Standard Operating Procedures (SOPs) – Contracts
Objective:
To ensure that all contracts are legally sound, aligned with KSA laws, and comply with project-specific requirements.
Procedure:
1. SOP for Contract Drafting & Review
Receive Contract Request:
Business Development or Project Management submits a request for contract drafting.
Identify contract type: Main Contract, Subcontract, Consultancy Agreement, JV Agreement, or NDA.
Gather Required Information:
Project Scope, Terms & Conditions, Pricing, and Compliance Requirements.
Client’s or Subcontractor’s legal details (CR number, VAT registration, etc.).
Draft Contract:
Use FIDIC-based contract templates if applicable.
Ensure inclusion of Payment Terms, Liquidated Damages, Dispute Resolution Clauses, and Force Majeure Provisions.
Verify alignment with KSA Procurement Laws & Public Investment Fund (PIF) Mega Project Requirements.
Internal Review & Approvals:
Contracts Administration Team: Initial review for compliance.
Legal Department: Risk assessment and legal validation.
Finance Team: Financial feasibility check.
Executive Approval: Final review by Contracts Director / CEO.
Client/Stakeholder Review & Negotiation:
Send the draft contract to the client or subcontractor for feedback.
Hold negotiation meetings to finalize contract terms.
Contract Finalization & Execution:
Obtain signatures from authorized representatives.
Register the contract in Aconex (BEC Arabia’s Document Management System).
Distribute the signed contract to relevant departments.
2. SOP for Change Order & Variation Management
Objective:
To ensure proper handling of contract variations, ensuring project feasibility and compliance.
Procedure:
Identify Change Requirement:
Project Manager submits a Change Request (CR) citing modifications in scope, schedule, or budget.
Identify the impact on cost, timeline, and contract terms.
Assess the Impact of Change Order:
Contracts Administration Team: Reviews implications on existing contract terms.
Estimation & Finance: Evaluate cost adjustments and budget impact.
Legal Team: Checks contractual risks.
Negotiate & Approve Variation Order (VO):
Client, consultant, or subcontractor reviews the cost and schedule impact.
Secure approvals from Project Director & Contracts Administration Head.
Finalize the updated contract terms.
Amend & Issue Variation Order:
Update contract records in Aconex and inform all stakeholders.
Ensure payment schedules reflect the agreed variation.
3. SOP for Contract Compliance & Risk Management
Objective:
To ensure all contracts comply with KSA regulations, mega project frameworks, and corporate policies.
Procedure:
Regulatory Compliance Review:
Verify contract compliance with:
KSA Construction & Procurement Laws
Saudization (Nitaqat) & Local Content Requirements
PIF & NEOM Standards
Risk Assessment & Mitigation:
Identify contractual risks (delays, penalties, payment disputes).
Establish risk-sharing clauses with subcontractors.
Set up early warning systems for contractual risks.
Auditing & Documentation Control:
Conduct quarterly compliance audits on active contracts.
Maintain all contracts in Aconex for transparency & audit readiness.
Regularly update contract templates for legal & regulatory changes.
4. SOP for Subcontractor & Supplier Agreements
Objective:
To standardize the onboarding, contracting, and performance monitoring of subcontractors and suppliers.
Procedure:
Prequalification & Due Diligence:
Assess subcontractors' financial health, compliance records, and project experience.
Verify registration on Etimad & NUPP platforms (for government projects).
Contract Drafting & Agreement Finalization:
Use standardized subcontractor agreements with predefined KPIs.
Establish scope of work, payment terms, penalties, and termination clauses.
Secure legal review and executive approval.
Performance Monitoring & Compliance:
Regularly assess subcontractor performance through compliance checklists.
Enforce contract terms for delays, quality issues, or safety violations.
Maintain an updated record of subcontractor agreements in Aconex.
5. SOP for Dispute Resolution & Claims Management
Objective:
To handle contract-related disputes efficiently, minimizing legal risks and financial exposure.
Procedure:
Identify & Document the Dispute:
Capture all relevant communications, invoices, and contractual references.
Log the issue in the Contracts Administration Risk Register.
Attempt Internal Resolution:
Arrange meetings between stakeholders to resolve the issue amicably.
Seek a compromise through payment restructuring, timeline extensions, or contract amendments.
Escalate to Mediation or Arbitration (if unresolved):
Engage legal counsel to assess arbitration or litigation risks.
Follow dispute resolution mechanisms outlined in FIDIC/KSA Contracts Law.
If necessary, escalate the case to KSA Arbitration Center or Ministry of Commerce.
Final Settlement & Documentation:
Secure a legally binding resolution agreement.
Update contract records and risk assessment reports.
6. SOP for Contract Closeout & Handover
Objective:
To formally close completed contracts, ensuring all obligations are met.
Procedure:
Review Project Completion Status:
Confirm all deliverables, inspections, and quality checks are met.
Obtain the final completion certificate from the client.
Financial Reconciliation & Final Payments:
Verify final invoices, deductions, and retention releases.
Secure financial clearance from the Finance Department.
Contract Archiving & Compliance Review:
Conduct a post-contract audit for documentation accuracy.
Store all final contract documents in Aconex for compliance & future reference.
Update the Lessons Learned Repository with insights for future projects.
Conclusion
These Standard Operating Procedures (SOPs) ensure that the Contracts Administration Department at BEC Arabia operates efficiently, ensuring compliance, risk management, and legal protection across all contractual engagements.
🚀 With a structured approach to contract management, BEC Arabia ensures project success while minimizing risks, legal disputes, and financial exposure.
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