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Contractors may exit the UAE if disputes get worse

The state of contract resolution has left some contractors to consider whether it's worth doing business in the UAE

Contracts have raised the prospect of exiting the GCC.
Contracts have raised the prospect of exiting the GCC.

Entrenchment and an adversarial market could see contractors exit the UAE, with some said to be concerned about the state of dispute resolution.

Late payment, poorly drafted contracts, and a culture that some say has not changed in the last decade continue to plague the sector. And contractors in the GCC are getting irked.

While disagreements between client and contractor can be healed through dispute resolution and alternative dispute resolution (ADR), there is a worry that contractors could exit the market if the situation worsens.

“Some contractors are debating whether it’s worth continuing in the industry because there is just so much risk [in the UAE],” said senior quantity surveyor at Alemco, Paul Yates.

READ: DIFC launches division for construction and tech disputes

“A lot of the major contractors are struggling with their cash positions in the UAE market. When these disputes happen, you can see projects come to a standstill. Previously, maybe contractors would be willing to just see it out on the basis that they could override the cash flow issue through UK funding or central funding from a sister or parent company. But now contractors, I think, are willing to say they’ll just stop and walk away because they know it will never get to a dispute position where they feel they can challenge the employer because there is such a small client base.”

Chris Lyon, also a quantity surveyor from Alemco, a mechanical, electrical and plumbing (MEP) subsidiary of Alec, added: “We find that, from the contractor’s side, the client requests things to get done immediately, but they don’t understand the impact to the programme [or] the impact to the overall contract values. It impacts the ability to deliver a project on time.”

Lyon and Yates raised their concern at Construction Week’s inaugural Dispute Resolution Question Time on 21 March. Here, many attendees spoke of a construction sector that was at a tipping point.

Rob Jackson, director of the Royal Institution of Chartered Surveyors in Middle East, was one of five panellists speaking at the forum. He suggested the sector may need to reinvent itself by “rewiring the contractual dispute framework”.

In the interest of balance, it is worth noting that attendees from investment giant BlackRock said there was a “lack of understanding” on the contractor side around dispute resolution. 

While no contractors said that they had firm plans to exit, it would not be the first time companies have left the GCC in recent years.

In July 2017, the now collapsed construction giant Carillion exited major GCC countries, including Saudi Arabia and Egypt. At the time, the business said it would only bid for construction contracts where it could do so via “lower risk procurement routes.”

In the same year, Balfour Beatty announced plans to exit the Middle East.

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Construction Week - Issue 751
Oct 13, 2019