Projects & Construction
In a new circular issued by the Executive Council on 26 March 2019, the Abu Dhabi government has demonstrated its recognition and understanding of the payment issues that construction contractors and suppliers regularly face in the UAE.
While a copy of the circular is not yet public and we await further details, sources say that the circular requires government departments and state owned companies:
This directive shows the government's proactive approach to tackling the cash flow problems that contractors and subcontractors face in the UAE construction industry.
In particular, the government has sought to tackle the issue of money getting 'stuck' in the supply chain, either from contractors refusing to pass down payments to subcontractors or from relying on conditional payment or 'pay when paid' provisions when they have not received payments from further up the chain.
Facilitating the movement of cash along the supply chain should help contractors complete projects in a timely manner and invest in new projects, with less time spent on chasing payment and managing cash flow.
That said, there are still some uncertainties that may hinder the success of this welcome initiative. In particular:
Nevertheless, while we await publication of the circular to the public, the circular is a positive step for the Abu Dhabi construction industry.