Can a new contract type help Middle East construction avoid disputes?

Can a new contract type help Middle East construction avoid disputes?
Neha Bhatia is the editor of Construction Week.
Published: 30 June 2019 - 4 a.m.
By: Neha Bhatia

Half way into 2019, the Middle East’s construction industry has seen a number of market trends making an impact on the everyday building process. For instance, the adoption of 3D printing has reached new heights, with local players – such as Saudi Arabia’s Ministry of Housing and Al Kathiri Holding – and international organisations like France’s Vinci, making multimillion-dollar investments to use the technology on their projects.

However, it is the contracting sector’s quiet but quick evolution in terms of contract models that has perhaps had the greatest impact on the industry in the past six months.

For instance, Dubai Electricity and Water Authority (Dewa) has recently called for the submission of expressions of interest for Hassyan sea water reverse osmosis plant, the utility’s first project under the independent water producer (IWP) model. The IWP contract follows Dewa’s success with the independent power producer model it adopted for its Mohammed Bin Rashid Al Maktoum Solar Park project.

As regional director for the Middle East at Aurecon, Ermis Marques, told Construction Week prior to his inclusion in the 2019 Power 100 list, design-and-build contracts are also gaining traction in the region, causing significant disruption in the sector.

Perhaps companies should return to standardised – and unedited – Fidic contracts to solve the problem. Would a test-run with time and materials contracts work in the Middle East, or does an entirely new type of contract – designed specifically with regional business dynamics in mind – need to be created if local companies are to thrive?

Describing design-and-build contracts as an exciting prospect, Marques explains that while the new approach is challenging some traditional clients in the region, the adoption of this model, if handled correctly, would lead to tangible benefits for various project stakeholders.

Contract models may seem a rather mundane topic to the average construction executive in the Middle East. However, as dispute resolution continues to drive business for regional law firms, construction leaders would do well to return to the drawing board in order to identify and plug common contractual gaps that pave the way for ambiguity and potential disputes.

Perhaps companies should return to standardised – and unedited – Fidic contracts to solve the problem. Would a test-run with time and materials contracts work in the Middle East, or does an entirely new type of contract – designed specifically with regional business dynamics in mind – need to be created if local companies are to thrive?

I do not expect answers to these questions to come easily, but as Construction Week’s reporting during the first half of this year has shown, these are some of the silent niggles that are currently keeping the Middle East’s most senior leaders on their toes. The CW team is keen to see how the industry will respond to these questions over the next six months of this year.

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