Freedom of contract meets its match: Pay If Paid Clauses

by Andrew Ness

Cash-flow from lender to owner to construction manager to subcontractors is the lifeblood of any construction project. And maintaining a sufficient flow of funds is essential to every construction manager’s ability to manage the job. Contract provisions requiring a contractor or subcontractor to continue to work, even if the right to payment is disputed, mean little to the fate of the project if subcontractors cannot meet payroll.

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How “Fit” is your Contract?

by Sarah Thomas

As lawyers, we want what is best for our client. We will fight for that additional clause or that tricksy wording that will give our client that added protection that may, someday, prove decisive in an argument with the contractor or the employer.

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Heading for India? Some Issues to Consider…

by Sachin Kerur

With construction activity in India now worth $50 billion per annum and accounting for around 6% of Indian GDP, India is an attractive market for contractors.

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Key points while entering into a joint venture in the Middle East

by James Bremen

The use of joint ventures or consortiums are attractive because they allow contractors, consultants and financiers to team up and offer owners a single interface for all needs of a project.

Owners are increasingly requiring that consortiums be formed to provide a single point responsibility and to ensure bidders have the ability to perform the scope of work.

In light of this development, this article seeks to highlight some of the key legal and practical issues, which should be considered when entering into a joint venture or consortium agreement. The term “consortium” is used throughout the article to refer to both “consortium” and “joint venture.” [Read more…]

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Dubai construction sector ‘in big trouble’

The construction industry in Dubai has no chance of recovery in 2010 and the emirate’s real estate operators too were likely to face difficulties over the coming months, said an industry expert.

Those construction companies which are solely operating in the Dubai are in for big trouble, Khaldoun Tabari, vice chairman and CEO of  Dubai-based engineering contractor Drake & Scull International, was quoted as saying in Arabian Business. [Read more…]

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Be careful when you terminate a contract

In the current economic climate, there is growing interest in whether a contract can be cancelled, if one party is no longer able to fulfil its obligations due to financial difficulties.

A basic principle of contract law is that the contracting parties must perform their obligations with good faith and in a manner consistent with the contract. However, subject to this basic principle, a party to a contract that is subject to UAE law, can seek to end the contract in one of three ways: [Read more…]

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Manage Political Problems as Issues

Manage Political Problems as Issues
The larger your project gets, the more you will find that the issues you encounter are more and more political in nature. The issues have to do with the use of resources, project direction, project deliverables, how the project should be run, how the project impacts people, etc. The resolution of these issues requires you to gain consensus among people that have differences of opinion. In other words, the resolution requires you to recognize and work in office politics.
Generally speaking, politics is all about interacting with people and influencing them to get things done. This can be a good thing, a bad thing, or a neutral thing, depending on the tactics people use. The behavior of people can make office politics good or bad. Let’s consider some examples of how utilizing political skills might be good, but can also be bad.
You are able to move your ideas forward in the organization and get people to act on them (good), by currying favor, suppressing other opposing ideas and taking credit for the ideas of your staff (bad).
You have an ability to reach consensus on complex matters with a number of different stakeholders (good), by working behind the scenes with people in power, making deals and destroying people who don’t get on board (bad).
You receive funding for projects that are important to you and to your organization (good), by misrepresenting the costs and benefits, and by going around the existing funding processes (bad).
You develop a reputation as someone who can get things done (good), by using legitimate and illegitimate tactics and by walking over people that get in your way (bad).
The point of the examples is to show that influencing people and getting things done in a company bureaucracy is a good thing and the general term of “office politics” can have good connotations or bad. However, the typical use of the term is used to describe the shady methods that are used to get things done in the company bureaucracy.
It is not uncommon for a project team to be impacted by office politics. This can occur when there is a difference of opinion on the project deliverables, requirements, scope change requests, risk perceptions, etc. Are these differences of opinion caused by office politics, or just a legitimate and valid difference of opinion between people who both think that they are representing the best interest of the company?
Dealing with office politics is not a standard project management process. However, once the politics start to impact the project adversely, the situation should be identified as an issue, since the resolution is outside the control of the project team. You can’t utilize a checklist to resolve political issues. Political problems are people-related and situational. What works for one person in one situation may not work for another person in the same situation because people, and their reactions, are different. Identifying the problem as an issue will bring visibility to the situation and hopefully get the proper people involved in the resolution.
Generally, project managers need to become good at identifying and trying to resolve political issues. There are three areas to work on.
Try to recognize situations and events where politics are most likely to be involved. This could include decision points, competition for budget and resources, and setting project direction and priorities.
In general, deal with people openly and honestly. When you provide an opinion or recommendation, express the pros and cons to provide a balanced view to other parties. Make sure you distinguish the facts from your opinions so the other parties know the difference. You should always try to communicate proactively with all stakeholders.
If you feel uncomfortable with what you are asked to do, get your sponsor or your functional manager involved. They tend to have more political savvy and positional authority, and they should be able to provide advice and cover for you.
If you feel good about what you are doing, how you are influencing and how you are getting things done, then you are probably handling office politics the right way. If you feel guilty about how you are treating people and if you have second thoughts about the methods you are using to get things done, you are probably practicing the dark side of office politics.

The larger your project gets, the more you will find that the issues you encounter are more and more political in nature. The issues have to do with the use of resources, project direction, project deliverables, how the project should be run, how the project impacts people, etc. The resolution of these issues requires you to gain consensus among people that have differences of opinion. In other words, the resolution requires you to recognize and work in office politics. [Read more…]

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Regulation shapes revolution in Gulf sustainable buildings

Abu Dhabi will make sustainability compulsory from 1 January. The argument that the Gulf doesn’t care about the environment is false. Abu Dhabi’s new building code, regulations that make sustainability compulsory in all buildings and major retro-fits throughout the emirate, come into force on 1 January 2010.

They will set a minimum standard for all the elements involved in project delivery, from the design of new buildings to the way redundant structures are demolished. This encompasses energy efficiency, water use and the wider environmental impact of construction. [Read more…]

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The Cash Cow

On demand’ guarantee bonds are a typical form of contractual security in the UAE construction industry, particularly on large projects. Their use in theory, is to afford the employer with secured funds from a surety, in the event the defaulting party does not perform under a contract or becomes insolvent.

Prior to the onset of the liquidity crisis last year, the general attitude of an employer (as a beneficiary) would have been to threaten the encashment of a bond to impose commercial pressure on a contractor to perform. A call upon an on-demand bond would have been made if strictly necessary e.g. in the event of material or persistent default. [Read more…]

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The Importance of Documents During the Crisis

It is undeniable that UAE is now facing the onslaught of the global financial crisis. Although UAE’s oil revenue has cushioned the impact of the crisis to some extent, the speed in which the impact of the crisis is spreading across the real estate and construction industries, particularly in Dubai, is unprecedented.
The number of construction projects being scaled back or even suspended is on the rise. Consequently, we have been receiving an increasing number of enquiries and instructions from employers and contractors involving suspension and termination issues. Inevitably, some projects will fall into dispute whenever a party decides to suspend or terminate the contract. A dispute or a chain of disputes may occur at any level, be it between the master developers and sub-developers, sub-developers and its consultants or contractors, or down to the level between the contractors and its sub-contractors and suppliers. [Read more…]

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