Parsons chief remains upbeat on region despite payment issues

The chief executive of Parsons has said that he sees “several good signs” in the Middle East market, despite the challenges that it has faced in getting payments from some clients over the past 12 months.

In an interview with The National, Chuck Harrington cites a stabilisation of the oil price, greater Arabian Gulf sovereign debt issuance, projects linked to Dubai Expo 2020, Qatar’s 2022 Fifa World Cup and Kuwait’s modernisation attempts as factors for optimism in the region.

The US engineering consultancy, which has about one-third (4,213) of its 13,000-plus global employees based in the Middle East, also envisages greater opportunities for providing defence and security consultancy, systems and services to regional governments.

“While we are an emerging player in the Middle East, Parsons has an impressive global defence and security resume that we expect to grow in 2017,” Mr Harrington said.

The employee-owned company posted updated financial figures for 2016 on its website last week showing a 12 per cent decline in net operating income to US$144 million as revenue fell by almost 6 per cent to $3.04 billion. Its liquidity also continued to shrink, falling by a further 11 per cent to $144m. Five years ago, it stood at almost $500m.

Mr Harrington said that getting paid on time “continues to be a major problem for companies doing business here”, adding that payment cycles in the region can be twice or three times as long as contracted terms.

“Now, in some cases, we share some responsibility for late payments; when, for example, we don’t have all our required documentation complete and we don’t set the right expectations with the client up front. However, we have programmes where the paperwork is all submitted on time but the projects are still late in paying,” said Mr Harrington.

The Middle East was responsible for about 20 per cent of Parsons’ global revenue last year.

“Given the major contraction in infrastructure awards across the region in 2016, our business here held its own,” Mr Harrington said.

The 70-year-old company is involved in major projects in the UAE and Saudi Arabia. In the former, it has been a key adviser to Dubai’s Roads and Transport Authority (RTA), for which it oversaw completion of the Dubai Water Canal project last year. It is also working for the RTA on the new Shindagha bridge crossing and the deep wastewater tunnel projects. In Saudi Arabia, a joint venture with Egis is managing two contract packages for the Riyadh Metro. Parsons is also working for the ministry of housing on an infrastructure programme delivering 74 million square metres of housing land, and its contract overseeing the development of Yanbu Industrial City for the Royal Commission for Jubail and Yanbu recently entered its 40th year.

In 2012, the scope of land covered under the contract increased by 420 square kilometres to 600 sq km, and a master plan covering the extended city was finished in 2015.

“Parsons is currently tasked with growing our participation in support of this growth, which aligns directly with the kingdom’s new National Transformation Programme,” Mr Harrington said.

He said the programme “can lead to multiple project opportunities for us”, not least in the area of public-private partnerships where it has expertise developed in the US.

“As this region becomes more comfortable with these models, Parsons will be able to capture solid market share,” Mr Harrington said.

A report published last month on the GCC construction sector by the regional news service Meed found that the value of construction and transport contracts in the region dropped for a third consecutive year in 2016, falling by 19 per cent to $78bn.

The UAE market experienced an 18 per cent increase in project awards (driven mainly by activity in Dubai) to $35.4bn, but awards in Saudi Arabia fell by 62 per cent to $11.5bn.

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