Article 62 of the Saudi Government Tenders and Procurement Law
المادة 62 من نظام المنافسات والمشتريات الحكومية · الفصل الثاني: الضمان النهائي
The final guarantee in continuing service contracts is reduced annually according to what has been performed, provided it is never less than 5% of the value of the remaining works.
Official text (Arabic)
This article has not been amended since the law was issued.
يخفض الضمان النهائي في عقود الخدمات ذات التنفيذ المستمر سنوياً بحسب ما يتم تنفيذه من الأعمال، على ألا يقل الضمان في جميع الأحوال عن (5%) من قيمة الأعمال المتبقية من العقد.
This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers
Article 62 explained in plain English
This Article concerns a specific type of contract, continuing service contracts, such as contracts that run for years and in which the work is performed continuously.
The rule under Article 61 is that the contractor submits a final guarantee of 5% of the contract value, which is kept until he performs his obligations and the project is received as final. But this Article recognizes that part of the contract is completed each year, so it provides that the final guarantee is reduced annually according to the works performed.
The reduction has a minimum that may not be gone below: the guarantee may in all cases not be less than 5% of the value of the works remaining under the contract. As performance progresses the remaining works shrink, and with them the minimum guarantee.
The benefit of this provision to the contractor is that he does not keep a bank guarantee tied up at its full original value throughout the years of the contract, while the government entity remains protected by a guarantee proportionate to what has not yet been performed. The guarantee is submitted in one of the forms Article 63 accepts, such as a bank guarantee letter from a local bank.
The text does not state the procedures for the reduction or the way of proving what has been performed, so details are referred to the contract and its documents, and a lawyer who specializes in government contracts can be consulted in case of dispute.
Practical example
A company in Riyadh contracted with a government entity for cleaning services for 3 years worth SAR 3,000,000, and submitted a final guarantee of SAR 150,000. After the first year it had performed works worth SAR 1,000,000, leaving works worth SAR 2,000,000, so the guarantee is reduced according to what has been performed, provided it is not less than SAR 100,000 (5% of the remainder).
Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.
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Frequently asked questions about Article 62 of the Saudi Government Tenders and Procurement Law
Is the final guarantee reduced in continuing maintenance and operation contracts?
Yes. In continuing service contracts the final guarantee is reduced annually according to the works performed.
What is the minimum for the final guarantee after the reduction?
It may in all cases not be less than 5% of the value of the works remaining under the contract.
Does the annual reduction apply to supply contracts?
The text limits the annual reduction to continuing service contracts.
More articles on Concluding the Government Contract and the Final Guarantee
- Article 55
The Article requires government contracts and their documents to be drafted in Arabic, allows another language alongside it with Arabic governing, and allows correspondence alone to suffice if the contract value does not exceed SAR 300,000.
1- تُصاغ العقود ووثائقها وملحقاتها باللغة العربية، ويجوز استخدام لغة أخرى إلى جانب العربية على أن تكون العربية هي المعتمَدة في تفسير العقد وتنفيذه وتحديد مواصفا
- Article 56
The Article caps continuing service contracts at five years unless the Ministry approves more, requires the term to fit the work, and requires performance and evaluation conditions allowing termination or reduced payments.
1- لا تتجاوز مدة عقود الخدمات ذات التنفيذ المستمر، كالصيانة والنظافة والتشغيل والإعاشة، (خمس) سنوات، وتجوز زيادتها في العقود التي تتطلب طبيعتها ذلك؛ بعد موافقة
- Article 57
The Article refers to the Implementing Regulations the determination of the types of contracts that government entities may use.
تحدد اللائحة أنواع العقود التي يجوز للجهات الحكومية استخدامها.
- Article 58
The Article allows government contracts to include clauses on transferring knowledge, training and operating skills to the employees of government entities.
يجوز تضمين العقود بنوداً تتعلق بنقل المعرفة والتدريب ومهارات التشغيل إلى موظفي الجهات الحكومية.
- Article 59
The contract is drawn up with the winning bidder after he is notified of the award and submits the final guarantee letter, and in public construction contracts the contractor must be enabled to start within 60 days unless the documents say otherwise.
1- يحرر العقد بين الجهة الحكومية وصاحب العرض الفائز بعد إبلاغه بقرار الترسية وتقديم خطاب الضمان النهائي. 2- يُمكّن المتعاقد معه في عقود الإنشاءات العامة من البد
- Article 60
The Article requires government entities to submit the contracts specified by the Regulations to the Ministry of Finance for review before signing; the Ministry reviews them within 15 working days or they are deemed approved.
1- تلتزم الجهات الحكومية بعرض عقودها -التي تحددها اللائحة- على الوزارة لمراجعتها قبل توقيعها، وعلى الوزارة مراجعة تلك العقود خلال (خمسة عشر) يوم عمل من تاريخ ور
The texts are reproduced from the official website of the Bureau of Experts at the Council of Ministers for reference; where they differ, the officially published Arabic text prevails. This content is not legal advice.