Burning midnight oil on the airport

He is responsible for the world’s largest single MEP contract. And with the price of metals going through the roof, he probably has more to worry about than even his most stressed-out peers in the UAE construction industry cauldron. But despite it all, Thermo general manager Alan Sporle is still smiling. Just don’t mention the price of copper! Sean Cronin reports

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By  Sean Cronin Published  July 1, 2006

|~|MEP1int200.gif|~|Alan Sporle, general manager, Thermo|~|‘Beware the ides of March’ is an expression that has particular resonance for Thermo general manager Alan Sporle – and some of the Shakespearean drama as well.

March 2007 is the deadline set by Dubai Civil Aviation for the new terminal at Dubai International Airport to become
operational.

And Sporle makes no attempt to disguise his apprehension.
“It’s a date that’s going to come very rapidly and we are all dreading it.”

With refreshing candor for a contractor, he doesn’t try to hide the immense challenge faced by everyone involved in this high-profile project – which is perhaps the source of more rumour and speculation than any other in Dubai.

MEP contracts don’t come much bigger than this. The value of the mechanical, electrical and plumbing works on the new terminal at Dubai International Airport is a colossal US $463 million (AED1.7 billion) – part of a $4 billion job that has been hit hard by the rising costs of construction materials – first steel, then cement and now copper and aluminium.

Although Thermo, with 10,000 employees on its books, can hardly be described as a minnow – the airport job is nonetheless a large one for it to handle comfortably.

“We never dreamed of taking on the IT systems for the project and now we have the might of Alcatel and Arinc – two of the biggest high-tech companies in the world – as our sub-contractors.”

Alcatel’s package on the project is worth around $52 million and it is working alongside Arinc to supply, integrate and deploy security and access control systems.

The contract includes installation of closed-circuit TV, radiating cable for the extension of the existing TETRA system, a master antenna system for an entertainment distribution network, and an overall structured cabling network connecting all systems that is over 7,000 km long.

The award of the giant MEP package on the airport has been responsible for the unprecedented growth of Thermo over the last 12 months.

Last year its turnover stood at around $220 million while this year it is projected to more than double to $460 million. Controlling this incredible rate of growth has become a major issue for the company according to Sporle.

“We have had to put a cap on it and slow down, because there is always the fear of outgrowing yourself.

“Projects are being announced on a daily basis, it’s non stop and in some cases we are having to say ‘I’m sorry but we just don’t have the people to give you’.”

That is largely because much of the group’s resources are tied up at the airport where it is currently facing major cost pressures. In this it is not alone.

Al Naboodah Laing O’Rourke was awarded the main contract on the airport back in the summer of 2003 – just before the costs of steel and cement really began to spiral out of control.
Now as the MEP works reach their peak, the cost of copper and aluminium is also rocketing.

It is almost as if the world’s commodity markets have conspired against the project. Sporle says that the rising metal prices have had a significant impact on its contract although the contractor was fortunate enough to forward buy much of what it needed for the airport.

“Copper is going through the roof, in the order of 60% in the last three months – we have guys dedicated to looking at what’s happening in the London Metals Market,” he explains.

“Last year when tin was at its highest, suppliers would just cancel your orders to your face and sell it to the next guy who was willing to pay 50% more. That was what happening.
Whether that will happen again with copper I don’t know - but that is how bad it got.

“We were lucky enough to forward buy – but you have to ask clients to be reasonable,” he adds.

This request for ‘reasonableness’ is something many contractors in the region will identify with as they seek to protect themselves from material price rises without the benefit of price escalation clauses within their contracts.

Sporle says “At the end of the day, there is no such thing as a bad client. He has his interest to get the project completed. All we ask is with costs going up, be fair and reasonable. It’s a case of saying: ‘You know what is happening in the market – cut us some slack’.”

It means that for contractors like Thermo, the risks involved in taking on major contracts such the airport cannot be underestimated.

“If you take FIDIC, there is a clause within the contract that says should prices rise out of your control then you have recourse to the client, but sadly a lot of clients won’t accept this and these clauses are often crossed out.

“Your contractor might say: ‘This is our price at the time of tender but should the market fluctuate, we reserve the right to increase our prices. Those tenders are usually sent straight back.”

He adds: “The big clients like DCA will listen to you, all you are asking is for them to be fair and reasonable.”

Sporle and his team are now working to ensure that the MEP package on the project is delivered on time and on a contract of this size, this is no straightforward task.

“You do burn a lot of midnight oil, but the thing I say to my guys is identify the problem now and show me where we are at risk.

“Lets manage that risk now and not two months before we close the job.

“When it’s finished you as a passenger just want to check-in, do your duty free shopping and get on your plane.

“That has to be trouble free. An airport this size might have three A380’s coming in and 20 other planes hitting ground at any one time.

“If the IT and MEP are not working 100 per cent then that airport is not working, that is what it comes down to,” he says.
While the airport contract accounts for the lion’s share of the contractor’s current workload, the group is also involved in several other major contracts in the UAE.

It is currently in the process of completing seven towers on the Jumeirah Beach Residence project and is tendering for MEP works on Green Community West.

Finding staff to resource all of these projects is becoming increasingly difficult because of the specific electrical, mechanical and plumbing skills required.

While all contractors in Dubai are facing recruitment issues – the problem is more acute for the MEP sector.

He says: “If anyone believes you can go over to India and pick up 50 electricians and 50 plumbers just like that, they don’t know what they are talking about because they are no longer in existence. Work in India is in abundance at the moment.”

Finding senior site professionals doesn’t seem to be any easier: “Accommodation is the biggest killer. Everyone is paying a premium because you know they can walk across the road and get a job,” says Sporle.

The ides of March are now just eight months away – after which Sporle and his Thermo airport team will be able to take what will be a well-earned break.

Or at least they will if they haven’t picked up the contract for Concourse Three which has yet to go out to tender – but that’s another story. ||**||

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