What is the Saudi Arabia New Contractor’s Classification System?
The new contractor classification system is newly developed by the Ministry of Municipal and Village Affairs and Housing of Saudi Arabia. The final detailed version was launched after its approval by the Council of Ministers with the participation of the relevant authorities of the Saudi Contractors Authority, the Saudi Commission for Engineers, and the National Housing Services Company. The new contractor classification indicates the contractor’s ability and competence to execute projects according to their potential (financial, technical, administrative, and operational)
The contractor classification system is based on qualifying, documenting, and evaluating contractors’ capabilities to improve the services provided quality, reduce commercial cover-ups, and increase the contractor’s competitiveness to provide better service to citizens.
The new system is based on three criteria
- Legal Criteria:
Include Commercial Registry, General Authority for Investment License, and Employment Statement from the competent authority. In addition to the MoA and statute.
- Financial Criteria:
Include net fixed assets, net equity, and contract income.
- Technical Criteria:
Includes human resources, project management, sustainability, quality control, and previous corresponding performance.
The classification system includes technical specializations for workers in establishments according to sector and years of experience. The approved contractor is qualified by the Saudi Contractors Authority and contractors wishing to enter this program must disclose the range of service prices in each field.
What sectors does the new system target?
– Real estate and Construction Companies
– Telecommunication and IT
– Maintenance and Operation services
– Engineering Consulting Facilities
Highlights of the Contraction Companies Classification
– Government agencies and institutions are not entitled to accept or award any bid for a project unless the contractor is classified.
– The Minister shall grant the classification following the information and data provided by the contractor and the classification shall be based on the criteria of technical, financial, and operational appreciation.
– The licensed contractor shall be classified following the foreign investment regime by the procedures applicable to the classification of the Saudi contractor. The Council of Ministers may exclude it by the regulations it establishes.
– According to classifying criteria, the contractor is categorized into one of six different classification categories and activities.
The following are the classifying criteria:
- Financial capacity
- Technical, administrative, and executive capacity: organizational structures, administrative and technical cadres.
- Total number, type, and value of projects.
Any other criteria or conditions established by the Regulation.
The Grades of Classification for Contracting Companies in KSA:
1. Special Category:
This is the highest level of the Categories for Contracting Companies and has the highest number of requirements to be met. While local companies can choose among the Categories for classification, All foreign branches must be classified in the Special Category only.
Requirements:
➢ At least SAR 20 million Equity for last Fiscal year
➢ 3 Company Engineers, each with 10 years overall experience, required per classifying activity.
➢ Executed projects from the Company worth AED 240 million in the last 10 years per classifying activity
2. First Category:
Requirements:
➢ Minimum SAR 10 million Equity for last Fiscal year
➢ 2 Company Engineers, each with 10 years overall experience, required per classifying activity.
➢ Executed projects from the company worth AED 120 million in the last 10 years per classifying activity.
3. Second Category:
Requirements:
➢ A SAR 5 million Equity for the last Fiscal year
➢ 2 Engineers, each with 7 years overall experience, required per classifying activity.
➢ Executed projects from the Company worth AED 60 million in the last 10 years per classifying activity.
4. Third Category:
Requirements:
➢ 2 Company Engineers, each with 5 years overall experience, required per classifying activity.
➢ Executed projects from the Company worth AED 30 million per Classifying Activity in the last 10 years. (Parent Company
5. Fourth Category:
Requirements:
➢ 1 Company Engineer, each with 5 years overall experience, is required per classifying activity.
➢ Executed projects from the Company worth AED 15 million in the last 10 years per classifying activity. (Parent Company)
6. Fifth Category:
Suitable for New Contracting Companies with no past project experience.
Requirements:
➢ 1 Company Engineer, each with 4 years overall experience, is required per classifying activity.
7. Sixth Category:
Suitable for New Contracting Companies with no past project experience.
Requirements:
➢ 1 Company Engineer, each with 3 years overall experience, is required per classifying activity.
The penalties mentioned by the law in case of violation of the provisions or regulations of the classification system
Include one or more of the following penalties:
- Decrease the classification degree
- Freeze the classification and prevent its renewal for a period not exceeding five years
- Elimination of classification
How to apply for Contractor Classification in Saudi Arabia?
At J M J Facilities Management Services EST, we support your business journey in Saudi Arabia, whether you are a contracting company or a real estate development company, enabling you to learn about all the legal requirements for qualifying real estate development companies for an appropriate rating of your business size and work experience.
