Governance Framework for Construction Contractors and Subcontractors in the Kingdom of Saudi Arabia (KSA)

The Kingdom of Saudi Arabia (KSA) has established a comprehensive governance framework for construction contractors and subcontractors to ensure that construction projects are executed efficiently, safely, and ethically. This framework is underpinned by key legislative acts and standards that set the parameters for the industry. Two major components of this governance structure are the National Construction and Tender Law (NCTL) and the Saudi Building Code (SBC).

National Construction and Tender Law (NCTL)

The NCTL, enacted by Royal Decree No M/191 of 2023, represents a significant update to Saudi Arabia's construction law landscape. Scheduled to come into force on December 16, 2023, this legislation introduces several transformative changes aimed at enhancing the regulatory environment for construction projects.

Key Provisions of the NCTL:

1. Contractual Obligations: The NCTL clarifies and strengthens the contractual obligations of both contractors and subcontractors, ensuring that all parties adhere to defined terms and conditions.

2. Tendering Procedures: It outlines transparent procedures for bidding and awarding contracts, aiming to reduce corruption and favoritism in the procurement process.

3. Dispute Resolution: The law establishes more robust mechanisms for resolving disputes between parties, including expedited processes for handling claims and disagreements.

4. Safety and Compliance: The NCTL mandates stricter compliance with safety regulations and standards, reflecting a commitment to reducing workplace accidents and enhancing overall project safety.

Saudi Building Code (SBC)

The Saudi Building Code (SBC) complements the NCTL by providing detailed technical standards and requirements for construction practices. The SBC is a comprehensive set of guidelines designed to ensure that building projects meet safety, durability, and performance standards.

Key Components of the SBC:

1. Design and Construction Standards: The SBC outlines requirements for architectural and engineering design, including load-bearing structures, materials, and construction methods.

2. Safety Standards: It includes provisions for fire safety, electrical systems, and other critical aspects of building safety.

3. Environmental Considerations: The code incorporates environmental sustainability measures, promoting practices that minimize ecological impact and improve energy efficiency.

4. Quality Assurance: The SBC emphasizes quality control and inspection protocols to ensure that construction projects meet prescribed standards throughout their lifecycle.

Additional Legislation and Industry Standards

Beyond the NCTL and SBC, several other legislations and industry standards play a crucial role in governing the construction industry in Saudi Arabia. These include:

1. Licensing and Registration

- Saudi Contractors Authority (SCA): All contractors must register with the SCA, which oversees the classification and registration processes to ensure compliance with legal standards. This registration is essential for participating in government projects [SCA Saudi](https://sca.sa/en/Normal/aq) [SCA Saudi](https://sca.sa/en)

- Foreign Investment: Foreign contractors must obtain licenses from the Saudi Arabian General Investment Authority (SAGIA) to operate legally in the KSA [GLA & Company](https://www.glaco.com/blog/construction-law-practice-guide-saudi-arabia/)

2. Contractual Obligations

- Standard Contracts: Use of standardized contracts like FIDIC templates to delineate the rights and responsibilities of all parties involved.

- Performance Bonds: Contractors are required to provide performance bonds and guarantees to ensure project completion and adherence to quality standards. [Muqawil](https://muqawil.org/en/contractors)

3. Labor Laws

- Saudi Labor Law: Governs employment aspects such as working hours, wages, health, and safety.

- Saudization (Nitaqat Program): Requires a certain percentage of Saudi nationals in the workforce, promoting local employment. [GLA & Company](https://www.glaco.com/blog/construction-law-practice-guide-saudi-arabia/)

4. Safety Regulations

- Occupational Health and Safety (OHS): Compliance with OHS standards set by the Ministry of Human Resources and Social Development (MHRSD).

- Saudi Building Code (SBC): Details technical and safety requirements for construction projects. [Muqawil](https://muqawil.org/en/contractors)

5. Environmental Regulations

- Environmental Protection: Adherence to regulations enforced by the General Authority for Meteorology and Environmental Protection (GAMEP), aimed at minimizing environmental impact. [Muqawil](https://muqawil.org/en/contractors)

6. Quality Control and Assurance

- Project Management Standards: Implementation of best practices to ensure project quality and efficiency.

- Inspections and Audits: Regular checks by regulatory bodies to ensure compliance with standards and contractual obligations. [GLA & Company](https://www.glaco.com/blog/construction-law-practice-guide-saudi-arabia/)

7. Dispute Resolution

- Arbitration and Mediation: Preferred methods for resolving disputes, supported by the Saudi Center for Commercial Arbitration (SCCA) and governed by the Saudi Arabian Arbitration Law. [GLA & Company](https://www.glaco.com/blog/construction-law-practice-guide-saudi-arabia/)

8. Financial Regulations

- Payment Terms: Clear contractual payment terms to ensure timely disbursements.

- VAT and Tax Compliance: Adherence to tax obligations as per the Zakat, Tax and Customs Authority (ZATCA) regulations. [GLA & Company](https://www.glaco.com/blog/construction-law-practice-guide-saudi-arabia/)

9. Ethical Conduct

- Anti-Corruption Measures: Strict compliance with anti-corruption laws overseen by the National Anti-Corruption Commission [Nazaha] (https://nazaha.gov.sa/)

- Transparency and Accountability: Essential for maintaining integrity in the bidding process and project execution. [GLA & Company](https://www.glaco.com/blog/construction-law-practice-guide-saudi-arabia/)

This comprehensive governance framework ensures that construction projects in Saudi Arabia are carried out with the highest standards of safety, quality, and ethics, aligning with the country’s Vision 2030 goals.