Intense competition for contracts and increased manpower and material costs are negatively affecting serious players in the sultanate's construction industry, which in turn is affecting the quality of work, according to the Oman Society of Contractors (OSC).
Speaking to Muscat Daily, Salim Talib al Sheedi, CEO of OSC, said recent profit margins of local construction companies have not been encouraging. This is, he added, mainly due to the lopsided competition from non-serious contractors which has been prevailing for some time.
“Unfair competition in the market has affected the returns of serious players and damaged the quality of work as companies are forced to compromise on quality while reducing price. Some companies are taking up jobs at lower project values just to survive, but those that do not want to compromise on the quality of work are facing tremendous difficulties, with some even forced to leave the market,” he said.
Sheedi said that the frequent changes to legislation on manpower have increased costs and created pressure on all construction companies.
“All of a sudden construction companies have had to hike minimum wages and Omanisation levels, which is contributing to higher construction costs. The price of construction materials, which have gone up globally, are adding to the problems,” Sheedi said.
He added that some international firms are taking advantage of the situation as they do not have overhead costs and complete functional establishments as do local companies, which have functioning for a long time and facing the practical difficulties of the market.
Regarding the new directives issued on the tendering process in various government entities, Sheedi said, “The new directives which had given authority to local tendering committees in various government entities to award tenders of less than RO1mn value has lead to a situation where a lot of efficient registered companies are facing unfair competition from non-serious, smaller international contractors.”
This situation has been exploited by some local contractors as well, he said. “Some large contractors have also been offloading small contracts to small sub-contractors at very low cost, which is not possible for genuine market players,” Sheedi added.