Oman Investment Fund: Report on Mega Project Construction Procurement

This report, prepared for the Oman Investment Fund, provides a comprehensive overview of mega project procurement. It begins by defining megaprojects and their significance, then delves into the key drivers of such projects worldwide, including factors like economic impact and stakeholder involvement. The report identifies barriers in procurement, both globally and specifically within Oman, such as jurisdictional complexities, unclear roles, and limited contractor capabilities. Critical success factors are explored, including pre-project planning, top management support, proper leadership, client consultations, and a committed team. The report concludes with a proposal for an innovative procurement ecosystem tailored for mega projects in Oman, aiming to enhance value for money and improve project outcomes.

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Mega Project
Megaprojects are some of the large scale, complex ventures that require around 1 billion or more
to complete. They mostly involve both the private and public stakeholders. Megaprojects require
large investment commitment and a long-lasting effect on the economy, people and atmosphere
at large. The public attention is normally attracted by megaprojects since they have an impact on
the environment and budget, and they make 8 percent of total global GDP. The low benefits or
high cost of megaprojects normally results from corruption, and they do not only refer to
construction projects but also any project with a budget of multi-billion and have a high level of
innovation and complexity.
Drivers of megaprojects commonly found worldwide
Success factors
Risk allocation
Risk is an important element in any mega projects, and, it is one of the main elements that
significantly affects the final cost of any project. Risk allocation always takes place where more
than one contractor is responsible for the execution of a project. In any project, there is a need for
recognizing risk and managing them and this affects the performance of the project and final
cost.
Pre-project planning
This is an important stage in mega projects since it entails overlooking the process in terms of
importance to the overall project. This is the stage where the project is defined for example;
setting up of the team, establishing deliverables, drawing of the Gantt chart and delegation of
activities. Without taking this particular stage seriously the team may lose sight of how to
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properly plan and execute on the project. In most megaprojects, carrying out pre-planning
involves a various range of activities such as identification of team, budgeting and scheduling,
and establishment of goals. Most managers overlook this stage due to the following reasons
which include;
 Institutional or internal pressure whereby the project managers are pressurized thus
entering the project with a wrong mindset.
 External stakeholders pressure.
 Excitement to get the project underway.
Top management support
Without support from the top management then it is difficult to attain the objectives of the
organization. In the case of megaprojects, they involve lots of money thus they need to be taken
seriously when it comes to activities and decisions being undertaken. The support rendered by
the top management carries out a vital duty in the success of megaprojects (Rolstadas, 2011, p.
528). Any project is funded with capital and the approval of capital is done by a person in the
management. After the approval of the capital, it is upon the management to wake up and start
overseeing the progress of the capital towards the objectives put in place. And in case the project
fails then they are to be blamed. As part of the oversight, the management would be vigilant to
see if there are any extra opportunities present when the execution of the project is taking place.
The risk management and the vision of the project will be mapped by the management while the
project team is busy carrying out the planned operations.
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Proper leadership
In any megaproject, a vital role is played by leadership in management which helps in
maximizing the efficiency and achieving objectives of the organization (Venkataran, 2011, p.
421). Some of the importance of proper leadership in the organization include;
 Initiating actions by sharing with subordinates some of the plans and policies needed
before the operation.
 Leadership entails the motivation of workers with monetary and non-monetary rewards
and thereby making the organization to achieve its goals.
 Leadership entails the provision of guidance since the work of a leader is not only to
supervise but also instructing the subordinates on how to carry out their operations
effectively.
 A leader creates confidence to subordinates and this is achieved by expressing the work
efforts to the subordinates, collecting views from employees concerning their complaints
and solving their problems, and explaining to them what is expected from them, their
roles and guidelines to attain their objectives.
 Providing morale to employees and leadership entails winning employees' trust and
confidence. Some of the important aspects to consider in the organization include having
personal contact with the employees and also keeping human relations with the
employees.
 Leadership involves building a work environment and this will in stabilizing the
organization at large. There is a need for having personal contact with workers and this
involves listening to their concerns and complaints, and developing procedures how to
look into those complaints.
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Client consultations
Consulting clients before undertaking any project is important before commencing any project.
A client may change his or her mind after starting to undertake the project leading to cost
overrun (World, 2014, p. 97). The clients should be given enough time to list their expectations,
the problem is that some of the anticipations of the customers may altered during the course of
the project and therefore causing differences and subsequently project letdown. Clients normally
have a vital duty to carry out in the project since they are the ones for whom the project is
fundamentally envisioned and made for. Sometimes project managers find it hard to satisfy the
clients particularly when you are dealing with a complex project and at the same time the level of
uncertainty faced is high. The difficultly arise because the customers are not explaining clearly
what they expect at the end of project and they need to come out clearly at the start of the project
to avoid changing their needs during the execution. During the production and design stages is
when the needs of clients mostly changes.
Proper coordination and training
Before executing the project, the plan needs to be drawn to minimize the risks leading to the
failure of the project (Rolstadas, 2011, p. 876). Some of the advantages achieved relating to
proper coordination and planning of megaprojects include;
 The efficiency of the organization increases.
 The risk associated with mega projects activities.
 It promotes proper coordination within an organization and this entails coordination of all
short, medium and long term plans.
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 The project personnel are motivated since the objectives and all plans are well articulated
so they know what is expected from them. Numerous monetary and non-monetary
incentives are provided by a good plan to both employees and managers.
 It enhances the creativity and innovation of the project managers.
 It enhances decision making since different plans are made by managers and the best of
all strategies available.
 Planning enhances the maximum utilization of resources since it reduces the wastage of
valuable resources.
A committed and integrated team
In mega projects, employees working as a team lead to the success of the organization, and
grouping workers for sharing work undertakings or processes enables them gain thoughts and
improved teamwork (Rodrigue, 2013, p. 87). Commitment simply means employees are more
likely to pick up the slack for a missing worker. Employees normally tend to run away from a
certain task which they are expected to perform, though the success of the mega projects relies
on how employees are committed and united. Through the commitment of employees, the
bottom results are noticed since committed employees come up with decisions benefiting the
organization at large.
Failures factors
Jurisdictional complexities
One of the greatest challenges in megaprojects is complying with the rules and regulations put in
place maybe by the government. There are certain standards put in place by the government
which requires agreement with some operations to be implemented at different levels of the
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organization. Sometimes the duration of agreement activities may be longer duration compared
to project duration, therefore generating a culture of uncompleted tasks.
Unclear definition of roles, responsibilities, and authority
Pre-project planning is an important process in every project since every employee knows what
is expected of him or she, the kind of duties he or she needs to take to avoid duties clashing and
every employee will be responsible if he or she fails in the sector allocated to him. This will
make employees work towards a common goal (Priemus, 2013, p. 332).
Limited capable contractors
Megaprojects require qualified and reliable contractors who can carry out his or her duties
accordingly. Some contractors are paid after delivering substandard services. Megaprojects
require qualified contractors since they involve lots of money therefore necessary measures
should be taken into consideration to avoid future cost implications.
Underperforming contractors or key subcontractors
If the contractors or key subcontractors fail to attain the expected levels of services or goods, the
value of money is not seen by the owner of the project. Subsection or faulty works may need
repair to be done earlier or expensive correction (Morris, 2013, p. 65). The contractors need to
carry out their duties effectively and to achieve this, they need to understand the requirements of
the clients before getting involved in some serious operations. The cost of maintenance and
operations may significantly increase due to insufficient quality. Being a contractor means
coming across numerous risks and challenges. They are difficulties they are going through for
example scarcity of workers, the language of the contracts and insurance terms. Some of the
factors leading to project contractor failure include;
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 Poor project management and this results from unskilled personnel in the middle and top
management, failing to comprehend the company policies and procedure.
 Deprived accounting is branded by a deficiency of cash flows, failure to forecast cash
flows, operating loses, low bids on the contracts and fading profits.
 Poor planning and this includes improper business plan that entails all financial,
marketing, growth, and operations aspects (Morledge, 2013, p. 321).
Barriers in the procurement of megaprojects globally
Limited pre-procurement dialogue
It is important that before taking the task in megaprojects, the project manager need to be
interacting with their supplier market to;
 Evaluate the clients’ wants.
 Deliberate the service design.
 Comprehend and improve the supplier base.
Many managers forget to interact with suppliers at the pre-procurement phase and this should be
practiced to enhance the outcome and efficiency. Currently, two procurement procedures have
been introduced that entails both dialogues baked in. Pre-procurement dialogue should be
practiced or become a norm such that the value for money is represented and services are
rendered effectively.
The inappropriate decision about procurement approach
Procurement normally depends on the interpretation of the legislation and this shows there is
need of enlightening officers in the procurement field concerning the use of grants since
procurement is not all about the specialization size that means it is an agreement. To ensure the
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megaprojects are undertaken successfully, there is a need for ensuring the procurement
approaches are varied to suit individual circumstances (Miller, 2011, p. 219).
Contract sizes are increasing
In the current situation, an increase in the larger scale has been noticed and this is mostly driven
by government enthusiasm. Some disadvantages accrue as a result of large contracts more so in
megaprojects are increasing. To eradicate the issue of large contracts, the government should
develop a prime contractor in future programs by offering more backing and extensive schedules
to permit associations construction.
Payment by outcomes
This is where the contractors are paid based on the quality of services they have rendered. In
most cases, the client provides contractors 70% of their monthly contract price in arrears to
ensure suppliers provide a degree of certainty in meeting fixed costs. The remaining 30 percent is
paid when the performance targets are met (Merrow, 2011, p. 76).
Shot procurement timescales
Those who want to compete for contracts for mega projects are normally discouraged by the
short procurement timescales. Complex projects require a considerable amount of time and
money and this is the reason why eligible contractors are not bidding for work. And to eliminate
this particular barrier, then training of professionals in the field of procurement should entail
procurement schedules that replicate the difficulty and the contract scale being proposed
(Higgins, 2013, p. 87).
Disproportionate requirements at PQQ and ITT stages.
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To determine whether the contractor has the capability and suitability to deliver certain services
needed in mega projects, then it is determined by the help of PQQ. The use of PQQ does not
favor contractors since they spend a lot of time more than 4 weeks per year completing tenders
and PQQ. A contractor faces a barrier from Invitation to Tender (ITTs) documents limiting them
from providing services they wanted to deliver. To eliminate this particular barrier, there is a
need for procurement professionals to ensure that the requirements at the PQQ and ITT stage
should be appropriate and relevant. This depends on the number and quality of questions being
asked.
Contract awarded on price and not value
Most of the projects nowadays people consider price rather than delivering value for money.
Contractors need to be motivated by mission rather than profit. To get rid of this barrier, teaching
officials and procurement specialists should entail increasing a better comprehending of risk,
value for money, and social value (Hart, 2016, p. 89).
Excessive monitoring and evaluation requirements
Contractors only are benefitted when there are appropriate and feasible monitoring and
evaluation requirements. The effectiveness and efficiency of servic3e delivery are reduced,
resources are wasted when there is excessive and inappropriate monitoring and evaluation
requirements. To eliminate this barrier, procurement professionals should be trained on the
importance of proportionate monitoring and reporting requirements. And integrate reporting
costs into funding arrangements (Hart, 2016, p. 87).
Poor quality data and reporting by public authorities
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The formation of policy and driving improvements in procurement is enhanced by open and
transparent procurement data. Lack of data or poor data creates challenges for constructing
appropriate performance baselines and outcomes targets.
Poor decommissioning
Decommissioning entails bringing to an end the delivery of a service or an important section of a
service to bring about enhancements to current service. Improvements may entail value for
money, productivity, and reduced budget. In decommissioning, services exist, reviewing process
changes and then a fresh competition to win the contract starts. There is a need for training
officials to refer to and work meticulously with service benefactors when the service is
withdrawn (Grimsey, 2017, p. 56).
Critical success factor in the procurement process for mega project
Some of the success factors in procurement for megaprojects include;
a) Subcontractor conditions. The topic of subcontracting must be addressed in the contract,
stating clearly the conditions and approvals needed. The subcontractors must be
acknowledged within the tender offers, and their qualifications substantiated.
b) Supporting and educating suppliers/ creation of markets
c) Guarantee in contracts. Grantees against goods or services need to be stated in any
contract, their act, distribution dates or agreement need to be very clear concerning the
degree of the warranty.
d) Ethical standard. Ethical standards are not equivalent in all countries and these should be
openly quantified in contractual forms and made perfect in all dealings.
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e) Pricing. The good or service offered reflects the contractual risks involved and is
therefore to some extent influenced by the buyer policy.
f) Split buying. This is used in aspects involve procuring high quantity parts since it offers
advantages of spreading the risk associated with production over two or more suppliers.
This is useful in a situation where every supplier shows an individual construction
proficiency needed by the project (Gretschmann, 2009, p. 123).
g) Effective organization of wide policies to ensure that everyone is aware of the strategy.
h) Auditing regularly and monitoring to assess where the contractor is in the context of
sustainability procurement.
i) Offering training and guidance to those participating in the procurement to ensure
sustainability is achieved.
j) Commitment to sustainable development as an organization policy.
k) Forming procurement consortium where relevant by pooling procurement.
The innovative procurement process of mega projects ecosystem of mega projects in Oman
pursuance of the superior value of money (VfM)
For the mega projects to carry out their daily functions, the ability of procurement to purchase
services and goods is critical. Innovation plays an important role in procurement to be effective
and enhancing innovation means processes that are transparent and efficient, and facilitate equal
access and open competition. Megaprojects, as the major purchasers in every market, can also
drive innovation in the private sector through the stimulation of their response to current and
future service needs (Gil, 2017, p. 56).
In a case of megaprojects, the changes in the procurement are centered on providing solutions to
complex problems through the collaboration of independent, numerous actors who work together
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