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UAE's Construction Needs New Framework - Mashreq

Infra News - Published on Tue, 17 Sep 2019

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Mr Mohammad Khader Al Shouli, Managing Director and Head of Contracting Finance at Mashreq Bank, said that only a complete redoing of construction contracts can remove some of the persistent issues troubling the industry in the UAE. These contracts are badly drawn up on the one side and takes a long time to understand if they come into dispute. The major flaw is that there is no uniformity in what’s put into them. The issues are systemic, contractual and cultural. Mashreq Bank has now come up with a set of recommendations to reset how the UAE construction industry functions, cutting across all levels, from signing off on a contract to project delivery. And even where the contracting parties end up in disputes.

Enforce: The language used carries quite a punch. Enforce a Construction Contracts Act codifying payment timeframe, adjudication and certification terms. At present, clients are free to impose conditions due to the highly fragmented nature of the industry. It does not stop there - the sector also needs to “place restrictions on contractors with less experience or a negative track record by judging them on the basis of technical competence to ensure submitted bids focus on best practices. The current lowest-price-wins model rewards a short-term approach to quality, safety and innovation.

Payments: Even with a slowdown on the real estate development side, the local construction sector has got plenty to build on, not least with the many infrastructure projects, including, of course, all of the works associated with the Expo 2020. But the industry continues to be weighed down by sundry issues, with payments or the delay in receiving them - topping the worry list. A few players have been forced to exit as the cash needed to keep bare minimum operations disappeared.

Al Shouli said that “So many projects keep getting floated that it’s clogging up the system. For a solution, the sector just needs to see how contracts get done in the oil and gas industry. There, the contracts are done to international standards and it’s something rarely seen in the construction space.”

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Posted By : Rabi Wangkhem on Tue, 17 Sep 2019
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