Dubai: His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice President and Prime Minister, in his capacity as Ruler of Dubai, has issued Law No. 08 of 2014, partially amending Law No. 06 of 1997 on Contracts of Government Departments in the Emirate of Dubai.
Pursuant to the new law, the 10 per cent Performance Bond exemption articulated in Article 32 of Law No. 06 of 1997, has been amended to include any contracts with total value not exceeding AED 500,000 which comprises commencement of any works or provision of consulting services.
Additionally, if the contractor failed to present the performance bond and the total contract value ranges between Dh500,000 and Dh2,000,000, then the contractor may benefit from the performance bond exemption, yet an amount equivalent to 10 per cent of the contract’s payables is held against the final performance bond until the project’s final handover and this amount is subject to release upon submission of an equivalent bank guarantee.
Dr. Lowai Belhoul, Director-General of Government of Dubai Legal Affairs Department, said that the new law answers to requests from various government departments and aims to encourage services providers and small and medium enterprises that practice construction, commodities and services activities. He added that the new law took into consideration the financial burden caused by the performance bond which relatively increases the projects’ cost.
Dr. Belhoul expects that the new legislation will have a positive impact as it adds more flexibility to Dubai Government’s contracting procedures, facilitate operations, relieve financial burdens on contractors and service providers and encourage SMEs to engage in serving Dubai’s economy and attain sustainable development.