By Joseph Salameh, MEng, MSc (PM), PMP – Expert Witness & Certified Arbitrator, CEO at Experts Project Management LLC
The construction industry in the UAE has been facing numerous difficulties in recent years, particularly for contractors and subcontractors. These difficulties include delays, money deductions, preparing claims for extension of time and prolongation cost, and a high number of disputes ending in courts or arbitration.
1. Difficulties Faced by Contractors Working in the UAE
1.1. One of the major issues contractors face in the UAE is the lack of a clear and transparent payment system. As a result, many contractors report that they have to wait long periods to receive payment for work already completed and may also face disputes over the payment amount due. This can lead to financial strain for contractors, making it difficult for them to continue working on the project or pay their workers and suppliers.
1.2. One of the main challenges facing contractors in the UAE is delays. These delays can be caused by various factors, including a lack of proper planning, unexpected site conditions, and delays in obtaining necessary approvals and permits. These delays can result in significant financial losses for contractors, as they may be required to pay for additional labor and materials and may also face penalties for not completing the project on time.
1.3. Another major issue facing contractors in the UAE is money deductions. These deductions can be made for a variety of reasons, including poor workmanship, failure to meet project specifications, and delays. These deductions can have a significant impact on the financial viability of a contractor and can make it difficult for them to continue working on the project.
1.4. In addition to these difficulties, contractors in the UAE also face a lack of standardization in the construction industry. This can lead to confusion and misunderstandings, as different project owners and managers may have different expectations and requirements. This can make it difficult for contractors to plan and execute projects and can also lead to disputes and delays.
1.5. Another challenge faced by contractors in the UAE is the lack of proper training and education for construction professionals. This can lead to a lack of skilled workers and project managers, making it difficult for contractors to deliver projects on time and within budget.
1.6. Preparing claims for extension of time and prolongation costs is another significant challenge for contractors in the UAE. These claims can be complex and time-consuming to prepare, and may require the assistance of legal and technical experts. Additionally, contractors may face resistance from project owners and managers, who may not agree to the claims or may seek to minimize the amount of compensation offered.
1.7. Finally, the high number of disputes ending in court or arbitration is another major challenge facing contractors in the UAE. These disputes can be costly and time-consuming, resulting in significant delays and financial losses for all parties involved.
2. Potential Solutions
To address the above challenges, contractors in the UAE can take several steps to mitigate the risks and minimize the impact of these difficulties. Below are some potential solutions:
2.1. The government and industry stakeholders in the UAE should work together to establish a clear and transparent payment system, standardize the construction industry, and provide training and education opportunities for construction professionals. Furthermore, contractors should take the initiative to seek out education and training opportunities to improve their skills and knowledge and to stay up to date with the latest industry trends and best practices.
2.2. One effective solution is to establish clear and detailed contracts, in line with the UAE laws in force, that clearly outline the responsibilities of all parties involved and provide for transparent and fair dispute resolution mechanisms. Contractors should have a robust contract administration and project management team. They can help identify potential issues and implement effective solutions. Furthermore, contractors should establish a strong claims management process and ensure that claims are prepared and submitted promptly and accurately. They should also seek the assistance of legal and technical experts to help navigate the complex claims process.
2.3. Contractors should work closely with project owners and consultants to identify and address potential problems early on and proactively manage risks throughout the project. This will help to minimize delays and disputes and will help to ensure that projects are completed on time and within budget.
3. Claims for Extension of Time
3.1. Preparing claims for extension of time (EOT) can be a complex process, and there are a number of reasons why such claims may not be successful. One common issue is a weak narrative, which can make it difficult for the contractor to clearly communicate the reasons for the delay and the impact it has had on the project. Another issue is the use of incorrect delay analysis methodologies, which can lead to inaccurate conclusions about the cause of the delay and the impact it has had on the project.
3.2. When preparing claims for EOT, it is vital to have a clear and well-supported narrative that explains the reasons for the delay and the impact it has had on the project. This should include detailed information about the events that caused the delay, the impact it has had on the project schedule, and the steps that were taken to mitigate the delay.
3.3. Another critical factor in preparing successful claims for EOT is the use of appropriate delay analysis methodologies. There are several different methods that can be used to analyze delays, including As-Planned versus As-Built analysis, Time Impact analysis, Windows Analysis, and Collapsed As-Built analysis. Selecting a methodology will be based on the specific circumstances of the project and the information that is available. Where the claim would otherwise be prepared in-house, it is advisable to engage a third-party claims expert, because an expert in claims preparation has the necessary knowledge and experience to analyze the delay and its impact on the project and to prepare a convincing claim for EOT.
3.4. Special attention should be paid to subcontractors: when they are late in completing their scope of work, they may face significant deductions, contra-charges, and delay damages from the contractor. This can be costly for the subcontractors, especially if they do not have a proper programme or updated records to support their claims. In order to avoid this, it is important for the subcontractor to take action in a timely manner and consider hiring a third-party specialist in claims. This can improve their position and assist them in defending their case, as well as preventing illegal deductions or unfair delay damages. The third-party claims specialist can help the subcontractor in preparing proper contemporaneous records and also help them in preparing a proper programme and updating it on a regular basis. The specialist can also assist the subcontractor in presenting their case in a clear and effective manner and can also provide expert witness testimony if necessary. This can increase the subcontractor's chances of successfully defending their position and avoiding costly deductions or damages.
3.5. Finally, preparing claims for an extension of time is a complex process that requires a clear and well-supported narrative and appropriate delay analysis methodologies. The hiring of a third-party expert in claims preparation can be beneficial in achieving successful claims, and the cost of hiring an expert is a small fraction of the delay damages that may be incurred if the contractor is unable to complete the project as agreed in the contract with the employer.
4. Conclusion
The construction industry in the UAE is facing a number of challenges for contractors, including delays, financial deductions, a lack of a clear and transparent payment system, a lack of standardization, a lack of proper training and education for construction professionals, difficulties in preparing claims for extension of time and prolongation costs, and a high number of disputes ending in court or arbitration. However, by collaborating, taking a proactive approach, and implementing effective solutions, the government, industry stakeholders, and contractors can work together to mitigate these risks and minimize the impact of these difficulties to ensure the success of construction projects in the UAE.
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