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Lack of transparency a key issue in the MEP contracting industry

Irregular cash flow can severely impact the functioning of businesses, say MEP contractors

| | Mar 28, 2017 | 1:51 pm
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MEP contractors highlight a serious situation that comes in the way of their operations – lack of transparency among the general contractors, which affects cash flow and morale.

Cash flow is key to any business. Delay in receiving payment from the client can affect the payment to employees, contractors, vendors, suppliers, labour force, among others. It could cripple businesses at worst.

MEP contractors often complain about not receiving their dues on time or when their role has been completed and it is time to move to another project. V Chandrasekhar Reddy, CEO of UAE-based Elemec Electromechanical Contracting, says: “As an MEP unit, our commitment to projects is consistent more or less, and we have to ensure that the inflow takes care of the outflow. So even a short period of break has a huge impact on the project’s progress and the company’s functionality. And being so-called domestic contractors, they are playing havoc with specialist sub-contractors, not just MEP contractors. If you look into any project, the builder will put a fort. And the biggest guy exposed to extra-precautionary measures is the MEP guy.”

Reddy says businesses cannot survive if there is a dent to the cash flow.

According to the Wage Protection System, the monthly salary of workers has to be transferred directly to their bank account within a week. Failing to comply with the rules would see the company being blacklisted by the authorities. “Yes, such labour welfare measures are welcome, as they bring much wanted discipline,” says M Vasanth Kumar, CEO of Qatar-headquartered Arabian MEP, “but the other area – payment to subcontractors and vendors – has been left untouched.” This could lead to smaller companies going bust, and bigger companies coming under a lot of pressure, says Kumar.

A monthly assessment to see if all parties involved, including MEP contractors, is being paid on time, can help ease the situation, says Reddy. He even suggests making it part of a regulatory framework.

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