# Commercial Department

## **Commercial Department Overview**

#### **Strategic Cost Management, Contract Administration, and Quantity Surveying for Mega Construction Projects**

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### **1. Introduction**

The **Commercial Department at BEC Arabia** plays a vital role in **managing financial, contractual, and procurement aspects of construction projects**. It ensures that projects are **delivered within budget, comply with contract terms, and achieve profitability while maintaining operational efficiency**.

The department consists of **key functions** that contribute to the financial success of BEC Arabia’s projects:

* **Cost Estimation and Budgeting** – Ensuring accurate project cost projections and budget allocation
* **Contract Administration** – Managing contractual obligations, claims, and risk mitigation
* **Quantity Surveying (QS)** – Overseeing material quantities, cost control, and value engineering
* **Procurement and Subcontractor Management** – Ensuring cost-effective purchasing and supplier compliance
* **Payment and Financial Reconciliation** – Verifying project costs, progress payments, and financial reporting

A **360-degree approach** ensures the department **optimizes cost efficiency, mitigates financial risks, and ensures compliance with contractual and regulatory requirements** in Saudi Arabia’s construction industry.

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### **2. Commercial Department Structure and Responsibilities**

| **Function**                                 | **Key Responsibilities**                                                       | **Integration with Other Departments** |
| -------------------------------------------- | ------------------------------------------------------------------------------ | -------------------------------------- |
| **Cost Estimation and Budgeting**            | Prepares cost estimates, forecasts budgets, and assesses financial feasibility | Business Development, Project Planning |
| **Contract Administration**                  | Drafts, reviews, and manages project contracts, claims, and variations         | Legal, Procurement, Project Management |
| **Quantity Surveying (QS)**                  | Conducts material take-offs, cost control, and value engineering               | Engineering, Procurement, Construction |
| **Procurement and Subcontractor Management** | Manages supplier contracts, cost negotiations, and vendor compliance           | Procurement, Logistics, Finance        |
| **Financial Reporting and Cost Control**     | Tracks project expenditures, cost deviations, and ensures payment approvals    | Finance, Accounting, Project Control   |

**Benchmark:** The Commercial Department ensures that **all projects remain within 5% of their allocated budget while maintaining compliance with contractual terms and financial targets.**

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### **3. Key Responsibilities of the Commercial Department**

#### **3.1 Cost Estimation and Budgeting**

* Develops **project cost estimates and budgets** based on tender documents
* Evaluates **cost implications of design changes and engineering modifications**
* Ensures all estimates comply with **FIDIC, NEC, and KSA regulatory cost structures**
* Works with Finance to **track and adjust project cost forecasts**

**Deliverables:**

* Project Cost Estimate Reports
* Cost-Benefit Analysis and Financial Feasibility Studies
* Cost Tracking and Adjustment Plans

**Benchmark:** **90% accuracy in cost estimates compared to actual expenditures.**

***

#### **3.2 Contract Administration and Risk Mitigation**

* Drafts, reviews, and manages **client contracts, subcontract agreements, and supplier contracts**
* Ensures compliance with **contractual obligations, payment terms, and risk mitigation strategies**
* Monitors contract variations, claims, and dispute resolution processes
* Works with Legal to **ensure adherence to Saudi contract law and FIDIC contract frameworks**

**Deliverables:**

* Contract Review and Risk Analysis Reports
* Variation Order and Claims Documentation
* Contractual Risk Mitigation Strategies

**Benchmark:** **100% compliance with contract obligations and legal requirements.**

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#### **3.3 Quantity Surveying (QS) and Cost Control**

* Conducts **material quantity take-offs and bill of quantities (BOQ) preparation**
* Monitors **on-site material usage to prevent over-purchasing or waste**
* Identifies opportunities for **value engineering and cost-saving solutions**
* Works with procurement to **negotiate competitive material pricing**

**Deliverables:**

* Project Bill of Quantities (BOQ) Reports
* Cost Control and Material Usage Analysis
* Value Engineering Recommendations

**Benchmark:** **Minimizing material waste to below 3% of total project costs.**

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#### **3.4 Procurement and Supplier/Subcontractor Management**

* Oversees **procurement of materials, equipment, and subcontractor services**
* Negotiates **cost-effective pricing and favorable contract terms with vendors**
* Ensures **supplier compliance with BEC Arabia’s quality and contractual standards**
* Conducts **procurement risk assessments to prevent supply chain disruptions**

**Deliverables:**

* Procurement Cost Savings Reports
* Vendor and Supplier Performance Audits
* Procurement Risk Assessment Reports

**Benchmark:** **Achieving at least 10% cost savings through strategic procurement.**

***

#### **3.5 Payment Processing and Financial Reporting**

* Verifies **contractual payment terms and approves progress payments**
* Conducts **cost reconciliation between estimated and actual project expenses**
* Works with Finance to **generate accurate cost reports and profitability analysis**

**Deliverables:**

* Payment Approval Reports and Cash Flow Analysis
* Financial Reconciliation and Cost Variance Reports
* Budget Performance Analysis

**Benchmark:** **Ensuring that 100% of payments are processed within contractual deadlines.**

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### **4. Compliance and Regulations in the Commercial Department**

The Commercial Department ensures compliance with:

* **Saudi Ministry of Finance and Etimad e-Procurement System**
* **FIDIC and NEC Contract Frameworks** for international contract management
* **VAT and Financial Reporting Standards** for Saudi Arabia
* **Anti-Corruption and Compliance Regulations** in procurement and subcontracting

**Benchmark:** **Zero non-compliance incidents in financial and contractual audits.**

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### **5. Digital Integration and Cost Control Monitoring**

| **Technology**          | **Functionality**                            | **Application in Commercial Department**                         |
| ----------------------- | -------------------------------------------- | ---------------------------------------------------------------- |
| **SAP ERP**             | Cost Tracking, Budget Forecasting            | Monitors project expenditures and financial reconciliation       |
| **Aconex**              | Contract Documentation and Claims Management | Manages contracts, claims, and payment approvals                 |
| **Primavera P6**        | Cost Scheduling and Forecasting              | Ensures project cost planning aligns with construction schedules |
| **Power BI Dashboards** | Financial Analytics and Reporting            | Tracks budget deviations, cost savings, and financial KPIs       |

**Benchmark:** **100% financial transactions and contract data must be digitally stored and monitored.**

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### **6. Commercial Department Key Performance Indicators (KPIs)**

| **KPI Name**                               | **Definition**                                                            | **Target Benchmark**   |
| ------------------------------------------ | ------------------------------------------------------------------------- | ---------------------- |
| **Cost Overrun Percentage**                | Difference between actual and estimated project costs                     | Below 5%               |
| **Contract Compliance Rate**               | Percentage of contracts executed as per legal and regulatory requirements | 100% Compliance        |
| **Procurement Cost Savings**               | Percentage of cost reduction through strategic sourcing                   | Minimum 10%            |
| **Supplier and Subcontractor Performance** | Percentage of vendors meeting contractual obligations                     | Minimum 95% Compliance |
| **Invoice Payment Processing Time**        | Average time taken to approve and process payments                        | Within 30 Days         |

**Benchmark:** All **financial KPIs must be tracked and reported monthly for performance monitoring.**

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### **7. Conclusion**

The **Commercial Department at BEC Arabia** ensures:

* **Strategic cost management and financial control for mega construction projects**
* **Seamless contract administration, claim management, and dispute resolution**
* **Effective quantity surveying to optimize material usage and cost control**
* **Procurement and subcontractor management to achieve cost efficiency and quality compliance**
* **Compliance with Saudi regulations, FIDIC standards, and financial reporting requirements**

By integrating **structured commercial management, digital tracking, and strategic cost control**, BEC Arabia ensures **profitable, compliant, and financially optimized project execution**.
