Some comments.
- It's not unexpected that construction costs would increase from the original estimate. As per the article costs have doubled. Culprits are cost inflation in materials and change orders.
- Also not unexpectedly despite the announcement that contractors would be paid, it does take time for money to move through the system. While the unnamed company official has denied that they have a receivable of US$5.3 billion, even half that amount is serious money.
The problem may be that there isn't enough available cash.
The Emirate owes substantial unpaid amounts. Dubai Metro is just one of the Emirate's projects.
New financing seems unlikely. Government revenues are insufficient. Shaykh Khalifa hasn't written another check.
This coupled with Shaykh Mohammed's waiving of fines for late CR renewals suggests that more economic pain is on the way in Dubai. Despite this week's festivities for Burj Khalifa, there is a lot more pain in store for Dubai.
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3 comments:
It's unclear how much is owed, but even half the $5.3bn is highly unlikely at this late stage of the works. If progress payments weren't cleared the works would have never been able to progress even until now. Which contractor can finance a project like this from his own pocket? It's not a PFI as far as I know.
Thanks.
It's good to have someone familiar with the industry commenting here.
What would you think would be a reasonable estimate of unpaid amounts?
It seems to me that there has to be an abnormal level of past dues to cause the consortium to delay or stop work.
I can't guess how much but normally you'd expect payment to be linked to progress of work. Usually contractors submit payment requests for varying amounts monthly which then need to be 'certified' by the contract administrator and processed / paid within a certain timeframe (which is usually ignored /delayed on more or less spurious grounds).
See also my comment on you follw up post.
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