Monday, 23 November 2009

77.8% face non payment issues: poll

by Conrad Egbert on Nov 19, 2009

The majority of contractors say they're having serious problems getting paid by clients

According to an online poll on this website, 77.8% of respondents have said they are facing “serious difficulty getting clients to pay” for work they’re carried out on projects with only 22.2% saying they’ve “had some delays but cash is still coming through.”

No one (0%) clicked on the option “we've been fairly paid, and paid on time.”

Most contractors in the region have said they have had trouble getting some private and government clients to pay up money owed to them for projects they’re working on.

Due to the financial crisis, many developers in the region have had finance issues, which have resulted in their being unable to pay contractors for work done.

But contractors feel this is not good for the industry as it hurts the region’s image as a business hub. Some contractors like Besix have not tendered for the past nine months.

“If we’re not getting paid, what’s the point in putting in a tender?” asks Philippe Dessoy general manager Six Construct, which is part of a consortium working on the finishing touches on the Burj Dubai, scheduled to open on January 4.

“We’re not a bank, we are providing a service and we expect to be paid for it. It’s simple business. If we’re not paid, how will our business survive and in the end that would affect any company’s decision to be here,” he added.

Thomas Barry, CEO of Arabtec, which is the largest listed contractor in the UAE, also said that payment issues are an ongoing problem.

“We’re trying to come up with various ways to overcome the issue but we’re still going around in circles,” said Barry.

“We’ve been offered property in return but that’s not going to help us in any way as the property is being sold to us at boom prices which are not reasonable anymore.”

Dutco Balfour Beatty general manager, Grahame McCaig said at the Construction Week Dubai Conference earlier this month that property given in lieu of payments was not going to solve the problem.

“Accepting property in lieu of payments won’t allow us to pay our sub contractors or maintain a workforce of people. We have to pay their salaries so we need cash, not property.”

But Dubai’s Roads and Transport Authority (RTA) director of marketing and corporate communication Peyman Younes Partham told Construction Week that the RTA didn’t have these problems.

“There’s a contract that binds any work that we do. We have been operating for four years and have spent over US $8 billion (AED30 billion) on different projects, so that’s a lot of contracts and we haven’t had any issues.

“That’s because the RTA doesn’t have a habit of not honouring contracts, and neither do its partners. If we do a lot of projects, there’s bound to be a lot of work going on and some differences, but nothing that can’t be solved,” he added.

Saturday, 21 November 2009

One in Three Ashghal Projects Delayed
Web posted at: 11/9/2009 6:23:1

DOHA: The Public Works Authority (Ashghal) has admitted to not being able to complete more than 32 percent of the planned infrastructure projects.

The contracting companies that were awarded the various projects encountered a number of problems. For instance, some of them took up work beyond their capacity, while others suffered because building material became expensive.

The escalating cost of building materials led to the failure of contractors to manage their respective projects with the payments they received in instalments from the PWA. Moreover, the designs of some projects were changed very late, almost at the time a project was to be implemented, which again made the contractors suffer.

This was disclosed by the Acting General Manager of Ashghal, Nasser Al Moulvi, to Al Sharq in a detailed interview yesterday.

Speaking about the delay in projects, Al Moulvi said: "We should also take some blame with the contracting companies. It is not entirely their fault."

When told that it is generally believed that Ashghal soft-pedals on the issue of erring contractors and does not act tough, he said the contracting companies, on the contrary, accused "us of being tough with them." "As a matter of policy we do not believe in penalising contractors unless driven to the wall because our focus is on seeing a project completed without compromising on quality," said the official.

Asked about the German company (Bilfinger Berger)and the jeopardized February 22 Road project, he said only 30 percent of the work was remaining and work will resume by the year-end.

Asked if the dispute with the company was over QR850m, Al Moulvi said the amount was close to it, and in reply to another question if the German firm would be awarded any other contract, he quipped: "No, not at all. The question does not arise."

Monday, 9 November 2009

Price escalation in Qatar

, November 8th, 2009

Chandana Jayalath discusses what to do when faced with price escalation in Qatar.

The majority of contractors in Qatar have been locked into lumpsum fixed-priced contracts where there is no provision for price escalation. Open market vacillations are a risk to the contractors, even in contracts having long durations.

But a surge in material costs has considerably affected the bottom line where profit margins are not as high as they once were.

For example, in Qatar, during the last ten months steel prices went up by an average of 65%, Red Meranti timber by 70% and asphalt by 40%. As a result, contractors have been searching for recovery means through claims on their own basis.

Many contractors use consumer price index (CPI) as the basis for claims although the purpose of the index is far different.

However, contractors will have a difficult, if not impossible task in getting respite from such increases. Even if the contract has become economically burdensome, it is unlikely to be sufficient to excuse performance.

The only way to get rid of this issue is to compensate the additional cost on an ex-gratia basis in existing contracts and share the risk on a contractual basis in future contracts.

The aim behind any strategy should be to reasonably reimburse the contractor for changes in input prices over which they have no control at all.

This means the contractor can be eligible if he could not foresee in advance. On the other hand, it may be cheaper in the long run for the employer to pay for what happened rather than what the contractor thought might happen in those areas of doubt, which the contractor cannot influence. The benefit of the doubt would then be passed on to the employer.

Albeit contract provisions do not provide for claims that are not capable of being contractually supported, the employer may well be in a position to consider them at corporate level since it is a macro economic global crisis that has been unprecedented.

The foregoing is not only limited to contractors; consultants also face a similar situation in their contracts.

PSA which stands for professional services agreement has been extensively adopted in the procurement of consultancy services in public infrastructure projects in Qatar, although it is relatively an old version that goes far back to 1984.

Typically, the contracts for professional services, be them design or supervision, include a project brief prepared by the employer describing what he intends to obtain or the scope of service. In addition to the project brief, there are three separate schedules forming part of many consultancy contracts in Qatar.

A clause in schedule B of the memorandum of agreement states that “should there be any extension to the contract period, the consultant must continue the services at the same monthly rates and prices” so that it expressly forbids any fee adjustment in the contract and shall pass the pricing risk onto the consultants for an indefinite period of extension.

It further contradicts the clauses 7.6 and 7.7 of the PSA which says that “service during longer periods shall be deemed to involve additional services” and “the government and the consultants shall agree any additional or reduced fees prior to beginning any additional or changed services”.

This provides an opportunity to agree on new rates for longer periods than shown in schedule C in the contract. Optionally, the engineer may treat each case individually by recommending compatible rates.

A consistent criteria is important, particularly when the professional service market is so volatile in nature that prediction on the fee structures for longer periods is hard, requests for the period is beyond the original completion date, reasons for extension is no fault of the consultant and when uninterrupted service is critical to finish.

In these circumstances, a ‘reasonable’ compensation within a ‘contractual’ framework is imperative for the well-being of the industry as a whole.

Who is Dr Chandana Jayalath?
Dr Chandana Jayalath is a Member of the Royal Institution of Chartered Surveyors and a senior contracts specialist for the Public Works Authority (PWA) in Qatar. His latest industrial exposure has been sidelined in the settlement of various commercial and contractual issues, claims and disputes arising in the infrastructure projects spearheaded by the PWA.

Ashghal wins legal battle against German firm

Ashghal wins legal battle against German firm
Web posted at: 11/1/2009 5:24:17

DOHA: The Public Works Authority (Ashghal) has won a legal battle with the German construction major Bilfinger-Berger, the main contractor of the 22 February Road project. The court lifted a ban on Ashghal against awarding the construction works of the delayed project to another contractor, an Arabic daily reported.

Ashghal and the Bilfinger have been on a tug of war after the German company allegedly failed to carry out the project works as per the original schedule. Ashghal later announced that it would award the project to three other contracting companies. Bilfinger approached the court against the Ashghal decision and the court delivered an order temporarily restricting the Authority from its move. The court, however, after hearing Ashghal delivered an order in favour of Ashghal.

It was in March 2009, Ashghal formally announced that Bilfinger partially suspended the project work. Both the parties tried to reach a consensus to resume work. As the talks failed, Ashghal announced its decision to award the works to other contractors. It was against this backdrop, Bilfinger approached the court.

Ashghal in road revamp drive
Web posted at: 11/1/2009 8:27:31
Source ::: The Peninsula

DOHA: The Public Works Authority (Ashghal) has launched a QR8.5m project to develop Al Murrah area and many major roads leading to the area. The decision is part of Ashghal’s ongoing projects to develop Qatar’s suburban roads to ease the traffic congestions in the areas.

QPS International Company is responsible of developing Madinat Khalifa North and Markhia (area No. 32 and 33) roads at a cost of QR178m. The work is expected to be completed by September 2011.

Bin Omran Contracting and Trading Company are in charge of developing the Madinat Khalifa South and Markhia (area No. 34) roads at a cost of QR197m. The work is scheduled to be completed in April 2011.

The Middle Rayyan (Area No. 2) project work has been awarded to Al Jabber & Al Makhlouf Contracting Company. The QR35m project work is expected to be completed by August next year.

The construction of the roads leading to Barwa City is scheduled to be completed in September 2011. The QR63m project has been awarded to Marbo Contracting Company.