Compliance and Regulations
Commercial Department Compliance and Regulations – A 360-Degree Approach
Ensuring Full Compliance with Contractual, Financial, and Procurement Regulations in Mega Construction Projects
1. Introduction
The Commercial Department at BEC Arabia plays a crucial role in ensuring compliance with national and international financial, contractual, and procurement regulations. Regulatory compliance is essential for:
Preventing financial and contractual risks
Ensuring legal and regulatory adherence in procurement, cost management, and subcontracting
Maintaining transparency in commercial transactions and contract administration
Avoiding disputes, penalties, and regulatory breaches
This compliance framework aligns with:
Saudi Ministry of Finance and Etimad e-Procurement System
FIDIC (International Federation of Consulting Engineers) and NEC (New Engineering Contract) frameworks
Saudi VAT, financial reporting, and taxation laws
Public and private sector contract regulations
Anti-corruption and transparency laws governing procurement and commercial dealings
A 360-degree compliance approach ensures that BEC Arabia’s financial and commercial transactions adhere to best practices while mitigating legal risks.
2. Governance and Compliance Framework
2.1 Compliance Governance Structure
Compliance Area
Responsible Stakeholders
Key Oversight Areas
Financial Compliance
CFO, Finance Team, Commercial Directors
Budget tracking, VAT compliance, financial reporting
Contractual Compliance
Legal Team, Contracts Administration
Contract drafting, claims, FIDIC/NEC adherence
Procurement and Supply Chain Compliance
Procurement Team, Commercial Managers
Supplier contracts, vendor negotiations, Etimad regulations
Regulatory and Government Compliance
Government Affairs, Legal, Auditors
Saudi Ministry of Finance, tax audits, anti-corruption compliance
Benchmark: All commercial transactions must be documented, reviewed, and approved before execution to ensure compliance with Saudi regulatory requirements.
3. Contractual Compliance and Regulatory Requirements
3.1 Compliance with FIDIC and NEC Contract Frameworks
All construction contracts must comply with FIDIC or NEC standards to ensure fair and transparent agreements.
Contracts must define risk allocation, payment terms, variations, and claims management in accordance with FIDIC rules.
Ensures force majeure, liability, and indemnity clauses are legally sound to mitigate financial risks.
Key Compliance Deliverables:
Standardized Contract Templates (FIDIC-based)
Contract Risk Assessment Reports
Legal Compliance Audits
Benchmark: 100% of contracts must be legally compliant with FIDIC/NEC guidelines before approval.
3.2 Change Order and Variation Compliance
All change orders and cost variations must be formally documented and approved.
Ensures compliance with contractual obligations, consultant approvals, and cost tracking requirements.
Change orders exceeding a 5% budget variation must be escalated for executive approval.
Key Compliance Deliverables:
Change Order Justification Reports
Contract Variation Logs
Consultant and Client Approval Records
Benchmark: Zero unauthorized contract variations or cost escalations.
3.3 Claims and Dispute Resolution Compliance
Claims must be managed in accordance with contract terms and Saudi legal requirements.
Adheres to FIDIC Dispute Avoidance and Resolution (DAAB) procedures.
Ensures all claims are properly documented, reviewed, and justified before submission to clients or consultants.
Key Compliance Deliverables:
Claims Assessment and Justification Reports
Arbitration and Legal Dispute Resolution Records
Contractual Risk Mitigation Strategies
Benchmark: 100% of claims must be legally and contractually justified before submission.
4. Financial and VAT Compliance
4.1 Budget Control and Cost Compliance
Ensures all project budgets align with approved financial plans.
Monitors cost overruns and ensures budget deviations remain within acceptable limits.
Adheres to Saudi financial reporting and audit requirements.
Key Compliance Deliverables:
Monthly Budget and Cost Reports
Cost Deviation Analysis
Financial Audit and Compliance Logs
Benchmark: Project cost deviations must not exceed 5% of the allocated budget.
4.2 VAT and Taxation Compliance
Ensures full compliance with Saudi VAT laws (15%) on procurement and subcontractor payments.
All invoices must be VAT-compliant and properly documented for audit purposes.
Works with finance teams to submit tax reports and ensure adherence to financial regulations.
Key Compliance Deliverables:
VAT-Compliant Invoicing Records
Tax Reporting and Audit Reports
Supplier and Subcontractor Tax Compliance Logs
Benchmark: 100% of invoices must be VAT-compliant and submitted in accordance with Saudi tax laws.
5. Procurement and Supply Chain Compliance
5.1 Compliance with Etimad e-Procurement System
Ensures all government-related procurement follows the Etimad platform regulations.
Verifies supplier prequalification, contract registration, and financial approvals.
Ensures bid evaluation processes are transparent and corruption-free.
Key Compliance Deliverables:
Supplier Registration and Prequalification Records
Procurement Approval Logs
Etimad Compliance Audits
Benchmark: 100% compliance with Etimad procurement regulations for all public-sector projects.
5.2 Subcontractor and Supplier Compliance
Ensures all subcontractors comply with contract safety, quality, and financial obligations.
Implements performance monitoring and audits for supplier compliance.
Prevents supply chain risks by enforcing financial and contract verification processes.
Key Compliance Deliverables:
Subcontractor Financial and Contract Compliance Reports
Supplier Performance Audits
Non-Conformance Reports (NCRs) for procurement violations
Benchmark: 95% compliance rate for all subcontractors and suppliers with contract requirements.
6. Anti-Corruption and Transparency Compliance
6.1 Compliance with Saudi Anti-Bribery Laws
Ensures procurement and financial transactions are transparent and ethical.
Implements whistleblower policies and fraud prevention mechanisms.
Adheres to Saudi anti-bribery and corporate governance regulations.
Key Compliance Deliverables:
Financial Transaction Audit Logs
Anti-Corruption Compliance Reports
Fraud Risk Assessments
Benchmark: Zero tolerance for corruption or financial misconduct.
7. Digital Compliance and Regulatory Tracking
7.1 Integration of Digital Compliance Monitoring
Technology
Functionality
Application in Commercial Compliance
Aconex
Contract and Procurement Document Control
Stores all financial and procurement compliance records
SAP ERP
Cost and Budget Monitoring
Ensures financial compliance with Saudi tax laws
Power BI Dashboards
Financial Reporting and Risk Analysis
Tracks budget variances and regulatory compliance
Primavera P6
Procurement and Cost Control Integration
Aligns procurement timelines with budget allocations
Benchmark: 100% of commercial transactions must be digitally monitored for compliance tracking.
8. Conclusion
The Commercial Department at BEC Arabia ensures:
Full compliance with FIDIC/NEC contract frameworks and Saudi financial regulations
Strict adherence to VAT laws, procurement standards, and budget control measures
Effective claims management, dispute resolution, and variation control
Transparent financial transactions with zero tolerance for corruption
By embedding structured compliance frameworks and digital tracking mechanisms, BEC Arabia ensures financial integrity, contractual security, and regulatory excellence in all commercial operations.
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