Saturday, January 16, 2010

Breaking News: Shit finally hits fan at Blue City: Redesign allows contractors to get the boot (maybe)

Ah, Blue City.

Or as the BCC1 PR chaps prefer, the post-AAJH name of 'Al Madina A'Zarqa'


Photo: Blue City's aspiration before the global real estate crash.

We've had a history here at Muscat Confidential. You can check the back posts if you're new. But good news for Blue City investors and bond holders.

It's rumoured BCC1 has actually met its sales targets via bulk sales to Qatari/Kuwaiti/Saudi/Iranian money. A miracle indeed. [Though Dubai collapsing, the fact Blue City is in safe Oman AND the prices were - to be honest - a relatively good deal in this regional market.]

That was the good news.

Photo: The old bait and switch.


The bad news is that the clients want villas, not fancy Euro-style flats. So a reshuffle of the design - finish flats sold & started, plus the hotels and golf course, make the rest phased villas and town homes - means the existing contract with ACO is waaaaay too pricey. Negotiations to agree a new much reduced % for AECO broke down a while ago, and now BCC1 is (quite legally) using the clauses in the contract to dump the old contractors (well, maybe... a negotiation is seldom over in Oman) as they can get a number of local lads to slap up some villas and don't really nice some pricey foreigners so much.

Photo: Negotiation, Oman style.

Still, cash seems tight. I'm told the main Project Engineers ACE, the chaps who actually supervise the contractor AECO, have been kicked off the job* and staff will be repatriated asap. Thats around 70 guys. If AECO really do go (and they haven't yet) that'll be about 2000 workers off the job and sent home this month plus another 2000 next month, along with the people organising them.

Reports that the staff at BCC1 themselves are not getting their salaries on time lately. Money's too tight to mention.

So, good news for Oman! is how it can be spun: the scaled down ITD we all knew Blue City would be looks like it will come to pass. And the local boys will get a bit more work. And the (newly 'regionalised' from the original Japanese, at a discount) bond holders get paid, and masses of free Government infrastructure will get built. The brilliant jeweled city will come... er... later, for sure.

Nice play.

Hey Dragon! So what if a few totally legal contractual clauses get executed ... and (mainly foreign) contractors take a bit of a haircut? Its a recession! you might ask.

Well...

Fair enough. And if Richard can snatch salvation from the jaws of bankruptcy, well, I'm sympathetic. 'A man's gotta do what a man's gotta do, give me results, thats why you get the big bucks, Omelettes and eggs', etc.

Although, I'd just note that when a business starts to play the 'hard ball contract game', it usually gets expensive in the longer run. People in future don't want to work with you so much, lots of inefficiencies occur, and as a result you (and sometimes the wider industry or country) end up paying a higher 'risk premium'.

And those contractor expats will return to their home countries and slag off Oman, seeing as how some of them have just paid deposits for rent.. Making it that bit harder to recruit for everyone. And to attract tourists.

So thanks Richard. Glad those Qataris like the villas. You're doing a good job for your shareholders. Time for a press release soon?



[*several reports say for 'non compliance']

10 comments:

  1. Interesting.... I assume ACO are AECO?

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  2. are the apartments at Al Namaan happening???

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  3. Hi Dragon, Mmmmmm. Richard eh? Richard! Tell us more...

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  4. These are all speculations. Although the design is suspended, the construction is still being carried on.

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  5. Firstly, there is no company called ACO involved in this project. The Design & build contractor is AECO.

    This project will not be stopped. it cannot if anyone cares for the image of Oman in the region. However, what you have mentioned in terms of re-design is probably happening. But AECO as the desgn and build contracotr is involved in this process. Plus, kicking them out of the project at this time is not going to be beneficial for BCC1 as there are huge compensation packages which will have to be setteled first. So ultimately, even if kicked out, they will not make any losses.

    I too heard ACE is out of the picture. At the same time, Ihave heard that BCC1 is looking for a new consultant. Who knows, if the govt gets involved, Royal Court of Divan can handle the part ACE did...

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  6. What a fucking joke. Oman, Oman, Oman... What a load of baloney. Spare me please, its just so, so sad. Oman will never get up to speed in the world game.

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  7. According to the latest information things are far worse at Blue City than mentioned on this blog. They have recently made about all expat-staff redundant (engineers, managers, sales, etc.) and other staff have received their salaries last month via ASIT in stead of BCC1, with a fair chance of not receiving any further salary for the coming month... A real promising start for 2010 indeed.

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  8. I like it. A hard rain is gonna fall.

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