The Kingdom of Saudi Arabia has witnessed considerable development in recent years. A series of five-year plans, targeting socio-economic development, have established infrastructural works and projects in strategic sectors of the national economy. These plans also emphasised the importance of ensuring the optimum utilisation of the resources involved. Accordingly, public works and projects were constructed with due regard for efficiency and effectiveness. The government has widely adopted the contracting method for the execution, operation and maintenance of such works and projects in accordance with specific control procedures in the applicable regulations and instructions.
In undertaking public projects the objectives of the government are to develop its facilities in order to complete the phase of establishing the basic structures pertaining to the national infrastructure in conformity with the five-year development plans of the state. These are formulated to ensure optimum utilisation of available financial resources to promote the stability and social welfare of Saudi society.
The types of public projects being undertaken by the government vary in accordance with the various activities of government entities. The following are examples of these construction projects:
Based on the general objectives of the established policy for implementing development plans, all government organisations developed long -term plans for proposed projects and programmes. These plans are submitted to the Ministry of Planning which evaluates their feasibility using appropriate investment criteria. Comprehensive plans for the proposed projects and programmes are then forwarded to the Council of Ministers for approval. The approved plans are referred to the Ministry of Finance and National Economy which prepares the necessary long-term funding programmes in accordance with their order of priority.
The government entities concerned submit to the Budget Department of the Ministry of Finance and National Economy proposed annual budgets which include short-term plans and programmes for the execution of public works and projects. The Budgets Department studies, evaluates and discusses the plans with the respective entities in preparation for submission to the Council of Ministers for approval of the required annual financial appropriations.
The Council of Ministers issues a decree approving the annual financial appropriations. Issuance of this decree is considered the commencement of the budget implementation phase and the funds appropriated for public projects, classified as budget chapter IV expenditures, represent the greater portion of government expenditures which are made for the construction of the public works and projects required for the development of the national economy.
The regulations governing the execution of government projects (Government Procurement and Project Execution Regulations and By-Laws), in addition to supplementary and explanatory resolutions and circulars, require that a government department or instrumentality must obtain permission for hiring a contractor to execute the project from the entity representing the controlling authority. For example, it is a legal prerequisite to obtain the approval of the King for those projects which cost over Saudi Riyals (SR) 100 million, prior to concluding the relevant contracts. The regulations also require co-ordination between the entity wishing to execute the project and other entities regarding certain issues which fall within their jurisdiction. For example, long-term contracts (extending beyond one year) are submitted for review by the Ministry of Finance before a contractual agreement is concluded.
Authority criteria refer to the financial and administrative obligations exercised by officials of a government organisation when administering a project, hi Saudi Arabia, the Government Procurement and Project Execution Regulations specify the following authorities :
3.2.1. In Case of Direct Procurement
The minister or head of the independent organisation concerned has the authority to approve execution of projects which cost not more than SRI million, but is not authorised to delegate his authority except for work less than SR500,000.
3.2.2. In Case of Public Tenders
The minister or head of the independent organisation concerned has the authority to approve execution of projects which cost SR3 million or more. For those projects which cost less than SR3 million, the deputy minister or his nominee has the authority to approve their undertaking.
3.3.1. The administrative entity must provide accurate, detailed and comprehensive specifications for the works and projects to be executed. In addition, it must also establish general specifications and quantity tables, on the basis of which the competing contractors submit their tenders. The right of both parties should be addressed in the formulation of both terms and specifications.
3.3.2. The successful contractor must comply with contract terms and specifications and the applicable regulations and instructions. The contractor should be licensed to undertake the type of construction involved in the works or projects to be undertaken. Contractors- are bound by:
There are three methods of obtaining contracts for the execution of public works and projects:
3.4.1. Direct Procurement
Direct procurement occurs where the administrative entity resorts to direct agreement with a selected contractor, provided that the cost involved does not exceed SRI million.
3.4.2. Limited Competition
Participation is open to a limited number of contractors who meet necessary financial and technical requirements. This type of competition is limited to consulting work (conducting studies, establishing specification and supervising execution). Bids from eligible consulting firms are invited by direct correspondence.
3.4.3. Public Competition
Tenders are invited, through local newspapers and the government gazette, from all eligible contractors who meet the necessary financial and technical requirements.
After ensuring that they are qualified to perform the required work, interested contractors obtain copies of the terms, specifications and quantity tables of the project being tendered. Competitive tenders are then submitted by the contractors to the administrative entity concerned. Important points to be observed by contractors in submitting tenders are:
After being opened in public at a specified time, tenders are examined, analysed and checked to see that they meet the required terms and specifications. The Tender Committee may seek assistance of appropriate technical and other experts in making their recommendation to the authority concerned.
3.7.1. Government procurement and project execution regulations require that if the tender exceeds SRI 00,000 in value, a formal contract must be concluded between the administrative entity and the contractor as soon as possible after official notification of the award. The successful contractor is obliged to provide the final guarantee of not less than 5% of the contract value. However, if the tender is less than SRI 00,000 in value, it is sufficient to conclude the contract through a letter of assignment.
3.7.2. At least four copies of the contract are made. One copy is sent to the administrative entity responsible for the actual contract payments. Another copy is sent to the Zakat and Income Tax Department. The original copy of the contract is sent to the General Auditing Bureau, accompanied by all relevant documents, vouchers and data within two weeks from the date of signing the contract.
3.7.3. To avoid conflicts arising from inaccurate legal formulation of public works contracts, a Council of Ministers' resolution requires the use of a uniform public works contract. The distinctive features of this standard contract are:
The objectives of controlling public works and projects are to ensure :
The control process in the construction of public works and projects is based on :
The following points represent the control elements :
Controls may be classified according to perspective, as shown below :
4.4.1. Source Perspective:
Controls may be divided into internal controls of the authority responsible for the work and external controls of independent entities such as the General Auditing Bureau and Ministry of Finance and National Economy.
4.4.2. Training Perspective:
re-audit controls (before spending takes place) are exercised by the financial representatives of the Ministry of Finance and National Economy and post-audit controls (after spending takes place) are exercised by the General Auditing Bureau.
4.4.3. Technical Perspective:
Technical controls of the different phases of project execution are carried out by the technical team of the entity or by consultants specially hired for this purpose or by the Ministry of Public Works and Housing.
5.1.1. The control exercised by the General Auditing Bureau (GAB) by virtue of its mandate are post-audit. Its objective is to ensure that expenditure is incurred in accordance with the regulations and instructions governing the expenditure process and within the specified rules. The objective of the audit is also to show deficiencies, detect errors and identify appropriate measures to prevent recurrences. Post-audit control is characterised by the fact it is more accurate than pre-audit control due to its comprehensiveness and wider scope covering all phases of expenditure. In addition, post-audit control provides the auditor with sufficient time to analyse expenditure and determine whether it complies with applicable regulations and instructions.
5.1.2. The GAB performs its audit work in accordance with the following principles :
5.2.1. The controls of the GAB over public works and projects are based on two major principles:
5.2.2. The GAB realises that the concept of comprehensive auditing is better suited to serve the requirements of national development and the tasks and challenges that have to be met by government entities. Therefore the GAB adopts the comprehensive approach to the audit of public works and projects, as detailed below:
i. Financial Compliance Auditing
The purpose of this type of auditing is to give an objective, professional and independent opinion on the compliance of an audited entity's financial reports with specific accounting standards. It also provides a professional opinion as to compliance with applicable statutory laws and instructions governing the auditee. Accordingly, the various contracts and related vouchers for public works and projects are examined where most practical - at headquarters or at works sites.
ii. Managerial and Economic Efficiency Auditing
The purpose of this type of auditing is to assess available economic resources, ascertain whether they are being managed efficiently, identify the causes of waste, excessive spending or misuse and recommend ways of improving resource utilisation.
iii. Programme Evaluation or Effectiveness Auditing
The purpose of this type of auditing is to compare the degree of closeness to or divergence from, an organisation's established objectives. Consequently, management is advised of the reasons for any shortcomings. This kind of auditing includes analysis of alternative means and methods of attaining objectives.
Computers are widely used in the audit of public works and projects by both the project executing entities and the GAB. They are used in all phases of the work from the time the contract is concluded to the completion of the project.
5.3.1. Use of Computers by Auditees
Government entities subject to GAB audits use computers in various activities including those related to the execution of public works and projects. For example, computers are used in:
The GAB audits works programmes in contracts through its specialised EDP Auditing Department, which was recently established to keep up with the development and expansion in the use of computers by auditees. Auditing these works programmes includes :
5.3.2. Use of Computers by the GAB
The GAB has a highly advanced information centre linked to the National Information Centre which is used in public works and projects auditing. Various programmes have been developed for the follow-up of contract auditing. All data related to these contracts are listed along with audit findings and reported to auditees in addition to recommendations for remedial action. The programmes also include data needed for auditing the phases of project execution from the commencement of the contract until the site is handed over by the contractor on completion.
The difficulties faced by the GAB in the audit of public works and projects using computer programmes involve:
To cope with these difficulties, the GAB endeavours to keep up with the rapid developments in the computer area, train auditors in the various programmes and systems and acquire the latest advanced computers.
6.1. The importance of audit reports is attributed to the fact that they are the vehicles by which examination and review results can be communicated. The GAB informs auditees of its audit findings and recommendations for corrective action in the form of reports.
6.2. The regulations require that all ministries, government agencies, public organisations and municipalities must respond to the GAB's findings within one month.. Any delay in responding is considered to be negligence and is subject to penalties stated in the employee disciplinary regulations. The GAB also has the right to request the Board of Control and Investigation to determine who is responsible for the delay.
6.3. The GAB prepares an annual report for each financial year which includes :
6.4. The annual report is submitted to the Custodian of the Two Holy Mosques, the King and the Ministry of Finance and National Economy. The President of the GAB may also submit other reports of a general or special nature concerning a specific issue during the year.