Teamwork: capacity issues shift client-contractor relations

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In a resource-constrained market, many clients are now entering into direct negotiation with contractors in order to secure successful delivery of their projects.

The relationship between contractors and clients has traditionally been quite a tense one. Market forces of supply and demand have created power struggles between each party and led to a long-standing adversarial relationship.

But in the last year the winds of change have started to pass through the UAE construction industry. Traditional approaches to procurement are being questioned and key clients have evolved their contracts in an attempt to secure delivery in a resource-constrained market.

This has led to an increase in direct source negotiation and the advent of partnerships between client and contractor.

"More and more clients are negotiating contracts with who they want to work with, because time is money now," said Steve McConnachie, general manager, Al Masaood Bergum. "Overheads are so expensive and delayed projects are costing money."

In a market where tight deliverables and stretched capacity are among the main challenges, many parties to construction contracts have realised the importance of improving their working relationships. On Aldar Properties' Al Raha Beach project in Abu Dhabi, which has a construction phase spanning decades, the developer has adopted a partnering form of contract that sees contractors being brought in at an earlier stage to overcome time and cost issues. It also offers more of a risk-sharing approach, something that has traditionally led to an imbalance between parties.

"The relationship will balance itself out with the potential of partnering," said Gordon Moffat, regional managing director, Systech International.

"If a client selects a contractor who offers various options at an earlier stage, it can optimise the build time by discussing methods of building with a contractor early.

"Ultimately, clients are concerned about delivery: getting the right contractor with the right track record who will be able to deliver on time is a priority."

But for others, the situation is more clear-cut, with economic factors playing a greater role in the successful procurement of a contractor.

"Good client and contractor relationships are essential for the smooth flow of things, but at the end of the day it's the bank guarantee that a contractor provides that will get them the job," said one local contractor.

"Relationships take a back seat when the time of awarding the contract comes up. Business is business in the end and that's how the client sees it."

But while economic viability will always remain a concern for developers, there are further indications that the wider picture is being considered in order to bring contractors on board.

In a move to improve the risk-sharing relationship, the Abu Dhabi Government recently adjusted certain clauses in its FIDIC-based contracts for infrastructure works. Although the move has received a mixed response from the industry, with some experts saying that it doesn't go far enough, one local contractor believes it is a step in the right direction.

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