Housing Ministry seeks feedback on draft contractor classification regs

Saudi Arabia’s Ministry of Municipalities and Housing (MOMAH) is seeking public input on the draft Executive Regulations for the Contractor Classification System.

The draft regulations aim to develop and strengthen the existing framework to be on par with the recent advancements witnessed in the local contracting sector. This is in addition to ensuring compliance with international standards while enhancing the quality of both public and private sector projects.

Under the proposed changes, contractors seeking to break down a specific project into different executable fields must submit a formal request in this respect. If approved, the decision is definite.

The given project must be already completed, located within the Kingdom, and have a minimum value of SAR 600 million, with subdivided portions valued at no less than SAR 75 million.

The update also requires contractors to submit a classification application that includes several key documents, including classification forms, a valid commercial registration or its equivalent specifying the requested classification fields and activities, and consolidated or branch-level financial statements (balance sheet and income statement) for the most recent year.

The financial statements must be no less than six months old and no more than 18 months from the date of registration in the commercial register, certified by a licensed chartered accountant.

Financial statements issued within the Kingdom should be deposited with the Saudi Business Center, except in specified cases. For foreign company branches established within the Kingdom less than 18 months ago, contractors may submit the parent company’s most recent financial statements, certified by a licensed chartered accountant.

Similarly, entities wholly or partially owned by government bodies or controlled by other companies, having existed for no more than 18 months without completing their first fiscal year, may submit their balance sheet as well as income and capital statements, which should also be certified by a licensed chartered accountant.

Applications must further include the organizational structure, governance mechanisms, and the qualifications and experience of administrative and technical personnel.

Contractors will also be mandated to provide contractual documentation (or equivalent documents if no formal contract exists) for projects completed or still underway and are based inside or outside the Kingdom, at a minimum completion rate of 50% for execution projects and 30% for maintenance, operation, and service projects.

For government projects, the project owner’s approval is required if the contractor assigns, partially assigns, or subcontracts the contract. The main contractor must disclose subcontractor agreements and their values for all ongoing or completed government projects.

Additionally, establishments employing 20 or more workers must hold group housing licenses. Companies must maintain a valid commercial license.

When classification is requested based on the parent company’s experience and data abroad, the foreign parent firm must submit a written undertaking to provide financial, technical, and administrative support to its Saudi-based unit, ensuring the branch’s proper performance and fulfillment of obligations.

Other documents or data may be requested following the review and analysis of the classification application.

Under the draft regulations, classified contractors could request amending their valid classification certificates, including upgrading or deleting any field or activity after 90 days from the certificate’s issuance.

Contractors may also add new classification fields or activities during the certificate’s validity, subject to classification conditions and criteria.

However, projects will not be counted as execution experience under certain conditions such as when contracts are signed before the commercial registration date. This also applies to projects outside the classification scope, those withdrawn from the contractor, or projects where the contractor had no actual role in execution.

Experience is also deemed invalid if the contractor fails to provide subcontracting approvals or if the contracted work’s financial value exceeds the classification financial limit.

Lastly, failure to submit required documents or data after study, analysis, and inspection of the main office and project site will result in the disqualification of any given project.