77.8% face non payment issues: poll

by Conrad Egbert on Nov 19, 2009 www.constructionweekonline.com

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.

One in Three Ashghal Projects Delayed

Web posted at: 11/9/2009 6:23:1

Source ::: THE PENINSULA

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."

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
Source ::: THE PENINSULA

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.

Ashghal inks contracts worth QR1bn
Web posted at: 10/20/2009 1:28:52
Source ::: The Peninsula

Acting General Manager of Ashghal Nasser Ali Al Mawlawi and Business Development Manager of Aljaber Engineering Chan Chung-Yan shakes hands after the signing ceremony held at the Ashghal headquarters yesterday. Salim Matramkot

DOHA: The Public Works Authority (Ashghal) has signed a slew of major projects in roads, drainage, and building sectors. The QR1bn plus value projects include construction of a number of schools, construction of roads and development of drainage networks.

Nasser Ali Al Mawlawi, Acting General Manager, Ashghal, signed the contracts with the concerned companies at a function held at the Authority’s headquarters yesterday. One of the key projects, include the development and modernisation of road infrastructure in Madinat Khalifa (South).

The work include reconstruction of roads with new asphalt and curbstones, interlocking tiles for footpaths, parking lots, in addition to the implementation of the new network for the rain water drainage upgrading the old drainage network with disposal rooms, upgrading fresh water network with domestic links, as well as modernising the telephone lines, electricity network and new street lighting.

The QR178.5m project covers an area from Markhia Roundabout up to Emigration Roundabout, between Khalifa Street and Omar bin Khatab Street.

Ashghal signed a separate contract with QBS International for the development of internal roads of Madinat Khalifa (North) and Markhiya. The project envisages development of all internal infrastructures and upgrading the asphalt level, footpaths, interlock, landscaping and street lighting.

The contract with Marbo contracting company include the earthworks for peripheral roads at Barwa City-Phase-I. The project works include the clean up of the site and removal of all debris and waste material and its disposal in the treatment plant for hazardous substances at 40km away from the project site.

The works also include re-establishment of the existing hanagar construction on the actual borders of the proposed Barwa city. The proposed project also includes temporary protection to oil and gas pipelines owned by Qatar petroleum and the establishment of concrete walls adjacent to the proposed road platform.

Road development in Central Rayyan is another major contract that the Authority signed yesterday. The works consists of construction roads and intersections in the Zone of 35 of Al Rayyan Municipality. The work also include facilitating the work on the project taking into account the future works including traffic diversions and protecting existing services such as services of water, electricity, telephone and drainage.

Design and Construction of a 1200 Transmission Main to Al Rakhiya Farm from Doha West and Operation and maintenance of two Sewer Treatment Plants at Nuaija and Industrial area are the other two key projects.

Ashghal also signed contract for the construction of six different school complexes. The school building consists of two-story reinforced concrete construction comprising 25 classrooms to accommodate a total of 650 students. The building will have facilities of laboratory, indoor game halls, a theatre and external services including guardrooms, service rooms, sports arena, shaded car parking and compound wall around a total area of 10,000 square meters.




Web posted at: 10/20/2009
Source ::: The Peninsula

DOHA: The Public Works Authority (Ashghal) has revealed that discussions were progressing to resolve the disputes between Ashghal and the contracting companies which are involved in some of the prestigious projects of the Ashghal, the Authority has revealed.

Talking to reporters here yesterday, Nasser Ali Al Mawlawi, Acting General Manager, Ashghal said that the project works of 22 February Street, a major component of the multi-million riyal Doha Expressway, would be resumed by the end of this year.

The prestigious 22 February Interchange and Al Amir Street is a major infrastructure development projectundertaken by Ashghal as part of its efforts to modernise the infrastructure network of the State. This important part of Doha Expressway project is estimated at QR15bn. The 22 February and Amir Street project is a 6km stretch beginning from Emigration Interchange extending up to Al Asiri Underpass on D Ring road. The project estimated at QR1.28bn includes construction of four interchanges with one bridge and one of them with four levels with three-lane dual carriageways. The work also include construction of 5.5km service road along the major street.

The Joint Venture comprising Bilfinger Berger of Germany and Al Hamid of UAE undertakes the project. The project was halted following a financial dispute between Ashghal and the contracting company early this year. The company left the work in midway March this year. The tug of war between Ashghal and the contracting company had also affected the project work of Industrial Interchange. The project is again part of Doha Expressway. The project site in the west side entrance to Doha is interlinked with two busy routes, Salwa International Highway and Industrial area, and therefore people are eagerly waiting for the completion of ongoing project works on the route.

“The disputes between the contractors of some projects have almost resolved. The discussions regarding some other projects are fast progressing”, Al Mawlawi said. He said Ashghal is not discriminating local companies with foreign companies while awarding contract to major projects. There are a good number of local companies which are involved in some of our prestigious projects.

On the delay in the completion of schools projects, Al Mawlawi said the recession and the dispute between Ashghal and a section of contracting companies have contributed to delay in project works. “However, we are confident of completing the school projects well ahead of the next academic year,” he said.

Expert calls for review of Construction Laws

Monday 19/10/2009 October, 2009,

By Sarmad Qazi

Unnecessary appointment of “experts” is bogging down the flow of court rulings and delaying the cases being heard in Qatar courts, a legal expert has said.

Ala’a Hamad, managing director of Arab Law Bureau, said the practice is particularly irksome in construction-related cases where the role of experts should be rectified.

Speaking at a Society of Construction Law – Gulf (SCL) event in Doha, Hamad, whose presentation focused on ‘Dispute Resolution and the Qatar Courts’, said: “With the size and complexity of projects (construction) going on in Qatar, we wouldn’t expect a judge to become an expert in matters related to construction.”

In such cases, according to Hamad, experts are appointed with the role of assisting a judge by providing the court a clear picture after checking through technical details and information.

“But in Qatar, too many experts are being asked to actually determine which party is liable in a court case. And that is actually a very valid ground for lawyers for an appeal,” Hamad added.

The Arab Law Bureau’s practice includes construction contracts, banking and project finance, setting up of businesses in Qatar, joint ventures, international contracts and litigation and insurance.

“An expert is an expert and not a judge. There is an inherent defect in the laws that would need to be immediately addressed,” Hamad suggested.

Giving an overview of the laws of the country, Hamad said Qatar has a civil law largely based on Egyptian laws which in turn were influenced by French laws.

Civil law means, laws are generally based on the principle and judgements issued by courts from time to time and are not binding on future rulings.

Shariah does not play a major part in construction claims and is confined to addressing such matters as inheritance disputes among others.

“Prior to 2004, we only had a ministerial decision pursuant to the old building law and it was very limited. After 2004, we have a lot of sections on construction,” Hamad explained.

According to him, when a claim is filed by contractors (in some cases government agencies against contractors), an expert is asked to file a report before the court on what he has seen at the site. There could be more than one expert depending on the size and complexity of the project.

“In one instance, we filed a case against a company claiming QR1mn but the other company said it was only QR800,000 and after re-checking our client agreed to the amount. But in the meantime the judge had already appointed an expert. That slowed down the case, and eventually delayed a decision,” he recalled.

The meeting was chaired by Jennifer Westall (senior associate at Eversheds LLP and member of the SCL committee).

Expert Proposes Dispute Board for Building Industry

GULF TIMES Saturday 17/10/2009 October, 2009

By Sarmad Qazi

An expert has called for all the construction contracts in the country to include provision for a ‘dispute board’ if contractors want ‘happy endings’ to their projects.

Speaking at a Society of Construction Law – Gulf (SCL), Wayne Clark, the contract co-ordinator for a leading global contractor (Bilfinger Berger) which has multi-million dollar contracts in Qatar, said that the success rate of dispute board is a significant 99%.

“If we desire happy endings to our projects then we should all call for dispute boards in our contracts,” Clark said.

“Used efficiently, the dispute boards are also advantageous in lowering expensive litigation, and arbitration. They also take less time when compared to litigation,” he added.

The American Arbitration Association (AAA) puts the success rate of its dispute boards at 99%.

Explaining the mechanism of the boards, Clark said first contractors should ensure to know the dispute clause at the tender stage and in the absence of a suggestion of a dispute board should request for one.

“They are usually made up of three members, rarely only one. The selection process includes each party (contractor, client) nominating one person both of who go on to nominate a board chair.”

The dispute board members should hold regular site visits for more interaction which allows identification of potential differences at a very early stage.

“In case of a dispute between the parties, the board uses multi-layered steps including holding joint meetings with all parties, followed by private meetings. There is also a ‘cooling off period’ where parties are obliged to at least make earnest attempt to an amicable settlement,” the expert noted.

“Throughout the mediation effort, the boards should encourage communication and ensure a relaxed atmosphere where common sense can prevail,” he added.

In case of a dispute board is unsuccessful in resolving a dispute, the matter is then taken to the local courts by the aggrieved parties.

Narrating the story of an international contractor which had a major infrastructure project in Doha up until 2009, but one that was eventually terminated towards the end by the client, Clark said there was no dispute board mechanism in the contract.

“Quite late in the process real differences arose. These differences then led to an untimely and premature end to the contract while damaging the relationship the contractor had with sub-contractors and all parties.”

“Had we had the dispute board mechanism the barriers erected by differences would never have been created or if they did could have been torn down,” Clark added.

SCL-Gulf aims to promote the study and understanding of construction law amongst all those involved in the construction industry in the UAE and Gulf region.