The payment chain is a loan, and the contractor is the lender

A contractor on a public project in Saudi Arabia submits a certificate once a month. Under Article 109 of the procurement regulations, with every office meeting its deadline and nothing queried, the money arrives 86 days later. If one payment order is returned for amendment at an unlucky moment, 128.

So a monthly invoice is settled in something between a quarter and a third of a year. That is not a late payment. That is the rule working exactly as written, and it is the number this piece is about, because the wait is not an inconvenience. It is a loan, it has a size, and somebody is making it.

Why the delay is not the story people think it is

, read: Private projects overrun too. The difference is who counts.Private projects overrun too. The difference is who counts.

What a payment period actually creates

The instinct is to price the wait as interest on one invoice. That understates it by a factor of the number of certificates in a year, because the certificates overlap.

A contractor invoicing monthly and paid 86 days later never has one certificate outstanding. It has roughly three, all the time, from the first month to the last. The chain does not delay the money once; it sets a permanent balance, and the size of that balance is the contractor's annual turnover multiplied by the length of the chain and divided by 365.

At 7.25%, the rate the contract itself nominates and which is derived below, carrying 283m costs 20.5m a year against 7.2m under a 30-day rule. Take the same programme through one returned payment order and the standing balance is 421m and the annual cost 30.5m.

There is a small identity worth noticing, because it makes the number easy to check without a spreadsheet. The financing cost of the wait on a single certificate, as a percentage of that certificate, is exactly the annual financing cost as a percentage of annual turnover. At 86 days and 7.25% both are 1.71%. At 128 days both are 2.54%. Whatever the chain costs on one invoice as a percentage, it costs on everything, every year.

What that does to a contractor, in the European Commission's own words

This publication's rule is that a finding against a requirement rests on the requirement's own relief provisions, on an authoritative body's stated doubts, on arithmetic, on a named dataset, or on an exhibitable contradiction. The arithmetic above is the third. The mechanism is the second, and the European Commission states it more plainly than this publication would dare to state it.

Two things have to be said about that quotation before it is used.

The first is that it describes late payment, and Article 109 at 86 days is not late. It is on time. The chain is long by design, and the Commission's mechanism applies to a long agreed term just as it applies to a broken one, which is precisely why the same proposal caps agreed terms at 30 days rather than only punishing lateness.

The second is that the proposal is not law. It was published on 12 September 2023; the European Parliament adopted its position in March 2024; and the Parliament's own Legislative Train Schedule, updated on 1 August 2026, records the file as blocked, with the Council as the blocking institution. The instrument in force is still the 2011 directive. That is worth stating rather than hiding, and it is a finding of its own: the diagnosis is agreed at the level of a legislature, and the remedy has stalled in the chamber where the member states, who are the payers, sit.

The chain's effects also do not distribute evenly inside the contractor. Part of the outflow can be pushed down the supply chain, which is what the Commission means by the damage spreading. Part cannot. Payroll falls on the same day every month whatever the Ministry is doing, and so do the bank's own instalments on the plant. A payment period is therefore not a uniform squeeze; it is a squeeze that lands hardest on the outgoings a contractor has least discretion over.

Paying late is an attractive form of finance that costs the debtor nothing but does have a cost for the creditor.

There is one more piece of evidence, and it is circumstantial rather than causal, so it is offered as what it is. Saudi Arabia's National Infrastructure Fund runs a Contractor Financing Program which covers up to 50% of partner banks' facilities to contractors under specific contracts, stated on its own page as de-risking lender exposure in order to incentivise the banking sector to finance contracting companies. It is aimed at contractors on national projects valued between 200m and 1.25bn riyals. That a sovereign instrument exists to get banks to lend contractors working capital does not prove the payment chain caused the need. It does establish that the need was real enough to legislate for, at that scale, in that market.

The chain, as written

Read the units rather than the numbers. The word عمل, work, is what turns a day into a working day, and it is present in paragraphs 2, 3 and 5 and absent in paragraph 4. So the chain is not written in one unit. It is 25 working days followed by 45 calendar days, which on a five-day week with no public holidays is 14 plus 21 plus 45: 80 calendar days from statement to cash with every office on time.

That mixed unit is not a curiosity. It is the reason two things happen later in this piece that nobody designed: a public holiday costs the chain either nothing or a fortnight depending on which paragraph the days are sitting in, and an official translation was able to change the length of the chain by one word without anybody noticing.

The rate, which the contract supplies

Pricing the wait needs a cost of money, and the temptation is to assume one. The contract nominates one instead.

Three points above the repo is 7.25%, and every money figure in this piece uses it. It is not a claim about what any particular contractor borrows at. It is the rate the standard form itself says the wait is worth, which makes it sourced twice and attributable to nobody.

Two honesties travel with it. FIDIC's formula names a "discount rate" of the central bank, and the Saudi Central Bank publishes no rate under that name; on the reverse repo the answer would be 6.75%. And FIDIC compounds monthly where the arithmetic here is simple interest, so every figure understates the remedy slightly, in the payer's favour. The payment chain calculator takes whatever rate a reader knows they actually pay.

One certificate, on real dates

Eighty days is the rule's own arithmetic on an average year. A certificate is not submitted into an average year. It is submitted on a date.

Take a certificate of 100m submitted on 25 March 2025, which on the Umm al-Qura calendar is the 25th of Ramadan: the first day of the government closure, and five days before Eid al-Fitr. Eid al-Adha falls about 70 days later. It is the worst-looking submission date in the year, and what follows is not what it looks like.

So Article 109's three periods sit under three different exposures. The consultant is a private firm on 4 days. The agency is a government office on 10 or 11. The Ministry is on none, because its period is not measured in the unit a holiday can reach.

Every office meets its deadline and the certificate is paid on 19 June, 86 days after submission. That is 6 days longer than the rule's own 80, and the interesting part is where those 6 days came from. Not from the 10-day government closure the certificate was submitted into, which touched nothing: the paper was with the consultant until 14 April, ten days after those offices reopened. Not from Eid al-Adha either, 11 days of which sit squarely inside the Ministry's period and cost nothing at all, because that period is written in calendar days and a calendar day happens whether anyone is at work or not.

The 6 days came from the consultant's own 4-day Labour Law holiday and where the weekends fell around it. A private firm's shorter holiday moved this certificate; the two government closures, 21 days of them, did not.

What a single query is worth

Now return the payment order once, on the 30th day of the Ministry's period.

That is 4 June, which is inside the Eid al-Adha closure. The agency that has to answer the query cannot answer it, and if it needs 3 working days to do so, which is an assumption and the only one in this example, those days do not exist until the office reopens. The resubmission is 16 June. The 45 days then run again in full and payment falls on 31 July: 128 days.

Two features of that are worth more than the headline. The first is a cliff. A query raised on the 21st day of the Ministry's period returns the order on 26 May and payment falls on 13 July, at 110 days. The same query raised one day later returns it on 27 May, the 3 working days run into the closure, resubmission slips from 29 May to 12 June, and payment falls on 27 July, at 124 days. Fourteen days of the contractor's cash turn on one day of somebody else's timing, and 278,082 riyals of financing with them.

The second is a plateau. Every query raised between the 24th and the 37th day of that period produces exactly the same payment date, 31 July, because the closure absorbs the difference between them. For a fortnight in the middle of the Ministry's clock, when the query is raised makes no difference at all. Neither the cliff nor the plateau is in the rule; both are in the interaction between a rule written in two units and a calendar the rule does not mention.

In money on the single certificate, at 7.25%: 1,708,219 on the clean run against 2,542,466 with one query, an increase of 48.8%. Against the 80 days the rule states on an average year, the same certificate has gone from 1,589,041 to 2,542,466, which is 60% more. On the standing balance across a 1.2bn programme, the same change is 283m becoming 421m.

The same query under FIDIC

A query is not unusual and no rule pretends otherwise. What differs is what a rule does about one.

So the difference is severability, not speed. Put the same disagreement through both. Suppose 5% of the certificate is queried.

Under FIDIC the Engineer trims the 5m and certifies 95m, which is paid 56 days after the complete statement arrived. The contractor finances 95m for 56 days, which is 1,056,712, and the disputed 5m carries an entitlement to financing charges at the same rate, running from the original due date, if it is later determined due.

Under Article 109 the payment order goes back whole. All 100m waits, the 45 days run again, and the contractor finances 100m for 128 days, which is 2,542,466. That is 2.4 times the FIDIC figure, and none of it carries an entitlement to anything: it is recoverable, if at all, as a claim under Article 68, which is a different thing with its own clock and its own cap.

Two honesties. Whether the Engineer would in fact trim rather than reject is a matter of how 14.6 is administered, and a wholesale failure to meet the contractual preconditions for a statement is a different case from a disputed line in it. And the 56 days run from receipt of the Statement and its supporting documents, so a package short of its evidence has not started the clock. That completeness gate is in all three rules, and it is the part most likely to be where the real delay lives.

What is on the other side of the ledger

Three things, and the piece is worth less if it skips them.

The first is that the Saudi regulations do provide working capital at the front of the contract, and it materially reduces the figures above.

On the 1.2bn contract above, that is 120m up front, recovered at 10m a certificate over 12 certificates, so the outstanding advance averages 65m across the contract. Against 283m of standing working capital it offsets 23%, leaving 218m and a financing cost of 15.8m a year rather than 20.5m.

Three qualifications go with that, and they are why it reduces the figure rather than answering it. It is discretionary, يجوز rather than a right. It is capped at a tenth. And it is not free money: it requires a bank guarantee for its full value, which costs a fee and consumes facility headroom the contractor would otherwise use for the working capital the chain creates.

The second is that the chain buys something. What a longer chain buys is verification before public money leaves, by parties with different incentives, and a private owner who pays in a fortnight is buying less of that. Whether the second and third verifications catch what the first would not is an empirical question nobody has published an answer to, and this piece does not settle it either. The figure that would settle it is how many payment orders the later offices returned last year, for what, and what the return was worth.

The third is that the wait is priced, not absorbed. A contractor who can compute the figures above puts them in the tender, so the owner pays the financing cost whether or not anybody writes it down. That cuts both ways: it means the chain is not free to the owner, and it also means the harm is concentrated on the contractors who cannot compute it or cannot fund it, which is not the same set as the ones who priced it.

Eighteen days that exist only in the translation

The mixed unit has one more consequence, and it is a straightforward error rather than a design choice.

The Ministry of Finance publishes an English translation of the Regulations, and it is the version an international contractor, lender or adviser is most likely to read. Its paragraph 4 says the Ministry shall pay "within forty-five (45) working days maximum". That word is not in the Arabic. Carried through the same conversion it produces 63 calendar days for the Ministry rather than 45, and a chain of 98 days rather than 80.

The translation is not careless in general. The English text of the Law opens with a note setting out four conventions it applies: singular includes plural, masculine includes feminine, present includes future, and person covers natural and legal persons. Those are the ordinary conventions of statutory translation and they are declared. Rendering a day as a working day is not among them, and it is not a convention: it is a change to a period.

It runs in the contractor's favour to discover it. A bidder pricing the chain from the translation is financing 98 days of float and putting that in the tender; a bidder pricing it from the Arabic is financing 80. On a 100m certificate the 18 days are 357,534, and on the 1.2bn programme they are 59m of standing balance and 4.3m a year. It also runs against the contractor to rely on it, because under the Arabic the Ministry has committed to a shorter period than the English suggests, so an English-reading contractor may treat as timely a payment that is in fact overdue.

A claim about a document rests on the document, because a listing, a banner or a summary can be wrong, stale or scoped differently from the thing it describes. A translation belongs on that list. Where a rule was enacted in a language other than English, what it requires is what the enacted text says, and a published translation is a description of it, however official the body that issued it.

Which reading this takes

The finding is not that the Saudi chain is too long. At 80 days it is longer than the four comparators, and whether the extra verifications earn their price is the empirical question above, which nobody has answered.

The finding is that the length of a payment chain is a financing decision that no party to it treats as one. The owner sets it in a regulation, where it looks like a procedural period. The contractor carries it on a balance sheet, where it is a facility. It reaches the owner again as a line in the tender price that says something else. Between those three places nobody computes it, and the reason nobody computes it is that no rule in the Saudi chain names a cost of money at all, where FIDIC, the European directive and the United States rule all do.

The limits. The Arabic and the English were both read at the Ministry's own published files, and this piece reports what each says; it does not say which governs as a matter of Saudi law, which is a question for a Saudi lawyer and not for this publication. No dataset of actual payment times against Article 109 was found, so nothing here says whether the periods are met in practice, on either side, and nothing here says how often a payment order is in fact returned or for what. The working capital arithmetic assumes an even monthly certificate and takes no account of retention, mobilisation or the profile of a real programme; it is a floor, and a lumpy programme is worse rather than better. The Commission's account of the mechanism is its reasoning rather than a measurement, and the proposal carrying it is blocked. The 2019 law and its regulations are replaced by the law gazetted on 4 September 2026 when it takes effect, and whether the new regulations keep the mixed units is a dated review owed by January 2027.

The worked example carries its own limits. The dates are the Hijri periods the two regulations name, converted on the Umm al-Qura calendar; where an office announced something different, the different dates are the ones that govern and the calculator takes them. The 3 working days the agency needs to answer a query is an assumption: raise or lower it and the cliff moves, but it does not disappear, because what creates it is the closure and not the number.

What would change this

A fourth is neither drafting nor cheap: an interest provision. The argument for one is not fairness, it is price discovery. A contractor who cannot recover the cost of the wait puts it in the bid, so the owner pays it either way, once as a financing line somebody has computed and once as a number nobody has. Both the European directive and the United States rule say so explicitly, and both chose to pay it visibly. What the Saudi rule buys instead is the absence of a liability the Ministry would have to budget for, which is a real advantage and belongs on the other side of the ledger. Nobody has published what either choice costs, which is the figure that would settle it.

What to examine

• Take each period in your governing rule and write the unit beside it. If two periods in one chain have different units, the total cannot be stated in either without a conversion, and somebody has been stating it anyway.
• Where you are working from a translation, check the periods against the enacted text. A translation that declares its conventions has told you what it does; it has not told you what it did by accident.
• Ask who bears the restart when a payment order is returned for amendment. If the contractor does, every query is a free extension for the payer, and the query does not have to be a large one.
• Ask whether an advance payment is on offer, what percentage, and what the guarantee will cost, because that is the only part of the chain the contractor can negotiate before signing.
• Put your own submission dates against your own holiday calendar before the programme is fixed, rather than after a certificate has landed badly. A monthly cycle has 12 submission dates a year and they are not equally priced.
• Ask what the second and third verifications have found in the last year that the first missed. If nobody can say, the cost of the chain is being paid for a control nobody has measured.

Add up your own chain, period by period and unit by unit, and price the float, with the payment chain calculator.

---

Sources. Saudi Executive Regulations of the Government Tenders and Procurement Law, Articles 108 and 109, read in the Arabic in the Ministry of Finance's published law-and-regulations file, and Article 109 also in the Ministry's own English translation, both 7 September 2026. Government Tenders and Procurement Law, Royal Decree M/128, 2019, English translation, front-matter translation note and Article 1; both instruments are replaced by the law gazetted on 4 September 2026 when it takes effect. European Commission, proposal for a Regulation on combating late payment in commercial transactions, COM(2023) 533 final, explanatory memorandum and recitals 3 and 11, read in full, with its status read at the European Parliament's Legislative Train Schedule. Directive 2011/7/EU, Article 4 and recital 23, read at the Official Journal. FIDIC 1999 Sub-Clauses 14.6 to 14.8 via Tyson's free clause commentary on the International Construction Knowledge Hub, and FIDIC's own question and answer service for the 1999 suite at fidic.org. Procurement Act 2023, section 68, read at legislation.gov.uk. 5 CFR 1315.4, read at eCFR. Executive Regulations for Human Resources in the Civil Service, Articles 127 and 128, read in the Arabic at the Ministry of Human Resources and Social Development, and the same ministry's Holidays and Leaves page for the business sector. National Infrastructure Fund, Contractor Financing Program page. Policy rates read at the Saudi Central Bank. Every date and money figure in the worked example is computed by the payment chain calculator on this site, whose engine is tested against the periods in each rule.