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Managing risk in the GCC construction market

19 December 2025

 

The scale and complexity of construction projects under way in the GCC region has attracted global attention. And while large-scale project announcements continue to dominate the headlines, the underlying risks – insufficient financing, harsh contract clauses and a tendency to delay dispute resolution – are often overlooked.

Around the region, many contractors are experiencing difficulties once projects have started because they mistakenly believe they have the necessary in-house skillsets to navigate these complex issues.

MEED has convened a panel of construction consultants and specialists to develop a checklist to help contractors and subcontractors operating in the region to navigate the market’s challenges as the sector moves into 2026.

The proactive steps are aimed at positioning a company so that it can maximise recovery and mitigate threats posed by unresolved claims and poor commercial or contractual administration.

Systemic risk

The regional market is characterised by several systemic issues that amplify risks for contractors. 

The fundamental problem is finance. Projects frequently suffer because they are not fully financed from the start, which places financial strain on contractors. This problem is then compounded by the region’s traditional contractual environment, which means disputes are typically not finalised until well after jobs have been completed, creating cash flow problems for contractors, particularly near the end of such projects.

Further financial strain is created by unconditional performance guarantees and retention. The combined requirement for advance payment bonds, a 10% performance bond and sometimes 5%-10% retention represents a significant draw on contractors’ cash flow. The growing tendency of employers to pull bonds further exacerbates the situation.

Many contractors sign up to one-sided contracts so as to secure more work, rather than challenging their employers. Key contractual issues include:

> Unrealistic timelines: Contractors set themselves up to fail by accepting unrealistic timescales on projects, despite the knowledge that the work often takes twice as long.

> Deficient design: A major risk, particularly on high-profile projects, is a lack of specification and design progress. Many contracts, such as the heavily modified Silver Book – a standard contract published by the International Federation of Consulting Engineers (Fidic) for turnkey engineering, procurement and construction projects – presuppose that the contractor has sufficient information to design, build and deliver, even when there is substantive information missing, which renders lump-sum pricing obsolete and inevitably leads to dispute.

> Lowest-bid mentality: Contractors often fail to factor necessary commercial support from legal and claims specialists into their tender figures, making their bid appear more competitive but leaving them without a budget to seek help until it is too late. As a result, projects are managed with budgets that are barely sufficient, rather than being run properly to a successful conclusion.

Supply-chain erosion

The quality and capacity of the subcontractor market, particularly in the mechanical, electrical and plumbing (MEP) field, has eroded significantly. 

Some major MEP players have closed or left the market due to underpricing, prompting contractors to call in their performance bonds. This means the region is receiving progressively lower quality for increasingly higher costs, further straining the delivery phase for main contractors.

The risk of subcontractor insolvency is increasing and must now be considered a primary project risk. Contractors should monitor financial health, diversify subcontractor dependencies, challenge allocated resources and secure step-in rights wherever possible.

Many Silver Book contracts in the GCC now include heavily amended, employer-friendly clauses that push design and ground-risk even further onto the contractor – often beyond what Fidic intended. These amendments require careful review and firm pushback.

The GCC remains a market of opportunity, but success in 2026 will belong to contractors that combine disciplined tendering, transparent commercial governance and early issue resolution. Optimism is not a strategy; preparation is. 

A 10-point checklist for contractors in 2026

1. Mandate contractual due diligence: Invest time and money into a thorough contract review before signing. Be prepared to challenge harsh clauses, particularly those unfairly allocating risk, such as unknown conditions and full design responsibility. Assume that bespoke rather than standard amendments govern your entitlement. Treat the special conditions as the real contract.

2. Factor commercial support into the budget: Do not omit the cost of essential commercial support from the tender, such as quantity surveyor teams, quantum and delay specialists, legal review and claims preparation. Even if not visible in the front-line figures, this cost – which could be as low as 0.01% of the project value – must be factored in to ensure a budget for early and continuous engagement.

3. Prepare a realistic baseline programme: Stop committing to programmes just to fit the tender. Develop a realistic programme from the start, identifying risks and including necessary code books to track delays early. Consider commissioning an independent programme review at the tender stage – this is common internationally and reduces later arguments about logic, durations and sequencing.

4. Confirm project funding: Ensure that the project financing is fully in position before starting work. Many problems stem from projects that are only partially financed, leading to cash running out near completion. Gone are the days of not asking employers for greater transparency when it comes to funding projects.

5. Establish a strong commercial and claims function: This is where commercial management starts. Set up systems to ensure contractual compliance, including seven-day claim notifications. Variations are inevitable, and proper substantiation is required to secure entitlement – if it is not recorded, it cannot be recovered. Diaries, cost records and notice logs remain the foundation of entitlement.

6. Seek early specialist engagement: Prevention is better than a cure. Bring in specialists early to examine time and cost issues before problems arise. Consultants can provide advice, help set up the correct commercial systems and prevent the escalation of unresolved issues.

7. Adopt an old-school approach to claims management: Technology is useful, but nothing beats resolving issues face to face. Engage directly with the employer’s team regularly to negotiate and agree claims early. This manages the client’s expectations when it comes to budgeting and allows the contractor to secure cash flow sooner. A simple early-warning culture – even when not contractually required – prevents surprises and builds trust with the client.

8. Avoid wasting resources: Focus claims efforts only on events that are actually recoverable and demonstrably critical. Contractors often waste time chasing things that will not be recoverable. Prioritise issues that are both time-critical and clearly fall under the employer’s risk – everything else should be logged but not pursued aggressively.

9. Upskill internal teams: Use specialist involvement as an opportunity to upskill your in-house commercial team. Have them sit alongside specialist consultants to learn proper commercial and contractual administration processes, creating a lasting work-culture benefit.
10. Push for faster dispute resolution: When a dispute arises, advocate for a swift resolution mechanism like adjudication, mediation or expert determination to temporarily resolve cash flow issues. Dispute adjudication boards are intended to give quick, interim decisions. However, if not set up from the start of the project, the process becomes protracted – sometimes taking many months – so fails to provide the cash-flow relief contractors urgently need.  Where clients resist adjudication, propose interim binding mediation or expert determinations, or failing this, milestone-based dispute workshops – anything that accelerates getting cash back on site.

MEED would like to thank Refki El-Mujtahed of REM Consultant Services (refki@rem-consultant.com; www.rem-consultant.com) for facilitating this article, as well as the following co-contributors:

Aevum Consult | Lawrence Baker | lawrence.baker@aevumconsult.com | www.aevumconsult.com

Decerno Consultancy | Lee Sporle | leesporle@decernoconsultancy.com | www.decernoconsultancy.com

Desimone Consulting | Mark Winrow | Mark.Winrow@de-simone.com | www.de-simone.com

Forttas | Derek O’Reilly & Martin Hall | derek.oreilly@forttas.com & martin.hall@forttas.com | www.forttas.com

IDH Consult | Ian Hedderick | ian.hedderick@idhconsult.com | www.idhconsult.com

White Consulting | Nigel White | nigelwhite@whiteconsulting-me.com | www.whiteconsulting-me.com

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Colin Foreman

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