A new chapter in Saudi government procurement: key features of the new Government Tenders and Procurement Law

1. Background

The Kingdom of Saudi Arabia has enacted the new Government Tenders and Procurement Law (the New GTPL) pursuant to Royal Decree No. M/76 dated 27/02/1448H. The New GTPL replaces the previous Government Tenders and Procurement Law (the Previous GTPL) issued under Royal Decree No. M/128 dated 13/11/1440H. Comprising 101 articles (compared to 99 articles in the Previous GTPL), the New GTPL enters into force 120 days after its publication in the Official Gazette. This reform represents a significant component of Saudi Arabia’s Vision 2030 economic transformation programme, modernising the regulatory framework governing public procurement to enhance efficiency, transparency, competitiveness, and alignment with international best practice.^[1]

2. Key Features of the New GTPL

2.1 Expanded Objectives and Fundamental Principles

The Previous GTPL set out five core objectives for government procurement, focused primarily on protecting public funds and ensuring fair competition. The New GTPL retains the same five objectives but expands the second, the achievement of optimal value for public funds at fair competitive prices, to require that account be taken of life-cycle cost, quality of execution, operational efficiency, and risk management. This change marks a shift from purely price-driven procurement toward value-for-money considerations across the contract lifecycle, and bidders should expect lifecycle, quality and risk criteria to carry greater weight in evaluation. 

Article 3(2) of the New GTPL retains the requirement that, before contracting a foreign party to supply procurements or carry out works inside the Kingdom, a government entity must verify that no more than one qualified person is available locally. However, the test is now framed by reference to licensing location rather than nationality. The Previous GTPL referred to “foreign persons” and “local persons”, whereas the New GTPL refers to persons licensed outside and inside the Kingdom respectively. As a result, a foreign-owned entity licensed in the Kingdom should now count as a person licensed inside the Kingdom and fall outside the restriction, while a person licensed only abroad remains subject to it regardless of ownership. Article 3(3) is new and directs the Implementing Regulations to prescribe special provisions for dealings with persons licensed outside the Kingdom, with the Law otherwise applying. It is an enabling provision rather than a new right of participation, and the practical extent of any liberalisation will depend on the Implementing Regulations.

Two further principles have been adjusted. Article 8 continues to require that works and procurements be limited to the government entity’s actual needs and contracted at fair prices, but the Previous GTPL’s additional requirement that such prices “not exceed prevailing market prices” has been deleted. Article 9 retains the priority for local small and medium enterprises, local content and listed companies, but the mechanism is now set by the Preference Regulation.

2.2 Institutional Organisation

Under Article 1, the New GTPL retains the “Unified Procurement Agency” but redefines it as one or more agencies determined by resolution of the Council of Ministers, rather than a single agency in charge of unified strategic procurement. The definition of “Head of Government Entity” has also been revised. Where an entity has a board of directors (or equivalent), the board or its delegate is now the head, rather than the president, governor or principal officer.

The Local Content and Government Procurement Authority (the Authority) is given a more formal role. Under Article 12(2), government entities must now coordinate with the Authority on local content requirements when preparing their advance procurement plans, so local content is addressed at the planning stage rather than only at evaluation. Article 12(3) limits the obligation to coordinate with the Ministry of Finance on appropriations to entities allocated items in the State General Budget. Under Article 13, the Ministry must issue and amend its policies, directives and guidance in coordination with the Authority, and must publish that guidance on the Portal. Under Article 14, the Unified Procurement Agency must prepare standard documents in coordination with the Ministry and in line with the Preference Regulation.

The New GTPL also strengthens procedural safeguards. Under Article 15(2), an entity may procure items on the Unified Procurement Agency’s lists outside the agency’s framework agreements if the agency approves its justification. If the agency does not decide within the period set by the Implementing Regulations, approval is deemed granted. Under Article 15(3), changes the agency requires following its review of feasibility studies, cost estimates and tender documents must have a basis in the Law and the Implementing Regulations. 

Notably, Article 51 replaces the Previous GTPL's itemised delegation limits with a single general rule. All powers under the Law and the Implementing Regulations rest with the Head of the Government Entity, who may delegate them to officials up to SAR 50,000,000, graduated according to each delegate’s responsibility. The head may also delegate the signing of contracts and other documents.

2.3 Methods of Contracting

Public tender remains the default method for all works and procurements (Article 28). The New GTPL nonetheless makes significant changes to the other methods and to the conditions for using them. 

Limited Tender (Article 30): A government entity using limited tender must now state its reasons and explain why a public tender is unsuitable. The Previous GTPL’s ground for works and procurements with an estimated value of SAR 500,000 or less, which required at least five bidders to be invited, has been deleted, so low value alone is no longer a basis for limited tender. A new ground covers works and procurements available from liberal profession practitioners. Overall, the changes narrow the limited tender route and focus it on its substantive grounds. 

Direct Procurement (Article 32): The value ceiling has increased tenfold from SAR 100,000 to SAR 1,000,000, with priority still given to local SMEs. Six new grounds have been added: research, development and innovation; works or procurements available only from a single liberal profession practitioner; software licences, software and website subscriptions; specialist scientific journals; space at exhibitions, events and conferences; and training of government employees. The General Authority for Military Industries ground now covers military and security procurement generally, rather than only weapons, military equipment and spare parts. The single non-profit ground is limited to local entities, no longer requires the entity to perform the contract itself, and applies even where other, non-charitable suppliers are available. Every use of direct procurement must now be justified with documented reasons and must respect the principles of competition and spending efficiency, which will be relevant to any later audit or challenge. 

Reverse Auction (Article 33): The method is no longer described as “electronic”. The requirements that bids be received through the Portal and ranked automatically, and that bidders be given guidance on using the Portal, have been deleted. The government entity must instead prepare detailed, accurate and clear conditions and technical specifications. The reverse auction is therefore no longer tied to the Portal.

Localisation/Knowledge Transfer (Article 34): Article 35 of the Previous GTPL already allowed the Authority, with Ministry approval, to conclude contracts for the transfer of industry and know-how. The New GTPL restructures it as a contracting method governed by separate rules issued jointly by the Ministry and the Authority, rather than by the Implementing Regulations. Government entities may now use the method themselves with the Authority’s approval, and the Law applies to matters the rules do not cover. 

Competition (Article 35): Competition was already a recognised method under Article 36 of the Previous GTPL. Article 35 of the New GTPL carries it forward and now refers to contracting for the best idea, design or other artistic and intellectual work, rather than with the bidder presenting the best intellectual property rights.

Framework Agreements (Article 58): Framework agreements have moved to Part Four of the New GTPL. They remain available where quantities, the volume of works or services, or execution dates cannot be determined. The Previous GTPL also allowed them where the subject of the contract could not be determined and that ground no longer appears. The Implementing Regulations will set special provisions, with the rest of the Law applying otherwise.

2.4 Bids and Award Process

Bid submission and validity: Under New GTPL Article 26, bidders may submit inquiries on the tender documents, and the government entity must answer them before bids close. Bids must still be submitted encrypted through the Portal (Article 36(1)). Sealed envelopes may now be used for national security reasons as well as technical ones, and the same applies to other ways of announcing bidders’ names (Article 36(3), (4)). Total prices must be stated in the original proposal including all fees and taxes (Article 40). Bid validity remains 90 days but is now expressed in working days, which in practice extends the period (Article 39). The Previous GTPL allowed a single further extension of 90 days. The New GTPL leaves the length of extensions open: bidders who wish to stay in must notify their consent and extend any bid security, and bidders who decline get their security back (Article 39).

Bid Security (Article 42): Bid security remains at 1-2% of bid value. The Previous GTPL already exempted direct purchase, competitions, intra-governmental contracts, non-profit entities and local SMEs. The New GTPL limits the non-profit exemption to local entities and adds liberal profession practitioners, emergencies and urgent cases. A uniform penalty now applies to exempt bidders. Where bid security would otherwise have been forfeited, an exempt bidder must pay 2% of its bid value. If it does not pay within 60 working days, the matter is referred to the violations committee, which may ban the bidder for up to one year.

Bid Opening and Review Committee (Article 43): Bids are opened in the presence of at least a majority of members instead of all committee members. They are reviewed at a meeting of all members, with recommendations adopted by majority and the chair holding the casting vote. The Unified Procurement Agency and the Local Content and Government Procurement Authority may each nominate a representative with full committee powers, and committee members and the secretary will be paid under the Implementing Regulations. Bidders may now attend only openings of sealed-envelope bids, which are used where the Portal cannot be.

Negotiation and Single Bids (Article 45): Sequential negotiation already existed under Article 47 of the Previous GTPL. What Article 45 of the New GTPL changes is the benchmark and the outcome. Negotiation is now triggered where the best bid exceeds the estimated cost plus the contingency percentage, rather than where it is significantly higher than market prices. If no bidder will come down to that level, the head of the entity must cancel the tender, unless he finds a gross error in setting the estimated cost and approves the award. In that case, a report must be sent to the General Auditing Bureau. 

The Previous GTPL’s rule that a single bid could be accepted only at a price similar to market prices and with the head's approval has been replaced by a negotiation procedure. The same estimated cost plus contingency benchmark applies, together with the head’s power to approve an award where the estimated cost was set with a gross error, subject to a report to the General Auditing Bureau. The tie-break rule, previously in Article 50(2), now sits in Article 45(3). 

2.5 Contract Formation and Performance

Article 52(1) of the New GTPL introduces the rule that no legal or financial obligation arises for a government entity until the contract has been signed by all parties. For contracts of SAR 300,000 or less, the entity may now rely on the award decision instead of a formal contract, rather than on its correspondence with the contractor. The Ministry may still extend continuing service contracts beyond five years, but only where the nature of the contract requires it.

Article 56 introduces a formal signature procedure. If the successful bidder fails to sign by the date the entity sets, it is warned. If it still has not signed within 10 working days of the warning, the award is cancelled and any final guarantee is forfeited. A bidder exempt from the final guarantee instead pays a fine of 5% of its bid value. Failure to pay within 60 working days leads to referral to the violations committee, which may impose a ban of up to one year.

The site handover rule has also changed. The Previous GTPL required that the contractor in a public construction contract be allowed to start within 60 days of notification of the award. The New GTPL now obliges the government entity, in any contract requiring a work site, to hand the site over within 60 working days of signing, unless the tender documents provide otherwise (Article 56(3)). Finally, the Ministry of Finance’s review of specified contracts now takes place before signing and is reduced from 15 to four working days (Article 57).

2.6 Final Performance Security

The final guarantee remains at 5% of the contract value, payable within 15 working days of notification of the award. The exemptions have been substantially revised (Article 59):

• The value threshold below which no final guarantee is required rises from SAR 100,000 to SAR 300,000.
• Three exemptions are added: contracts with liberal profession practitioners, emergencies, and urgent cases. The Regulations may also specify further cases.
• The non-profit exemption is limited to local entities.
• The exemption for companies in which the State owns at least 51% of the capital has been removed. State-owned companies must now provide final security on the same basis as other bidders.

2.7 Change Orders 

Change orders: The Previous GTPL allowed change orders that increased the contract value by up to 10% or decreased it by up to 20%. Article 67 of the New GTPL replaces this single rule with separate limits that apply both to contracts and to purchase orders under framework agreements: 

• New items may be added up to 10% of the contract or purchase order value, with the contractor’s consent;
• existing items may be increased by up to 20%, with the contractor's consent required for increases above 10%;
• existing items may be reduced by up to 20%, or by more with the contractor’s consent.

Where new items and increases to existing items are ordered together, the total increase may not exceed 20% of the contract or purchase order value. The parties may also now agree to change the contract's non-financial provisions, provided the change is consistent with the Law, the Regulations, the Preference Regulation and the mandatory terms of the standard contract forms.

2.8 Penalties and Delay

The cap on delay penalties for contracts other than supply contracts falls from 20% to 15% of the contract value, while the 6% cap for supply contracts is unchanged (Article 70). The cap on penalties for deficient performance of continuing service contracts likewise falls from 20% to 15%, in addition to deduction of the value of unperformed work. These penalties now apply only where the failure is for reasons within the contractor's control (Article 71).

2.9 Contract Termination

Mandatory termination (Article 74(1)): The insolvency ground has been narrowed. The Previous GTPL required termination where the contractor became bankrupt, filed for bankruptcy, was proven insolvent or was placed under receivership. The New GTPL requires it only where a final judgment commences liquidation proceedings under the Bankruptcy Law, insolvency is established by court judgment, or the contractor is a company dissolved or liquidated under the Companies Law. A bankruptcy filing or a restructuring procedure alone no longer triggers mandatory termination. Assignment without the entity’s written approval remains a mandatory ground. However, the Ministry’s approval is no longer part of the test, and the entity may exceptionally continue the contract with the Ministry’s approval. 

Discretionary termination (Article 74(2)): Receivership moves from the mandatory to the discretionary grounds. The Previous GTPL’s fixed 15-day period to cure delay or breach after written notice is replaced by a period to be set by the Implementing Regulations. After termination, the remaining works may be offered through any of the contracting methods in the Law, not only the original procedure.

Public interest and agreed termination (Article 75): Termination in the public interest still requires the Ministry's approval. Article 75(1) now expressly preserves the contractor’s right to claim compensation before the competent court for the resulting loss. Termination by agreement with the contractor, which also required Ministry approval under the Previous GTPL, no longer does.

Consequences of termination (Article 76): Termination for receivership is added to the grounds on which the final guarantee is forfeited. A contractor exempt from the final guarantee whose contract is terminated for bribery or fraud, unauthorised assignment, delay or breach, or unauthorised subcontracting must now pay a fine equal to the value of the final guarantee. If it does not pay within 60 working days, it is referred to the violations committee for a ban of up to one year. That ban is in addition to any ban for the underlying violation.

2.10 Complaints, Violations and Challenges

Committees (Articles 84 and 87): The minimum membership of both the grievance committee and the violations committee is reduced from five specialists to three. Each committee is reconstituted every three years but now continues to work until the reconstitution decision is issued, avoiding gaps between terms. The violations committee’s remit now expressly covers breaches of the Implementing Regulations as well as of the Law and contracts. 

Grievances (Articles 84 to 86): The grievance deposit changes from half the initial guarantee to 0.5% of the bid value, or SAR 15,000 for grievances against prequalification decisions, refundable if the grievance succeeds. A grievance to the government entity must now be decided by the person with authority over the tender concerned. The period to escalate to the committee is now three working days rather than three days. 

Violations decisions (Article 87): Decisions of the violations committee now take effect from notification to the parties concerned rather than from issuance. They may be challenged before the competent court, rather than the Administrative Court, within 60 days of becoming effective. That court may also stay their enforcement. 

2.11 Disposal of Movable Assets

Movables with an estimated value below SAR 200,000 may still be sold by public auction or by another method in the Treasury’s interest. The reasons for the chosen method must now be recorded in minutes, and sales may not be split to bring them below the threshold (Article 79). In open public auctions, the Previous GTPL required the successful bidder to provide a 5% guarantee, which could be given by cashier's cheque or cash. Instead, every participant must now provide a lump-sum guarantee set by the entity, in a form allowed by the Regulations (Article 80(3)).

Under Article 81, if an auction attracts no bids after two announcements, the entity may now invite specialists in the relevant field to buy the items, rather than offering them to dealers. If no fair price is offered, the items may be donated, now only to local charities, associations or non-profit entities, after notifying the Ministry. Where donation is not possible, the entity may dispose of them in any appropriate manner.

2.12 Dispute Resolution

Government entities remain bound to perform their contractual obligations, now expressly in accordance with the contract terms. Where an entity fails to do so, the contractor may claim compensation before the competent court rather than the Administrative Court (Article 94). The same change is made for public interest terminations and for challenges to violations committee decisions (Articles 75(1) and 87). Article 94(2) now specifies that it covers disputes arising from the contract between the entity and the contractor. Contractors should therefore continue to obtain, and keep a record of, ministerial approval before relying on an arbitration clause in a government contract.

2.13 Exemptions and Transitional Provisions

Exemptions (Article 97): The procedure for exempting works or procurements from provisions of the Law is now more structured. An exemption must be limited to a specified period, specific works or procurements, or a specified category of them. The requesting entity must:

• identify the subject of the exemption;
• explain the difficulties caused by the provisions concerned;
• give the reasons and objectives of the request;
• assess its financial and economic effects, including on local content and spending efficiency;
• identify the alternative provisions it will apply.

As before, the request goes to the Prime Minister, who forms a committee including the Minister, the chairman of the Authority’s board and the head of the requesting entity.

3. Key Differences at a Glance

The following table summarises the principal differences between the Previous GTPL and the New GTPL across key regulatory parameters: 

4. Practical Implications

The New GTPL introduces several changes with direct practical implications for entities engaged in Saudi government procurement:

Foreign Access and Localisation: The local-availability test for foreign participants is now framed by licensing location rather than nationality (Article 3(2)). Foreign-owned entities licensed in the Kingdom, for example through a licensed branch or subsidiary, should therefore fall outside the restriction. Article 3(3) leaves the specific rules for persons licensed outside the Kingdom to the Implementing Regulations, and the localisation and knowledge-transfer method will operate under separate rules issued jointly by the Ministry and the Authority (Article 34). Foreign entities should review whether a local licence would improve their position, and should monitor both sets of rules closely.

Enhanced Procurement Flexibility: The tenfold increase in the direct procurement ceiling to SAR 1,000,000 and the six new direct procurement grounds will streamline routine purchasing. However, every direct procurement must now be justified with documented reasons and respect competition and spending-efficiency principles (Article 32). The value-based ground for limited tender has also been removed (Article 30). Suppliers should expect faster processes for smaller procurements, while government entities should keep a clear justification record for audit and challenge purposes.

Faster Procurement Cycles: The Ministry review period falls from 15 to four working days, and the minimum standstill period from five to three working days, with some tenders exempt altogether. The single Bid Opening and Review Committee and the new signature procedure will also shorten timelines. Bidders should be ready to provide the final guarantee and sign promptly after award. A bidder that fails to sign within 10 working days of a warning risks losing the award and its guarantee, or paying a 5% fine if exempt (Article 56).

Reduced Penalty Exposure: Penalty caps for non-supply and continuing service contracts fall from 20% to 15%. Continuing service penalties now apply only to failures within the contractor's control, and the Minister may raise the caps only where the case requires it (Articles 70 and 71). This should reduce the risk premium priced into bids. Contractors exempt from bid or final security should note the new fines that replace forfeiture (Articles 42, 56 and 76).

Improved Termination Protections: Contractors gain meaningful protection. Mandatory termination for insolvency now requires a final liquidation judgment or court-established insolvency, and receivership becomes a discretionary ground (Article 74). Termination by agreement no longer needs Ministry approval, and the right to compensation after a public-interest termination is now express (Article 75). Contractors should check that their contracts and financing documents reflect the new grounds and the cure period to be set by the Regulations.

SME Support: Local SMEs keep their exemption from bid security and their priority in direct procurement. The grievance deposit falls to 0.5% of bid value, which lowers the cost of challenging decisions. Exempt SMEs should, however, note the new 2% penalty where their bid security would otherwise have been forfeited (Article 42).

5. Conclusion

The New GTPL represents a significant modernisation of Saudi Arabia's government procurement framework, although many of its features refine mechanisms already in the Previous GTPL rather than replace them. By raising financial thresholds, consolidating delegation and committee structures, shortening approval and standstill periods, reducing penalty caps, and replacing market price with the entity’s estimated cost as the benchmark for negotiation, the New GTPL creates a faster and more predictable procurement process. At the same time, it strengthens accountability through documented justification for direct procurement and limited tender, reporting to the General Auditing Bureau, and new penalties for exempt bidders and contractors. It also gives contractors greater protection on termination and late payment. The reforms reflect the Kingdom’s commitment under Vision 2030 to a business-friendly regulatory landscape that attracts investment while building domestic capacity and local content.

Stakeholders engaged in or contemplating participation in Saudi government contracts should review their procurement strategies, compliance frameworks, and contractual templates to align with the new regime ahead of its entry into force. 
 

^[1]Royal Decree No. M/76 dated 27/02/1448H (the "New GTPL"), replacing the Previous GTPL issued under Royal Decree No. M/128 dated 13/11/1440H. The New GTPL comprises 101 articles and enters into force 120 days after publication in the Official Gazette.