Why Contracting Has Been Slow to Digitize
Few industries run on paper the way contracting does. The site diary is handwritten. Progress claims are built in Excel, printed, signed and sent. Material requests travel by WhatsApp and phone calls. Supervisors collect attendance sheets at the end of the week. Then someone at head office keys all of it into the accounting system, days or weeks after it happened.
That is not laziness. It reflects how the work is done: scattered sites, patchy connectivity, field teams who never needed software before, and contracts that differ from one job to the next. The consequences are the same everywhere, though. Management learns the real cost of a project too late, claims go out late so cash comes in late, and disputes with subcontractors and clients are settled on memory rather than records.
Digitizing the contracting sector means capturing data once, where it originates, on site, in the store or at the office, and letting it flow to everyone who needs it: project managers, finance, procurement and leadership. This guide covers the problems paper creates, the core building blocks of a digital contractor, worked examples for progress claims and earned value, and a practical rollout plan.
What Paper Actually Costs You
- Late cost visibility. Overruns show up in the monthly report, weeks after they started, when correcting them is harder and more expensive.
- Repeated entry. The same quantity is written in the site diary, the engineer's sheet, the claim and the ledger. Every transfer is a chance for error.
- Slow claims. Gathering quantities from sites, pricing and checking them by hand takes days, and every day of delay adds a day to the cash cycle.
- Subcontractor disputes. Without a dated record of work done and materials received, payment arguments come down to one side's word against the other's.
- Material leakage. Issues not tied to a project and BOQ item end up on the wrong job or nowhere at all.
- Digital-by-design obligations. E-invoicing, wage protection files and GOSI all expect structured data that paper does not produce easily.
The Building Blocks of a Digital Contractor
1. Work breakdown and project budget
Everything starts with splitting the project into measurable items: earthworks, concrete, blockwork, electrical, mechanical, finishes, each with a BOQ quantity, a rate and an estimated cost budget. This structure is the spine every later cost attaches to. Without it, costs land on "the project" as a single number nobody can analyze. Our guide to project budgeting and cash flow goes deeper on setting it up.
2. Daily site recording
Instead of a paper diary, the site engineer or foreman records each day: work done and quantities, labor present and hours, equipment working or idle, materials received and used, and issues or delays. This record is the source for claims, labor cost and equipment cost. Because some sites have weak signal, choose a tool that lets people record offline and sync later, or set a fixed daily upload time from a place with coverage.
3. Electronic progress claims
A claim should be an output of the data, not a separate exercise: certified quantities × BOQ rates, less agreed deductions, routed through site engineer, project manager, finance and the client's consultant.
Hypothetical example: a SAR 12 million contract with a 10% advance (SAR 1.2 million) recovered at 10% of each claim, and 10% retention released on handover. In month four, work worth SAR 900,000 is certified:
| Line | Amount (SAR) |
|---|---|
| Certified work | 900,000 |
| Advance recovery 10% | (90,000) |
| Retention 10% | (90,000) |
| Net due before VAT | 720,000 |
Under the Saudi time-of-supply rules, VAT on an advance is due when the advance is received, so the system has to handle the recovered portion without taxing it twice. For government contracts, VAT has been due since November 2021 at the earlier of the payment order or receipt of payment. The VAT treatment of retention depends on contract wording and is worth confirming with your adviser. The point is that these rules are configured once and applied to every claim, instead of relying on the accountant to remember them each month.
4. Procurement and materials
- Material requests originate on site and are tied to the project and BOQ item.
- Quotes are compared side by side and approved against authority limits and the item's remaining budget.
- Site receipts are matched to the purchase order on quantity and specification.
- Issues from the site store are posted to the item, so used quantity sits next to BOQ quantity and waste shows up early.
5. Field labor
Labor is often the largest variable cost. Digitizing it means recording each worker's attendance against the project they worked on, spreading the cost across items, and feeding payroll. Schedules must respect the midday outdoor work ban from 12:00 to 15:00 between 15 June and 15 September, Labor Law limits on hours and overtime, and the Mudad requirement, since March 2025, to upload the wage protection file within 30 days. Geo-fenced attendance around the site reduces buddy punching and ends the weekly chase for timesheets.
6. Equipment
Each machine needs a record: where it is, which project it serves, hours run, fuel and maintenance. Its cost (depreciation, fuel, maintenance, operator) is charged to projects by hours used. Rented equipment needs return dates tracked, because a rented machine standing idle on site costs money every day.
7. Subcontractors
Each subcontract carries its own BOQ, claims matched to certified work, retention and deductions. Linking a subcontractor's claim to progress on the main contract item stops you paying for work the client has not yet accepted. See our guide to subcontractor management for more.
8. Reporting
When data flows from source, reports become automatic rather than a monthly ordeal: actual versus budget per item, percent complete, unbilled work in progress, claim aging and retention due for release.
Earned Value: Is the Project on Track?
Comparing cost to budget on its own misleads. A project that has spent half its budget is excellent if half the work is done and in trouble if only a quarter is. Earned value combines cost, progress and time:
- Planned value: the budgeted value of work scheduled to date.
- Earned value: the budgeted value of work actually completed.
- Actual cost: what has really been spent.
Hypothetical example: the cost budget is SAR 10 million. At month six, planned value is SAR 5 million, earned value SAR 4.5 million and actual cost SAR 5 million.
| Indicator | Calculation | Result | Meaning |
|---|---|---|---|
| Cost performance index | 4.5 ÷ 5 | 0.90 | Each riyal spent produces 90 halalas of work |
| Schedule performance index | 4.5 ÷ 5 | 0.90 | Progress is about 10% behind plan |
| Estimate at completion | 10 ÷ 0.90 | About SAR 11.1 million | Roughly SAR 1.1 million over if performance holds |
A warning in month six leaves time to act: review crew productivity, renegotiate materials, or raise variations for extra work that was never priced. The same warning in month ten usually leaves nothing to do but absorb the loss.
Variations and Claims: Where Margin Leaks
Projects rarely finish with the scope they started with. The client changes the design, site conditions surprise everyone, or approved drawings arrive late and work stops. Each event has a cost, and who bears it usually depends on documentation. On paper, the change is executed on a verbal instruction and the contractor scrambles months later to assemble evidence. Digitally, each variation has its own record: date and source of the instruction with the attached document, affected items and quantities, estimated cost, proposed price and time impact, client approval status, and a billing path separate from the original items. Because the daily log records delays and their causes, the contractor also has a clear basis for extension of time requests and protection against delay penalties for days it was not responsible for.
Documents, Drawings and Correspondence
Working from a superseded drawing is one of the most expensive site errors. The consultant revises a drawing, the new version reaches the office by email, and the site keeps building from the old print. The fix is not complex software but clear rules: one place for all project documents organized by type, a revision number and date on every drawing with the current approved version clearly marked, important letters linked to the item or variation they concern, and inspection requests with their results recorded, since they underpin certified quantities.
Bank Guarantees and Insurance
An active contractor may hold dozens of guarantees at once: bid bonds, performance bonds and advance payment guarantees, each with an amount, expiry, bank and commission. Missing a renewal causes trouble with the client. Forgetting to cancel an expired guarantee means paying commission for nothing and tying up facility limits. A digital register with expiry alerts solves both and shows finance how much of its facilities is in use at any moment. The same logic applies to project and equipment insurance and to safety certificates each contract requires.
Government Projects
Much Saudi contracting work comes from government entities, which have their own digital track. Etimad has handled government tendering electronically since 2018, and the 2019 Government Tenders and Procurement Law gives preference to local content and local SMEs. A new Government Tenders and Procurement Law was published in September 2026 and takes effect on 2 January 2027, replacing the 2019 law. Contractors need to track and document local content, and keep financial and technical records ready for each tender. A system that keeps the actual cost and BOQ of every past project lets you price new tenders from experience rather than guesswork.
Project Cash Flow in One Example
Profit on paper does not pay wages. A contractor spends SAR 800,000 a month on labor, materials and subcontractors, submits the claim at month end, the consultant certifies it in two weeks, and payment arrives 45 days after certification. Each month of work therefore needs about two months of funding before cash returns, so the contractor carries roughly SAR 1.6 million of unrecovered cost at any time, plus retention that only comes back after handover. Submitting the claim a few days before month end instead of two weeks after it, which organized daily data makes possible, cuts that burden directly.
Revenue Recognition and Work in Progress
Work completed at month end but not yet claimed is earned, unbilled revenue. The reverse, claims ahead of actual progress, is revenue billed in advance. Under IFRS 15, construction contract revenue is usually recognized over time based on progress. Reliable digital tracking of cost and progress is what makes that percentage defensible instead of a year-end estimate. Tranquil's work in progress capability supports this side of the business.
A Practical Rollout Plan
- Start with one project, ideally a new mid-sized job, rather than moving everything at once.
- Standardize the item structure across estimating, budgeting and execution so projects can be compared.
- Train the field first. The site engineer is the data source. If the tool is not easier than the diary, good data will not arrive.
- Bring finance in early. The first system-generated claim is the real test; review it with finance and the client before committing.
- Measure after three months: claim preparation time, cost accuracy and number of disputes against the old baseline.
How Tranquil Supports Digital Contracting
Tranquil's contracting solution covers cost and revenue estimation, daily activity management, material management, project budgeting, timesheet invoicing and work in progress, connected to accounting, purchasing, HR, payroll, assets and ZATCA e-invoicing.
Frequently Asked Questions
Does a small contractor need specialized software?
If you run more than one project at a time or deal with claims, retention and subcontractors, a system saves time and prevents errors from day one. Cloud ERP lowers the entry cost because no in-house servers are needed.
How is a progress claim produced from the system?
Certified quantities from the daily log are multiplied by BOQ rates, advance recovery and retention are deducted, and the claim is approved before the e-invoice is issued.
What if the site has poor connectivity?
Use tools that allow offline recording and later sync, or fix a daily upload time from a location with signal. What matters is that work is recorded on the day it happens.
Which KPI matters most to a project manager?
The cost performance index, because it ties spend to work actually completed and flags overruns early enough to act.
Does Tranquil handle contracting projects?
Yes. Tranquil includes a contracting solution covering budgeting, daily activity, materials and work in progress. Contact the Tranquil team to discuss your projects.