ACE anger as Nakheel slashes fees

The Association for Consultancy and Engineering is calling for government action to support UK consultancy and engineering firms working in the United Arab Emirates who are being forced by clients to accept massive fee cuts and also facing the arbitrary renegotiation of previously agreed terms and conditions of contract.

The huge volume of construction work in the UAE, particularly in Dubai, has faltered in the last few months as property values have fallen.

The UAE construction juggernaut has not been funded solely on oil wealth but also from massive borrowings leveraged on oil reserves and rapid development.

ACE chief executive Nelson Ogunshakin said: “While we welcome the recent £13 billion bail-out of developers Nakheel from the Dubai and Abu Dhabi authorities, there remains a number of serious concerns, namely a staggering amount of unpaid fees, which our soundings indicate are around £400 million rather than the figure of £200 million that has been originally projected by some in the industry.

“There is also a growing sense of mistrust in the UAE, and it looks set to worsen through episodes like this.”

ACE has formally written to the business secretary Lord Mandelson as well as UK Trade and Investment and the Department for Business, Enterprise and Regulatory Reform (BERR) to seek official backing.

ACE claims the difficulties facing consultants in the emirate, following the near-financial collapse of Dubai-based property developer Nakheel, have been threatening to make waves in the construction sector for some weeks.

ACE’s soundings suggest that consultants are being forced to accept fee cuts of up to 35 per cent in some cases, with unpaid invoices for completed projects becoming increasingly commonplace.

“After visiting the UAE over the last couple of weeks and listening to feedback from our member firms, ACE feels that ministerial representation is needed in order to ensure that consultants are not rooted to the bottom of the pecking order when it comes to fee settlements being paid out,” said Mr Ogunshakin.

“We know that firms are being made to comply with an unfair negotiation strategy and that in many cases their contracts are effectively being torn up. Added to that, it seems that clients are asking firms to waive their right to legal action to recover fees – a situation which is unjust and cannot be allowed to continue,” he said.

“Clients are taking advantage of the current economic situation and doing so at the expense of consultants and other construction professionals, many of whom work for UK and global firms. It is totally unacceptable.”