Partnering Construction Contracts - a Viable Option in the Middle East?

Tom Moorcroft
With a leaner market and a greater emphasis on averting risk, could the Middle East construction industry now benefit from reassessing its contractual relationships?

What is partnering?

Although widely used in the United Kingdom and North America, the Middle East has yet to fully explore and embrace this form of contract. So, for those who are new to this, partnering is a co-operative relationship between business partners, formed in order to improve performance in project delivery. Co-operative is absolutely the key word.

Why look at a new approach for the Middle East?

FIDIC is the established form of construction contract in the Middle East, but it is not without its problems. Clients, developers and contractors choose FIDIC because of local familiarity (both in the supply chain and in the legal system), but it’s known for being inflexible and can contribute to an adverse relationship if it is not amended to balance the risks.

Partnering seeks to establish stable relationships to execute the project(s). Diverse multi-stakeholder objectives can be brought together in a shared concept of the project’s context and value.

Partnering seeks to establish stable relationships to execute the project(s). Diverse multi-stakeholder objectives can be brought together in a shared concept of the project’s context and value. Shared risk is a central theme of this route and the collaborative approach can result in an effective conflict management strategy.

What are the potential benefits of partnering?

The Royal Institute of Chartered Surveyors (RICS) suggests these advantages:

  • a reduction in the number of disputes

  • the benefit of early supply chain involvement

  • it is based on an open book and a win/win culture

  • there is integration of the design process with the construction process

  • the main benefits are generated from strategic partnering (multiple projects) rather than a single project

Business culture factors

Business negotiations in the Middle East are typically lengthy, with discussion and reflection playing an important part.

Partnering can be sensitive to the local business culture, factoring in an appreciation of regional strengths whilst emphasising a whole team approach.

Partnering can be sensitive to the local business culture, factoring in an appreciation of regional strengths whilst emphasising a whole team approach. However, some culture adjustment is certainly needed to make partnering work – a move away from a competitive or adversarial approach. Successful partnering outcomes usually include time spent working on process, typically starting with workshops that embed the desired behaviours into the participant organisations.

How does the partnering contract work?

Partnering itself is not a legal agreement. The contract and specifications form the legal relationships between the parties. Options usually include:

  • a traditional construction contract with a separate partnering charter

  • a two-party contract aligned to partnering

  • a multi-party partnering contract

In the second and third options, the parties are contractually bound to working co-operatively – the partnering principles make up part of the contract.

What would it take for the market to embrace partnering?

A government-led strategic partnering example (ie. multiple projects) would be the most fruitful path. Many Middle East contracts are short term and without a whole life costing element.

A government framework agreement, such as a department of transport for example, would lend itself to partnering. This would offer scope for cumulative lessons learned.

A government framework agreement, such as a department of transport for example, would lend itself to partnering. This would offer scope for cumulative lessons learned.

Do we have the skills available in the Middle East?

Many inward investor firms have the necessary expertise and experience in their global portfolios – Faithful+Gould certainly does. Not only consultants, but also funders, developers, designers, contractors and their suppliers have skills to share. However, some culture change would be necessary and the legal system is not currently accustomed to dealing with this route.

Is there a future for partnering agreements in the Middle East?

It is likely that some organisations may already be in “partnering agreements” with their suppliers of goods and services, albeit actual formal partnership agreements may not be apparent. In relation to the question of the whether formal partnering agreements will become common in the Middle East, maybe the key question is what motivated other markets into these agreements in the first place; and whether these same motivations will ever be felt in the Middle East?