge of the tender department for the GCC operations of Besix. He was promoted to deputy general manager of Six Construct in 2003, and then general manager in 2007.
So Philippe has been in the Middle East for the last twenty one years and Sixco for forty seven. And the company has grown, as he explains: “Now in the Gulf we have 15,000 people of which 9,000 are in the UAE. Of those around 2,000 are senior staff.”
Firstly he talks about the roots of Sixco: “In 1966 there were very few contractors. Dubai was a new country and nobody knew what would happen. And as it began to develop there was a shortage of contractors.”
Now it is very different in Dubai: “The international crisis means there is not enough work in Europe. So people are coming to Qatar, Saudi, Oman – or where the money is. The Koreans are here, the Chinese are here. Korea has problems and the Chinese activity is down.”
Perhaps the secret of Sixco’s success is its versatility: “We always have around fifteen projects of which ten are major projects. We are working internationally in Qatar and Saudi. We have worked everywhere in the Middle East except Kuwait. We are currently the lowest tender for a major hospital there so who knows,” he reflects.
“We’ve tried to diversify but other markets are difficult. In Saudi we are building a major football stadium. We are happy where we work. We have been approached to build in Iraq but we feel it is still a little bit early. Perhaps in two years’ time but for the time being we are holding back.”
Of course to create a tender document is expensive: “The most costly tenders are Public-Private partnerships (PPP). There you need a design team, you need lawyers, you need financial. These are a lot of activities which are outside the scope of a contractor so these can cost up to three million dollars. Design and build tenders cost a lot of money, maybe a million dollars. Some projects are already designed, maybe a consultant has been called in. Then, they can be as low as a hundred thousand dollars.”
“We will turn down a project if we do not think we can bring something special to the project, if is too easy. That is why we
try to build landmark projects. But there are limits to how big we can go. Take the Burj Khalifa. It is not too big to build it, but
it is too risky. We did Burj Khalifa in a joint venture with Samsung and Arabtec. Even a massive project like that was a tender,
five groups were invited.”
So why have Sixco lasted so long? “We are very selective about who we work for. We work for governments or listed
companies. We have two ongoing PPPs with the Ajman Government, and anotherwith the Abu Dhabi government for the
last three or four years. These companies are proper working entities, the Abu Dhabi government own 60%, we own 20%
and another contractor has 20%. So the government is controlling the revenues and costs, they are truly in control.”
“We are contractors before we are investors. A PPP is not that profitable but our revenues are more stabilised. A PPP
gives you some flat revenues. Contracting is up and down, now it is down, but five years ago it was a boom.”
He explains how projects work: “We try to find more specialised projects. We have three types of activities including
Marine. In Marine work we would take any projects, even small size, because marine work needs special equipment
and we have it. We like projects which are machine intensive because they are more specialist and therefore more profitable.”
“In infrastructure such as Doha Metro we are talking up to $3bn so we go into a joint venture to spread the risk. In
building we can put up a project in our own unless it is a really big building and we decide to spread the risk.”
He explains how the current climate affects contractors: “In the current climate customers will nearly always go
to the lowest quote for the moment. This was not the case four years ago. If it is a
few percent then it may be okay, but for more than that, then they will go for the cheapest quote, especially if the project is
not that urgent.”
“It should be easy to make money here with cheap labour and no tax. But everybody has the same conditions. It is a very competitive environment so everyone gets labour from the same places. For the developer the cost of the construction is cheaper than in Europe, not for the contractor, just for the developer,” Dessoy adds.
Asked if he is worried about new companies coming to Dubai he is definite: “New companies are not coming into
Dubai anymore, they are going to Qatar.” But it is still intensely competitive in the UAE: “I would not start a new company
now though because the projects are getting bigger and bigger and are therefore more risky.”
“We are starting to see movement in Dubai. Abu Dhabi is restarting projects and Qatar is booming. We are very lucky
because we have had no trouble getting paid. Still it is not always easy to be cash flow positive.”