Contracts fall short of legal standard for PPP

The legal framework for public-private partnerships not part of Abu Dhabi's new contract for construction projects.

NEWS, Business
Although large-scale infrastructure projects, such as railways, can be facilitated by PPPs, there is still no law governing them in Abu Dhabi.
Although large-scale infrastructure projects, such as railways, can be facilitated by PPPs, there is still no law governing them in Abu Dhabi.

The legal framework for public-private partnerships (PPP) will not form part of the Abu Dhabi government's new contract for construction projects.

The Abu Dhabi Law No. 1 of 2007, 80% of which is based on rules applied by the International Federation of Consulting Engineers (FIDIC), was launched earlier this month.

But while the Abu Dhabi government is forming partnerships with the private sector for the execution of infrastructure projects such as desalination, sewerage and power plants, there is still no formal legal standard governing them.

"There is no legislative framework for PPP-type projects; however, the government is very much involved with such projects on a case-by-case basis," said Edward Sunna, head of the construction and engineering department, Al Tamimi & Company.

"It's really been the drive of international players who've teamed up with Abu Dhabi banks to bring about simple, private contracts between the different parties to execute these sorts of projects."

Having a legal basis for PPP projects would encourage bigger contractors to bid for massive infrastructure deals, according to Riaz Malik, managing director of piling contractor, Bauer.

"PPP is a very good concept. The projects are happening at the moment but the missing link is still the legal basis," he said.

"Big companies are always looking for a clear and transparent legal basis - it's not a matter of mistrust - it's about knowing your rights and obligations. The legal basis gives you ownership rights that might otherwise be conflicting."

Malik added that the UAE is an ideal place for PPP-style projects, particularly with the investments being made not only in power and desalination plants but also in industrial complexes, airports, roads, schools and hospitals.

"Particularly given the foreign interest in real estate, I believe the UAE is an ideal place for PPP as there are major infrastructure projects happening. But you need a strong drive from the government to come up with clear PPP regulations."

The aim of the Abu Dhabi Law No. 1 2007 is to attract contractors with the experience and capability to work on government projects planned for the next 10 to 20 years.

"I believe this is the right way forward - it gives everyone transparency," added Malik.

"Everyone knows their responsibilities, there are no hidden clauses. You can better evaluate yourself and calculate risk. At the moment there is a lot of 'cut and pasting' going on with contracts - but this will bring about a standard that everyone knows."

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