Archive for the ‘Construction Contracts’ Category

Crisis for Gulf Construction Companies?

Let’s take a look at what has been happening in the Gulf construction market recently.

Drake & Skull announced plans for a major restructuring after suffering losses in 2016 of AED 787M, an improvement on 2015 when they lost AED 939M. A few weeks ago 8,000 employees of the 40 year old company Saudi Oger received letters announcing that 31st July 2017 will be their last day at work. The company apparently owes $3.5Bn to Saudi banks. Arabtec needed a cash injection early this year too after announcing losses of AED 3.4Bn in 2016. In 2015 the losses were reported at AED 2.35Bn. In March last year Al Jaber missed a debt repayment of AED16.2Bn which had been put in place in 2014 to restructure the company and in August, they announced the sale of their share in ALEC and the Shangri-La Hotel Abu Dhabi to finance yet another restructuring exercise. Then there’s the fall out between Al Habtoor and Leighton, the list goes on and this is just the tip of the iceberg for the Gulf construction industry…the small sub-contractors, sub sub-contractors and suppliers don’t make news in the financial press.

What is going on with contractors in the Gulf? Is there no work?

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6 Key Actions UAE Contractors Should Take in Today’s Tough Market

UAE contractors are facing tough market conditions, with cash flow constraints and greater competition for fewer contracts placing a squeeze on margins. Expo 2020 is just around the corner now but much of the anticipated bonanza from Expo and related projects has yet to kick off. The region however still offers decent long-term fundamentals for companies prepared to ride out the current slowdown in the market.

In addition to the current slow down, UAE contractors still face pressure on cash-flow from trying to close out legacy projects, and be paid for projects delivered back in 2008-10. Many contractors are finding that market conditions in 2016 are tougher than in the previous year and most have witnessed an increase in construction disputes.

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How to Make Sure Your Claims are Accepted

If you wish to ensure that your claims are accepted, you need to bear in mind EC Harris’ (now ARCADIS) report Global Construction Disputes Report. This report cites incomplete and/or unsubstantiated claims as one of the major reasons for construction industry disputes.

A typical scenario that I have experienced on many occasions is when a contractor submits a badly prepared or ‘inadequately expressed’ claim to the engineer for evaluation and the engineer rejects the claim on the basis that the contractor has not proved his case. The engineer is quite correct to do this, because the onus is on the claimant to prove that the claim is just and in such a case, the Contractor has not done so. The Contractor, however, believing that he has good basis for the claim, then refers the matter as a dispute. (more…)

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Claiming Prolongation Costs when there is no Entitlement to an Extension of Time | Can it be done?

It is generally accepted that, in a situation where a contractor is entitled to an extension of time, he is also entitled to claim for time-related costs for the additional time that he was obliged to remain on site. Such costs are usually referred to as prolongation costs.

Are there situations, however, where a contractor may legitimately claim for the payment of costs when an extension of time is not warranted? Well, yes there are. Consider the following example:

The contractor is constructing a high-rise building and has a tower crane on site, which his programme shows is to be removed on a certain date. The contractor however receives a variation order to change the specification of the air-conditioning chiller, which is located on the roof of the building and needs to be hoisted into position by the tower crane. The change to the chiller requires modifications to be made at the factory where the chiller is being manufactured and this will delay the delivery of the chiller to a date later than the date by which the contractor had planned to remove the crane. (more…)

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Omission of Items Included in the Bill of Quantities, but not Shown on the Drawings

I recently received a request for advice from one of our course attendees. I have been asked for advice about this topic on several occasions so I thought it worthy of a blog. The situation and query was as follows: (more…)
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