MUSCAT: Oman has removed a 5% retention requirement from standard government contracts and introduced tougher measures to address project delays, as it seeks to improve contractors’ cash flow, accelerate delivery and strengthen local content requirements.

The Ministry of Finance, working with the Projects, Tenders and Local Content Authority, issued a new Design, Procurement and Implementation Contract and updated the standard Construction Contract and Engineering Consultancy Contract.

The contracts are mandatory for government entities subject to Oman’s Tenders Law.

The revisions follow technical and legal reviews aimed at addressing implementation challenges, clarifying contractual responsibilities and improving the efficiency of public spending.

A key change removes the 5% retention previously withheld from the actual contract value, freeing up funds for contractors to support project execution.

Under the revised provisions, contractors must submit a remedial plan when delays reach 5% to bring work back into line with the approved schedule. At 15%, their eligibility will be reviewed, potentially resulting in restrictions on participation in future government projects.

The contracts also explicitly require compliance with Omanisation rules, the employment and training of Omani nationals, and greater use of local suppliers and contractors. The measures aim to increase participation by Omani companies and small and medium enterprises while developing domestic skills and supply chains.

The definition of force majeure has been expanded to include natural disasters, epidemics and pandemics, providing greater clarity on obligations and the allocation of risks between contracting parties.

The revised terms also give employers broader powers to withhold or suspend payments and offset amounts against payments, subject to contractual provisions.

Other changes cover insurance, guarantees and the rights and responsibilities of employers and contractors. They are intended to reduce overlapping authority, limit change orders and strengthen adherence to project schedules and budgets.

Engineer Abdullah bin Humaid Al Habsi, head of the Projects Follow-up Office, said the revisions were part of a broader effort to improve government project management, strengthen spending efficiency and create a more attractive contracting environment for national companies.

He said the contracts had been reorganised into six sections to improve transparency and governance and clarify each party’s rights and obligations.

The sections cover the standard contract template, project-specific conditions, general conditions, the scope of work and local content requirements, the price schedule, and contract management procedures.

Al Habsi said the framework would give government entities more effective tools to oversee projects while maintaining a fair and supportive environment for contractors.