05 April 2011
MUSCAT -- The Oman Society of Contractors (OSC) yesterday raised the issue of classifications of contractors at a meeting with Dr Rasheed al Safi al Huraibi, Chairman of the Tender Board. Dr P Mohamed Ali, OSC Chairman, pointed out that the Society, which was established four years ago with the key objective of development of the local construction industry and growth of small and medium contractors, was the brain child of the Tender Board.
He said that the construction industry is Oman's largest private sector employer and is a major contributor to country's GNP and thus has a significant role to play in the development of the Sultanate.
The issue of classifications of contractors as 'local' and 'international' was discussed at length at the meeting. The OSC emphasised that the present criteria were established many years ago, at a time when projects were minuscule and very less competition. "Today, the scene has changed and the Society believes that the existing practice needs revision," said Dr Mohammed Ali.
Over the last few years Oman has seen an influx of international contractors. While the OSC recognises the country's need to bring in expertise and knowhow, it recommends the establishment of criteria to determine "international contractors". Currently contractors having small offices in their home countries have sometimes been given the status of "international contractors" and furthermore there exists no regulations sanctioning their participation for bidding tenders in Oman. The OSC believes that there is a need for proper definition and criterion for their qualifications.
The Society suggested the Chairman of the Tender Board that during the lean period from 2002 to 2004 many of the local Omani contractors went bankrupt and had to close operations due to lack of work and unhealthy competition. Subsequently during the 2006 to 2008 period when oil prices escalated there was a scarcity of local contractors to execute the numerous projects which resulted "international contractors" flooding the Omani market.
Presently the scenario has changed as local contractors capable of executing large scale projects exist in the Sultanate, while international companies continue to flood the market making unhealthy completion which may again lead to the situation of 2002. Dr Al Huraibi assured the delegates that this will be looked into closely and urged the members to engage small and medium sized contractors.
The delegates explicitly conveyed that the present standard conditions of contract have been drafted years ago and should be re-visited. They further deliberated the need to include for price escalation considering the volatility in the market. The Society members went on to explain that variations to contracts was a common phenomenon in all government contracts. Upon the Tender Board Chairman's enquiry, the OSC explained that variations were necessary and all contracts encounter such variations at the time of project execution.
There are times when variation amounts touch more than fifty per cent of the initial contract values. There is no room in contracts to address the issues related to payments for variations, while the contractors are required by the present conditions of contract to execute the instruction of the client and engineer the amounts related to such variations often take ages to be realised. This has a major financial impact on the contractor's cash flow.
With regards to process of tendering, OSC opined that national interest and a holistic approach should be considered at the time of award as the lowest bidder is not always the most favourable offer.
Preference to local products and percentage of Omanisation prevailed over the discussion. It was emphasised that the government should impose stricter rules in terms of utilisation of local products and services. It was expressed that given the current level of trained national labour force, the 30 per cent Omanisation requirements in the construction sector is difficult to attain.
However, the delegates confirmed that the construction sector is ready to absorb a large number of Omani job seekers, after proper training. The focus, with government support should be on providing middle and upper management employment for nationals after adequate training. Omanisation percentages should factor the length of service, type of position and salary. This will help in making Omanisation sustainable and also facilitate the company in securing due percentage benefits there from.
The Tender Board Chairman termed the meeting fruitful and indicated that such meetings should be held regularly. He also assured to look into the issues raised by the OSC as well as the formation of a technical committee to facilitate strategic plans to enhance the construction industry.
MUSCAT -- The Oman Society of Contractors (OSC) yesterday raised the issue of classifications of contractors at a meeting with Dr Rasheed al Safi al Huraibi, Chairman of the Tender Board. Dr P Mohamed Ali, OSC Chairman, pointed out that the Society, which was established four years ago with the key objective of development of the local construction industry and growth of small and medium contractors, was the brain child of the Tender Board.
He said that the construction industry is Oman's largest private sector employer and is a major contributor to country's GNP and thus has a significant role to play in the development of the Sultanate.
The issue of classifications of contractors as 'local' and 'international' was discussed at length at the meeting. The OSC emphasised that the present criteria were established many years ago, at a time when projects were minuscule and very less competition. "Today, the scene has changed and the Society believes that the existing practice needs revision," said Dr Mohammed Ali.
Over the last few years Oman has seen an influx of international contractors. While the OSC recognises the country's need to bring in expertise and knowhow, it recommends the establishment of criteria to determine "international contractors". Currently contractors having small offices in their home countries have sometimes been given the status of "international contractors" and furthermore there exists no regulations sanctioning their participation for bidding tenders in Oman. The OSC believes that there is a need for proper definition and criterion for their qualifications.
The Society suggested the Chairman of the Tender Board that during the lean period from 2002 to 2004 many of the local Omani contractors went bankrupt and had to close operations due to lack of work and unhealthy competition. Subsequently during the 2006 to 2008 period when oil prices escalated there was a scarcity of local contractors to execute the numerous projects which resulted "international contractors" flooding the Omani market.
Presently the scenario has changed as local contractors capable of executing large scale projects exist in the Sultanate, while international companies continue to flood the market making unhealthy completion which may again lead to the situation of 2002. Dr Al Huraibi assured the delegates that this will be looked into closely and urged the members to engage small and medium sized contractors.
The delegates explicitly conveyed that the present standard conditions of contract have been drafted years ago and should be re-visited. They further deliberated the need to include for price escalation considering the volatility in the market. The Society members went on to explain that variations to contracts was a common phenomenon in all government contracts. Upon the Tender Board Chairman's enquiry, the OSC explained that variations were necessary and all contracts encounter such variations at the time of project execution.
There are times when variation amounts touch more than fifty per cent of the initial contract values. There is no room in contracts to address the issues related to payments for variations, while the contractors are required by the present conditions of contract to execute the instruction of the client and engineer the amounts related to such variations often take ages to be realised. This has a major financial impact on the contractor's cash flow.
With regards to process of tendering, OSC opined that national interest and a holistic approach should be considered at the time of award as the lowest bidder is not always the most favourable offer.
Preference to local products and percentage of Omanisation prevailed over the discussion. It was emphasised that the government should impose stricter rules in terms of utilisation of local products and services. It was expressed that given the current level of trained national labour force, the 30 per cent Omanisation requirements in the construction sector is difficult to attain.
However, the delegates confirmed that the construction sector is ready to absorb a large number of Omani job seekers, after proper training. The focus, with government support should be on providing middle and upper management employment for nationals after adequate training. Omanisation percentages should factor the length of service, type of position and salary. This will help in making Omanisation sustainable and also facilitate the company in securing due percentage benefits there from.
The Tender Board Chairman termed the meeting fruitful and indicated that such meetings should be held regularly. He also assured to look into the issues raised by the OSC as well as the formation of a technical committee to facilitate strategic plans to enhance the construction industry.
© Oman Daily Observer 2011
