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Strengthening Supplier Responsibility for Delivery Delays
Amendment to the Contracts and Warehouse Management Law in Dubai Government 2026
Strengthening supplier responsibility for delivery delays
Government contracts represent one of the most important tools relied upon by government entities to implement their projects and secure the necessary materials and services for the efficient continuation of their operations. Therefore, the Dubai government continues to develop its legislative framework in this regard to achieve the highest levels of governance, transparency, and protection of public funds.
In this context, Law No. (10) of 2026amending some provisions of Law No. (12) of 2020 regarding contracts and warehouse management in the Dubai government, includes substantial amendments to the provisions regarding supplier delays and the resulting penalties and procedures. Our office's team reviews in this article the key points you need to know whether you are a supplier or a contracting government entity.
First: Background of the original law
Law No. (12) of 2020 was issued to regulate government procurement procedures, inventory management, and the disposal of government assets according to modern standards. Its main objectives include:
- Achieving economic efficiency in government procurement.
- Enhancing integrity, transparency, and equal opportunities among suppliers.
- Protecting public funds.
- Standardizing contracting and inventory management procedures.
- Supporting digital transformation in government operations.
Second: What has changed under the 2026 amendment?
The new amendment focused on Article (76)related to supplier delays in delivering contracted materials. Accordingly, if the supplier delays delivery or the materials are rejected by the acceptance committee, the director general may grant the supplier an additional period not exceeding 30 daysif there is an interest for the government entity in that.
The fundamental change — comparing penalties:
| Item | Previous text | The new amendment 2026 |
|---|---|---|
| Daily delay penalty rate | 0.05% of the value of the materials | 0.5% of the value of the materials |
| Maximum total penalty | — | 20% of the value of the contracted materials |
Third: What happens if the delay continues?
If the delay penalty reaches its maximum and the supply is not executed, the law grants the government authority to take one of the following two actionswithout the need for prior notice or a court ruling:
First action: Purchase the materials at the supplier's expense
The government may purchase the materials from another supplier and charge the delayed supplier the price differences, in addition to administrative expenses at a rate of10% of the value of the contracted materials.
Second action: Terminate the contract
The government may terminate the contract and confiscate the final guarantee, with the right to seek compensation from the supplier for damages resulting from the delay.
| Action | Consequences |
|---|---|
| Purchase of alternatives | Price differences + 10% administrative expenses on the supplier |
| Terminate the contract | Confiscation of the final guarantee + right to compensation for damages |
Fourth: The importance of the amendment for suppliers and contractors
The amendment reflects a clear trend towards enhancing contractual discipline. The new penalties are ten times higher than the previous ones, which means a direct financial impact on the profitability of the contract in case of delay. Therefore, suppliers must:
- Strictly adhere to contractual deadlines from day one.
- Plan supply chains in advance and manage operational risks.
- Provide backup inventory when necessary to avoid delays.
- Document any exceptional circumstances that may hinder supply.
- Request an extension early when there are justified reasons before the contractual period expires.
Legal advice for suppliers
- Review the contract terms before signingand verify its feasibility and your actual ability to fulfill its obligations.
- Document any emergencythat may affect the supply as soon as it occurs.
- Communicate with the government authority earlyIf you anticipate a delay, do not wait until the deadline expires.
- Keep detailed recordsof the implementation stages and correspondence with the government entity.
- Consult a legal advisorin case of a dispute or potential delay.
The role of the lawyer in government contract disputes
- Reviewing government contracts and assessing their legal risks before signing.
- Providing consultations related to penalties and delay procedures.
- Representing the supplier before the relevant government authorities.
- Claiming rights and compensations in case of contractual disputes.
- Assisting suppliers in drafting extension requests and legal defenses.
Frequently Asked Questions
Is it permissible to grant the supplier an additional grace period after a delay?
Yes, the general manager may grant an additional grace period not exceeding 30 days if it is deemed beneficial for the government entity, and this is not considered an acquired right for the supplier but rather a discretionary authority of the administration.
What is the maximum delay penalty under the new amendment?
The law sets the penalty ceiling at 20% of the total value of the contracted materials, calculated at a rate of 0.5% for each day of delay or part thereof.
Can the contract be terminated due to delay?
Yes, if the delay continues until the penalty reaches its maximum limit, the government entity has the right to terminate the contract, confiscate the final guarantee, and claim compensation, without requiring a prior court ruling.
Is it necessary to obtain a court ruling before taking the termination or alternative purchase action?
No. The law allows the government entity to take these two actions directly without warning or court ruling in the specified cases, providing the government entity with a more effective and swift tool to address delays.
Can the supplier be held liable for compensation in addition to the penalty?
Yes, the penalty does not prevent the claim for compensation for actual damages resulting from the delay according to the provisions of the law and the contract.
Summary
- The late fee has increased from 0.05% to 0.5% per day — ten times the previous rate.
- The maximum penalty is 20% of the value of the contracted materials.
- The government entity may terminate the contract or make alternative purchases at the supplier's expense without notice or court ruling.
- An additional grace period of up to 30 days is available at the discretion of the general manager.
- Advance planning and early legal consultation are the first line of defense for suppliers.
If you are a supplier contracted with a government entity in Dubai or facing a contractual dispute or need specialized advice, our office team is fully prepared to provide the necessary assistance.