Mitigation of Delayed Projects in the UAE

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Introduction

In the construction industry, one of the most common and recurrent problem is the delay that is associated with projects. Delays in the launching and completion of projects cost the parties involved in terms of money, time, safety of the project, and the overall quality. These effects are not only felt in the construction industry but also other sectors of the economy that are hurt as well.

The effects are multiple in a country that earns most of its revenue through the projects and the construction industry in general. The best example is the United Arab Emirates. It is estimated that the construction industry in the UAE contributes to more than 14% of the GDP, which makes the industry an important one to the country’s economy.

Investigation is required into the causes of delay in the industry, as it leads to loss of revenue. It was reported that over 50% of the projects in the UAE experience delays with their completion surpassing the set time (Faridi, & El-Sayegh, 2006, p.67).

Some of the causes of delays in the construction industry and especially in the UAE include delay in the approval of drawings, inadequate and late planning, and slow decision-making for the part of the owners. Some of the people involved in the delays include the owners, the stakeholders, construction professionals, and the final users of the projects.

These people are also the main causes of the delay based on the part they play in the project construction. The delay of projects causes increase in overhead costs. After the project is complete, the total cost used in construction is more than that projected at its start.

Some of the projects delayed in the UAE include the construction of housing units, office blocks, airports, and industries. This paper focuses on the mitigation of delayed projects in the UAE by looking at the case studies for some of the delayed projects in the country over the past decade.

Reasons for Delays

Many people view completion of a project on the time projected for completion especially the construction companies to be a sign of success (Faridi, & El-Sayegh, 2006, p.67). The planning of projects therefore takes into consideration the consequences of construction delays. Significant effort is spent here. However, despite the meticulous planning and adequate preparation, over 50% of the projects in the world are not completed on time. The delay in completion of projects in the UAE is because of many factors, which may co-exist to push the completion time further.

Project delays are both in principle and in the actual construction phase. Delays start in the conception of the project, the planning, and in the interpretation of the designs. Previous studies have listed the causes of project delays to be in the construction phase while at the same time ignoring the delays that may take place in the development of the plan, the drawings, and in the other pre-construction events.

It is therefore necessary to know that many delays can take place in a project even before the groundbreaking takes place. Some of the reasons behind the delay in these stages include financial constraints, poor competence of the planners, constant revision of the plans, and delay in inspection of the plans by the government authorities overseeing the legal factors.

Differences between the investors and other parties involved in the construction have caused delays of projects in the past (Faridi, & El-Sayegh, 2006, p.68). After the construction of a project has started, delay can take place at any stage. One of the major causes of delay at this stage is the financial constraints. Many projects have run out of money at a period in their construction.

This case has necessitated their abandonment and suspension for a given period. Design flaws have also caused major projects to be suspended and in the end delayed in the UAE. When the contractor starts working on the designs, flaws may be found thus necessitating revision. Work on the project stops to facilitate revision of the designs.

Project delays can be internal or external to the project. This classification is based on the origin of the delay (Faridi, & El-Sayegh, 2006, p.69). The signatories of the contract who include consultants, contractors, and the clients cause internal delays (Faridi, & El-Sayegh, 2006, p.67). External causes of delay arise from events and individuals who are not involved in the contract.

These causes are not in the control of the parties (Faridi, & El-Sayegh, 2006, p.69). Some of the external factors causing delay in project completion include natural events such as disasters, delay in provision of building materials by the suppliers, and changes in government policy during the construction process.

Another classification of delays is the categorization into “excusable but non-compensable delay, compensable delay, and inexcusable delay” (Faridi, & El-Sayegh, 2006, p.69). The first delay is caused by factors external to the organization. It is equivalent to external delay in the previous classification. Compensable delays “result from acts or omissions of the owner or someone for whose acts an owner is liable” (Faridi, & El-Sayegh, 2006, p.69).

Inexcusable delay results from the contractor, the suppliers of the materials to be used in construction, or the sub-contractors involved in the process of construction. The most common cause of delay in the UAE projects is due to internal factors mainly in the financing of the projects (Faridi, & El-Sayegh, 2006, p.69).

Some researchers have concluded that most of the causes of project delays in the construction process can be found in the preliminary phases. These include poor estimation of quantities, errors in the design, conditions at the project construction site, elevation of costs of materials, and construction process (Faridi, & El-Sayegh, 2006, p.70).

The estimate is important in project construction. In fact, it is done through plans and or quotes (Faridi, & El-Sayegh, 2006, p.70). Delays caused by cost escalation, underestimation of the costs, inflation, and complex projects are the main causes of the overrun costs (Faridi, & El-Sayegh, 2006, p.70). Project managers should therefore use real quantitative data to make thorough studies of the projects to be constructed “in order to formulate pertinent terms before starting to attribute the said project” (Faridi, & El-Sayegh, 2006, p.70).

Industrialists in the construction industry should also be given special attention during project planning since their involvement will contribute in the reduction of delays due to cost escalation (Faridi, & El-Sayegh, 2006, p.70). The engagement of poor contractors in the construction of major projects has not been discussed in the past as a cause of project delays in the UAE. However, it is believed that poor planning and the communication breakdown caused by the engagement of poor contractors in the project management is a significant cause of delay in the completion of some of the projects.

Reasons for mitigation of Delayed Projects

The UAE and Dubai in particular present a challenge to the construction industry due to a number of factors. These include the rapid construction growth, the tight schedule involved, and the unique architectural expectations of each project from the clients in the country (Faridi, & El-Sayegh, 2006, p. 71).

The industry also has players from a number of countries. With the divergent views and specifications, the challenge of completion of projects on time presents very often. With the large number of projects being undertaken in the country, the performance of the economy is related to the outcome of these projects. Any poor outcome has a negative effect on the economy.

Examples of reasons for the delay in the projects in the country include the large-scale nature of the projects (Faridi, & El-Sayegh, 2006, p.71). Some of the large projects completed in the recent past or under construction include the Dubai Marian, Souk Al Nakheel, the palm Islands, the extension of Dubai international Airport, and the Burj Khalifa (Faridi, & El-Sayegh, 2006, p. 70).

Most of these projects experienced delays in their construction. Those under construction have had the dates of completion pushed forward.

International companies mainly do the construction of the major projects in the UAE due to the inability of the local companies to undertake projects of such large magnitude. The international companies are involved in disputes and settlement cases in the process with the subcontractors. This often leads to project delays.

Project delays lead to increase in pricing of the final items under construction due to the increase in overhead costs in the extra time the projects take. The problems of inflation also contribute to the rise in the final costs of the unit. This condition is often felt with the increase in the time required for project completion.

Another reason for delays in construction projects in the UAE is the procurement approach by the companies involved in the projects (Faridi, & El-Sayegh, 2006, p.71). For most of the projects in the UAE, the traditional procurement approach is favored with the foreign consultants involved in the preparation of contract documents and project design (Faridi, & El-Sayegh, 2006, p.72).

The market has also experienced an influx in small contractors who are also affected by the market trends. When the market trends change with time, small contractors end up delaying any of the projects they are undertaking and hence a major cause of delays in the Emirates (Faridi, & El-Sayegh, 2006, p.72).

With the boom in construction industry and the large returns experienced by the real estate business, many of the contractors are involved in commitments that are well above their capabilities (Faridi, & El-Sayegh, 2006, p.72). They often end up taking a number of projects, which also end up being delayed. There is a need to mitigate the delay in projects caused by this kind of workmanship.

The effects are detrimental to the economy if left unchecked. With the prices of oil meant to reduce over the next decade, the UAE economy will be dependent on the revenue earned in the construction of the projects and in the completed ones. It is therefore necessary to ensure that the projects undertaken are not delayed, as this will have a significant effect on the UAE economy.

Suggestions for Delayed Projects

The financial crisis that rocked the world after the year 2007 is a major factor in the delay of projects experienced in the UAE. Avoiding it was not possible for the industry. However, the method of dealing with the repercussions of the crisis in the construction of projects is important to the clients, as it determines the eventual fate of the projects.

Since the delays in the past have been caused by the unrealistic duration set by the owners and the contractors, the control of most of these projects should be done by the authorities in the construction industry, which should also be allowed to set the time for completion of the projects.

The making of provisional sums and additional costs to the projects has also been a cause of delay in the part of the client. Adequate financial planning should be done with enough room being left for any added costs. The government should also come up with a legal framework of streamlining the industry.

In some of the delayed projects, the contractors have abandoned the project at times due to delays in payment from the clients. This case could be avoided if the clients and the project contractors plan adequately for the financing of the projects with the clients respecting the terms of the contract.

The consultant firms in the UAE and especially in the state of Dubai, which has been experiencing a construction boom, are usually full of drawings for the many projects being planned. However, these firms are not willing to let any business pass them.

They end up overworking their employees. With the increased speed at which the drawings are demanded by the clients and the large workload, the designs are often full of flaws whose correction causes delay in the construction process, as the errors are corrected (Faridi, & El-Sayegh, 2006, p.73).

The main problem affecting the designing of projects and their approval in the UAE is the limited number of consultants. It is therefore common for projects to have documents, which are incomplete, frequent changes in the specifications of the building, and an involving inspection procedure (Faridi, & El-Sayegh, 2006, p.74).

The mitigation of delays caused by the shortage of specialists in the construction industry could be achieved by the training of more specialists in the country, engaging more foreign-based consultants, and providing suitable conditions for the working of immigrant specialists in the country (Faridi, & El-Sayegh, 2006, p.75).

The contractors have often been the source of delays in some of the projects due to differences in culture, mistakes during construction, and breakdown in communication between the internal and external participants of the projects. This situation can be corrected by increasing the number of contractors in the country and or facilitating the creation of better working conditions in the industry.

The government has a number of measures that it can implement to streamline the construction industry to ensure a better return on the investments it makes in this field. With the experience from the global economic crisis, the authorities here should relook into the development agenda and do more planning to ensure that a repeat of the same does not occur in the future.

There is also a need to train more professionals in the construction industry especially specialists. This effort will improve delivery of quality projects on time. Some of the causes of delays are beyond individual, company, or government control. They should therefore be pre-empted with adequate planning being done beforehand.

Case Studies

Delay in the completion and opening of projects in the United Arab Emirates is common. Most of the complete projects and those under construction have experienced some degree of delay at some point in their construction. It is therefore important to focus on some of the major projects that have reported delay in their completion, as this would assist in the efforts to mitigate delayed projects in this country.

In the following case studies, profiles of the projects are discussed with focus being made on the causes of delay in each of them. This case is then followed by recommendation on the steps that could have been taken to avert the delays.

Burj Khalifa

The Burj Khalifa is currently the world’s tallest building, and currently the landmark of downtown Dubai. The building was an ambitious project undertaken by Emaar Properties PJSC at an estimated cost of 1.5 billion US dollars (Foreman, 2011, p. 23). It took six years to construct with construction beginning on January 2004 and completion taking place on January 2010.

The notable features of the project include the Dubai fountain, which is on record as the tallest functional fountain in the world, as it shoots water a hundred and fifty meters high as it is illuminated by thousands of lights and 50 color projectors (Foreman, 2011, p. 23). The fountain also has music playing as it shoots the water up. Other records include the “world’s highest observatory deck with an outdoor terrace located on Level 124” (Foreman, 2011, p. 24).

The building was the crowning piece of the project that entailed the construction of a 500 acre mixed use development, “Downtown Dubai” (Foreman, 2011, p. 25). Apart from the construction of this 828-meter building, the project also involved the construction of the largest shopping mall in the world and an entertainment destination (Foreman, 2011, p. 23). The building, when completed, would be 160-storey high incorporating 185,000 square meters of residential space and more than 28,000 square meters of office space (Foreman, 2011, p. 24).

The building also has the “world’s first 160-room Armani Hotel in addition to the world’s highest swimming pool, located on Level 76” (Foreman, 2011, p. 26). The whole project was initially valued at 20 billion US dollars. More than 12,000 workers were on the site (Foreman, 2011, p. 23). 22 million labor hours went into the construction of the project with the laborers coming from over 100 countries (Foreman, 2011, p. 23).

The project also included the construction of a park, which is on a lake with an island on it. Millions of people witnessed the opening ceremony of the project internationally, as it was aired on the internet and in the broadcast stations. It also received awards for the many records that it attained at its completion.

Apart from all the glory and praise that the project enjoyed, and still enjoys after its completion, there were some delays in the opening of the project, which pushed the inauguration date to a number of days past the scheduled date of completion.

Until the year 2006, the construction progress of the Burj Khalifa was remarkable and well ahead of schedule. However, the construction started lagging behind after workers form countries such as India, Bangladesh, and Pakistan started complaining of the low wages they were receiving at the project (Foreman, 2011, p. 23).

The building also received economic blows especially in the year 2008 when the real estate markets started experiencing the economic crisis. The world economic crisis reduced the prices of the investment while at the same time making the prices of materials escalate (Foreman, 2011, p. 24).

The same year experienced a fall in world trade with the prices of oil in the international market slumping (Foreman, 2011, p. 24). It is reported, “In late 2008, the price of property at Burj Dubai slumped by about 50%-60% while prices in the surrounding Downtown Burj Dubai fell by at least 22%” (Foreman, 2011, p. 24).

The construction delays in the project are a combination of internal and external factors as discussed above. Some of them could have been avoided if the contractor, engineers, and the owner of the project had evaluated and predicted the causes of delay before the start of the project. For the economic crisis of 2008, the project managers and financier could have done little to avert the delay caused by it.

However, the delay could have been mitigated by adapting the crisis adequately. The project contractor and the owner should have also allowed a longer time of construction by stating a hypothetical completion date and working towards beating the deadline.

For a project of its magnitude, the number of employees employed is large. This case may have caused the cost escalation as evidenced during the completion of the project. Even after the completion of the project, the company responsible for the investment reported a delay in the occupation of the completed units and office suites (Faridi, & El-Sayegh, 2006, p.67). Should adequate planning have taken place before the start of the project, these problems could have been simulated and planned.

During the construction process of the tower, the workers are said to have rioted due to poor pay and poor working conditions (Foreman, 2011, p. 26). The riots led to the destruction of property and a halt in construction work. This case was also a source of delay in the completion of the project. It is reported that the cause of the riot was a delay in the buses used by the workers in the evening with most of them being stranded at the work place.

Workers did not work for company in the days following the protest despite going back to their stations (Foreman, 2011, p. 25). This was one of the causes of reduction in output by the workers in the construction process and hence a major cause of the delay in the project completion.

The awarding of better pay could have prevented the strike by the employees. It would also have contributed to the completion of the project on time. The working conditions of the workers and their housing units were said to be poor and hence a factor in their grievances.

Improvement of the living conditions of the workers could have been done by ensuring that adequate planning takes place in the welfare of the employees. The company should have set up proper housing units for the employees before the start of the project.

The project is the most ambitious in recent times in Dubai. The delay in the completion elicited a change in the policy on the planning for projects in the UAE state. The financial crisis that took place in the years presiding the opening of the building was also a very significant factor in the delay of completion of the project. The state of Dubai was forced to ask for a bail out from Abu Dhabi to aid in the completion of the project along with others that had stalled.

A grant was then made to the state. This act was viewed as a positive gesture by the Dubai administration. In return, name of the tower was changed from Burj Dubai to its present name; Burj Khalifa (Foreman, 2011, p. 23) meaning that the project could have been delayed farther should Abu Dhabi have declined to offer the grant to her neighbor.

The main reason for the economic hardship experienced by Dubai during the economic crisis of 2008 is the large number of projects that it was undertaking mainly in the construction industry (Foreman, 2011, p. 23). To mitigate the delays, the government therefore has to come up with a limit to the number of construction projects it can undertake at a particular time. This strategy will ensure that there is regular supply of the required capital for subsequent projects.

The Burj Khalifa stands as evidence that delay in the construction industry is inevitable even in the large-scale projects. The surrounding ‘Downtown Dubai’ also experienced delays in completion. This case was also because of a number of factors (Foreman, 2011, p. 25). These were related to the causes of delay in the Burk Khalifa.

If same measures were put, the problem would have been solved. In the mitigation of delays in the projects in the UAE, the Burj Khalifa project is important to consider. The findings would help the authorities involved in the planning for future projects of that scale.

The Dubai Waterfront

The Dubai waterfront just next to the palm islands was designed to be the largest project of its kind in the world. The developers, engineers, project designers, and the owners of the project also stated that the project would be the single largest development ever made by man (Frasca, 2011, p. 34). The construction of the project is similar to the construction of the palm islands adjacent to it. It would involve a series of islands and artificial canals when completed (Frasca, 2011, p. 34).

The project was originally intended to serve as a destination for the wealthy in the area and in the world after the creation of its luxurious housing projects and hotels. The project would also have zones, which would be residential, commercial, and amenity zones (Frasca, 2011, p. 34). The owners of the investment scheduled the project’s completion to the year 2020 though this has been debated due to the suspension of the project on financial grounds.

The Dubai waterfront company is responsible for the running of the project. Nakheel, which is a real estate investment company, has a 51% stake in the project (Frasca, 2011, p. 34). Nakheel is a well-established real estate company with branches in the Middle East and elsewhere in the world.

Its involvement in the project was therefore a significant contribution to the popularity of the project, and the financing was to be made by using the Islamic bonds that it possesses. Several companies are also involved in the project though they have smaller stakes in the project.

The original plan of the project was made to resemble the star and crescent symbol, which is a common symbol in the Islamic world (Frasca, 2011, p. 34). The construction of this crescent-shaped archipelago of Islands would also involve the construction of the Palm Jebel Ali that is also constructed by the same real estate investment company Nakheel (Frasca, 2011, p. 34).

The palm island would be at the center of the crescent. It would be sheltered by it from the sea (Frasca, 2011, p. 34). The construction works started with the construction of the canal running parallel to the Dubai coastline in the year 2007 (Frasca, 2011, p. 34). The construction was halted at this stage. The reason behind the suspension was financial constraints.

The project is expected to be delayed for a number of years because of the financial crisis, which hit the world at the time of the start of the project. The project owners have however announced that several parts of the project would be opened to the public. The parts completed have successfully sold.

The suspension of the project is also expected to last until the market for the envisioned units and components improves (Frasca, 2011, p. 34). With the global financial outlook, this case is likely to take place slowly. The project will therefore be delayed longer or done away with (Frasca, 2011, p. 34).

The above project is just but an example of a delay that is caused by a combination of internal and external factors. With the ambitious development by the project owners, the financial planning was poorly done. The managers and the investment company involved in the project supervision and development should have done adequate planning to ensure that the project is complete.

Nakheel Real Estate Investment Company was engaged in the construction of many projects at the time of construction of this project. The case reveals the delays experienced in its construction. Most of the projects that the company had planned to undertake at this particular time and those it had been working on have also stalled with some of them being cancelled.

With adequate planning, the company could have foreseen the impending financial crisis besides reserving some of the money to complete the on-going projects before engaging in new ones.

Dubai Maritime City

The ambitious project, which happens to be a member of the Dubai World Group of companies, is expected to be the first of its kind in the world (Frasca, 2011, p. 34). The completion of the project was slated for the year 2012. However, delays have been experienced from its start. The project involves the construction of a maritime city in Dubai, which will have residential, industrial, educational, and recreational areas.

The delay in the construction of the project are mainly due to the financial constraints experienced in the construction period, the difficulty in the construction of the components of the project, and the delay due to correction of the original plans.

With the drop in the property value experienced in the UAE in the advent of the global crisis, the project received a blow as the demand for most of the units under construction fell with those remaining retailing at a cheaper price. The client also had to invest more money on the project. The delay in the payments to professional means that time was lost in the construction process.

There has been growing speculations as to the actual completion date of the project with some of the professionals in the field stating that it would take more than five years beyond the time earmarked for completion (Foreman, 2011, p. 29).

The World Island Project

The World Island Project is another project that has experienced a number of belays since it began in the year 2003. The project consists of many artificial small islands arranged to make an illustration of the world. These islands were then sold off to developers with the intention of developing them to residential and recreational areas.

By the year 2010, the islands were still to be developed despite their completion with only one building existing on them. The building was used as a show-home (Frasca, 2011, p. 34). The main culprit for the reduction in demand for the islands and the drop in the prices is the global financial crisis, which is thought to have resulted in the reduced demand and increased cost of materials for construction (Frasca, 2011, p. 34).

The project has since stalled with rumors that the islands had begun eroding and sinking into the sea (Frasca, 2011, p. 34). Some suggestions were also made that the islands are inhabitable. This case has discouraged many investors in the project. It is reported that the price of properties in the UAE fell by 58% in the year 2008 thus qualifying as a major factor in the abandonment of the project by most of the investors initially interested in the development (Foreman, 2011, p. 29).

The company involved in the transport of people to and from the islands has also experienced the economic blow. It has since considered pulling out of the agreement. This situation is a major blow to the project since the value of the units is set to drop as the owners sell them off. Nakheel Investment Company that is responsible for the project has not set any time for completion of the project. The duration of the delay in completion therefore remains unknown (Foreman, 2011, p. 29).

Analysis

The above projects demonstrate the need for mitigation measures in the delays of projects. The main reason for most of the delays in the projects has been cited as the financial constraints arising after their start with almost all of them being affected by the global financial crisis, which took place in the year 2008. Billions of dollars were lost in the delay of the projects due to the escalation of the building costs.

The prices of property in the UAE are also said to have dropped with the global financial crisis. This situation discouraged further investment in the ongoing projects (Frasca, 2011, p. 34). The growing uncertainty in the market is also said to have locked potential property buyers in the industry here. This decision locked the much-desired money for property investment in the UAE.

The economy is also said to have been affected by the delays in the completion of the projects being undertaken here. In Particular, Dubai had to take a grant from its neighbor Abu Dhabi (Foreman, 2011, p. 23). The financial crisis and the effect on the economy led to some people referring to it as the Dubai financial crisis (Frasca, 2011, p. 34).

In the year 2008 alone, more than 200 projects in Dubai were stalled or suspended following the pending resolution of the financial crisis. Most of them were not to resume construction. The auctioning of the construction equipment took place for some. The contractors closed their operations in the country with others concentrating their resources on a number of projects.

Some of the causes of the delay in completion of the projects were internal to the parties involved in construction. However, these were of little significance. The mitigation efforts in place for the delayed projects in the UEA are mainly the control of the stalled projects by the government and the intervention that it took in the wake of the global financial crisis.

Recommendations

In the mitigation of delayed projects in the UAE, some measures are necessary. They need participation from all the parties involved in the construction of the projects. The major player in the mitigation efforts is the federal government of the UAE, which has the control in the industry.

It should therefore actively participate in the streamlining of the industry by setting standards in the construction industry, and embarking on the vigorous training of consultant specialists in this field. The government should also set up a committee or a board whose function would be to look into the financial implications of new projects in a bid to recommend the actions to be taken in the case when the projects are delayed.

The industry should also find a way to attract more specialists into the country. This move will reduce the burden on the few specialists. In the end, the delays caused by the constant revision of drawings and plans due to poor work by the consultants would be mitigated. There is also a need to motivate workers in all levels in the projects. This case will improve their output thus reducing the delays caused by this party.

The UAE has enjoyed a boom in construction industries over the past. This situation has often had an effect on the pricing of the property in this part of the world. The federal government should make legislation aimed at regulating the industry to ensure that the investors do not lose the money they invest in the projects.

Conclusion

As discussed above, a number of projects in the UAE have been delayed due to one reason or another. A need has therefore arisen for the mitigation of the delay in projects in this country. The federal government is the main player in the mitigation measures. Some of the major causes of delays discussed above include the financial crisis of 2008, the escalation of construction costs, and the drop in the cost of completed units in the UAE.

These delays are said to have influenced the local economies in a significant way and hence the need to avoid the same in the future. Some of the recommendations have been provided on how to prevent a repeat of the same in the future.

Reference List

Faridi, A., & El-Sayegh, S. (2006). Significant factors causing delay in the UAE construction industry. Construction Management Economics, 24(11), 67–76.

Foreman, C. (2011). Abu Dhabi projects: turning a vision into reality. Dubai, UAE: MEED.

Frasca, A. (2011). Dubai, debt, and dependency the political and economic implications of the bailout of Dubai. Austin, Tex.: University of Texas.

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