Volume IV Issue No.

10

The Global Leader in Managing Construction Risk

RECOMMENCING OPERATIONS AFFECTED BY CIVIL UNREST PART 2

At the end of last year we published an article Managing Risk on Major International Contracts affected by Civil Unrest which aimed to provide guidance to companies involved with construction projects in countries that were affected by the Arab Spring. We suggested certain steps to be taken in an effort to try and protect the commercial interests of companies as they suspended their operations and evacuated their resources. We also briefly touched upon matters to be addressed once the civil unrest had subsided. In this second article we have set out in more detail the matters to be considered in recommencing operations. Safety & Security First and foremost has to be the safety and security of working in the particular countries concerned and the regions where the projects are located. Current security updates can be obtained from embassies and consulates located in-country. Many companies employ expatriate staff from different countries around the world; it is vital to consider the attitude of the indigenous population towards the nationalities of the staff deployed as well as the nationality of the company. Once it has been established to the satisfaction of the company that the country is safe then Hill recommends that a small Reconnaissance Team is sent to conduct a feasibility study covering all aspects of the companys return to operations and to establish the status and condition of any existing project(s). Operational Review It is suggested that particular attention is given to any change in governmental regime, its impact on historic key relationships and sponsorship arrangements under the previous regime, the validity of the companys trade licence and other licences/permits, and any changes in legislation, taxation, rules and regulations which may have an effect on the companys risk profile. The Team also needs to investigate the availability of the local banking facilities to allow funds to be transferred for payment of local suppliers, subcontractors and services, and for local currency payments to be repatriated. It is also important to establish the rate of inflation, currency exchange rates
David Brodie-Stedman Senior Vice President & Managing Director Asia, Middle East and Africa Abu Dhabi Office Butti Al Otaiba Bldg., Suite 1601 & 1602 Sh. Khalifa St., P.O. Box: 5201, Abu Dhabi U.A.E Tel : +971 2 627 2855 Fax: +971 2 627 2042 E-mail: auh@hillintl.com

and the status of all project bonds and insurances. Another key element to review is the Countys infrastructure, without which projects cannot be constructed. The Team needs to assess the reliability of utilities: electricity, water, telecommunications, sewage and waste disposal, and the general state of the transportation system to facilitate the logistical operations. Project Audits For any ongoing projects that were suspended due to civil unrest, developers, consultants and contractors need to establish the following: whether the contracting parties still exist as commercial entities and are trading; if the consultancy team (design and supervision) is still operating in-country and under contract; whether there a desire to continue with the project and a willingness to honour the executed agreements; all and any outstanding payment issues and the likelihood of securing those payments. Hill recommends that a full audit of each project is undertaken to establish the feasibility of re-commencing the works, which should include a review of the general and structural condition of the project and plant. This will allow the structural stability of any structures completed or in progress to be determined and the extent of any damage that would need to be repaired together with the possible associated costs. To re-start operations it is vital that local suppliers, subcontractors (materials, transportation and plant) and local skilled/unskilled workforce are available. The Team needs to determine this, together with the condition of the local infrastructure, and the availability of suitable labour and staff accommodation, and catering and medical facilities. Specifically in respect to each Project set up and Site, the Team needs inspect the project offices; both structure and content, and assess the condition of the remaining project documentation, records and office equipment. The Team also needs to conduct an inventory and condition survey of the companys plant, equipment, vehicles, and purchased materials that are on and off Site.
David Merritt Senior Vice President & Managing Director Middle East and Africa Sultan Business Centre 5th Floor, Suite 501 P.O. Box: 71467, Dubai - U.A.E. Tel. : +971 - 4 - 337 2145 Fax : +971 - 4 - 335 6077 E-mail : dxb@hillintl.com

Analysis The Teams findings will provide the raw data necessary to analyse the companys position, and allow it to make an informed decision whether and when, if at all, to re-enter the country. The results of the investigations should also provide sufficient data for the company to develop a new or revised business strategy in light of the political changes and establish the first steps in attempting to recover its financial losses due to the civil unrest. Although the Arab Spring has quietened, unrest continues across the region in places such as Syria, Libya and Egypt and has locally spread into neighbouring countries. Part III of this series of articles will therefore explore potential avenues for recovering costs and losses due to civil unrest.

Jeffrey Badman Director & Country Manager of Hill Claims Group

Hill International, with 3,000 employees in 100 offices worldwide, provides program management, project management, construction management and construction claims and consulting services. Engineering News - Record magazine recently ranked Hill as the 11th largest construction management firm in the United States. For more information on Hill, please visit our website at www.hillintl.com.

Disclaimer: This article does not constitute advice, legal or otherwise, and is provided only as general commentary. Appropriate professional advice should always be obtained before taking or refraining from taking any action in relation to such information and/or the application of applicable law. This article and the materials contained in it are provided on the basis that all liability for any loss or damage, whether direct or indirect, arising out of or in connection with any use or reliance upon this article is excluded to the fullest extent permitted by law.