Published September 2015
As Dubai prepares for Expo 2020, the Dubai government continues to maintain a high level of interest in public infrastructure projects with local and foreign companies eager to participate. With 35 government entities and an estimated USD $6 to 8 billion investment in infrastructure projects by the government specifically in relation to Expo 2020, tender opportunities are expected to increase significantly. As government procurement contracts can be lengthy and complex, it can be daunting for bidders, particularly foreign investors, to navigate the process. This article will therefore touch upon some of the fundamental aspects of the tendering process in Dubai, including key legislation and the implementation of an electronic tender system to streamline procurement.
Tender Process
Unlike private businesses, the Dubai government must adhere to a tender process when contracting with a member of the private sector. The government tender process in Dubai is governed by UAE Law No. 16 of 1975, a federal law which regulates all contracts of public works, services and supplies, and Dubai Law No. 6 of 1997, which regulates government procurement contracts at the emirate-level. In some instances, there may be limited scope by the respective government body to vary the requirements set out by law.
1. Public Invitation to Tender:
In most cases, the government department will initiate the process by advertising the tender in two daily newspapers as well as on the online tender system, eSupply, which is operated by Dubai egovernment and Tejari.
The advertisements must contain the minimum information outlined in the UAE tender laws, including, but not limited to, information about the tender authority, rules for submitting the bid, and the bid validity period.
Government departments generally have strict rules about the number of tenders they must obtain before a final selection process takes place.
2. Submission of Tender:
Before a business can apply submit a tender for a government job, they should register with eSupply.
The bidding company will generally be required to submit a complete proposal, which should include necessary information such as pricing, timelines and service levels. The bidder must also agree to the contract terms and conditions proposed by the contracting government department.
While the eSupply system allows a company to submit their details for the tender online, the department may still require hard copies of documents, including but not limited to:
In accordance with the tender rules, the documents should be submitted in a sealed envelope together with an initial bond ranging between two (2) and five (5) percent of the estimated value of the bid. The required documents are generally submitted in Arabic, unless the tender contract specifically indicates that English is appropriate. Any amendment to the tender documents, retraction of the bid, or elimination of any item on the bid is not permitted.
In order to avoid future legal disputes, the bidding company must ensure that it is compliant with the contracting department’s rules before submitting a bid. Foreign companies are permitted to participate in the government tender process but may require a local agent or have a local presence before the final contract is signed off.
3. Selection of Winning Bid:
Assuming the government department has received the requisite number of bids, it will typically choose the winning bid based on the economic benefits of the proposal. The selected bidder will be notified before being required to sign the final contract.
The successful bidder will also be required to submit an interest-free performance bond equal to a certain percentage of the tender value in the form of an unconditional irrevocable letter of guarantee from a local bank. The exact bond value will be determined by the government department.
4. Finalising the Contract:
Upon receipt of the required performance bond, a final contract is executed by both parties. The contract outlines in detail the specific terms and conditions of the agreement, including provisions pertaining to termination, resolution of disputes, penalties and the execution period.
In light of the growing public infrastructure projects in Dubai, it is critical that companies in the private sector are familiar with the tendering process and consider the nuances of entering into government contracts. Given the strict regulatory framework within which the UAE tendering process operates, as well as the expected increase in bidders, companies must carefully and strategically submit their bids to ensure maximum chances of success with their tenders.
If you are interested in participating in the tender process, or if you would like to discuss the content of this article in more detail, please contact: Sunita Singh-Dalal, Partner (ssingh-dalal@ach-legal.com or +9714-4529091). You may also visit: www.ach-legal.com.
Author:
Sunita Singh-Dalal
Partner
AC&H
Tel: 9714-4529091
Email: ssingh@achlegal.com
With contribution from: Bijan Motiwala
