Who pays when the scope changes? The real cost of change on Saudi Mega-Projects

On Saudi Arabia’s mega-projects, scope change is not an exception. It is a constant, and one that routinely drives delay, valuation friction and protracted commercial negotiations.

Design continues while construction is underway. Interfaces evolve as adjacent packages advance at different speeds. Instructions are issued to maintain programme momentum and documented later. Pricing lags performance, sometimes by months, sometimes by years. What begins as a delivery necessity often hardens into a valuation problem, long before any dispute formally arises.

These projects are being delivered at a scale and pace few construction markets have experienced. Ambition, geographic spread and sheer logistical complexity place these projects in a category of their own. Program certainty is often prioritized over contractual tidiness, particularly where deadlines are immovable and political visibility is high.

International contractors, including those listed on the FTSE 500, Nikkei 500 and other major indices bring decades of accumulated delivery experience, governance systems, risk controls and commercial processes built to preserve margin across long-duration, capital-intensive works. Many mega-project delivery organizations, by contrast, are mobilized at speed. Teams are assembled quickly. Delivery structures evolve while projects are already underway, and package interfaces are defined and redefined.

None of this is inherently problematic. It is how large, fast-moving projects operate when delivery deadlines are immovable and political visibility is high. The challenge arises in how these realities interact with contract structures and Saudi law once commercial positions crystallize.

This article examines why scope change on large Saudi projects so often becomes a prolonged valuation exercise rather than a clean contractual debate, even where entitlement is not seriously contested. The explanation lies not in hostility to contractual mechanisms, nor in any structural deficiency of Saudi law, but in the interaction between scale, delivery practice and a legal framework that evaluates disputes by reference to performance, benefit and harm alongside agreed procedures.

Contractual frameworks and the Saudi market norm

Most major Saudi mega-projects are delivered under familiar international contract forms, commonly based on the FIDIC Red, Yellow, or Silver Books, with extensive bespoke amendments. It is now standard for these contracts to be governed by Saudi law, with disputes referred to SCCA arbitration, often seated in Riyadh. Proceedings may be conducted in Arabic or on a bilingual basis.

These choices reflect market maturity rather than localization risk. Saudi-law-governed FIDIC contracts and SCCA arbitration are now widely accepted across the construction ecosystem, offering enforceability, procedural structure and an increasingly deep pool of institutional and arbitral experience. International contractors, consultants, and funders have become increasingly comfortable operating within this framework.

Within those contractual frameworks, variation regimes are clearly articulated. Contractors must give notice of events giving rise to claims. Engineers or employer representatives are tasked with issuing determinations or certifications. Valuation follows agreed methodologies, often tied to contract rates, derived rates or cost-based assessments.

In theory, scope change is managed through defined steps. Notice is given. Instructions are issued. Pricing is agreed or determined. Payment follows. In practice, scale disrupts that sequence.

On mega-projects involving hundreds of interfaces and overlapping packages, strict procedural compliance becomes difficult to maintain in real time. Commercial teams make pragmatic decisions to prioritize delivery. Notices may be late, incomplete or aggregated. Instructions may be issued verbally or informally to maintain momentum. Pricing may be deferred on the shared understanding that it will be resolved later, once the factual picture is clearer.

None of this is unusual. What is unusual is the cumulative effect when such practices persist over long periods and across large volumes of work.

When entitlement is not the real issue

On large Saudi projects, disputes over scope change rarely turn on whether additional work was performed. By the time legal advisers become involved, the work has usually been instructed, executed, and physically incorporated into the project. Concrete has been poured. Systems have been installed. Interfaces have been completed and handed over to downstream packages.

The factual question of “was the work done?” is typically uncontroversial. The difficulty lies elsewhere.

Pricing may have been deferred deliberately. Interim valuations may not capture disruption, inefficiency or cumulative impact. The project may still be live, with further scope evolution expected. Parties may prefer to postpone final valuation until delivery stabilizes.

As a result, differences crystallize around valuation and timing, not entitlement. Who carries interim cost? Which baseline applies when changes overlap? How should cumulative disruption be assessed? When does pricing finally fix?

These are not purely contractual questions. They sit at the intersection of contract, delivery practice and law.

Strict notice requirements, sole-remedy clauses, exclusions of certain heads of loss and liability caps introduced by bespoke amendment can all affect recoverable quantum, even where entitlement in principle is accepted.

This is where disputes move away from binary debates about entitlement and into prolonged, evidence-heavy valuation exercises.

How the Civil Transactions Law frames the analysis

The Saudi Civil Transactions Law (CTL), in force since 2023, codifies principles long applied by Saudi courts. It does not displace contractual mechanisms, nor does it render FIDIC-style procedures irrelevant. Instead, it provides the legal lens through which disputes over performance and payment are assessed.

Article 95 requires contracts to be performed in good faith. This principle informs how courts and tribunals assess conduct where strict reliance on contractual formality conflicts with the parties’ course of dealing.

In scope change situations, where work proceeds to maintain program momentum and valuation is deferred, good faith constrains attempts to rely exclusively on procedural non-compliance to deny payment altogether. Notice provisions or valuation machinery remain relevant, but they are assessed in context.

Under the CTL, construction contracts are treated as muqawala (work contracts). The law recognizes entitlement where additional or modified work is instructed or performed with the employer’s knowledge, even if remuneration has not been finalized at the time.

Article 144 empowers courts and tribunals to prevent one party from retaining a substantial benefit without lawful cause. In construction disputes, this operates as a corrective where work has been executed, accepted and integrated into the project, but valuation remains unresolved or contested.

Taken together, these principles explain why disputes are assessed holistically, with performance reality informing contractual analysis, not replacing it.

The real battleground: Valuation, timing and cashflow

Once entitlement is broadly accepted, valuation becomes the pressure point.

Variation instructions are issued, but pricing is left open. Engineers are cautious in interim certification, particularly where cost impact is uncertain or documentation incomplete. Commercial teams assume that pricing can be resolved later, once the project is closer to completion and the full effect of change is visible.

Over time, unpriced scope accumulates. Individual changes that appear manageable in isolation combine to produce substantial cumulative impact. The quantum gap widens. By the time differences crystallize, the sums involved are material and the evidence complex.

Contractual provisions often exacerbate this dynamic. Existing rates may not reflect actual cost. Disruption may be excluded or narrowly defined. Notice-based entitlements may be challenged. Overall liability caps may begin to loom as an upper boundary on recovery.

Saudi law does not impose a mechanical solution. The CTL allows courts and tribunals to assess cost, benefit and impact on a fact-specific basis. This flexibility suits complex valuation disputes, but it also leads to less predictable outcomes and increases dependence on evidential quality.

For international parties accustomed to more formulaic approaches, this introduces a different risk profile. The risk is not that claims will fail outright, but recovery driven by detailed factual reconstruction rather than contractual arithmetic alone.

On mega-projects, timing matters as much as quantum. Contractors often carry significant volumes of unpriced work for extended periods, creating cashflow pressure and balance sheets strain Employers may have limited incentive to resolve valuation early while delivery continues and leverage remains.

Saudi law does not eliminate this commercial reality. It influences how it is managed, tempering extreme reliance on procedural cut-offs while respecting agreed contractual limitations.

The result is a familiar pattern across many mega-projects: Entitlement acknowledged, valuation contested and resolution deferred until late in the project lifecycle.

FIDIC mechanisms and structural limits on recovery

FIDIC mechanisms shape how valuation disputes develop.

Notice provisions, particularly under Clause 20 (1999) or Clause 20.2 (2017), impose time-based conditions on recovery. Failure to comply can bar or reduce entitlement. Determination mechanisms under Clause 3 give significant discretion to the Engineer or Employer’s Representative. Valuation clauses may constrain recoverable cost. Limitation of liability provisions, where introduced by amendment, can cap overall recovery or exclude certain heads of loss.

Importantly, many of these limitations do not operate by denying entitlement outright. They constrain valuation.

On mega-projects, where entitlement is often accepted in principle, these structural limits come into focus late, once the magnitude of unpriced scope becomes clear and positions harden.

The evidential reality of SCCA arbitration

Most Saudi mega-project contracts provide for SCCA arbitration. This reflects a preference for structured dispute resolution with local enforceability and increasing institutional maturity.

Arbitration is well suited to resolving entitlement questions and interpreting contractual mechanisms. However, valuation disputes are inherently evidential. They require detailed analysis of cost records, productivity, sequencing, causation and contemporaneous documentation.

Arbitration provides the framework in which contractual limits are tested against the factual record and the governing law.

As valuation disputes deepen, forensic analysis becomes decisive. The CTL’s emphasis on performance, benefit and harm makes evidential quality  critical. Outcomes turn less on procedural shortcuts and more on factual reconstruction.

For parties and funders alike, risk assessment shifts away from “is there entitlement?” but “can the value be proven?”

What this means for risk allocation

None of this suggests that Saudi law is hostile to contractual certainty. Contracts remain central. Notice provisions and limitation clauses are enforced.

What Saudi law resists is purely mechanical outcomes that ignore performance reality. At the scale of Saudi mega-projects, that resistance matters.

For contractors, employers and funders, the implication is clear. Risk sits less in entitlement than in valuation and timing. Managing it requires strong controls, disciplined documentation, early pricing engagement, and a realistic understanding of how disputes mature.

In this context, third-party capital addresses imbalance created by scale, duration and evidential complexity.

Conclusion

Scope change on Saudi mega-projects is inevitable. The legal framework governing those projects does not negate contractual mechanisms, but it does assess them alongside performance, benefit and harm.

As a result, scope differences frequently develop into prolonged valuation exercises rather than clean entitlement disputes. That dynamic reflects scale, speed and statutory discretion operating together, not legal uncertainty.

Understanding that interaction is essential for anyone allocating risk on Saudi Arabia’s largest construction projects.