Appointing a Development Manager in Saudi Arabia: How the Agreement Is Built

What a development management agreement covers, the order in which to build it, and the gates that keep an absent owner in control of a Saudi project.

A development management agreement appoints a company to run your project as your agent: it procures the designers and contractor, controls cost and programme, deals with approvals and reports to you, while you keep ownership and the decisions that carry money. Building the agreement in the right order matters, because the scope defines the fee, the fee shapes the incentive, and the reporting gates are what make the arrangement usable from another country.

Before stage one

Before you appoint anyone, you need to know what you own, what you intend to build in broad terms, and which decisions you will never delegate. A development manager can be appointed at land stage or after design, and the scope differs greatly between those two points, so fix the starting line first.

• Title or a contract to acquire the site, with the plot details confirmed.
• A written statement of your objective: sell on completion, hold and let, or a mix.
• A budget ceiling and the maximum you are prepared to fund from your own capital.
• A list of decisions reserved to you, drafted before you hear what is convenient for the manager.
• Confirmation from a licensed adviser of how your ownership structure holds the asset, since the agreement must name the right entity.

Stage 1: Define the mandate boundary

Write down where the manager scope starts and stops. Does it include land due diligence, feasibility, design procurement, authority approvals, construction procurement, construction supervision, sales or leasing, and handover into operation? Each of these can sit inside or outside the mandate, and disputes almost always begin at a boundary nobody wrote down. Name who holds the contracts with designers and the contractor, because that determines who carries the risk if one fails.

• Deliverable: A one-page scope matrix showing every activity marked manager, owner or excluded.
• Owner: Owner, with input from the candidate manager.
• Approval gate: No fee discussion until the scope matrix is agreed.

Stage 2: Agree the reserved matters

Reserved matters are the decisions that require your written consent regardless of what the manager thinks: approving the budget and any increase above a stated threshold, appointing or replacing the contractor, signing contracts above a value you set, changing the product mix, agreeing prices for sales or leases, and drawing debt. Keep the list short enough to be respected and specific enough to be enforceable.

• Deliverable: A reserved matters schedule with monetary thresholds.
• Owner: Owner, with legal review.
• Approval gate: Thresholds stated in figures, not in words such as material.

Stage 3: Fix the fee structure and what it covers

Decide whether the fee is a percentage of project cost, a fixed amount by stage, a monthly retainer, or a base fee with a completion or performance element. Then decide what is reimbursable: site staff, travel, printing, insurance, software. A percentage of cost rewards a larger project, so if you use it, cap the base and add a performance element tied to something you actually want, such as delivery within budget or achieved sales values.

• Deliverable: A fee schedule with the reimbursables listed and capped.
• Owner: Owner and manager.
• Approval gate: Written confirmation that no other charge exists outside the schedule.

Stage 4: Set the reporting pack and the calendar

Specify the monthly report contents: physical progress against baseline programme, cost report with commitments and forecast final cost, change register, claims position, cash flow for the next three months, approvals status, risks with owners and dates, and photographs. Then set the day of the month it arrives and the date of the monthly call. For an owner abroad, the reporting clause is the most valuable clause in the agreement.

• Deliverable: A sample report template attached to the agreement as the agreed format.
• Owner: Manager, approved by owner.
• Approval gate: One complete report issued in the agreed format before the first fee payment.

Stage 5: Build the authority and banking arrangements

Decide what the manager may sign, what it may instruct and what it may pay. Many owners keep payment authority themselves or set dual authorisation above a threshold, with the manager certifying and the owner releasing. Where project funds sit in an account the manager operates, require statements with the monthly report and a defined limit on single transfers. Have a licensed adviser confirm the local banking and signing formalities for your structure.

• Deliverable: A signing and payment authority table, mirrored in the bank mandate.
• Owner: Owner, with adviser and bank.
• Approval gate: Bank mandate matches the agreement before any funds are transferred.

Stage 6: Agree performance measures and the exit

State what good performance means: budget maintained within a stated tolerance, programme milestones met, reports delivered on time, approvals obtained without avoidable delay. Then state what happens if it is not: fee reduction, step-in rights, replacement of named staff, and termination for convenience on notice with a defined handover of records, drawings, approvals and contracts. An agreement you cannot leave is not a management arrangement, it is a dependency.

• Deliverable: Performance schedule plus termination and records handover clauses.
• Owner: Owner, with legal review.
• Approval gate: Termination for convenience available with a defined notice period and handover list.

Stage 7: Run a trial stage before committing the whole project

Where you can, appoint for the first stage only, such as feasibility and design procurement, with an option to extend into construction on the same terms. You learn how the company reports, how it handles bad news and whether it meets its own dates, at a fraction of the exposure. The option to extend keeps the commercial incentive aligned during the trial.

• Deliverable: A stage one appointment with a priced option for the following stages.
• Owner: Owner.
• Approval gate: Extension exercised only after a written review of stage one performance.

Handovers between stages

The scope matrix drives the fee schedule, the fee schedule drives the reserved matters thresholds, and the reserved matters drive the reporting pack, because you can only approve what you are shown. Draft them in that order and each one narrows the next. Drafted in reverse, you end up with a long report nobody reads and a fee that pays for activity rather than outcomes.

How you know it is finished

The appointment is properly made when you can answer four questions from the document alone: what the manager must deliver and by when, what it may not do without you, what the total cost to you is including reimbursables, and how you would end the arrangement next month if you had to. A licensed Saudi adviser should confirm the agreement works under local law before you sign it.

Domira designs, builds and manages projects across Saudi Arabia for owners who are based abroad: land appraisal, feasibility, design, construction, handover and asset management under one accountable contract. Send us the plot or the brief and Domira will put the numbers in front of you before you commit.