Remembering mistakes of the past is good for the future

Remembering mistakes of the past is good for the future

Architect firms, developers and contractors have all learned lessons from the global economic downturn which will help to avoid the same mistakes taking place, according to a panel at the Leaders in Construction 2014 Summit.

Projects across the UAE were hard hit as the recession took hold with many abandoned completely.

But some stalled developments are coming back on-line – and the design and build business is better equipped to ensure they are completed, the event heard.

Bishoy Azmy, CEO of Dubai-based Al Shafar General Contracting, said: “I think it’s a good thing that a lot of us still remember the tragedies of the last crisis. There is a lot of wisdom in our minds despite the hype and the billions in project announcements.”

Ajay Rajendran, vice-chairman of Sobha Developers,  said that it would be “a travesty to forget all of the lessons we learned” during the recent crisis, but added that he believed the regulatory environment had changes which meant another bust was less likely.

“The problem in 2007-08 is that all of the money developers collected was used to buy another plot.

“Now that risk has been removed through RERA escrow arrangements. If a contractor feels the developer has an ability to sell and is pricing sensibly, that money will enter an escrow account and will be used to pay the contractor. So it is very secure from that point of view.”

Simon Moon, Middle East CEO of building consultancy Atkins, said there was “no doubt that there’s going to be huge opportunities”.

However, he said that much of the recent growth in the region had been fuelled thus far through increased government spending, which needs to be backed up by more private sector development.

He added that he would like to see a “maturing of the relations between developer, contractor and consultant”, as well as schemes being developed with greater integrity and with more thought being given into creating spaces where people can enjoy a mix of working, playing and living.

But terms in the region are still too heavily weighted against contractors in terms of risk, according to a panel discussion at the event.

Yousuf Ackayoglu, Middle East director for Turkish contracting giant TAV Construction, said that many contracts in the region “are more favourable from the employers’ side”.

“Contractors are risk-takers, but some (contracts) are beyond risks we will take. A contract without substantial changes is a kind of utopia. This is a fact. Changes will occur. How to manage this process is the main challenge we face,” he said.

He would like to see a method of alternative dispute resolution that is operational during the construction phase as opposed to waiting until a contract has completed and then sorting out legal wrangles.

Steven Miller, a senior vice-president of business development from contractor Shapoorji Palonji, said that when he began working for the Indian-headquartered firm two years ago its owner had said the firm had been in business for 148 years and had never been involved in a lawsuit.

“Two years later, I find us in Dubai where we’re already thinking about an arbitration. The local attitude over the past few years has been very unfair on the contractor,” he said

He cited a mega-project in Saudi Arabia where there was a raft of consultants involved – many of whom were creating or altering different designs.

“At a meeting, you have 30 people sitting around. Who is going to take any responsibility? At the end of the day, it always ends up with the contractor. He is the one who is stuck with the bill.”

Mark Jamieson, project director of Turner Construction International, argued that contracts in the region need to become more collaborative. He said: “The role of the intelligent client is becoming more important in this part of the world as they begin to understand their risks and responsibilities. They aren’t going to be able to thrust terms on contractors.”

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