Accurate valuation of work-in-progress crucial for construction industry

Work completed needs to be valued accurately and realistically, according to British Business Group's poll of top construction executives

Image used for illustrative purpose. United Arab Emirates, Dubai, cranes.

Image used for illustrative purpose. United Arab Emirates, Dubai, cranes.

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The biggest challenge facing the UAE construction industry is not delayed payments but under-valuation of work-in-progress, according to a British Business Group (BBG) poll of a cross section of the industry.

More than 70 construction leaders participated in the poll during an event in Dubai, the non-profit group said in its press statement.

Sixty-seven per cent of those polled said that work that is completed needs to be valued more accurately and realistically for the industry to remain healthy.

Payments for work in progress, whether on percentage completion or stage basis, help maintain the contractor's cash flow on projects that often take months or years to complete, according to experts.

Of those polled, 69 per cent also underlined the prevalence of a short-term approach and lack of consideration of the whole project life cycle when making decisions on capital projects during the construction phase.

Cynthia Corby, Audit & Assurance COO and Middle East construction lead for Deloitte, said the poll results underscored the broad agreement within the construction industry on the “principal root causes” of the problems that have plagued the industry.

Commenting on the life cycle approach, she said: “A clear focus on the whole life costs of a capital asset is critical in order to ensure assets are delivered within budget, on time, fit for purpose and fulfil the planned return on investment (ROI) for the stakeholders, be that a strategic ROI or a measured financial ROI.”

The focus on project lifecyle will ensure that assets can be capitalised on the owner’s balance sheet and deliver the business plan with robust cash flows to support its capitalised cost. It will allow monetisation of assets, if and when required, through a sale or securitisation of the asset.

Corby said the BBG construction roundtable is working towards assessing how the UK Construction Playbook can be adapted for the UAE region. The Playbook, launched by the UK’s Cabinet Office in December 2020, is a guidance document about sourcing and contracting public works projects.

The Deloitte official said the group is looking at adapting best practices and key policies and guidance for how private and public work projects and programmes are evaluated for feasibility and funding, procured, delivered and handed over for operations, encompassing the whole life cycle of the capital project.

(Writing by Anoop Menon; Editing by Seban Scaria)


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