Managing risk amid Saudi drive for a more sustainable mobility environment

DBO contracts present risk to employers and contractors alike. Mismanagement of issues relating to site access, subcontract packages, changes in work scope, delayed approvals or submissions and responses relating to design elements may pose significant risks to project timelines and budgets. Establishing completion so that the commissioning certificate may be issued and the operation service period commenced as per the DBO contract is also crucial in order to mitigate any risks.

To mitigate these risks and avoid disputes, parties involved must prioritise clear communication, detailed documentation, and early role clarification, ensuring that all stakeholders are aligned in fulfilling their contractual obligations and minimising potential disputes.

DBO contracts in KSA

The use of DBO contracts is rising across KSA as the Kingdom has undertaken numerous projects in a bid to increase its capacity to move people sustainably, in line with Vision 2030’s push for enhanced mobility.

Examples include the Riyadh Metro, which aims to reduce traffic congestion and lower emissions, and the NEOM urban development giga project, which integrates advanced, eco-friendly transport options. Both projects emphasise the need for early, clear agreement on roles, timelines, and environmental considerations, ensuring risk mitigation through upfront planning. The latest example, the King Abdullah Financial District announcing a monorail project, signals further commitment to sustainable transit.

While these projects align with sustainability goals, they also present a timely opportunity to remind project participants of the importance of careful documentation and role clarification to ensure all parties fulfil their contractual obligations and mitigate risk on projects that present potential environmental, logistical, site access and complex coordination issues. These projects also highlight the importance of robust project management from the outset, given the scale and national significance of such initiatives.

How to mitigate DBO contract risks

Holding early discussions around access issues that may impact work at the project site and reflecting those in the project schedule is important. Unless the access issues are flagged and incorporated into the project scheduling documentation, the risks associated with such issues may be allocated in way that the parties never intended.

Parties should also meticulously record issues and concerns about the work of nominated subcontractors. While many standard forms of building contracts enable the employer to select a subcontractor, who is subsequently employed by the contractor, via a ‘nomination’ procedure, depending on the jurisdiction and the specific terms of the contract, the consequences could be severe. It is therefore vital to ensure the record is clear about any reservations the contractor has made about any potential nominated subcontractor. The contractor must also continue to document any issues involving the works of any nominated subcontractor as the work progresses. Strong documentation could be the difference between a strong claim and a weak claim on this point.

Parties should also work to establish rules of the game around completion from day one. Waiting until the project is nearly complete to start thinking about what a finished project looks like poses a number of risks. The entire goal of the work is to get to completion so the parties must think about matters such as what will be required of the contractor to demonstrate that work is completed to the appropriate standards. Instead of relying solely on a clause in the contract replete with conditions, it is wise to think about establishing a check list approach to completement the clause so that each condition is stated in a way that is easy to understand, follow, and most importantly achieve.

Finally, meticulously maintaining contemporaneous records is vital. It is the records drafted during a project themselves that show the history of how the works actually unfolded. Without records, the parties are caught in a game of “he said, she said” where witnesses can run free with their own, potentially flawed, memories.

Revisiting these basic project management principles prior to and during the contract can allow parties to avoid risks and disputes, or easily remedy any disputes if they do arise.