COVER STORY CASHFLOW

challenges for the client,” he says. “Therefore, it is crucial to adopt a team approach and ensure that each party takes responsibility for its respective tasks. The contractor must deliver the project, the engineer must administer it and the client must pay on time through the engineer to the respective parties.”

Addressing challenges, achieving goals

Besides teamwork, there is a need for transnational flexibility and internal cash flow management structures, Berbari says. “The future looks grim, and I would quote the saying, ‘survival of the fittest’,” he says, while referring to current challenges confronting the MEP industry. The MEP industry, he says, faces difficulty in mobilising contractors across countries due to competitive rosters and due to restrictions in shifting a contracting company from one country to another. “For instance, many projects are being built in remote areas in Saudi

Arabia, like Neom,” he says. “However, it remains unclear if these projects will have a cap on employees or adopt the hire-and-fire model that has worked well in the United States.”

Berbari underlines the importance of cashflow management and recommends that companies retain as much cash as possible, take out employment insurance, keep aside salaries for at least 3-6 months and build reserves for end-ofservice payments. “Companies must manage multi-channel cashflow to build their stamina, which can take a decade,” he says. “The maximum allowed profit extraction in the construction industry should be 50% of annual profit and linked to cashflow above a certain threshold. Current cashflow regulations lead to many failures and struggles, and companies often resort to a snowball effect of using new job down payments to finance old jobs.”

Weighing in, Reddy says the MEP industry could overcome cashflow challenges through project partnerships, classification and rating of contractors and consultants, fixing a minimum value for a project with an escalation clause, ensuring transparency in payables and deductibles and through considering the financial and resource capabilities of contractors when awarding projects. Speaking from a broad perspective, Reddy says it is important for the MEP industry to focus on the core work than to get caught up in payment issues. “Specialists should be allowed to concentrate on their job, and training should be emphasised to keep up with advancements, such as the Internet of Things,” he says.

Loggerenberg, who is also the chair of the Dubai Construction Industry Business Group (Al Moltaka), which is registered through the Dubai Chamber of Commerce, says that one of the goals of the committee for this year is to arrange a roundtable discussion, to highlight the challenges the industry faces and to enable key stakeholders in the construction industry to provide feedback to the Government.

He says the time is ripe to address the situation of clients taking advantage of the situation, resulting in MEP consultants and contractors having to sign very one-sided contracts if wanting to be appointed on contracts. “Contracts should be fair, especially regarding payment terms and recourse for non-payment or delayed payment, and this needs to be addressed,” he says. “In terms of cashflow, it is straightforward. To quote the saying, ‘Turnover is vanity, profit is sanity, but cash is king for your business’.”

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