Dubai builders chasing contracts in Abu Dhabi are being forced to slash their prices to stay afloat as competition intensifies. Many international contractors and consultants have shifted focus to the capital as the financial crisis brought work to a standstill on building sites across Dubai. But while more projects are being tendered in Abu Dhabi, particularly for roads and social infrastructure, contracts are difficult to win and slow to be awarded, the contractors say.
The situation has encouraged some firms to "buy work", meaning bidding for contracts on a zero-profit basis in order to maintain turnover. Bishoy Azmy, the chief executive of Al Shafar General Contracting, said that his company faced competition from as many as 40 rival contractors on some public-sector tenders in the capital. "Even if you price low and with low margins, you might not get the project," said Mr Azmy, whose company built hundreds of apartments on Dubai's Palm Jumeirah development. "Onerous contract conditions are also returning, such as unreasonable price expectations from some clients; some contractors are willing to accept these conditions just to remain, if only in name." Other companies have placed dozens of bids but are yet to win any work in Abu Dhabi.
"The feedback is always 'your price is too high' and they ask us to reduce it. Nothing has materialised," said Simon Kok, the regional business development manager UEC Middle East, an engineering company. The Emirates six-year building boom drew construction companies from all over the world and a surplus of bids and a shortage of contractors allowed companies to pick and choose which projects they wanted. Contractors could command a profit margin of 15 per cent or more during the height of the boom, but margins of between 5 per cent and 8 per cent are now more typical.