Contractors hoping to build a motorway linking Abu Dhabi and Saudi Arabia are still awaiting a start date, even though a preferred bidder was selected two months ago.
The identity of the chosen bidder for what will be the country's biggest road project has yet to be revealed.
The road, to be built next to an existing link, is due to be delivered using the public-private partnership (PPP) model where contractors and financing partners form consortiums to fund and build projects.
PPPs are likely to be used on a much broader scale after the introduction of the Mafraq-Ghweifat motorway linking Abu Dhabi and Saudi Arabia, said John Lee, the motorway and planning adviser at the Abu Dhabi Department of Transport (DoT), at the CityBuild conference yesterday in the capital.
The DoT official said the agency in January selected its preferred bidder for the 327km motorway, which is expected to cost Dh10 billion (US$2.72bn).
"It is in the hands of the Government at the Executive Council level," Mr Lee said.
The project has been in development for several years and the Government chose a short list of three consortiums in late 2009. The three were the CCCC-MTD group led by China Communications Construction Company, the IRTIBAAT consortium led by the Macquarie Capital group of Australia, and the Mafraq Motorway Group consortium led by Strabag Societas Europaea of Austria.
A PPP is typically structured with a builder sharing the price of an infrastructure project by paying the upfront costs of construction. The government client then pays for the project incrementally over the life of the assets, which can be between 25 and 30 years in the case of a motorway.
This relieves the government of having to put up the entire capital costs of the project at the outset and gives the contractors an incentive to finish on time and on budget.
It also encourages them to provide high quality at the delivery phase, as they are also tasked with maintaining the roadway over several decades, hence the emphasis on a roadway's lifetime.
If the Mafraq-Ghweifat project is successful, Abu Dhabi could decide to structure other large-scale transport projects using the PPP model, Mr Lee said.
With Dh200bn of transport infrastructure projects planned for the emirate over the next 20 years, including trams, metros, long-distance rail systems and new roads, bridges, tunnels and motorways, the Government will face a spike in its annual expenditures, particularly as it also finances other projects for nuclear reactors, airports, ports, oil pipelines and arms purchases.
The benefit of the PPP approach is that it allows governments a "predictable, smooth cash flow", Mr Lee said, with the Government expected to reimburse the winning consortium of the Mafraq project on a monthly basis over a 25-year period.
If certain criteria are not met the government would withhold payments to the winning consortium as a penalty.
The PPP structure has met, with success in other parts of the world. According to UK statistics, conventional construction contracts overrun costs 73 per cent of the time, and deadlines in 70 per cent of cases.
But with PPP projects, those problems occurred in just 22 and 24 per cent of cases, respectively.
