Compliance and Regulations
Procurement Department Compliance and Regulations – A 360-Degree Approach
Ensuring Legal, Financial, and Regulatory Adherence for Mega Construction Projects
1. Introduction
The Procurement Department at BEC Arabia operates under a strict regulatory framework to ensure full compliance with Saudi procurement laws, financial regulations, and contractual obligations. Given the high financial impact of procurement transactions, compliance ensures:
Transparent and legally compliant procurement operations
Full adherence to KSA procurement laws, VAT regulations, and financial reporting standards
Mitigation of procurement fraud, contract risks, and supplier financial liabilities
Regulatory compliance with Etimad e-Procurement System for government contracts
Alignment with FIDIC contract procurement terms and international best practices
A 360-degree compliance framework is essential to ensure that all procurement activities adhere to Saudi regulations, financial policies, and international procurement standards, reducing legal risks and financial liabilities for BEC Arabia’s large-scale construction projects.
2. Procurement Regulatory Framework in Saudi Arabia
2.1 Key Compliance Areas
Compliance Area
Regulatory Requirements
Impact on Procurement
Saudi Public Procurement Law
All government-related procurement transactions must comply with Etimad e-Procurement System.
Ensures transparency, fair competition, and supplier prequalification.
VAT & Tax Compliance (ZATCA)
VAT (15%) must be applied to all supplier invoices, and tax filings must follow ZATCA regulations.
Prevents tax penalties and ensures financial compliance.
Financial Compliance (SOCPA & IFRS)
All procurement transactions must align with Saudi accounting standards (SOCPA) and IFRS.
Ensures accurate financial reporting and audit readiness.
Contractual Compliance (FIDIC Procurement Terms)
Procurement contracts must follow FIDIC contract terms for dispute resolution and payment terms.
Prevents legal disputes and ensures financial accountability in procurement contracts.
Supplier Compliance & Due Diligence
Suppliers must undergo financial, legal, and operational assessments before being approved.
Prevents supplier fraud, financial instability, and performance risks.
Benchmark: 100% of procurement transactions must comply with Saudi financial and contractual regulations.
3. Compliance with Saudi Public Procurement Law & Etimad e-Procurement
3.1 Etimad e-Procurement System Compliance
All government-related procurement must be processed through Etimad, ensuring compliance with Saudi Public Procurement Law.
All suppliers must be registered on the Etimad platform to qualify for government tenders.
Procurement contracts must be approved through Etimad’s electronic bidding and contract management system.
Key Compliance Deliverables:
Etimad Procurement Approval Logs & Compliance Reports
Supplier Registration & Prequalification Documentation
Benchmark: 100% compliance with Etimad procurement regulations.
3.2 Competitive Bidding & Supplier Prequalification
All procurement transactions must follow fair and transparent bidding processes to ensure compliance with anti-corruption laws.
Competitive bidding must be conducted for purchases exceeding SAR 1 million, unless direct procurement is justified and approved.
Prequalified suppliers must meet financial, technical, and legal criteria before contract award.
Key Compliance Deliverables:
Competitive Bidding Logs & Procurement Justification Reports
Supplier Prequalification & Financial Risk Assessment Reports
Benchmark: 90% of high-value procurement transactions must be competitively sourced.
4. VAT & Tax Compliance in Procurement (ZATCA Regulations)
4.1 VAT & Withholding Tax Compliance
VAT (15%) must be applied to all supplier invoices in compliance with Saudi Zakat, Tax, and Customs Authority (ZATCA) regulations.
Withholding tax (WHT) must be deducted on foreign supplier transactions as per Saudi tax laws.
VAT invoices must be electronically generated and stored to comply with FATOORA (E-Invoicing) regulations.
Key Compliance Deliverables:
Quarterly VAT & Withholding Tax Reports
ZATCA E-Invoice Compliance Audits
Benchmark: Zero tax penalties due to VAT or withholding tax non-compliance.
4.2 Procurement Tax Audit & Financial Reporting Compliance
All procurement transactions must align with Saudi accounting standards (SOCPA) and IFRS financial reporting requirements.
Monthly and annual procurement tax audits must be conducted to verify compliance with ZATCA regulations.
Key Compliance Deliverables:
Procurement Tax Compliance Audit Reports
Supplier Tax Filing & VAT Deduction Logs
Benchmark: 100% tax compliance in procurement-related financial transactions.
5. Contractual Compliance & FIDIC Procurement Terms
5.1 Procurement Contract Compliance with FIDIC
All procurement contracts must align with FIDIC contract terms, ensuring compliance with:
Payment milestones and financial obligations
Procurement risk allocation and liability protection
Procurement claims, variations, and dispute resolution procedures
Key Compliance Deliverables:
FIDIC-Based Procurement Contract Review Logs
Procurement Payment Term Compliance Reports
Benchmark: Zero procurement disputes due to non-compliance with FIDIC financial terms.
5.2 Supplier Performance & Financial Compliance
All suppliers must undergo financial audits and legal due diligence before being approved for procurement contracts.
High-risk suppliers must provide financial guarantees, performance bonds, or letters of credit (LCs) to secure procurement transactions.
Key Compliance Deliverables:
Supplier Financial Risk Assessments & Performance Reports
Procurement Contractual Compliance Logs
Benchmark: 90% of procurement transactions must be conducted with prequalified, financially stable suppliers.
6. Procurement Fraud Prevention & Compliance Risk Mitigation
6.1 Anti-Fraud & Procurement Integrity Policies
Procurement fraud prevention measures must be implemented, including:
Supplier background checks and conflict of interest assessments
Dual-approval policies for high-value procurement transactions
Financial transaction tracking and audit controls
Key Compliance Deliverables:
Procurement Fraud Risk Assessment & Compliance Reports
Supplier Integrity & Conflict of Interest Logs
Benchmark: Zero procurement fraud incidents.
6.2 Supplier Payment Compliance & Financial Accountability
All supplier payments must align with contractual payment schedules and milestone achievements.
No advance payments should be made without financial security (e.g., performance guarantees, LCs).
Procurement payments must be tracked in real-time through ERP and treasury systems to prevent unauthorized transactions.
Key Compliance Deliverables:
Procurement Payment Approval & Compliance Logs
Supplier Performance-Based Payment Tracking Reports
Benchmark: 100% of procurement payments must be contractually justified and pre-approved.
7. Digital Procurement Compliance & ERP Integration
7.1 Procurement Compliance Monitoring Systems
Technology
Functionality
Application in Procurement Compliance
ERP System
Procurement Cost Control, Supplier Compliance Tracking
Ensures financial transparency and real-time risk monitoring
Aconex
Procurement Contract & Payment Compliance
Tracks procurement approvals, supplier contracts & compliance logs
Power BI Dashboards
Procurement Fraud Prevention & Analytics
Provides real-time compliance tracking & fraud detection
Etimad E-Procurement
Government Procurement Compliance
Ensures compliance with Saudi public sector procurement regulations
Benchmark: 100% of procurement transactions must be digitally tracked and auditable.
8. Conclusion
The Procurement Department at BEC Arabia ensures:
Full compliance with Saudi procurement laws, VAT regulations, and financial policies.
Alignment with Etimad e-Procurement standards for government-related transactions.
Strict adherence to FIDIC procurement contract terms and payment schedules.
Real-time compliance tracking using ERP, Aconex, and Power BI analytics.
Fraud prevention measures and supplier financial due diligence.
By embedding structured procurement compliance frameworks, BEC Arabia ensures financial transparency, regulatory adherence, and operational efficiency in all procurement functions.
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