Centralisation of the process may bring short-term challenges, but the change is set to improve efficiency over the longer term

Known as Musanada (meaning “support” or “assistance”), the Abu Dhabi General Services Company is charged with providing assistance and support services for all government departments, agencies and entities, as decided by the Abu Dhabi Executive Council. Established in 2007 to provide a variety of support services, including procurement, to Abu Dhabi government entities, Musanada’s responsibilities include acting as a tendering body for public construction and infrastructure contracts.

The company’s importance has expanded in recent years. In 2013, for example – a year in which it awarded around 70 tenders – the body was designated a centralised means of tendering public construction contracts in fields like infrastructure and government housing projects. However, in certain other sectors, such as oil and gas, government companies continue to issue their own tenders. Musanada is set to make the tendering process more efficient, as it will act as a main contact point for government entities and external bidders. The public company is also expected to employ external consultants in order to train its employees and ensure a smooth transition to the new centralised process.

Some industry figures say the decision to further centralise tendering in Musanada has created some minor, temporary disruptions in the contracting process. It may take some time before players in the market become accustomed to Musanada taking over the infrastructural developments in the emirate. “In my experience, it often makes more sense for a health department to tender a hospital, for example, rather than a centralised entity, as it will know the sector better,” said Wassim Merhebi, executive director at Arabian Construction Company.

Classification

A notable feature of the local regulatory environment is that contractors and engineering firms are required to apply for classification by the Department of Municipal Affairs in order to work on projects commissioned by the government or state-run bodies. The level of classification (or levels, as firms can receive different classifications in different fields of work) depends on a range of criteria, including capital, experience and the number of staff in different technical categories.

A firm’s classification then determines the maximum value of contracts for which it can bid. Although the rules were introduced in 2010, the deadline for registering for classification was delayed until late 2012, when there were 1036 companies registered under the scheme – 726 in Abu Dhabi region, 277 in Al Ain and 33 in Al Gharbia.

Focus On Cost

Average tender prices in the UAE fell by 4% in 2013, according to consultancy EC Harris, though the firm forecast that prices would increase by 4-5% in 2014 and by a further 6% in 2015. Senior figures at several engineering, procurement and construction companies across a range of industries told OBG that tendering is very much price-driven, and that the lowest bid tends to win. Not a lot of emphasis is placed on technical merits or experience, and consequently companies with little experience are often awarded the contract.

Delays can be a recurrent feature of the tendering process, with several industry figures telling OBG that the authorities prefer not to rush such processes, and often put them on hold. For example, the tender for the second stage of the Etihad Rail project was originally due to be issued in the second quarter of 2014, but was postponed.

Indeed, such tendering delays can significantly add to the cost of applying for these contracts – which can be quite substantial at times. For example, according to industry players, companies in the sector have to be selective with the tenders they decide to bid on, as preparing these can cost as much as Dh3m ($817,000). Furthermore, the government sometimes cancels issued tenders or postpones the project, and if the project is modified companies have to re-tender, incurring further costs.