Late payment to contractors stalling KSA projects

Late payment to contractors stalling KSA projects
Updated 17 August 2013

Late payment to contractors stalling KSA projects

Late payment to contractors stalling KSA projects

Late payment to contractors from different government agencies in Saudi Arabia amount to more than SR100 billion, representing about 30 percent of the total volume of government projects in the Kingdom, according to Nabil Abbas, representative of the International Federation of Consulting Engineers (FIDIC) in Saudi Arabia and the Arabian Gulf.
Abbas said the delay in payments to contractors is one of the main reasons for the faltering of government projects in the Kingdom. These delays account for about 20 percent of the total stalled projects.
The system in Saudi Arabia requires contractors to implement projects as long as the contract has been signed, even if the payments are delayed. These delayed payments from government agencies, Abbas said, are not a justification for the contractor to stop, although international law obliges authorities to pay contractors within 30 days of maturity. However, in Saudi Arabia, delayed payments to contractors extend for periods ranging from three to six months, and up to a year in many cases.
Contractors, consultants and owners are all responsible for the delays and the failure of the implementation of projects, but the issuance of approvals for the implementation of government projects is the prime cause, he said.
Abbas also said: “The most important is the control of government agencies, which provide instructions, follow-up, and monitor compliance by issuing approvals in a period not exceeding 10 days, as well as postponing services which obstruct the implementation of government projects.”
Abdullah Radwan, chairman of the Contractors Committee at the Jeddah Chamber of Commerce and Industry, said that many of the causes of stalled projects are beyond the control of contractors. FIDIC’s contract will solve all the problems faced by the contractors, as well as 80 percent of the problems of stalled projects, noting that these contracts will contribute in speeding the completion and implementation of the projects.
He also emphasized that the delayed payments of contractors with government agencies exceeding SR100 billion is a result of bureaucracy. The launch of a contractors association, he said, is one of the most important solutions to creating an official umbrella for contractors, and to finding solutions to the many obstacles in the construction sector.