A new law could ease the requirement of contractors to fork out hefty performance bonds for Dubai government contracts.
Performance bonds, sometimes known as retentions, are issued to guarantee the satisfactory completion of a project by a contractor.
Under Law 08 of 2014, exemptions for paying the 10 per cent bond can be granted to contracts of under Dh500,000, including consulting services, Wam reported yesterday.
Rows involving performance bonds mushroomed after financial crisis when some developers cashed them on stalled projects, threatening contractors with insolvency and leading to a rash of legal disputes.
The director general of the Government of Dubai’s Legal Affairs Department, Lowai Belhoul, said that the new law took into consideration the financial burden caused by the performance bond that could lead to increased project costs.
Mr Belhoul expects that the new legislation will help small and medium enterprises in the emirate by encouraging them to participate in government projects.
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