Airport chief delivers warning to O’Rourke

Contractor “does not have a leg to stand on” to claim for cost hikes on Dubai project

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By  Sean Cronin Published  June 10, 2006

Contractor Laing O’Rourke has been warned against making a legal claim for ballooning construction costs on its controversial Dubai International Airport project. “This is a grown up game and there are contracts that cover the relationship between the client and the contractor,” said Khalifa Suhail Al Zafein, director of engineering projects in Dubai’s Department of Civil Aviation (DCA). “From a legal point of view they do not have a leg to stand on,” said Al Zafein, in an interview with Construction Week. Laing O’Rourke picked up the US $660 million (AED2.4 billion) contract to build the new terminal at Dubai International Airport, in 2003. It was hit by a massive increase in construction costs when the price of steel and cement rocketed. In response, the contractor set up its own steel factory and imported the material directly from Turkey. Now Laing O’Rourke is seeking to recoup some of its losses from the client, arising from the material prices. But Al Zafein warned that the contractor does not have any contractual right to compensation for rising construction costs. It is understood that none of the contractors working on the airport for DCA are protected by price escalation clauses. Rising material prices are now also thought to be impacting on the MEP works as the price of copper touches on record levels. “There is nothing in their contract that gives them any right to be given more money for any increase in building materials,” he said. The airport contract has been at the centre of controversy for Laing O’Rourke, since it picked up the job two years ago in joint venture with local partner Al Naboodah. In September 2004, five workers were killed when a section of reinforcement cage for a buttress wall collapsed. The expansion of Dubai International Airport will cost around $4.5 billion and increase passenger numbers to around 70 million per year by 2016 and 100 million per year by 2025. Al Naboodah Laing O’Rourke was unavailable for comment.

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