Policies and Procedures
Procurement Department Policies and Procedures – A 360-Degree Approach
Ensuring Transparency, Cost Efficiency, and Regulatory Compliance for Mega Construction Projects
1. Introduction
The Procurement Department at BEC Arabia follows a structured framework of policies and procedures to ensure cost-effective, transparent, and legally compliant procurement operations. These policies align with Saudi procurement regulations, financial best practices, and risk mitigation strategies to:
Ensure fair and competitive supplier selection and contract negotiation.
Mitigate procurement fraud and financial risks.
Ensure cost control, budget alignment, and procurement efficiency.
Comply with Etimad e-Procurement, VAT regulations, and Saudi Public Procurement Law.
Enhance supplier collaboration and mitigate supply chain disruptions.
A 360-degree procurement framework ensures that all procurement activities follow industry best practices while optimizing cost, quality, and project timelines.
2. Procurement Planning and Sourcing Policies
2.1 Procurement Needs Assessment & Demand Planning
Procurement must be aligned with project requirements, execution schedules, and budget approvals.
Demand forecasting must be conducted to optimize bulk purchasing, reduce lead times, and prevent material shortages.
Procurement plans must be approved by Project Control and Finance before execution.
Key Deliverables:
Annual Procurement Plan & Demand Forecasting Reports
Project Procurement Schedules & Cost Estimation Reports
Compliance Benchmark: Procurement cycle times must be optimized to reduce material delays by at least 15%.
2.2 Strategic Sourcing & Supplier Prequalification
All suppliers must undergo a prequalification process based on financial stability, technical capability, and regulatory compliance.
Only prequalified suppliers are allowed to participate in tenders, RFQs, and direct procurement agreements.
Suppliers must provide financial guarantees (performance bonds, letters of credit) for high-value procurement contracts.
Key Deliverables:
Supplier Prequalification & Risk Assessment Reports
Preferred Supplier List & Supplier Audit Reports
Compliance Benchmark: 90% of procurement transactions must be conducted with prequalified suppliers.
3. Tendering, Contracting, and Supplier Negotiation Policies
3.1 Competitive Bidding & RFQ (Request for Quotation) Process
Competitive bidding is mandatory for all procurement transactions above SAR 1 million, unless direct procurement is justified.
All tenders must follow standardized bid evaluation criteria, including cost, quality, and delivery commitments.
RFQs must be sent to at least three prequalified suppliers to ensure fair competition.
Key Deliverables:
Tender Evaluation Reports & Supplier Bid Comparison Sheets
Procurement Justification Reports for Direct Purchases
Compliance Benchmark: 100% of procurement transactions must follow competitive bidding guidelines.
3.2 Contract Award & Supplier Negotiation
Procurement contracts must be aligned with FIDIC terms, payment milestones, and penalty clauses for non-performance.
Contracts exceeding SAR 10 million must be approved by Finance, Legal, and Executive Management before execution.
Long-term supplier agreements must include cost escalation clauses and risk mitigation strategies.
Key Deliverables:
Procurement Contract Review & Approval Reports
Supplier Cost Negotiation & Risk Mitigation Logs
Compliance Benchmark: Ensure at least 10% cost savings through supplier negotiations.
4. Procurement Cost Control & Budget Compliance Policies
4.1 Procurement Budget Approval & Cost Monitoring
All procurement transactions must be pre-approved by Finance and aligned with project budgets.
Cost deviations above 5% require management approval and justification.
Monthly procurement financial audits must be conducted to track budget adherence and spending trends.
Key Deliverables:
Procurement Budget Allocation & Cost Control Reports
Monthly Financial Variance Analysis & Procurement Spending Logs
Compliance Benchmark: 95% of procurement transactions must be within the approved budget.
4.2 Payment Terms & Financial Risk Mitigation
Payments must follow contractual milestones and supplier performance verification.
No advance payments above 30% of the contract value should be made without a bank guarantee or performance bond.
Late payment penalties must be enforced on suppliers who fail to meet contractual obligations.
Key Deliverables:
Supplier Payment Schedule Compliance Reports
Financial Risk Exposure & Payment Performance Logs
Compliance Benchmark: Zero unauthorized procurement payments or financial mismanagement.
5. Regulatory Compliance and Legal Governance Policies
5.1 Compliance with Etimad e-Procurement Regulations
All government-related procurement transactions must be processed through Etimad, Saudi Arabia’s official procurement platform.
Procurement contracts must be digitally recorded and approved within the Etimad system.
Suppliers participating in government procurement must be registered on Etimad and meet regulatory criteria.
Key Deliverables:
Etimad Procurement Compliance Reports
Supplier Registration & Government Procurement Audit Logs
Compliance Benchmark: 100% compliance with Saudi Public Procurement Law and Etimad regulations.
5.2 VAT & Tax Compliance for Procurement Transactions
VAT (15%) must be applied to all procurement transactions in compliance with Saudi ZATCA tax laws.
All supplier invoices must be electronically generated and stored in compliance with Saudi e-Invoicing (FATOORA) requirements.
Withholding Tax (WHT) must be deducted on foreign supplier transactions as per Saudi tax regulations.
Key Deliverables:
Quarterly VAT & Withholding Tax Compliance Reports
ZATCA E-Invoice Compliance & Tax Filing Logs
Compliance Benchmark: Zero tax penalties due to procurement-related non-compliance.
6. Procurement Fraud Prevention & Supply Chain Risk Management Policies
6.1 Supplier Financial Due Diligence & Risk Mitigation
Suppliers must be audited for financial stability, legal compliance, and operational capacity before contract approval.
High-risk suppliers must provide performance bonds or bank guarantees before contract execution.
Procurement fraud detection mechanisms must be implemented, including conflict of interest disclosures and procurement integrity assessments.
Key Deliverables:
Supplier Financial Audit & Compliance Reports
Procurement Risk Mitigation & Fraud Prevention Logs
Compliance Benchmark: Zero procurement fraud incidents.
7. Digital Procurement & ERP Compliance Policies
7.1 Digital Procurement Tracking & Automation
Technology
Functionality
Application in Procurement
ERP System
Procurement Cost Control, Supplier Management
Ensures financial transparency and real-time risk monitoring
Aconex
Procurement Contract & Payment Compliance
Tracks procurement approvals, supplier contracts & compliance logs
Power BI Dashboards
Procurement Analytics & Cost Reporting
Provides real-time supplier performance tracking and budget variance analysis
Etimad E-Procurement
Government Procurement Compliance
Ensures legal compliance for public sector procurement transactions
Compliance Benchmark: 100% of procurement transactions must be digitally tracked and auditable.
8. Conclusion
The Procurement Department at BEC Arabia ensures:
Full compliance with procurement regulations, VAT laws, and contract governance policies.
Efficient supplier selection, contract negotiation, and procurement risk mitigation.
Seamless financial alignment with budget approvals and cost control frameworks.
Structured fraud prevention and supplier financial due diligence strategies.
Digital procurement integration with ERP, Aconex, and Power BI for real-time monitoring.
By embedding structured procurement policies and procedures, BEC Arabia ensures cost-effective, transparent, and legally compliant procurement operations that drive successful project execution and financial sustainability.
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