JVs can improve site relationships

What can be done to reduce the strain between contractors and developers? Go into joint ventures, of course. Monika Grzesik reports.
JVs can improve site relationships
By Monika Grzesik
Sat 31 Mar 2007 12:00 AM

Relations between contractors and developers are notoriously strained.

The current pressure to get construction jobs done, and within tight time schedules and budgets, has only served to compound the difficulties between the two parties: clients complain that tender prices are soaring, while contractors argue that traditional procurement methods place too much project risk on their shoulders, unfairly disadvantaging them should problems arise.

"The industry here is very adversarial and it shouldn't be," said Ron Barrott, CEO, Aldar Properties.

"It's very important to build trust between the contractor and the client. You have to put in what you take out."

Mark Prior, managing director, EC Harris, agrees: "Traditional barriers in the market are the same the world over, but the construction industry here in particular struggles with a lack of trust."

Much of the problem lies in the nature of procurement methods and the spreading of risk between the two parties.

"There is a need for a change of attitude in the industry. It has taken a long time for Dubai to realise that there is a better way to build things other than through the ‘them and us contract' involving two parties opposing each other," said Melvyn Ford, general manager, CSHK Dubai Contracting.

While the idea of forming collaborative relationships in the construction industry is common practice overseas, here it is shrouded in skepticism.

Aldar Properties recently took a major step towards breaking down traditional barriers by entering into the first developer-contractor joint venture in the UAE with the UK's Laing O'Rourke last November. The initial aim of the partnership is to execute projects in Abu Dhabi, starting with Al Raha Beach.

The company also joined forces with Tabreed earlier this month to build 25 new district cooling plants in Abu Dhabi.

According to Barrott, the key to building a better business environment is by forming relationships.

"Through forming relationships, this will lead to total transparency and trust. I believe that enlightened property companies and contractors should start adapting to the partnership approach.

"I'm all for bringing contractors in at an earlier stage, because they can add so much. The contractor is every bit as professional as the consultant, yet they are always left to the end of the process. If we can bring them in earlier, they will appreciate that and understand it and they will feel part of the team rather than coming in at the end, which is where you start this adversarial build-up."

Barrott added that contractors understand how a building needs to be built just as much as an architect, engineer or designer. "They also know which materials they can source in the market place and what prices they can source them for," he said.

"If the contractor is brought in at an earlier stage then they can add value to what is termed ‘buildability'. In other words, they can make the project more efficient to build and keep the costs down, and still come back with the same product at the end of the day."

Barrott said that the company's move to tie up with Laing O'Rourke is already reaping rewards.

"It's all about securing the resource, the right level of management expertise, and controlling your risk profile. We all need to work together."

Barrott also pointed out that in the current climate, teaming up with a contractor is an essential step, particularly as the demand on contractors in the region increases.

"At the moment, demand is outstripping supply, by a very large margin. There are not enough contractors to cope with the volume of work that is going on in the whole of the UAE, never mind the region. Contractors are taking advantage of that situation and their prices are going up by 20 to 30% per year. That is not supportable. Material prices are not rising that quickly, nor are their basic costs."

However, despite the benefits, it's clear that entrenched attitudes and traditional forms of relationship management in the industry will have to change significantly for this type of relationship to work.

"There has to be trust, there has to be openness, there has to be transparency," added Barrott.

For all the latest construction news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.

Subscribe to our Newsletter

Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.