Contracts Department Control
Over Independent Contractors
In Saudi Arabia the sewer contractor must pay good attention towards forming an excellent contracts department that can reach to the best performance levels, because it is entrusted with important responsibilities:
1) Agreement issuing, editing, reviewing and monitoring of implementation.
2) To review any engineering agreements before signing it with other parties (project's owners).
3) To check if the company can perform such agreements and to discover the presence of any errors early.
4) To review the agreements before dealing with any subcontractor, to see if it is possible to delegate such works, and to discover any errors at an early stage.
Managing the subcontractors work is possible, if you do the following steps
1) Proper contracting procedure.
2) Accuracy while approving the performed work.
3) Accuracy while settling their dues.
When a subcontractor finds that he's capable of doing a specific work and wishes to work for a main contractor, he will go through the following steps:
1) He should contact the engineering dept to show him the specification of work needed to be performed.
2) After that, he will be asked to prepare and suggest a cost estimate (pricing quotation).
3) Some companies' order, requires to get at least three quotations from three different areas for the same specific task.
4) The quotations will be examined later, to choose the best one of them that agrees with the expected task.
5) After that, an agreement will be prepared between the company (first party) and the subcontractor (second party) stating a clear and detailed nature of work such as (workplace, work duration, price, payment terms, billing time).
6) Before a subcontractor can submit his first bill, he should present a progress report, and get it approved by the site engineer.
7) The project engineer should supervise the subcontractor work to make sure that he performed the work according to specification.
8) The project accountant will prepare a progress bill for each subcontractor, depending on the progress report.
9) Progress bill should show (agreement number, project name, subcontractor name, bill number, previous work, current work, accumulated work, prices, advance payment, the retention amount).
10) The project administrator will prepare all the bills for sending them to the contracts department for final check.
11) Afterwards the bills will be sent to the head office to get it approved from the concerned departments for final approval. Settling the dues is the role of the accounting dept, but only after reviewing the agreement status to ensure that it comply with its terms and payment limits.
12) The contracts dept will send all the bills to the accounting dept for reviewing and recording it in the books and assign the cost to the concerned projects.
13) Now, the accountants can prepare the payment to settle these bills.
As we mentioned before, there is a long procedure before the cost is approved and recorded in the company accounting system.
Therefore, the the accountants should be careful while recording these costs, because all the following reports and studies will rely on the (coding and recording) of these transactions.
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