Contractors have submitted bids for one of the largest construction contracts ever tendered in the Gulf, as the Saudi government continues to invest in construction projects as part of a SR475bn ($127bn) budget for 2009.

The investment includes spending on infrastructure projects such as schools, universities, hospitals, roads, railways and airports.

The four-year contract, tendered by the National Guard, is for the construction of 17,000 villas spread across 11 sites. Each site includes officers’ villas, soldiers’ villas and associated buildings and infrastructure. Only three companies submitted bids for all 11 sites.

China’s Norinco is the low bidder with a price of SR17bn, followed by Saudi Binladin Group with a bid of SR23bn. Saudi Oger is the only other bidder for all 11 sites with a price of SR24bn.

The sites are located at Khashm al-Aan, Al-Hasa, Al-Qassim, Al-Medina, Taif, Jeddah, Dammam, Yanbu, Hail, Dirab and King Khaled Military Academy in northeast Saudi Arabia.

Three other contractors submitted bids for a portion of the works. Malaysia’s MMC Corporation submitted a price of SR14.5bn for sites at Al-Medina, Taif, Jeddah, Dammam, Yanbu, Dirab and King Khaled Military Academy. The UEM Group, also of Malaysia, submitted a price of SR3bn for sites at Jeddah, Dirab and King Khaled Military Academy.

South Korea’s Daewoo Engineering & Construction submitted a price of SR13bn for sites at Al-Hasa and Dammam.

The National Guard housing contract is one of several major projects tendered by the government this year. According to Gulf projects tracker MEED Projects, the majority of the $15bn worth of construction contracts awarded in Saudi Arabia in the first quarter of the year was on government-funded projects.

The government has awarded about $8.6bn worth of contracts for universities in Riyadh, all of which include major housing developments. Another $4.1bn worth of contracts has been awarded for railway schemes such as the Haramain high-speed rail network, and the Mecca light rail system.

Government involvement in the housing sector has so far been limited, but contractors say this will change because the kingdom needs more housing.

The Economy & Planning Ministry estimates that the kingdom’s population will reach 33 million by 2020, up from 27.5 million today, putting a strain on housing supply.

To meet demand, Saudi Arabia needs to build homes for nearly 800,000 people a year until 2020.

The private sector planned to deliver much of the required housing over the coming decade with massive real estate projects, such as the six economic cities.

But the future of many of these projects is uncertain as developers struggle to secure the funding they need to begin development.

Unlike other markets, such as the UAE, off-plan sales are not permitted in Saudi Arabia.