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We are starting to see positive steps being taken in the procurement and early construction works for a variety of rail networks.
Mena Rail News recently announced two new lines linking Bahrain and Qatar in anticipation of the FIFA World Cup 2022, whilst Oman Ministry of transport and Communication has successfully awarded its project management contract for phase 1 of the Oman GCC railway network.
The region is reaching a stage of ‘lessons learned’ from similar projects in the UAE, including Dubai Metro, and that is providing a solid base from which to build out required infrastructure across the region. Undoubtedly the various regional government authorities will also be looking to standards applied worldwide and out of region.
With these developments in mind we will focus on a series of updates specific to the railway sector in the coming months.
Railways are highly complex, and therefore high risk, projects. It goes without saying then that there are a number of particular challenges associated with railway projects ranging from:
In this edition we start by taking a look at employer responsibilities and links to procurement issues.
Employers, usually government entities, are responsible for setting procurement strategy and undertaking that procurement in conjunction with their project teams and professional consultants.
Getting to the stage of knowing what the Employer actually wants is time consuming and costly. To that end governments undertake a variety of extensive feasibility studies. The options for what type of railway system they actually want are extensive and include anything from a light or mono rail, metro or tram systems to extensive full scale mainline passenger carriage systems including freight and logistics.
Key components for success include the earliest setting out of Employer’s Requirements. Sitting alongside these are Performance Requirements. The integration of a solid railways project team within or alongside the Employer is key, particularly from a project management perspective and can include early design work and cost management analysis.
On the procurement side there is no one standard form of contract in use throughout the Middle East region. We are seeing an amalgamation of various types of contracts blended to cover required works and services relating to the design, construction, supply chain, service, operation and maintenance elements. The forms of contracts used are dependent on the overall procurement strategy but the contracts that we do see as a priority is use include:
Operation and maintenance (whether term maintenance or rolling)
Contracts are based on EPC, EPCM, PPP and Concession type arrangements, directly linked to the overall procurement strategy, and so use of FIDIC Silver Book (1st Edition 1999) is prevalent in the market.
Whilst many will look to alternative forms of tendering for these high risk projects including direct purchasing, 2-phase tendering or competitive negotiations, in reality tendering will likely fall across jurisdictions to the application Tender Boards and similar entities. Governments acting as Employers for rail projects will be most likely compelled to adhere to their Tender Board regimes and applicable legislation. This is because inherently these are public projects and the costs and complexity involved dictates that Tender Boards will drive procurement awards.
In the next edition we will take a look at financing options for rail projects with a particular focus on Islamic finance.
This article was written by Paula Boast.
For more information please contact Paula on +973 17 133212 or email@example.com.