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Sat 5 May 2007 12:00 AM

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TAV walks off U-Bora over contract dispute

Contractor decides to leave Business Bay project behind after clause changes were "refused".

Turkish contractor TAV Gulf has turned its back on the US $190 million (AED690 million) contract to construct the U-Bora tower in Business Bay, which it was awarded last month.

Even though TAV Gulf was given the letter of intent, it did not sign the contract.

South Korea's Bando Engineering and Construction is the developer and project manager.

A source close to the project told
Construction Week

that the letter of intent was given to TAV Gulf at the end of March.

But after analysing the contract conditions, the company asked the client for changes to be made, which were refused.

"Between the time of receiving the letter of intent and signing the contract, the market had changed considerably, so we asked them to reconsider a few clauses but they wouldn't hear of it," said the source.

The move comes at a time when contractors in the region are looking for a change in the way contracts are drawn up.

"There were many issues with the contract that we weren't happy with," said Selim Larlar, branch office manager, TAV Gulf.

"We reviewed the contract after we won it and made our recommended changes, but they refused to make those changes so we decided that it wasn't worth our while.

"One factor was that we wanted to use quality engineers with sound qualifications but they would cost more and the client didn't want that, they wanted us to use engineers that they recommended, whose qualifications weren't up to our standards."

When
CW

contacted Atheek Ahmed, spokesperson for Bando Engineering and Construction, he said: "We have no comment at this time."

Other contractors in the industry claim that commonly used ‘lump sum' contracts favour the client over the contractor, resulting in the contractor bearing all the risk. "Contracts here tend to be a little unfair and biased and all the risk is put on the contractor," said Bishoy Azmy, deputy general manager, ASGC.

"I think it's time that a ‘cost-plus' method is adopted. It's more transparent and protects the client against the current practice of inflated quotations and saves the contractor from taking on all the risk.

"With the lump sum method, if everything goes well, the contractor makes good money but if something goes wrong the contractor can run into heavy losses. But with Dubai becoming more global, with more international companies coming into town and bigger projects being announced, it is important for the industry to adopt a more intelligent method of working together."

Azmy added that a contractor is not bound to accept the contract on receiving a letter of intent. "Negotiations over contract clauses happen right until the contract is actually signed," he said.

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