Khalifa Port expansion – potential problems

Abu Dhabi Ports has announced plans to expand Khalifa Port container terminal by adding a 1,000-metre quay wall, and to deepen the port’s channel and basin to 18 meters.

These works will provide an addition 600,000 square metres of cargo-handling capacity and will allow the port to accommodate capesize vessels.

They are part of a broader development intended to increase Khalifa Port’s annual capacity from 2.5 million to 15 million TEUs and from 12 million to 35 million tonnes of general cargo by 2030.

If successful, this project will not only add welcome capacity to Khalifa Port, but also provide much-needed tendering opportunities for contractors operating in a depressed construction market.

But what are the potential pitfalls that may lie ahead for the employer and his contractors?

The proposed works present at least three project-specific risks to Contractors. First, the fact that the works are the expansion of an existing Port presents problems to the Contractor as well as the Employer.

The Contractor should negotiate for sufficient access to ensure that his construction works are not disrupted by the Employer’s on-going operations, or should at the outset agree who should bear the cost of such disruption and price his tender accordingly. If the Contractor is required to meet a specification that is dependent upon integration with the existing facilities, he should attempt to exclude liability if that result cannot be achieved because of deficiencies in the existing Port structure or layout.

Second, any port development carries a risk of delay and extra cost arising from unforeseeable physical conditions. Although the FIDIC-based contracts prevalent in the UAE allocate that risk to the Employer, Contractors must bear in mind that their entitlement to additional time and money is conditional upon compliance with strict time-limits on the giving of notices of claim.

Contractors should rigorously ensure that notices are submitted in relation to all potential Employer-culpable causes of additional delay and cost, from the outset and even if Employer/Contractor relations are good when the events in question occur.

Third, Contractors should note the provisions of local law. First, Article 880 of the UAE Civil Code renders the contractor liable to compensate the Employer for total or partial destruction of an installation occurring within 10 years, and for any defect that threatens its stability and safety, even if that collapse arose out of a fault in the land itself.

Second, Article 13 of Abu Dhabi Law No. 4 renders a Contractor liable for any defects that appear in the critical parts of a structure as a result of his neglect for a period of 10 years after preliminary handover. Contractors would be prudent to confirm that their insurance covers those liabilities.
Source: Arabian Supply Chain