Article 71 of the Saudi Government Tenders and Procurement Law

This Article regulates subcontracting, meaning that the contractor with the government entity assigns part of the performance to another contractor, undertaker or supplier, and sets three provisions for it:

1- Written approval is required. Subcontracting is not permitted without written approval from the government entity. The Implementing Regulations set the conditions and rules for subcontracting.

2- Direct payment. The government entity may make payments directly to the subcontractor, undertaker or supplier, without passing through the original contractor, and the Regulations set the conditions and rules for that. This is an authority of the entity and not an obligation on it under the text.

3- Joint liability. The original contractor remains, in all cases, jointly liable with the subcontractor for performing the contract under its terms; he cannot evade his obligations on the ground that the defect came from the subcontractor.

Subcontracting differs from assignment of the contract in Article 70; assignment requires written approval from the government entity and the Ministry together, while subcontracting requires the approval of the government entity. Joint liability connects with the penalty provisions that follow, since Article 72 sets the delay fine on the contractor if he is late in performance.

To make sure subcontracting arrangements are sound, a lawyer who specializes in government contracts can be consulted.