Arti Sangar is a partner is the Dubai office of DiazReus LLP
Although many residential projects across the UAE are ‘on hold’, the UAE government is continuing to commit money to infrastructure and other public projects. Of all the infrastructure projects planned or under way in the UAE, perhaps the most ambitious is the Abu-Dhabi based, Etihad Rail network. The project will link cities across the UAE in a 1200 kilometer network, and connect the UAE to Saudi Arabia as part of a broader Gulf rail network. The project is expected to unveil a large number of public invitations to tender, which is expected to attract foreign investors to participate. The interest in the public projects in the region is high and the run on participating in the projects has already started. This article will touch on some of the fundamental legal aspects of the tendering process relating to infrastructure projects in the United Arab Emirates.
Tender Laws in the UAE:
The federal law on tenders in the UAE, Law No. 16 of 1975, regulates all contracts of public works, services, and supplies. In addition to the federal law, each individual emirate has set out specific provisions regulating government procurement activities of emirate-level departments. In Abu Dhabi, for example, a contract between a foreign company and an Abu Dhabi government department is subject to Abu Dhabi Law No. 6 of 2008. Dubai Law on contracts of government departments i.e. Law No. 6 of 1997 is very similar to Abu Dhabi Law No. 6 of 2008. It contains similar provisions and details regulating contracts between Dubai government departments and companies entering into a contract.
1. Invitation to Tender. All government procurement contracts are subject to the provisions of bidding and tender regulations in the UAE. The concerned governmental body prepares the tender which is then advertised in two local daily newspapers. The advertisements for tenders must contain a minimum of information as provided in the tender laws, including but not limited to rules for submitting the tender, the authority to which the tenders are submitted and the tender validity period. The objective of this phase is to select suitable contractors to proceed to the next phase.
2. Submittal Procedure. The contracting authority will generally require the following from bidders: (a) the bidder’s complete, technical proposal in terms of technical solution, delivery timescales, service levels, and so on, which should comply in full with all of the authority’s requirements; and (b) acceptance of the proposed contract terms, subject to final clarification and fine tuning. The tenders have to be submitted together with a tender bond in sealed envelopes, on time and in accordance with the specific rules to avoid disqualification. Arabic is the official language in the United Arab Emirates although English is widely used and therefore bids should be in Arabic unless the tender document specifically indicates that English is required or accepted. The bidders must comply with the terms and conditions of the tender documents and amendments to the tender documents are generally not allowed.
3. Evaluation. Contracting authorities generally award a contract on the basis of the most economically advantageous provided that it is in conformity with the tender conditions and specifications. A tender which has been accepted is referred to the relevant governmental body. The successful bidder is notified and invited to sign the contract with the concerned governmental authority.
4. Performance Bond. If a company’s tender is selected, the company is required to provide a performance bond equal to 5 and 15 percent of the contract value. The performance bond is usually an unconditional and irrevocable letter of guarantee issued from a local bank. The government department determines the exact amount of the bond.
5. Drawing-up of the Contract: A formal contract is drawn-up by the government department. Subsequent to the submission of the required performance bond, the contract is then executed by the contractor and the government department.
Participation of Foreign Companies:
Foreign companies wishing to participate in government procurement programs may be required to have a local agent and provide bid and performance bonds. Foreign companies can generally participate at the general tender, however, by the time a contract is ready to be signed, participating foreign firms may need to have a local presence.
Participation in public procurements in the UAE needs to be carefully planned and the level of planning will depend on what goods or services are being procured. For complex procurements the tender process is likely to be lengthy requiring a full business case to be established for the proposed solution that the contracting authority intends to procure. We advise clients on the applicability of public procurement law and compliance with those rules and regulations. For further information please contact us at firstname.lastname@example.org.