Recovery steps for the GCC construction sector

Maximize revenue

Companies should seek to retain revenue by continuing work on project sites where it is still safe. For example, sites with the right safety protocols can be retained if allowed by local authorities. Simultaneously, contractors can reallocate excess staff to operation and maintenance functions, which will likely be less affected during the crisis, or to crisis-related programs led by local authorities.

Adopt operational excellence

Contractors can implement procedures to improve their operations. Updating their health policies and operational procedures will allow them to adapt to pandemic conditions—and future disruptions. Contractors can adjust work processes, teams, and schedules to accommodate social distancing. For example, rather than bringing everyone to the job site for a single eight-hour shift, they can shift to smaller teams which work on staggered shifts. Technologies such as drones can reduce the size of teams on job sites — particularly for functions like inspections. Longer-term, contractors should review their crisis-management capabilities and ensure they are prepared for future disruptions.

Another operational area for attention is supply chains. To minimize delays on projects, companies must analyze their supply base, identify potential bottlenecks, and replace or diversify their suppliers as needed. Companies should also reassess inventory levels, take into consideration new lead times to ensure business continuity. Given the low output of building material manufacturers, some companies may opt to negotiate longer-term contracts with suppliers — for example, agreeing to buy a larger allotment of capacity at a discount.

Adopt an agile business model

In the medium term, construction contractors should adopt an agile operating model to become more resilient. They can examine how to improve their cost structure by replacing fixed costs with variable costs whenever possible. For example, salary structures of employees should have a lower base salary and a higher variable cost component aligned to performance. Companies should revisit their decisions about which capabilities to retain internally and which to outsource. In general, core activities such as project management and control should be internal, whereas some support and secondary services could be outsourced to reduce fixed costs.

In addition, contractors should invest in digital technologies to become more agile and react better to market disruptions. For example, companies can deploy enterprise resource planning systems at the project level to better manage in real time financials, workforce deployment, scheduling, and overall logistics processes. More advanced technologies such as robotics and additive manufacturing, among others, can reduce unnecessary manpower costs. Alternative building methods such as modular, off-site construction can improve productivity and project delivery times. All of these technologies have a common theme — they help contractors become more efficient, more productive, and less dependent on manpower.

Diversify into more stable businesses

Given that disruptions could recur with frequency and severity, contractors should consider diversifying into service offerings and sectors that are less volatile to market shocks. One example is operations and maintenance — a natural adjacent market that is downstream in the construction value chain and which can be digitally managed.