UAE contractors back away from fixed-price contracts as materials costs climb

UAE contractors are increasingly unwilling to lock in prices on long-term projects, shifting more of the cost risk from regional tensions onto developers and clients, according to a new market report from consultancy Currie & Brown.

What’s happening: Tenders are coming back with additional qualifications and shorter quote validity windows, with some steel prices now locked for only around 30 days. Fluctuation clauses, which let contractors adjust their price if material costs move, are becoming common on longer programs. And contractors are also filing more extension-of-time claims — formal requests for more time to finish a project without penalties — as they stretch their capacity and wait longer for specialist materials and equipment to arrive.

The squeeze shows up in materials prices: Average cement prices are up 16% since January, concrete 10%, and steel reinforcement 8%, based on supplier pricing as of 31 August, the report says. Diesel has swung the most, jumping in April, falling back, and then rising again in August and September.

Metal- and energy-heavy work is taking the biggest hit, including MEP systems, electrical infrastructure, façades, steel, and aluminum. Higher freight, supplier, and ins. costs are part of it, the report says, alongside sharp global price rises for oil, aluminum, and copper. Demand from data centers is adding to the pressure on specialist electrical and cooling equipment, which data centers need in large volumes.

The pipeline is still moving

Work is moving ahead on data centers, Al Maktoum International Airport’s expansion, Etihad Rail, industrial and logistics projects, and residential units already sold off plan.

But new awards have slowed since the war began. UAE project awards fell 18.5% y-o-y to USD 29.2 bn in 1Q 2026, as we reported in April. They then dropped 56.6% q-o-q to USD 20.5 bn in 2Q, costing the UAE its spot as the Gulf's busiest projects market to Saudi Arabia, according to Kamco Invest data we reported in July. That’s c. USD 49.7 bn for 1H. The decline was broad-based, as seven of the UAE’s eight project sectors saw lower award values than a year earlier in 2Q.

Government transport projects are the exception. Transport made up more than a third of 1Q awards at around USD 10.1 bn, up from USD 3 bn a year earlier. The biggest item is Al Maktoum International Airport, where more than AED 55 bn in airport contracts are expected to be awarded by the end of 2026, and first-phase operations are targeted for 2032, as we reported in August.