civil contractor profile
VIEWPOINT
Saleh Muradweij, executive director of Drake & Scull Construction (DSC), gives an insider view on how companies are best placed to survive an economic downturn
Reflecting on Dubai’s construction industry prior to the recent global economic slowdown, it is clear that the boom was a contractor’s dream. Projects flooded in from both the private and public sector, and contracts were awarded with almost lightning speed. At Drake & Scull International’s (DSI) civil contracting business stream our revenue jumped by over 324 percent in two years, and our operations expanded from 300 to 3,000 employees. It was a time of great prosperity and everyone, from the smallest to the largest players in the industry, was making the most of it. The problem with exceptionally good times, however, is that they do not last forever.
As the dominoes began to fall in the US, it was inevitable that we would also begin to feel the pinch locally. While many contractors were still sustained by the projects they had won in the preceding years, they soon realised that new wins were too few and far between to keep up the growth rate experienced at that time. Moreover, during the boom, the ground rules were different. Contractors were hot com-
modities as demand shot up and supply struggled to keep pace. Back then, contractors dictated the terms of engagement. Post-boom, mid-recession, developers now have the upper hand. Newly awarded jobs now not only come with smaller advance payments and lower profit margins, but responses to tenders are vigorously compared, and decisions to award contracts take much longer. As with most unprecedented crises, it is tempting
to go into overdrive. However, before senior man- agement put the control mechanisms in motion, it is important to take a step back and identify the opportunities in this challenging situation.
A recession is a great time for management to go through company processes with a fine-tooth comb. Managing cash flow is essential, especially when it comes to receivable practices; demanding greater value from vendors and elimi- nating unnecessary processes that cost extra money is a sure-fire way of guaranteeing cash-flow stays manageable. A recession is also the best time to ensure that wherever
you invest, you receive a measurable return. This implies clearing the balance sheets of excess through effective pro- curement, manpower planning and other unnecessary costs. In times such as these, it is vital to cut out any dead
wood and streamline those parts of the business that are not pulling their weight, while also focusing on releasing the untapped potential of other areas. This means innovating, not just at a strategic level, but also from the ground up. Senior level and junior employees should all be part of the process of brainstorming out-of-the-box solutions for every issue – whether it is streamlining costs, boosting productivity or reducing overheads to cope with shrinking profit margins. At a time when most businesses are making conservative
choices, fortune will favour the brave. It is important to move against instinct and diversify, even though instinctively many companies would like to play their cards close to their chest. However, even while aggressively expanding our portfolio,
it is still imperative to do our due diligence in terms of fore- casting market trends. At DSI we carefully calculated our geographical and sector-led expansion to benefit from trends indicating that the public sector will invest heavily in national infrastructure. We established offices in strategic growth areas such as Jordan, Libya and Thailand, and we expect these offices to serve as future gateways to the Levant, Africa and the Far East respectively. In Thailand, traditionally, mechanical, electrical and plumbing
(MEP) works are executed separately. We spotted a gap in the market – a gap our integrated approach to the design and build principles of MEP, civil contracting and water, power and infrastructure engineering could fill. The key elements of our growth strategy are to expand geographically across the Middle East and North Africa region, and into new customer segments through selective
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/jun-sep 2010
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