The Kingdom of Saudi Arabia (KSA) boasts a thriving construction sector, but navigating its legal landscape can be tricky. Unlike some countries, KSA does not have a construction law; instead, KSA utilizes a diverse collection of legal enactments to administer the construction industry. These legal enactments are:

1. Sharia Law
2. Civil Transaction Law No. 191/1444H
3. Government Tenders and Procurement Law (GTPL) No. 128/1440H
4. Contractors’ Classification Law No. 9/1443H
5. Saudi Building Code (SBC)
6. Other laws inter alia, Labor law, Environmental law, and Measurement and calibration Law

Key Regulatory Bodies in the KSA Construction Industry

Several entities regulate construction activities in KSA, each with specific roles:

1. Ministry of Municipal and Rural Affairs (MoMRA); whereas, the roles of this entity can be succinctly summarized in the following:
2. The central government body overseeing construction activities across the Kingdom.
3. Issues building permits and licenses for construction companies.
4. Enforces compliance with the Saudi Building Code (SBC) through its municipalities.
5. Saudi Contractors Authority (SCA) operating under the umbrella of Ministry of commerce: whereas,  the SCA:
6. Acts as a regulatory body, overseeing the licensing and classification of construction contractors in KSA. This ensures contractors meet specific qualifications and experience levels before undertaking projects.
7. Set standard contract terms or offer guidance on drafting construction contracts to minimize ambiguity and potential conflicts.
8. Saudi Standards, Metrology and Quality Organization (SASO): In essence, SASO acts as a central body safeguarding the quality and safety of construction materials used in KSA.  Their work ensures reliable materials are available for projects, promotes best practices, and ultimately contributes to the safety and longevity of buildings and infrastructure in the Kingdom.

On a side note, Contractors are not mandated to undergo registration with the Saudi Standards, Metrology and Quality Organization (SASO). However, they are subject to a strict obligation to ensure that all construction materials utilized in their projects strictly adhere to the established SASO standards.

Compliance with these aforementioned SASO standards can be accomplished through direct procurement of pre-certified materials or by working with suppliers who guarantee SASO compliance.

Contractor Registration and Classification with the Saudi Contractors Authority (SCA)

Registering with Saudi Contractors Agency (SCA) is mandatory on all contractors working in KSA, including foreign entities. This registration process verifies the contractor’s general qualifications and adherence to regulations, allowing them to operate legally in the Kingdom.

The abovementioned authority (SCA) establishes a tiered system for contractor registration, as outlined in the following classifications:

1. Basic Membership: This membership is designated for Saudi Contractors licensed to practice contracting activities in KSA.
2. Associate Membership: Designated for Non-Saudi contractors licensed to practice contracting activities in KSA. As well as individuals or entities with a demonstrable interest in the KSA contracting sector.
3. Honorable Membership: Conferrable at the sole discretion of the Council upon individuals who have made exceptional contributions demonstrably advancing the Authority’s objectives.

Required Documents to obtain SCA’s membership:

According to Article 4 of Law No. 510 of the year 1436H concerning approving the regulation of the Saudi Contractors Authority.

It is worth mentioning that required document may vary from time to time.

• Company Registration Documents:
  • A copy of the Commercial Register (CR)
  • Company Memorandum of Association (if applicable).
• Financial Documents:
  • Audited financial statements for the past two or three years (depending on SCA requirements).
  • Bank statements demonstrating financial solvency.
• Technical Documents:
  • Details of the company’s experience in construction projects, including project types and values.
  • Resumes and qualifications of key personnel, especially engineers and project managers.
  • Proof of ownership or leasing of necessary construction equipment (if applicable).
• Other Potential Documents:
  • Tax clearance certificates.
  • Proof of membership in relevant professional associations (if applicable).

It bears mentioning that, pursuant to Article 5 of the aforementioned law, basic membership and affiliate membership expire in any of the following cases:

1. Death of a member with a natural personality, or expiration (dissolution) of a juristic personality.
2. Membership lapses if the basic or affiliate membership subscription fee remains unpaid for a period exceeding ninety (90) days from the established due date.  Following this period, an additional fifteen (15) days are granted after a formal warning to settle the outstanding amount.  Failure to pay within this timeframe, absent a Council-approved justification, will result in membership termination.
3. A decision is issued by the Council to terminate membership for any reason deems appropriate.
4. Revocation of the member’s license to practice the contracting profession, regardless of the reason for revocation.

Contractor Classification with MoMRA and Exceptions for Foreign Entities

Contractors working within the region of the Kingdom are subject to enrollment in Contractors classification system with MoMRA; whereas, Government agencies, bodies, institutions, and agencies with public legal personality may not award or accept any offer or bid for any project subject to classification unless the contractor is classified, and the project falls within the field, activity, and grade for which the contractor is classified. According to Article 3 of Contractors’ Classification Law No. 9/1443H

The Contractor’s classification level shall be based on a meritocratic evaluation process, taking into account its qualifications across one or more of the designated classification fields or activities. This evaluation will adhere to the following established standards:

1. Financial Capacity
2. Technical, administrative and executive capacity: organizational structures, administrative and technical cadres;
3. The total number, type and value of projects;

Exception for prominent foreign entities vying for Government Tenders by a virtue of the provision of the abovementioned contractors’ classification law which conveys that provisions of Cabinet Resolution No. 405 of 1435H concerning Opening the way for well-known foreign companies to enter government competitions, shall remain in full force and effect.

Based on the mentioned resolution,foreign companies participating in Public Sector Tenders may be exempted from some of the procedures in force at the Contractors Classification Agency. Additionally, some foreign companies may be exempt from registering with the agency mentioned above. This exemption applies to entities that have already registered with a regulatory body in their country of origin; provided such body is functionally equivalent to the Contractors Classification Agency.

In conclusion, despite the deficiency of a singular, codified construction law, the construction industry in the Kingdom of Saudi Arabia operates under a collection of legal enactments. This complex legal system, however, ensures a high standard for construction projects in Saudi Arabia, promoting safety, quality, and the participation of qualified contractors. Therefore, it’s important for contractors and stakeholders in the construction industry in KSA to be aware of these legal frameworks, regulatory bodies, and compliance requirements to navigate the construction landscape effectively and operate within the established guidelines.

If you chose us to support your specific issue, please do not hesitate to contact us using Inquiries Form (link to https://ahysp.com/contact-us/) or by sending an email to Info@ahysp.com