Kluwer Construction Blog

In Part 1 of this two part subcontracting series, we detailed some tips and traps with respect to subcontracting, and considered the criticality of successful subcontractor performance to the timely and on budget delivery of projects. In Part 2 below, we examine the risks of pro-forma subcontracts and back-to-back drafting and briefly touch on the benefits of bespoke drafted subcontracts.

Since Adam Smith first set his mind to the efficiency of the pin factory in 1776, specialisation and division of labour has underpinned industrial development. The construction industry has embraced specialisation and division of labour to such a degree that almost every construction project, no matter how large or small, is delivered in practice by a large number of separate parties, each with a narrow field of expertise and each with a commercial and practical imperative to maximise the efficiency within their field of expertise.

The UAE construction sector is a continually developing market with complex transactions becoming increasingly prevalent. The evolution of the construction sector has highlighted the need for more robust construction contracts that deal with all the relevant risk issues for a project.

Arbitration has long been established as a method of dispute resolution in the Middle East. In recent times, with the enormous economic growth experienced in the region, and the UAE’s liberal approach to foreign investment, the provision for solving disputes by arbitration has become even more prominent in commercial contracts, aided in part by the fact that it is the favoured method of resolving disputes under many standard form construction contracts.

Under both the contractual process and subsequent formal dispute resolution proceedings, contemporary records form a critical part of the evidence to be utilised in evaluating the contractual entitlement. The importance of good record keeping – by both contractors and employer’s agents or engineers—cannot be overstated.

News headlines in the UAE have recently proclaimed that “companies defaulting on salaries will soon be a thing of the past” (Gulf News), as the UAE government has launched its Wage Protection System (the “WPS”). Certainly the WPS is a significant step to protect the rights of workers in the UAE, and given the size and importance of the construction sector in the UAE, the WPS will also have a big impact on how employers in the UAE construction industry operate and pay employees. We look at the WPS, how it will operate and the impact the WPS will have on employers and employees across the UAE.

We are all still feeling the impact the global downturn is having on the construction sector in the UAE. Not only is it a challenge to find work in this market, increasing numbers of contractors and consultants are finding it difficult to recover payment for work they have already undertaken.

With global business headlines currently dominated by debt restructuring issues facing Dubai World, the Gulf region is again subject to the negative gaze of the West. Despite this, the UAE and the broader Gulf region is likely to be a fertile region for major international contractors over the coming years.
Imminent infrastructure projects in the Gulf, as well as the current one, will provide major contractors with opportunities when global pickings are slim. However, contractors are already facing, and will continue to face, an increased transfer of risk combined with compressed margins in respect of new infrastructure projects and EPC contracts.
‘Pressing the Contractor’ under t [...]

With construction activity in India now worth $50 billion per annum and accounting for around 6% of Indian GDP, India is an attractive market for contractors.

The construction sector in India employs around 40 million people. The granting of ‘industry’ status to the Indian construction industry by the Indian Government has resulted in fast track procurement procedures and enabled construction companies to obtain crucial working capital at market rates. As a result, institutional investors have re-rated many Indian construction stocks and many joint ventures are being discussed with foreign construction companies.

Before plunging head long into this rapidly growing sector, here are four issue [...]

Despite the challenging world economic conditions, the Gulf looks set to remain one of the most significant global construction markets.

It is true that there has been a collapse in demand regionally for the large, private developments and indeed it seems the speculative real estate market may be a thing of the past. This has led to a severe cooling off in the Gulf construction market that was in any case overheating towards the middle of last year. At the same time this has led to a decline in input construction prices. This means that if a developer is sure there is a market for a development, the project becomes economically more viable. Not every developer will be able to take advantage [...]