A measured approach to payment transparency and contractual resilience.
In the Gulf construction market, extended payment cycles repeatedly convert contractors and service providers into unintended creditors. While contractual documents may appear balanced, deferred payments often exceeding 90 days shift working capital burdens onto contractors, undermining margins, operational continuity, and commercial trust.
RGS has confronted this issue directly. Rather than accept the industry’s tacit acceptance of late payment as a norm, the company implemented a structured, commercial approach, Business for Business (B4B) that treats payment behavior as an early indicator of partner viability and project risk.
The operational reality
Project delivery frequently presents a dual narrative. On site, schedules are met, safety briefings occur, and teams perform efficiently. In finance, however, the same projects are characterized by repeated payment delays:
- Invoices progress through approval cycles at Day 60, Day 75, Day 90 and beyond
- Suppliers and subcontractors are paid by contractors who have not yet received funds
- Financial teams shoulder payroll, supply chain, and logistics obligations to avoid disrupting delivery
“We commence projects in good faith,” said Ash T. Arshad, General Manager, RGS. “Too often, clients do not adhere to agreed payment terms. Continuing work preserves the project, but it also places disproportionate financial risk on the contractor.”
Systemic practices and their consequences
Common commercial practices exacerbate the issue:
- Late payment has become routine rather than exceptional
- “Pay when paid” arrangements cascade liquidity risk through the supply chain
- Suppliers are pressured into discounts to accelerate cash collection, compressing already narrow margins
These practices do not merely affect cash flow; they erode trust and convert project meetings into de facto financial reconciliations.
Early detection and risk mapping
RGS treated payment behavior as a measurable risk factor and redesigned its pre-contract and project governance processes accordingly:
- Developed customer profiles to identify clients with histories of late payment, frequent disputes, or chronic cash constraints
- Analyzed sectoral and client-level patterns to distinguish transactional outliers from systemic behaviours
- Instituted a critical pre-project assessment: are we engaging with a client or financing their operations?
The company catalogued principal risks, late payments, bad debt, disputes, concentration risk, and manual billing errors and traced their root causes to onboarding deficiencies, ambiguous contractual terms, and ineffective dispute-resolution procedures.
Commercial measures and partnership principles
B4B is predicated on transparency and proportional allocation of commercial risk. RGS’s practical measures include:
- Open discussions of cash-flow expectations prior to mobilization
- Preference for milestone-based billing over undifferentiated lump-sum arrangements
- Structured, negotiated payment plans when clients demonstrate genuine short-term liquidity constraints
“As partners share risk, they must also share candour,” Mr. Arshad observed. “Late payments are an operational reality; denial is what undermines long-term collaboration.”
These measures inform project selection, contractual terms, and credit management, preserving both commercial viability and constructive client relationships.
The strategic question
Contractors routinely focus on technical delivery, safety, schedule, scope, and resourcing. A parallel, less frequently asked question is critical to long-term resilience.
If contractors persistently absorb their clients’ payment delays, at what point do they themselves become the principal financial risk?
RGS addressed that question proactively and adjusted its commercial behaviour. Resilient firms will be those that apply consistent, principled commercial discipline, accepting projects where the economic foundation is sound and declining or restructuring engagements where it is not.
Project success should be measured by more than built outcomes; it must also reflect equitable treatment of all contributors. By treating payment behavior as a leading indicator of relationship health and applying clear, commercially sound policies, RGS seeks to ensure projects are delivered effectively and that those who deliver them are compensated fairly and sustainably.
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