Keep up-to-date with delays

Jay Palmos.

By Dr Jay Palmos.

The growth of Dubai in the last decade has been unprecedented. However, the economic crisis has resulted in a decrease in jobs and, consequently, a slowdown in the number of people immigrating to the emirate.

But the unprecedented construction has not slowed. Last month, Deutsche Bank estimated that up to 30,000 new units will enter the Dubai residential market this year.

A UBS study predicts rental prices could decline by as much as 30% during the financial year 2010 due to overcapacity. These reports paint a bleak picture for developments currently under construction.

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Developers know that to increase the chance of renting space successfully they must enter the market as early as possible.

Due to the immense pressure to complete projects, developers are reticent to grant time extensions and continue to rely on strict liquidated damages provisions to force contractors into timely completion.

Of all the participants on a project, MEP contractors are most often blamed for project delay. The most common cause of blame stems from the fact that the MEP contractor relies heavily on the performance of others for its success, including scenarios where:

1. The MEP contractor is selected late in the nomination process, thereby reducing its overall time of performance (this issue is often compounded by unrealistic programme requirements);
2. Late access to site or critical parts of site such as the roof level (due to design change or construction delays);
3. The MEP scope is the technical heart of any project, and therefore it is linked to many other disciplines requiring long co-ordination and/or approval periods for submittals;
4. Due to the ubiquitous nature of MEP work, installation must be co-ordinated expertly to reduce congestion between subcontractors of different disciplines. No doubt, MEP contractors suffer disproportionately more from a sub-standard project manager;
5. Finally, even small dollar value MEP scope variations can have an enormous impact on completion if it affects a critical area of the scope. For example, an upgraded chiller system can impact the electrical requirements and ducting throughout the site – with the necessary utility co-ordination.

Delays have been reported as the most common and costly problem encountered on construction projects (Const Mgmt and Economics 1996). In normal economic conditions, contractors are compensated for delay caused by others through a time extension.

However, in today’s market, it is increasingly difficult to obtain such an extension. The most recent Middle Eastern academic research (Eng, Const & Architectural Mgmt Vol 16, No. 1, 2009) listed reasons where failure to provide adequate evaluations led to delay claims as: lack of awareness by site staff to detect a delay; insufficient skilled personnel for detecting a claim; and inadequate contract knowledge by site staff.

This research is particularly concerning for MEP contractors because most general contractors and developers are unfamiliar with the technical nuances of MEP work.

It is often extremely difficult to convince general contractors of entitlement to an EOT. To this end, MEP contractors must support their prime contractor by providing clear claims which demonstrate entitlement.

The conclusion of the research, particularly in light of the squeeze on developer’s profit margins created by the global financial crisis, is clear: protect your interests by having personnel specially trained in delay identification and contract interpretation available to you.

Early identification and prevention is the key to avoiding unnecessary costs. The survival of many contractors will depend upon the timing and total costs associated with their present contracts.

Dr Palmos, an experienced lead expert witness in delay litigation, is an engineer and licensed attorney, as well as a university lecturer.