The Sultanate of Oman has eliminated a 5 percent retention requirement from its updated standard government contracts as part of efforts to enhance contractors’ cash flow and accelerate project completion. The Ministry of Finance, in cooperation with the Projects, Tenders and Local Content Authority, announced the changes on October 27.
The revision affects contracts related to design, procurement, execution, construction, and engineering consultancy, which will be mandatory for government entities governed by the national Tenders Law. Previously, a 5 percent retention was withheld from contract values to ensure project compliance. The removal of this retention aims to alleviate liquidity constraints faced by contractors, thereby facilitating more efficient project delivery.
Under the new terms, contractors must submit a recovery plan once project delays exceed 5 percent of the scheduled time. If delays reach 15 percent, contractors’ eligibility to participate in future government projects will be evaluated and may be restricted. These provisions are intended to introduce stricter control over project timelines.
The updates follow comprehensive technical and legal reviews designed to resolve contractual ambiguities, clarify procedural requirements, and align project management with international best practices. Officials expect the changes to improve public expenditure efficiency by promoting on-time project completion, controlling costs, enhancing quality, and reducing associated risks and disputes.
The revised contracts also clarify the roles and responsibilities of involved parties, address issues related to insurance and guarantees, and define the respective rights of contractors and project owners. Local content and Omanisation obligations have been incorporated, requiring contractors to employ and train Omani nationals and prioritize local suppliers and subcontractors.
Abdullah bin Humaid al Habsi, Head of the Project Follow-up Office, described the update as part of a broader initiative to foster a contractual environment conducive to national company participation and stronger government oversight. He emphasized that the revisions establish clearer rights and duties and facilitate adherence to schedules and financial commitments.
The definition of force majeure has been expanded to explicitly include natural disasters, epidemics, and pandemics, which clarifies contractual obligations during exceptional events and promotes a more balanced risk distribution between parties. Project owners have also been granted greater authority to withhold or suspend payments and offset debts as stipulated in contracts.
The updated agreements are structured into six sections covering contract templates, project-specific terms, general conditions, scope of work and local content, price schedules, and contract management procedures. This format aims to enhance transparency, improve governance, simplify contract usage, and provide clearer mechanisms for dispute resolution.
Saleh bin Ali al Harthi, a development budgets expert at the Ministry of Finance, noted that four additional standardized contracts addressing services, small-scale works, procurement, and human resources are nearing finalization. Their official adoption is expected soon. The revised contract documents have been made available on the ministry’s website.