Article 78 of the Saudi Government Tenders and Procurement Law
المادة 78 من نظام المنافسات والمشتريات الحكومية · الفصل الثامن: إنهاء العقود
The Article requires the final guarantee to be forfeited when a contract is terminated for reasons specified in Article 76, preserves the entity's right to compensation, and refers the decision to the Article 88 committee to consider a ban.
Official text (Arabic)
This article has not been amended since the law was issued.
يجب عند إنهاء العقد بموجب الفقرة (1) أو الفقرة (2 / أ) أو الفقرة (2 / ج) من المادة (السادسة والسبعين) من النظام، مصادرة الضمان النهائي وذلك دون إخلال بحق الجهة الحكومية في الرجوع على المتعاقد معه بالتعويض عما لحق بها من ضرر، وتزود اللجنة المنصوص عليها في المادة (الثامنة والثمانين) من النظام بنسخة من القرار؛ للنظر في منع التعامل مع المتعاقد مع الجهة الحكومية.
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 78 explained in plain English
This Article sets out the financial and penal consequences of terminating a contract in certain cases of Article 76.
The cases that require forfeiture:
- All of paragraph (1) of Article 76: bribery, fraud, deception, forgery or manipulation; bankruptcy, insolvency, sequestration, or dissolution or liquidation of the company; and assignment of the contract without written approval from the entity and the Ministry.
- Paragraph (2/a): delay in starting, slow performance or breach of the contract conditions without correction within 15 days of written notice.
- Paragraph (2/c): subcontracting without written approval from the entity.
The Article does not cover the case of the contractor's death (2/b), for which Article 76 provides for settling dues and returning guarantees.
The consequences:
- Forfeiture of the final guarantee is mandatory.
- The entity keeps its right to claim compensation from the contractor for the harm it suffered; forfeiture does not prevent a claim for compensation.
- The committee referred to in Article 88 is given a copy of the termination decision to consider banning the contractor from dealing with government entities. That committee handles violations by bidders and contractors, and may ban the violator for a period not exceeding 5 years, lower its classification, or both, or impose a fine not exceeding 10% of the total value of its bid in place of the ban; its decisions may be challenged before the Administrative Court within 60 days of learning of the decision.
Because these consequences are serious, a contractor whose contract has been terminated would do well to consult a lawyer specialized in government contracts and administrative cases.
Practical example
A government entity in Riyadh terminated a maintenance company's contract because it subcontracted without written approval from the entity. Under this Article its final guarantee is forfeited, the entity may claim compensation for the harm, and a copy of the decision is sent to the Article 88 committee to consider banning it from dealing with government entities.
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 78 of the Saudi Government Tenders and Procurement Law
When is the final guarantee forfeited in government contracts?
When the contract is terminated under paragraph (1), (2/a) or (2/c) of Article 76.
Is the guarantee forfeited if the contract is terminated because the contractor died?
This Article does not cover death; in that case Article 76 provides for settling dues and returning guarantees.
Does the entity have to settle for forfeiting the guarantee, or can it also claim compensation?
Forfeiture does not affect the entity's right to claim compensation from the contractor for the harm it suffered.
Can a contractor be banned from dealing with government entities after termination?
The Article 88 committee is given a copy of the decision to consider this, and it may impose a ban for a period not exceeding 5 years.
Articles this article refers to
- Article 76
The Article lists the cases in which a government entity must terminate a contract and those in which it may, and how the remaining work is re-tendered after termination.
1- يجب على الجهة الحكومية إنهاء العقد في الحالات الآتية: أ- إذا تبين أن المتعاقد معه قد شرع -بنفسه أو بوساطة غيره بطريق مباشر أو غير مباشر- في رشوة أحد موظفي ال
- Article 88
The Article creates a committee to hear violations by bidders and contractors, which may ban a violator for up to 5 years, lower its classification or fine it up to 10%, with the right to challenge before the Administrative Court.
1- تكوّن بقرار من الوزير لجنة أو أكثر من المختصين، لا يقل عددهم عن خمسة ويحدد فيه رئيس اللجنة ونائبه، ويُنص في القرار على عضو احتياطي أو أكثر. ويعاد تشكيل هذه ا
More articles on Terminating a Government Contract
- 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 76
The Article lists the cases in which a government entity must terminate a contract and those in which it may, and how the remaining work is re-tendered after termination.
1- يجب على الجهة الحكومية إنهاء العقد في الحالات الآتية: أ- إذا تبين أن المتعاقد معه قد شرع -بنفسه أو بوساطة غيره بطريق مباشر أو غير مباشر- في رشوة أحد موظفي ال
- Article 77
The Article allows a government entity to terminate a contract when the public interest requires it, or by agreement with the contractor after the Ministry's approval, in accordance with the Implementing Regulations.
للجهة الحكومية إنهاء العقد إذا اقتضت المصلحة العامة ذلك، أو إذا تم الاتفاق على الإنهاء مع المتعاقد معه وذلك بعد موافقة الوزارة، وفقاً للشروط والإجراءات التي توض
- Article 79
The Article requires the government entity to evaluate the contractor's performance after the contract is fully performed, using the performance evaluation form, and results are announced only once the evaluation is final.
تتولى الجهة الحكومية تقييم أداء المتعاقد معها بعد اكتمال تنفيذه للعقد، وذلك باستخدام نموذج تقييم أداء المتعاقدين. ولا تعلن نتائج تقييم أداء المتعاقدين؛ إلا بعد
- Article 92
The Article requires the government entity to perform its contractual obligations, lets the contractor claim compensation before the Administrative Court if it breaches them, allows arbitration with the Minister's approval, and refers other dispute resolution means to the Regulations.
1- على الجهة الحكومية تنفيذ التزاماتها في العقد وفقاً لشروطه، وإذا أخلت بتنفيذ التزاماتها جاز للمتعاقد معها التقدم إلى المحكمة الإدارية للمطالبة بالتعويض. 2- لل
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.