Policies and Procedures
Commercial Department Policies and Procedures – A 360-Degree Approach
Ensuring Financial, Contractual, and Procurement Compliance for Mega Construction Projects
1. Introduction
The Commercial Department at BEC Arabia plays a critical role in cost control, contract administration, procurement, and financial compliance. Well-defined policies and procedures ensure:
Accurate cost estimation and financial planning
Full compliance with contract terms and legal requirements
Efficient procurement, supplier management, and budget control
Effective risk mitigation in financial and commercial transactions
Alignment with Saudi regulatory frameworks, FIDIC/NEC contract laws, and Etimad e-Procurement System
A 360-degree approach ensures that all commercial operations are structured, auditable, and aligned with project financial objectives.
2. Cost Estimation and Budgeting Policies
2.1 Project Cost Estimation Policy
All project cost estimates must be based on market rates, historical data, and quantity take-offs (QTOs).
Estimates must be reviewed and approved by Finance and Senior Management before submission.
Cost estimates must comply with FIDIC, NEC, and KSA regulatory standards.
Key Deliverables:
Bill of Quantities (BOQ) and Cost Estimation Reports
Project Financial Feasibility Studies
Budget Approval Documentation
Benchmark: 90% accuracy between estimated and actual project costs.
2.2 Budget Control and Financial Planning
All projects must have pre-approved budgets aligned with cost forecasts.
Budget variances exceeding 5% require financial re-assessment and approval.
Financial risk assessments must be conducted quarterly to avoid cost overruns.
Key Deliverables:
Cost Deviation Analysis Reports
Budget Forecasting and Risk Mitigation Strategies
Quarterly Cost Control Reports
Benchmark: Project budget deviations must remain below 5%.
3. Contract Administration Policies
3.1 Contract Drafting and Approval Procedures
All contracts must follow FIDIC and NEC frameworks for risk allocation, payment terms, and dispute resolution.
Contracts must include liability clauses, variation management terms, and legal protections.
The Legal and Commercial teams must review all contracts before execution.
Key Deliverables:
Contract Approval and Risk Assessment Reports
Standardized Contract Templates (FIDIC/NEC-Based)
Legal Compliance and Contract Review Logs
Benchmark: 100% of contracts must be legally reviewed before approval.
3.2 Change Orders and Variation Procedures
Any change orders exceeding 10% of the original contract value must be approved by Senior Management.
Variation orders must be justified with cost impact assessments.
All contract amendments must be documented in Aconex and approved by clients/consultants.
Key Deliverables:
Change Order Justification Reports
Contract Variation Logs
Client and Consultant Approvals for Variations
Benchmark: Zero unauthorized variation orders exceeding 10% of the contract value.
3.3 Claims and Dispute Resolution Procedures
All claims must be processed in compliance with FIDIC dispute resolution guidelines.
Legal and Commercial teams must review claims before submission to clients.
Dispute settlements must be documented in contract records to prevent financial liabilities.
Key Deliverables:
Claims Assessment and Justification Reports
Dispute Resolution Case Logs
Legal Review and Approval Documents
Benchmark: 95% of claims must be resolved within contractual deadlines.
4. Procurement and Supply Chain Policies
4.1 Procurement Approval and Supplier Management
All procurement transactions must comply with BEC Arabia’s financial policies and KSA regulations.
Vendors must undergo prequalification and risk assessments before contract approval.
High-value procurement transactions require dual-level approvals (Commercial and Finance teams).
Key Deliverables:
Supplier Prequalification and Performance Evaluation Reports
Procurement Risk Assessment Logs
Purchase Order Approval Records
Benchmark: 100% of vendors must pass compliance checks before contract execution.
4.2 Procurement Risk Management and Compliance
Ensures all procurements comply with Etimad e-Procurement System requirements for public sector projects.
Enforces ethical procurement practices to prevent fraud and financial risks.
Tracks procurement cycle times to ensure efficiency and timely material deliveries.
Key Deliverables:
Procurement Risk and Compliance Audits
Supplier and Subcontractor Performance Reports
Procurement Lead Time and Cost Optimization Strategies
Benchmark: Procurement cycle time must be reduced by 15% through efficiency improvements.
5. Payment Processing and Financial Compliance Policies
5.1 Invoice Verification and Payment Processing
Payments must only be processed for contractually approved invoices.
Payment approvals require financial verification and reconciliation with project budgets.
Delayed payments due to disputes must be tracked and resolved within 30 days.
Key Deliverables:
Invoice Approval and Reconciliation Reports
Payment Processing and Cash Flow Analysis
Dispute Resolution and Payment Delay Tracking Logs
Benchmark: 100% of payments must be processed within contractual deadlines.
5.2 VAT Compliance and Taxation Procedures
All invoices must be VAT-compliant as per Saudi tax laws (15%).
Tax reports must be submitted quarterly for regulatory compliance.
Financial audits must be conducted annually to verify tax compliance.
Key Deliverables:
VAT-Compliant Invoice Records
Quarterly Tax Reporting Documents
Audit Reports for Financial Compliance
Benchmark: Zero tax violations or compliance penalties.
6. Digital Compliance and Financial Control Integration
6.1 Digital Financial and Contract Tracking Systems
Technology
Functionality
Application in Commercial Policies
SAP ERP
Cost Tracking, Budget Control
Ensures real-time financial monitoring and compliance
Aconex
Contract Documentation and Compliance
Manages claims, variations, and contract approvals
Primavera P6
Procurement and Cost Forecasting
Aligns procurement and financial scheduling
Power BI Dashboards
Financial Reporting and Risk Analysis
Tracks KPIs for contract performance and cost control
Benchmark: 100% of commercial transactions must be digitally stored for auditability.
7. Conclusion
The Commercial Department at BEC Arabia ensures:
Accurate financial planning and budget control for mega construction projects
Strict adherence to contract terms, claims management, and dispute resolution policies
Efficient procurement and supplier management to optimize costs and reduce financial risks
Full compliance with Saudi tax laws, FIDIC frameworks, and financial reporting standards
Integration of digital tracking systems for enhanced commercial oversight
By implementing structured policies and procedures, BEC Arabia ensures financial integrity, contract compliance, and cost efficiency in all commercial operations.
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