The cost of building the Metro is estimated to have increased by 75%
The RTA is disputing a massive US $2.5 billion (AED9.18 billion) claim from the consortium responsible for building Dubai Metro, according to a source connected to the project, Construction Week has learned. The RTA has not denied the claim.
When asked if the claim was valid, RTA corporate communications director, Peyman Younes Parham said: “We won’t comment on any contractual issues.”
The source, who did not want to be named, said the consortium is insisting it is entitled to $2.5 billion in unpaid certified amounts and additional escalation costs, variation costs and delay costs due to changes in the metro design and specifications, but the RTA does not agree.
Story continues below
Advertisement
FEATURED COMMENT
I guess all comments below make sense. I would add that claims are only valid if the contractor had initially made a req
“(The RTA) is totally disputing it, they have said the money is not due and in actual fact, the consortium is already being overpaid,” he said.
“Right now it is just a claim and hasn’t got to the arbitration stage. But it is probably the biggest claim for a civil works contract ever seen in Dubai, possibly the world.”
If the claim proceeds to the courts it will be one of the most significant cases in Dubai’s construction history, he added.
The Dubai Rapid Link (Durl) consortium includes Mitsubishi Heavy Industries, Mitsubishi Corporation, Obayashi Construction and Kajima Corporation of Japan and Yapi Merkezi of Turkey.
The consortium was awarded a $3.39 billion contract in 2005 to build the metro’s red line and a $1.11 billion contract to build the green line in 2006.
In August the RTA chairman HE Mattar Al Tayer conceded that the cost of building the metro system had increased by “billions” since the original contracts were awarded.
He said more than half of the project had changed in terms of its design and facilities since its inception to cope with the growing needs of the city.
According to estimates the cost of the project increased by 75% to around $7.6 billion.
Durl corporate affairs manager Sam Majed also refused to talk about the claim.
“We don’t make any comments about anything related to the project, definitely nothing about contractual agreements between us and the client, it’s all part of a 100% confidentiality agreement, so absolutely no comment,” he said.
It is still unclear how much Durl has been paid for their work on the project, but in November the general manager of Mitsubishi Heavy Industries’ Middle East office Koji Okamoto told The National newspaper they were “still awaiting payment.”
Ten of the 29 stations on the metro’s red line opened in September, with the green line expected to be operational next year.
Page:
1
Readers' Comments
Kal (Dec 20, 2009) Dubai United Arab Emirates
Metro Claim
I guess all comments below make sense. I would add that claims are only valid if the contractor had initially made a request for payment at the time of delay or variation which was at the time agreed by the RTA. If the consortium decides to backdate/create variations to improve his cashflow, then the RTA will not pay. Claims are only valid if originally discussed and agreed at the time. notwhithstanding the above and you guys comments, I think this poor consortium has no chance. You are talking 2.5 billions from a government which is already in debts. reality is RTA belongs to DM which is a dubai government. I think the new law that just came out a few days back asking all government entities to return any surplus monies back to the government treasury is one way of protecting themselves against claims. The RTA will have no cash left and the consortium will need to deal with Dubai Govt directly. No chance.
Farouk Zaharna (Dec 14, 2009) Dubai United Arab Emirates
Claim over Dubai metro
Usually, Claims result from events which the contractor beleives are extra contractual and to which he feels entitled for additional compensation.If the Client approved such claim, it becomes a variation order to the original contract. Hence, payment of the approved claim will be due to the contractor. Otherwise, the claim become a dispute putting the burden of proof for entitlement on the contractor based on cause and effects. Good drafted contracts include specific clauses to deal with disputes.
The Colonel (Dec 13, 2009) Doha Qatar
Dubai Metro
Gentlemen, there will be a need to have the disagreement converted to a dispute if the contractual finer points are worthy of discussion. However given the perilous state of Dubai's finances the entire issue could be nothing more than a massive waste of time and resource. $2.5 billion is a substantial sum therefore one might suggest that if it had real merit other options were available at an earlier stage of this difference of opinion.
Ben Millington (Dec 13, 2009) Manama Bahrain
Claims
GAAGZ, I think Redders has summed up the point. In this instance, to keep things simple, I would broadly define 'claim' as to demand payment in accordance with a formal agreement. This was the terminology used by the person quoted in the article, who has a very good knowledge of these things. However, I am no expert and you may have a valid point with regards to the definition of 'claims' in regards to contractural agreements, thank you for sharing your thoughts
Redders (Dec 13, 2009)
United Arab Emirates
Metro Claim
For GAAGZ: A Claim is a demand for something you would not otherwise get if you did not ask and it seems from the report, something you believe you are entitled to, but the other party does not, or typically in these parts, won't give you!
So it's all a 'Claim'.
tukaram (Dec 13, 2009) dubai United Arab Emirates
Metro claims
I fully agree with GAAGZ. At best we may say this is what the contractor feels that he is entitled to get, which include outstanding certified payments, Variations & other claims
GAAGZ (Dec 10, 2009) Dubai United Arab Emirates
There is a difference between a claim, a change order and unpaid dues
I dont think it is correct to classify unpaid certificates as Claims, nor can you classify contract variations or change orders, which are issued under the contract provisions as claims. For Example: the delayed payment of the certificates does not classify the amount of the certificates under the "claims" header.However, the loss of interest on delayed payments can be considered as a "claim".Hence I dont really think that the above article is correctly worder nor is it's title.Please let me know your thoughts if I am mistaken.
Site Map
\
FEATURED COMMENT
I guess all comments below make sense. I would add that claims are only valid if the contractor had initially made a req