Contract Management

Overview

The Subcontractor Contract Management process ensures that all subcontractor agreements are legally binding, commercially sound, and compliant with BEC Arabia's policies and KSA regulations. This structured framework minimizes financial, legal, and operational risks while maintaining quality, performance, and accountability in mega projects.

A well-managed subcontractor contract ensures:

✅ Procurement Team – Drafts contracts with the correct legal, financial, and technical clauses. ✅ Legal & Contracts Team – Ensures contracts comply with KSA laws, dispute resolution mechanisms, and risk mitigation policies. ✅ Project Management Team – Has clear visibility on subcontractor deliverables, scope, and milestones. ✅ Finance Team – Manages subcontractor payments based on contractual milestones. ✅ HSE & Compliance Team – Enforces subcontractor adherence to safety, quality, and regulatory compliance.

Every subcontractor contract must be reviewed, approved, and stored in BEC Arabia's SharePoint system for tracking and compliance.

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Step-by-Step Contract Management Process

1️⃣ Drafting the Subcontractor Contract

Once a subcontractor is prequalified and selected, the Procurement & Legal Teams prepare a formal contract, which must include:

🔹 Scope of Work (SOW) – Clear definition of subcontractor responsibilities and deliverables. 🔹 Payment Terms – Progress-based, milestone-based, or fixed payment schedules. 🔹 Project Timeline & Deliverables – Defined project start, key milestones, and deadlines. 🔹 Performance Guarantees – Bank guarantees, advance payment guarantees, and retention clauses. 🔹 Variation & Change Order Terms – How changes in scope or specifications will be handled. 🔹 Dispute Resolution Mechanism – Steps for conflict resolution, including mediation and arbitration. 🔹 Termination Clauses – Conditions under which BEC Arabia can terminate the contract.

📌 Template: Standard Subcontractor Agreement

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2️⃣ Contract Review & Approval Workflow

All contracts must go through a formal approval workflow before signing.

Approval Stage	Responsible Party	Review Focus
Drafting & Initial Review	Procurement Team	Ensures contract includes project requirements.
Legal Review	Legal & Contracts Team	Confirms compliance with KSA laws and risk mitigation clauses.
Financial Review	Finance Team	Verifies payment terms, cost control, and taxation.
Project Review	Project Management Team	Ensures deliverables, timelines, and work scope are correct.
Final Approval	Procurement Director & CEO	Contract execution and final authorization.

📌 Template: Contract Approval Checklist

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3️⃣ Issuing the Contract & Agreement Execution

Once approved, the contract is:

✔ Digitally stored in SharePoint for reference. ✔ Sent to the subcontractor for review and signature. ✔ Signed by BEC Arabia's authorized representatives. ✔ Notified to Finance for payment processing.

A contract is only valid once all signatures are obtained and stored in the Subcontractor Contracts Folder.

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4️⃣ Managing Variations & Change Orders

If there are changes to the contract scope, price, or duration, a Change Order Process is initiated.

📌 Variation Process: ✔ Step 1: Subcontractor submits a Change Request with justifications. ✔ Step 2: Project Team reviews feasibility and cost impact. ✔ Step 3: Legal & Finance approve the revised contract terms. ✔ Step 4: A Variation Order (VO) is signed and stored in SharePoint.

📌 Template: Variation Order Form

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5️⃣ Performance Tracking & Compliance Monitoring

To ensure the subcontractor meets contract obligations, BEC Arabia follows a structured compliance tracking system.

📌 Performance Monitoring Includes: ✔ Monthly progress reports submitted by the subcontractor. ✔ Site inspections to ensure work meets project specifications. ✔ Payment approvals based on milestone completion. ✔ KPI tracking for subcontractor performance evaluation.

📌 Template: Subcontractor Performance Review

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6️⃣ Dispute Resolution & Contract Enforcement

If a subcontractor fails to meet contract obligations, BEC Arabia follows a three-step resolution process:

✔ Step 1: Issue a formal warning letter requesting corrective action. ✔ Step 2: If the issue persists, engage in a negotiation or mediation process. ✔ Step 3: If unresolved, escalate to arbitration or contract termination.

📌 Template: Subcontractor Warning Letter

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7️⃣ Contract Closeout & Final Handover

When a subcontractor completes all contractual obligations, the contract is formally closed.

📌 Contract Closeout Steps: ✔ Step 1: Conduct a Final Inspection of completed work. ✔ Step 2: Obtain all necessary handover documents (As-built drawings, warranties, etc.). ✔ Step 3: Process final payment after Finance approval. ✔ Step 4: Issue a Contract Completion Certificate and store all records.

📌 Template: Contract Closeout Checklist

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Common Contract Issues & Solutions

1️⃣ Subcontractor Requests Unapproved Variations

❌ Issue: The subcontractor performs work outside the agreed scope without approval. ✅ Solution: Issue a formal contract variation rejection notice and reinforce compliance.

2️⃣ Delayed Payment Disputes

❌ Issue: Subcontractor claims late payment. ✅ Solution: Finance verifies whether milestone conditions were met before processing.

3️⃣ Non-Performance & Quality Issues

❌ Issue: Subcontractor fails to meet quality standards. ✅ Solution: Issue a Non-Compliance Report (NCR) and require corrective actions.

📌 Template: Non-Compliance Report

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Documentation & SharePoint Storage

To ensure compliance and transparency, all contract-related documents must be stored in the Subcontractor Contracts SharePoint Folder.

📁 Key Documents Stored in SharePoint

Document	Purpose	Access Link
Standard Subcontractor Agreement	Official BEC Arabia subcontract agreement template.	Open Folder
Contract Approval Checklist	Ensures all necessary approvals are obtained.	Open Folder
Variation Order Forms	Documents all approved contract modifications.	Open Folder
Performance Tracking Reports	Tracks subcontractor KPIs and compliance.	Open Folder
Final Contract Closeout Documents	Stores final project handover files.	Open Folder

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Final Notes & Key Takeaways

✅ All contracts must be reviewed and signed before work begins. ✅ Variation orders must go through the formal approval process. ✅ Performance tracking ensures subcontractors meet contract deliverables. ✅ All contract disputes must follow structured dispute resolution protocols.

For any contract-related inquiries, contact [email protected] or the Procurement Department.