The discovery that several contractors were in what they thought were exclusive negotiations to build the Pentominium tower at Dubai Marina once again highlights how important trust between contractors and clients is to the construction industry.
For both parties, negotiations are a leap of faith as there are few formal checks and balances. Unlike competitive tenders, where contractors compete with one another on price, the client has to trust that the contractors will propose an honest price with a reasonable margin.
At the same time, the contractor hopes the client will not take advantage of the pre-construction services it provides before giving the project to another contractor at a discount.
Despite these risks, negotiation is now the preferred procurement method for a growing number of clients and most leading contractors in the UAE. The concept is also gaining in popularity in other markets, such as Qatar.
The logic is simple. Resources are scarce but can be secured for clients through these deals. For contractors, it means they can plan with more certainty.
But if the client holds talks with several other companies, the process is effectively the same as a tender. The contractor will submit a price and, depending on rival offers, may or may nor get the job.
If trust breaks down, the current preference for negotiated deals will quickly dissolve, causing difficulties for both sides.