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Sat 25 Jul 2009 04:00 AM

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Billing me softly

Work ban penalties, unpaid bills and strained relationships. It's not easy being a contractor in a downturn, and when you throw in the summer heat, you couldn't blame some for turning to the water bottle. UAE Contractor's Association vice-chairman Imad Al Jamal talks to Construction Week about the trials of a contractor's life.

Billing me softly

Work ban penalties, unpaid bills and strained relationships. It's not easy being a contractor in a downturn, and when you throw in the summer heat, you couldn't blame some for turning to the water bottle. UAE Contractor's Association vice-chairman Imad Al Jamal talks to Construction Week about the trials of a contractor's life.

From a contractor's point of view, what are your thoughts on the midday work ban?

The midday work ban has been in place, at least in theory, for a number of years, but for a long time it was not implemented as it should have been. So when the issue gained fresh momentum it was raised and proper implementation followed. But, when we consider its impact from a practical point of view, I don't really think it's going to make much difference.

Why not?

The productivity of the labour force during the hours surrounding midday is not great for obvious reasons - it's too hot. I'm an experienced contractor, and I know that contractors can shift their hours around to suit the conditions, either by working later hours or working shifts, and maintain a similar level of productivity, regardless of the timing of the ban.

Are the penalties severe enough for those who breach the ban?

They are severe enough, yes. I don't see any problem with the prescribed penalties, and the best way for contractors to deal with the penalties is simply to ensure they do not have to pay them.

Should contractors accept a softening of amounts owed by developers in return for immediate bill payment?

In purely practical terms, if you take the example of the last couple of years, we witnessed a huge increase in construction costs, yet many developers refused to give compensation to contractors to ease contractor's losses. Now the tide has turned 180 degrees and the opposite scenario is happening. So those developers that previously negotiated with good heart and good intentions, I think, they deserve a reduction. Those that did not, I do not think they deserve a reduction.

What is the general feeling among contractors regarding this issue?

An agreement or a contract must be and ought to be respected by both parties. This is universal common sense. You cannot change the payment terms of your contract just because the price is rising or falling. If any changes are to be made, they must be agreed by both parties.

So if money is owed, but bills cannot be paid, we have a catch-22 situation. How can this be overcome?

Big government or semi-government institutions or big private-sector developers are squeezing the contractor knowing that their business is suffering from cash-flow problems or availability of projects. And so, some contractors are accepting the reduction. I don't know how much exactly, whether it amounts to 20%-30%. Other contractors, on the other hand, are not prepared to accept a reduction.

Should contractors pursue such cases through legal channels?

Some contractors would be wise to go down that road. In the case of a huge multi-national contractor, for example, legal fees can be paid and the duration of trial, which can be lengthy, can be withstood. So if, at the end of the day they are backed by the terms of the contract, and they have stuck with their contractual obligations, they will probably be able to win.

How do the major developers feel about this?

Major developers and other institutions know they are not going to get a free ride. They may delay payment for a year or two or even three but, eventually, they are going to pay whatever is due plus what we call ‘back interest' and loss of income.

Is there a risk that such disputes could harm the developer-contractor relationship over the short-medium term?

Frankly speaking, if everybody sticks to international standards, like the Fidic standard contract for example, which deals clearly with such scenarios, there is no need for disputes to arise. The prices of things change, from materials, commodities and manpower to inflation and bank interest rates. If prices fall or rise there is a formula that can be applied within the Fidic system that tips the balance of the contract agreement to whichever party is due. If material prices go up, the developer compensates the contractor, and vise versa. The Fidic standard contract - the International Fidic - could be the answer for all of these problems.

The UAE Contractor's Association is a public welfare organisation set up to strengthen the UAE construction industry and the construction contracting business. Its stated aim is to sustain the positive role of UAE-based contractors in the task of national development of the UAE.

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