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Wed 10 Nov 2010 11:49 AM

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Gulf contractors may face pay delays in Qatar

Arabtec, Atkins report tough contract penalties in fastest-growing Gulf state

Gulf contractors may face pay delays in Qatar
Doha at night
Gulf contractors may face pay delays in Qatar
The Arabtec logo at one of the firms labour camps in Dubai

Gulf contractors working in Qatar may face payment delays on projects as clients take advantage of fragile market conditions, companies working in the emirate have said.

Dubai-based Arabtec Holding and Atkins Middle East report that contracts in the Arab state are heavily biased towards clients, with tough penalties imposed for delays.

“We have had problems with payments on one of our projects,” said Arabtec Holding’s Qatar branch manager, Ayman Al Barqawi. “It was partially resolved in October, and it is being resolved completely before the end of this month.”

Arabtec has been contracted for work on three projects at a combined value of QAR4bn.

“Payment is a risk,” said Gordon Jack, country manager for Qatar, Atkins Middle East.“The penalties for failure to deliver are quite harsh, and the way contracts are written is very much on the clients’ side.

“Companies will come across unusual bond requirements and penalty requirements on projects, so managing that can be quite difficult sometimes.”

Energy-rich Qatar was left comparatively unscathed by the Gulf-wide real estate crash that occurred in the wake of the global financial crisis in late 2008.

In Dubai, a former boom town, more than half of construction projects have been suspended or cancelled, the government said earlier this year.

By comparison, some 36.9 percent of Qatar’s 2010/2011 fiscal budget has been allocated for capital projects, with infrastructure set to account for the majority of the QR35.5bn ($9.7bn).

Over the next five years, growth in Qatar’s construction industry is expected to average 9.9 percent. Its economy is forecast to grow by 16 percent this year.

New York-based architectural firm Kohn Pedersen Fox Associates PC said projects in Qatar came with commercial risks.

“The biggest risks of working in Qatar appear to be commercial in nature. Many clients prefer performance bonds that are difficult to obtain after the financial crisis,” said KPF principal Anthony Mosellie.

Qatar projects are, however, benefiting from a decline in construction costs. According to Arabtec’s Al Barqawi, costs are down by an estimated 20 to 25 percent.

“Construction costs have come down considerably in the last year,” said Jack. “When there was a boom, all commodities were at an absolute premium, steel was going through the roof, concrete was going through the roof. Now this has all changed.”

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