SOURCE: Industrial Info Resources

October 09, 2007 05:01 ET

Contax Identifies Market Signals as Middle East Industrial Project Costs Escalate, an Industrial Info News Alert

JOHANNESBURG, SOUTH AFRICA--(Marketwire - October 9, 2007) - Reported by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas) -- "Risk" has been a much discussed and inspected concept in the past few weeks, as the subprime mortgage saga unwound on Wall Street. Who held the knowledge of where the risk lay? How now to handle the risk in new opportunities?

In the Middle East, industrial project owners learned between 2003 and 2006 that initial engineering, procurement and construction (EPC) contract investment estimates had the very real risk of escalating by 60% to 120% by the time the project was completed, and sometimes before the first soil was turned on site. The underlying input cost rise accounts for only part of the increase. Because of this cost escalation, projects are now being postponed and canceled, as the owners can see no other way to avoid the risk of rising prices and execution delays. Adding to the challenging conditions is the situation on construction sites where 30% to 50% of project managers have had no training to support the positions they hold. It is a problem for all major owners and contractors and impacts on costs, health and safety.

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