Government Contract Price Adjustments: When May a Company Submit a Claim?

Increases in the prices of materials and services may affect the cost and profitability of performing government contracts. However, not every increase automatically gives rise to a right to compensation; price adjustment is subject to specific conditions and procedures.

On 25 September 2026, the Umm Al-Qura Gazette published an amendment to Article (113) of the Implementing Regulations of the Government Tenders and Procurement Law, which governs the upward or downward adjustment of contract prices.

Conditions for claiming a price adjustment

Except for specified-profit-margin contracts, a claim may be made in the cases provided for by law where the prices of materials, services or contract items change after the bid is submitted, provided that the change increases the total contract cost by more than 3%. Where the change relates to customs tariffs, fees or taxes, compensation equals the amount of the change, without being subject to this threshold.

The contractor must prove that it actually bore the increase; the change must not have occurred after the expiry of the specified performance period; and the contractor must not have borne the increase as a result of its own delay, unless it proves that the delay was due to a cause beyond its control.

Submitting the claim on time

The claim, supported by documents, must be submitted to the consultant — or directly to the government entity where there is no consultant — before final acceptance of the works. Key supporting documents include evidence of prices at the time the bid was submitted, the actual costs at the time of performance, and the effect of the change on the total contract cost.

Price adjustment also applies to decreases; the difference may be deducted from the contractor in accordance with the controls set out in the Article.

Companies should therefore document performance costs and review the entitlement conditions early; complete claim documentation and timely submission are essential to protecting their financial rights.

Alhal Almutkan for Law Practice, Legal Consultancy and Notarization

Source: Official text of amended Article (113) — Umm Al-Qura Gazette.