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High Speed Railway in Saudi Arabia: Lessons to be learnt from the Spanish experience

public authorities. Concessions have a long tradition in the Spanish legal framework, have
been particularly used to construct highways, and have been characterized by the allocation of
considerable risk —demand, acquisition of the right of way and financial risks— to the private
sector in the contracts; but also by important guarantees by the government (Ortega, Baeza
and Vassallo, 2015).
The second approach to deliver transport infrastructure is the Design-Bid-Build (DBB) or
DesignAward-Build (DAB) where the public administration develops contract documents with
an engineer consisting of a set of plans and a detailed specification. Based on these documents
the contract is then awarded to the bidder with highest qualification. This is done largely
on the basis of an “open procedure.” Unlike other long-term infrastructure contracts in the
world —i.e. Design-Build-Finance-Operate contracts in the UK, and most of the PPP contracts
in Germany— (Tang, Shen, & Cheng, 2010), public works in Spain are hardly ever awarded by
means of a negotiated procedure.
This open procedure means that any company that fulfils the minimum requirements set out by
the government in the tender provisions is allowed to participate in the process. The government
chooses the winner in terms of a set of criteria —both economic and technical— according to
which the offers presented by different bidders are qualified. Contracts are not negotiated in
this approach since the government submits standard contracts to the bidders along with the
bidding terms. This was, for instance, the procurement process used in the new HSR trains
awarded by Talgo.
Sanchez and Gago (2010) prove that the transaction costs of the open procedure, for both
bidders and the government, are much lower than those of the negotiated procedure. These
low transaction costs are likely the most important reason why the number of participants
in the tendering processes in Spain is often quite large (Vassallo & Sánchez, 2007). However,
most of the construction companies are well-known Spanish firms since the lack of publicity
and transparency of the tendering and awarding processes in Spain creates strong barriers that
prevent foreign companies to compete fairly. Despite this problem, the construction cost of
HSR in Spain is cheaper than in other European countries, which could be explained by labour
cost, the existence of less-populated areas outside the major urban centres and also by the
construction procedures (Campos and De Rus, 2009). The long experience of Spanish companies
in public works, which have enjoyed competitive advantages against their competitors, could
also partially explain the technological and scientific innovations developed in Spain linked to
the HSR market (Guirao, 2013).
4.3.2 Saudi Arabia

Saudi Arabia is one the fastest growing markets in the world and considered as the largest
construction market in the Middle East. The value of projects that were announced by King
Abdullah during the G20 summit on 14-15 of November 2008 in Washington was €333 billion
to guarantee finance for development projects, including different sectors such as transport,
utilities, infrastructure, healthcare, education, etc. (Alrashed et al., 2008). However, the
largest allocation for the 2015 budget was paid toward the transport and infrastructure sectors
of €155.44 billion to complement the growth and development across Saudi Arabia. On the
other hand, construction is the largest non-oil sector in Saudi Arabia and many mega projects
are anticipated to be launched in the next year, including Haramain High Speed Rail, North-
South Rail, Riyadh Metro, etc. In this case, Saudi Arabia has experienced problems that have
caused delay in many projects. Alofi et al. (2016) mentioned that the procurement system is
one of the major factors that affect the construction performance in Saudi Arabia. There are
three different types of the Saudi Arabian procurement system, including public procurement
competitions, and direct and specific purchases. The public procurement competitions have the
majority of acquired purchases whilst projects under this category starts with the first phase of

International Congress on High-speed Rail: Technologies and Long Term Impacts - Ciudad Real (Spain) - 25th anniversary Madrid-Sevilla corridor 519