The Goverment Procurement Law Review 2021 9th Edition Saudi Arabia

Government
Procurement
Review
Ninth Edition
Editors
Jonathan Davey and Amy Gatenby
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© 2021 Law Business Research Ltd

Government
Procurement
Review
Ninth Edition
Reproduced with permission from Law Business Research Ltd

This article was first published in May 2021
For further information please contact [email protected]
Editors
Jonathan Davey and Amy Gatenby
lawreviews
Chapter 10
SAUDI ARABIA
Nick Simpson, John Balouziyeh and Bshayer Binyamin1
I INTRODUCTION
Saudi Arabia regularly features near the top of country rankings for ease of doing business,
freedom of contract and economic opportunity. As at 2021, Saudi Arabia was ranked the
18th largest economy in the world by gross domestic product, and the largest economy in the
Middle East. The country’s public spending in defence, healthcare, education, infrastructure,
transport, and other government-driven sectors is the highest in the Middle East and North
Africa. Saudi Arabia ranks fifth globally for defence spending alone, with an annual defence
budget hovering at approximately US$50 billion over the past three years. The size of the
Saudi economy, the range of its trading relationships and the importance of Saudi Arabia
for stability in the Middle East make Saudi Arabia a strategic partner for many western
governments and a key destination for foreign investment for companies seeking to do
business in, and with the government of, Saudi Arabia.
In line with Saudi Arabia’s ambition to attract goods and services from the world’s
leading multinational companies, simplify government procurement procedures, enhance
transparency, strengthen integrity and ensure fair treatment of bidders, Saudi Arabia
enacted the amended Government Tenders and Procurement Law, issued by Royal Decree
No. M/128 (the amended Procurement Law or amended PL),2 which amends the Saudi
Government Tenders and Procurement Law, enacted by Royal Decree No. M/58 (the 2006
Procurement Law or 2006 PL).3 The amended Procurement Law, which entered into force
on 1 December 2019 G, is accompanied by its Implementing Regulations, enacted by
Ministry of Finance Resolution 1242 (the 2019 Regulations).4 The 2006 Procurement Law
was accompanied by implementing regulations enacted by Ministry of Finance Decision 362
(the 2007 Regulations).5 This chapter will discuss the reforms introduced by the amended
Procurement Law and its 2019 Regulations in the areas of bidding procedures, awards and
dispute resolution.
1 Nick Simpson, is the managing partner, John Balouziyeh is a senior legal consultant and Bshayer Binyamin
is a trainee associate at the Law Firm of Wael A Alissa in association with Dentons & Co.
2 Dated 13/11/1440 H., corresponding to 16/7/2019 G.
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II YEAR IN REVIEW
The amended Procurement Law represents a major overhaul of the 2006 Procurement Law,
with most of the provisions of the 2006 Law having been substantively modified or abrogated
in their entirety. Together with the 2019 Regulations, the amended Procurement Law sets out
to regulate procurement procedures, prevent abuse of authority, protect public funds, attain
maximum value of public funds, strengthen transparency and integrity, ensure fair treatment
of bidders and enhance economic development.6
The reforms introduced by the amended Procurement Law are significant. One key
development is the adoption of a unified e-portal supervised by the Ministry of Finance
through which all government tenders and procurements must be announced. The e-portal
broadens the scope of potential tenderers globally and drives price elasticity, resulting in better
value outcomes for the Saudi government and an enhancement in the quality of participants
through competition. In addition, the electronic reverse tender regime established by Article
34 of the amended Procurement Law enhances value for money. Bidders have the chance to
submit successively lower bids during a specified bid period. Direct purchase tender process
waivers and performance bond exemptions for low value contracts also drive efficiency
in the market, with the speedier procurement process in this sector likely to result in the
expedited roll-out of smaller projects and procurement attentions diverted to larger, more
complex undertakings.
The reforms found in the amended Procurement Law in the areas of dispute resolution
should also increase foreign investor confidence. The historic dispute resolution procedures
of the 2006 Procurement Law left many government contractors with a sense of unease.
Article 78 of the 2006 Procurement Law entitled the contractor to register complaints with a
Violations Committee consisting of members from the Ministry of Finance and other Saudi
Arabian government authorities. The independence and neutrality of a committee consisting
wholly of government officials called to review claims from private contractors could be
called into question. While the 2006 Procurement Law provided for a means of appealing
the decisions of the Violations Committee, such appeals needed to be filed with the Board
of Grievances’ commercial courts. This, in turn, gave rise to unease among government
contractors, given delays and uncertainty in the adjudication of cases lodged with the Board
of Grievances.
The amended Procurement Law addresses these concerns. It grants the Administrative
Courts jurisdiction to resolve disputes and allows parties to government contracts to submit
their disputes to arbitration. Article 92 of the amended Procurement Law provides that
contractors may resort to the Administrative Courts to claim compensation in cases of breach
of contract. In addition, the government agency may, subject to prior approval of the Minister
of Finance, agree upon arbitration, as stipulated in the 2019 Regulations. Article 154 of the
2019 Regulations sets out the conditions required for the government agency to enter into
an arbitration agreement. The conditions require that the value of the underlying contract
in dispute exceed 100 million Saudi riyals, that the arbitral tribunal apply the laws of Saudi
Arabia and that the contract documents establish the terms of the arbitration. In line with
6 Art. 2 amended PL.
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these reforms, the Saudi Centre for Commercial Arbitration intends to be at the forefront
of procurement evolution in Saudi Arabia, providing technical expertise to assist in the
resolution of disputes in multiple specialised technical areas.
III SCOPE OF PROCUREMENT REGULATION

i Regulated authorities
As stated above, the amended Procurement Law, along with the 2019 Regulations, regulates
long- and short-term commercial agreements between private bodies and government entities.
The Procurement Law applies to all government entities, including ministries, agencies,
public organisations and independent public entities that have a separate legal personality.7
The language of Article 4 of the amended Procurement Law indicates that the law applies to
private persons wishing to engage in commercial dealings with government entities. While
neither the amended Procurement Law nor the 2019 Regulations provides a definition for
‘private persons’, it is generally understood that the term refers to both natural and juridical
persons (in various forms).
ii Regulated contracts
It is fair to state that the amended Procurement Law governs all types of commercial dealings
entered into by government entities and private persons, regardless of the amount involved.
A contract amount, among other factors, would determine the appropriate method to award
a contract. For example:
a a government entity may award a contract via limited tender if the estimated value of
the works and purchases does not exceed 500,000 riyals;8
b a government entity may resort to direct procurement, if the overall value does not
exceed 100,000 riyals;9 and
c a government entity may apply reverse auctioning to purchase goods available to
more than one supplier, contractor or service provider if the cost does not exceed
5 million riyals.10
As an exception to the above rule, the amended Procurement Law and the 2019 Regulations
allow an exemption11 from the tendering procedures outlined under the this legislation in
cases of emergency.12 Pursuant to Article 46 of the 2019 Regulations, a case of emergency
shall require the following:
a the occurrence of any of the following events:
• a serious and unexpected threat to public safety, health or security;
• a grave event that portends loss of life or property; or
• the use of public or limited tender procedures shall cause serious harm because of
the length of the proceedings;
7 Art. 10 and Art. 1 amended PL.

8 Art. 30.2 amended PL.
10 Art. 54.2 Regulations of 2019.
11 Art. 1, definition of the case of emergency, amended PL.
12 A case where there is a serious and unexpected threat to public safety, security or health, or there is a breach
resulting in loss of life or property and that cannot be dealt with through ordinary tender procedures.
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b the required works and procurements are not contemplated by the framework
agreement or cannot be performed;
c the approval of the government entity’s head shall be obtained; and
d the General Auditing Bureau shall be provided with all agreements, contracts and
exchange documents relating to these works and procurements.
The contracting private person contractor may not assign an awarded contract or any part
thereof to any other contractor, entrepreneur or supplier unless and until prior written
approval is obtained from both the relevant government entity and the Ministry of Finance.13
Article 117 of the 2019 Regulations stipulates the following conditions:
a such an assignment, whether full or partial, shall be reflected in an assignment
agreement concluded between the parties of the assignor and assignee and attested by
the relevant Chamber of Commerce. The assignment agreement should specify the
obligations of the parties towards the project and the government entity, and should be
approved by the latter; and
b the assignee contractor shall meet the relevant requirements and conditions for
undertaking the assigned works and shall pass all the requirements for technical
evaluation (and qualification, if so required). The assignment shall not result in damage
to the assigned works or a breach of their use.
IV SPECIAL CONTRACTUAL FORMS

i Framework agreements and central purchasing
The amended Procurement Law provides a basic framework for government tenders and
procurement in Saudi Arabia. However, the Law must be viewed simply as a framework,
and one that must be read within the context of sector-specific circulars, resolutions and
regulations, which may in some cases alter the substantive provisions of the Law. To illustrate
this point, we can examine the general rule requiring the government to purchase supplies
through public tender and the modifications of this rule by regulations specific to the health
and defence sectors.
As a general rule, all works and purchases must be put out to public tender. Public
tenders are announced on a unified web portal of government procurement that is under the
supervision of the Ministry of Finance.14 However, the amended Procurement Law provides
for certain exceptions.15
Article 47(a) of the 2006 Procurement Law specifically excluded the purchase of
weapons, military equipment and their spare parts from the requirements for public tenders.
It subjected the purchase of such equipment to the purview of a ministerial committee
formed by a royal decree and consisting of a chairman and at least three other members for
the purpose of selecting the best offer serving the public interest. The committee was required
to bring its recommendations before the President of the Council of Ministers for approval.
Article 32 of the amended Procurement Law has abolished the Ministerial Committee,
and the procurement of arms, other military equipment and their spare parts is now subject to

14 Art. 29 amended PL; see also Art. 1 amended PL.
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direct purchase through the General Authority for Military Industries (GAMI),16 superseding
the former ministerial committee. Today, the procurement of military equipment and their
spare parts purchased by GAMI is subject to direct procurement and is exempt from the rules
of public tender established by Article 29 of the amended Procurement Law.
In addition, direct procurement is permitted in the following cases:17
a if the work and items are exclusively available from a sole supplier, entrepreneur or
contractor, with no acceptable substitute, provided that the contract is concluded as
stipulated by the 2019 Regulations;
b if the estimated cost of work and purchases does not exceed 100,000,riyals provided
domestic small and medium-sized enterprises (SMEs) are given priority in the invitation
to tender;
c if the use of such direct procurement is deemed a prerequisite for safeguarding national
security and prevents the use of public or limited tender, the government entity shall,
after the contract is concluded, draw up a report setting out the reasons that prompted
the use of direct procurement and provide the General Auditing Bureau with a copy
of the report;
d if the work and purchases are available from a sole non-governmental institution or
a non-profit organisation, provided that the institution or organisation performs the
contractual obligations itself; and
e in cases of emergency.
However, some sectors further restrict the ability of their agencies to procure goods by direct
purchase. For example, the Ministry of Health has issued internal declarations that restrict
the ability of public healthcare agencies (including public hospitals) to procure goods by
direct purchase according to the following guidelines:
a the health affairs manager in towns such as Al Kharj has the authority to execute direct
purchases for amounts up to 300,000 riyals;
b the health affairs manager in cities such as Riyadh has the authority to execute direct
purchase for amounts up to 400,000 riyals; and
c hospitals have restrictions based on their size (hospital bed capacity): (1) for hospitals
with capacity of 500 beds and more, managers have the authority to execute direct
purchases for amounts up to 100,000 riyals; (2) for hospitals with capacity of 200 to
499 beds, managers have the authority to execute direct purchases for amounts up to
50,000 riyals; and (3) for hospitals with capacity of 199 and fewer beds, managers have
the authority to execute direct purchases for amounts up to 30,000 riyals.
If a purchase falls below the above thresholds and falls into one of the exemptions established
by the amended Procurement Law, public health agencies may purchase goods directly,
without needing to issue a public tender.
ii Joint ventures
The National Center for Privatization and PPP (NCP) was established in 2017 to enable
privatisation and public–private partnerships (PPPs) under Saudi Vision 2030 by:
(1) formulating regulations; (2) creating privatisation frameworks; (3) preparing government

17 Art. 32.2–32.6 amended PL.
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assets and services identified for privatisation; and (4) developing an efficient privatisation
process that targeted sectors will follow to solicit and engage private sector participation, as
well as promoting opportunities domestically and internationally.
The board of directors of the NCP issued Decision 2/5/2018,18 which consists of the
Privatization Projects Manual, which seeks to expand the user base of the privatisation model
by applying rules and procedures that would help relevant stakeholders in the public and
private sectors to better understand how to participate in projects.
Four months later, in July 2018, the NCP published the Draft Private Sector
Participation Law (PSPL), which seeks to attract foreign investors to partner in the launch of
infrastructure projects worth billions of dollars. Seeking to facilitate PPPs, the PSPL creates
a series of exemptions for projects and companies falling within the scope of its application.
For example:
a Under Article 47, the Procurement Law shall not apply to PPPs and sale of asset (SOA)
projects and contracts that are subject to the provisions of the PSPL and the regulations
issued thereunder. However, governmental entities and private parties may voluntarily
agree to subject PPPs or SOA projects and contracts to the Procurement Law.
b Under Article 49, as an exception to the Law of Real Estate Ownership and Investment
by Non-Saudis and any other regulations that restrict foreign ownership of real estate, if
approval is granted by the Council of Ministers, in private sector participation projects:
• non-Saudis may own real estate in whole or in part, except for properties located
within the boundaries of the cities of Mecca and Medina; and
• real estate may be leased to a private party within the boundaries of the cities of
Mecca and Medina for a period equal to the term of any PPP contract for the
purpose of implementing the PPP contract for real estate that is the subject of
the PPP contract.
c Under Article 50, the NCP may coordinate with the Ministry of Human Resources
and Social Development to determine the need for exemptions from the Labour Law
and the Nitaqat Guide in relation to employment in any PPP.
d Under Article 51, a private party is exempted from the application of Articles 150 and
181 of the Companies Act, which require shareholders of joint-stock companies (JSCs)
or limited liability companies whose capital loss reaches 50 per cent of the company’s
paid-up capital to dissolve the company, increase the share capital or risk having the
JSC deemed dissolved by operation of law.
e Under Article 52, the Competition Law does not apply to the actions of any private
party insofar as those actions are directly related to a PPP contract or PPP project.
Royal Decree No. M/10119 exempts ‘privatisation projects’ from the Procurement Law.
Some commentators interpret the term used in the original Arabic to refer to ‘privatisation
projects’ to apply not only to privatisation projects, but also to PPPs. The official text of Royal
Decree No. M/101, published in Umm Al-Qura, the official Saudi gazette,20 does not define
the term used in the original Arabic, but ‘ privatisation operations’ is a valid translation.
However, it is not outside the realm of possibility that, for a broader scope of application,
the government intended to include all PPPs when employing the term. However, this

20 Available at <https://www.uqn.gov.sa/articles/1532032275843847900>.
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interpretation is not persuasive because when the Saudi government refers to the term PPPs
in Arabic it generally uses a different term.21 Because nothing in the plain text of Royal
Decree No. M/101 explicitly states that PPPs fall within its intended scope, we can conclude
that PPPs are not exempted from the amended Procurement Law.
V THE BIDDING PROCESS

i Notice
As a general rule, all works and purchases must be put out to public tender and are announced
on a unified web portal of government procurement under the supervision of the Ministry of
Finance.22 However, the amended Procurement Law provides for certain exceptions to public
tender,23 as discussed below.
ii Procedures
Limited tender contracts, which fall outside public tender requirements, are permitted in the
following cases:24
a if the works and purchases are only available from a limited number of contractors
or suppliers;
b if the estimated value of the works and purchases does not exceed 500,000 riyals, by
inviting the greatest possible number of bidders, provided that they are not fewer
than five;25
c urgent cases;
d if the works and purchases are available from civil society associations or organisations
or from non-profit entities, provided that they execute the contracts concluded on their
own; and
e consulting services.
Limited tenders are subject to more relaxed rules than those applicable to public tenders.
The rules for limited tenders are set out in Section III of Chapter II of the 2019 Regulations.
The procurement of arms, other military equipment and their spare parts is now subject
to direct purchase through GAMI26 and is exempt from public tender (see Section IV.i).
In addition, Article 32 of the amended Procurement Law permits direct procurement
in certain exceptional cases, such as when services are exclusively available from a sole supplier
or the estimated value of the contract does not exceed 100,000 riyals.
21 For example, the Arabic term used in Article 47 of the Private Sector Participation Law is different from the
term used in Royal Decree No. M/101 to refer to PPPs.
22 Art. 29 amended PL; see also Art. 1 amended PL.
25 Under the 2006 Procurement Law, this threshold was set to 1,000,000 riyals (Art. 44 PL). The decrease
to 500,000 riyals represents a policy by the Saudi government to subject a greater number of government
contracts to public tender.
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iii Amending bids

The amended Procurement Law permits amendments of the prices of contracts or framework
agreements only in the following cases, as further specified by the 2019 Regulations:27
a if there is a change in the prices of materials or services covered by the tender and
specified by the 2019 Regulations;
b if changes to customs tariffs, duties or taxes are introduced; or
c if, during the implementation of a contract, unforeseeable material difficulties arise.
Moreover, the contracting government entity may issue variation orders involving increases
in contracts by not more than 10 per cent of their value or reductions by not more than
20 per cent of their value, as further stipulated by the 2019 Regulations.28
VI ELIGIBILITY
i Qualification to bid
Article 18 of the amended Procurement Law requires those with whom government entities
are working to meet a set of requirements laid out in the 2019 Regulations.29 As such, failure
to meet these requirements disqualifies bidders. Note also that the requirements are listed
by way of being the bare minimum. As the case may be, a government entity has the right
to impose any additional requirements it deems necessary for a particular work stream to
be deliverable.30
To submit a bid pursuant to Article 13 of the 2019 Regulations, a bidder would need
to hold the following set of valid, up-to-date regulatory registrations:
a a commercial registration certificate issued by the Ministry of Commerce or, when
a commercial registration certificate is not required under the relevant laws, the necessary
permits or licences for providing the intended services or carrying out the work;
b a certificate confirming regular payment of tax or zakat, issued by the General Authority
of Zakat and Tax (whenever payment is required);
c a certification declaring the registration and regular payment of contributions, issued
by the General Organisation for Social Insurance;
d a certification declaring membership of the bidder’s relevant chamber of commerce
(whenever payment is required);
e a certificate of classification in the field of works that is the subject of the application,
if the works are required to be classified;
f proof that an establishment is a local SME if it falls in this category, as determined by
the General Authority for Small and Medium Enterprises;
g a certificate of achievement of the required percentage for Saudisation of jobs, issued by
the Ministry of Human Resources and Social Development;
h a certificate of registration from the competent authority proving that an entity is
a non-profit institution, non-governmental organisation or similar.

30 Art. 13.J 2019 Regulations.
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Pursuant to Article 77 of the 2019 Regulations, a bidder is given a grace period of no longer
than 10 business days to submit any of the documents listed above that are missing or to
resubmit any renewed licences or permits.
Article 14 of the 2019 Regulations then lists the following persons that government
entities and their contractors are prohibited from dealing with:
a state officials (except for those licensed to undertake non-commercial activities,
including the purchase of state officials’ intellectual property rights directly or through
a publisher, those assigned to carry out technical works and those participating in
public auctions unless the purchased goods are intended for personal use);
b persons with whom dealing is generally prohibited, including those prohibited by a court
order or a decision issued by an authorised body, until the order or decision expires;
c companies that have been dissolved or liquidated;
d persons who are under the age of 18; and
e incompetent persons.
ii Conflicts of interest
Pursuant to Article 96.1 of the amended Procurement Law, conflicts of interest are regulated
under a set of separate regulations issued by the Ministry of Finance, namely the By-laws
for Regulating Conflicts of Interest in the Implementation of the Government Tenders and
Procurement Law and its Implementing Regulations, enacted by the resolution of the Board
of Ministries No. 537 (the Conflicts of Interest Regulations or the CoIRs).31 The CoIRs apply
to any employee related, directly or indirectly, to government tenders and procurement and
private persons that are dealing with a government entity, along with their employees.32
Moreover, where a conflict arises between their personal interests and those of
a government entity, the following persons are required to disclose such conflicts:
a the head of the government entity or its delegates;
b the director in the government entity’s board of directors;
c those participating in the preparation or drafting of the tender documents, regardless
of the nature of their participation;
d members of the committee opening envelopes and examining bids, and any other
related technical or financial committees; and
e experts who undertake any tasks related to procurement and tenders in favour of
a government entity.
The CoIRs provide general high-level guidance on how a conflict of interest should be
regulated. The CoIRs require every government entity, in collaboration with and under the
supervision of the Ministry of Finance, to issue a dedicated policy on conflicts of interest. The
policy should at least indicate the procedures adopted by the government entity to minimise
conflicts of interest and to disclose conflicts, and the appropriate procedures to be taken
when conflicts arise. The policy should also include a list of illustrative scenarios of conflicts
of interest.33

32 Art. 3 CoIR.
33 Art. 8 CoIR.
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iii Foreign suppliers

One of the long-standing objectives of the amended Procurement Law is to prompt local
businesses to engage in dealings with government entities. This is supported by the issuance
of supplementary sets of regulations, pursuant to the amended Procurement Law and
2019 Regulations, such as the Regulation for Preferring Local Content, SMEs and Listed
Companies, and the Terms, Conditions and Mechanisms for Preferring National Products
and Local Content.
Echoing that mindset, Article 3.2 of the amended Procurement Law allows government
entities to engage in dealings with foreign persons (those not already licensed by the Ministry
of Investment as foreign investors) only if the government entity has ensured that no more
than one local person with the necessary expertise can undertake the relevant scope of work.
Article 4 of the 2019 Regulations further requires the following:
a the relevant scope of work shall be posted on the procurement portal to ensure that
there is no more than one local person qualified to carry out the work;
b the Ministry of Investment (the key regulator of foreign investment) approves the
arrangement; and
c any qualification assessment, bid and procurement bond shall be conducted in
accordance with the amended Procurement Law and the 2019 Regulations.
VII AWARD
i Evaluating tenders
Bids to Saudi government ministries, agencies and instrumentalities are to be submitted in
an encrypted form through the unified portal, as stipulated by the 2019 Regulations. The
government entity announces the names of persons who have submitted bids through the
unified portal.34 Bidders must submit, along with their bids, a bid guarantee (the bid bond)
ranging from 1 per cent to 2 per cent of the bid value. A bid not accompanied by a bid
bond is disqualified.35 As an exception, a bid bond is not required for direct procurement,
competition, contracts of government entities between themselves, contracts signed with
non-governmental institutions, societies or non-profit organisations and contracts signed
with domestic SMEs.36
Within limited exceptions laid out in Article 61.3 of the amended Procurement
Law, a successful contractor must provide a performance guarantee (the performance bond
or performance bank guarantee) equal to 5 per cent of the contract’s value in favour of
the government within 15 business days of the date of being notified of the award. The
government entity may extend this time limit for a similar period. If the successful bidder
is late in providing the performance bond within this time frame, the bid bond will not be
returned to the bidder, and negotiations shall be conducted with the next bidder.37
The performance bond will be retained by the government until the contractor has
fulfilled all its obligations and the project is handed over, in accordance with the terms and

35 Art. 41 amended PL; see also Art. 11 PL of 2006.
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conditions of the contract.38 Certain tenders will also include an advance payment requirement
on behalf of the government. If an advance payment is made, an advance payment guarantee,
or payment bond, must also be provided.
The government entity may pay to the contractor an advance payment against a bank
guarantee equal to the value of the advance payment, as stipulated by the 2019 Regulations.39
The contractor can be held accountable for the advance payment in the event that the
government contract is terminated.40
Under Article 48 of the amended Procurement Law (see also Article 22 of the 2006
Procurement Law), no bid may be disqualified on account of its low price, unless it is at least
25 per cent less than the estimated cost and prevailing market prices (35 per cent was set
as the threshold under the 2006 Procurement Law) and provided that the Bid Evaluation
Committee has reviewed the estimated prices, has held a discussion with the lowest bidder
and asked the latter in writing to provide a detailed breakdown of the items that make up its
bid and explain the reasons for its low price. If, however, the Committee is not convinced
of the bidder’s ability to perform the Contract properly, it may recommend that the bid be
disqualified. The purpose of this provision is to combat the potential for fraud, corruption or
price control by dominant establishments.
ii National interest and public policy considerations

The purpose of the amended Procurement Law is to promote the public interest, among other
national objectives aimed at serving the Saudi citizens and the security of the Saudi state.
Prior to the issuance of the amended Procurement Law in 2019, the Ministry of Finance
issued a draft Government Tenders and Procurement Law in 2017, which sought to ensure
wider participation, transparency, best practices, promotion of the public interest and value
in the expenditure of public funds. Moreover, the Law sought to implement government
contracts at fair and competitive prices to ensure the optimum use of public funds, while
promoting integrity and eliminating the potential for personal interests to play a part in the
awarding of government contracts. Like the amended Procurement Law that was ultimately
issued in 2019, the draft Law sought to guarantee the fair treatment of bidders and promote
equal opportunity and economic development.
The amended Procurement Law of 2019 represents a major overhaul of the 2006
Procurement Law, but it maintains the aim of the 2006 Procurement Law to protect the
public interest. Together with the 2019 Regulations, the amended Procurement Law sets
out to promote the public interest by regulating procurement procedures; preventing
abuses of authority; protecting public funds; attaining maximum value from public funds;
strengthening integrity; ensuring fair treatment of bidders and transparency; and enhancing
economic development.41
The amended Procurement Law allows for its provisions to be waived or relaxed
when doing so would promote the public interest. For example, Article 77 of the amended
Procurement Law grants the government wide discretion to terminate contracts if the public
interest so requires, subject to the approval of the Ministry of Finance. Provisions of the
2006 Procurement Law similarly safeguarded the public interest by offering government

39 Art 66 amended PL.
40 Art. 155 Regulations of 2019.
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authorities discretion to waive or relax its rules; for example, the Article 47(a) exclusion of the
purchase of weapons and military equipment from the requirement for public tenders (see
Section IV.i). In addition, the 2006 Procurement Law required contractors and government
authorities to execute their contracts in good faith according to the contractual terms in the
service of the public interest.42
Laws safeguarding the public interest within the ambit of government tenders and
procurement are not limited to the amended Procurement Law and its 2006 predecessor.
A host of anti-corruption and bribery laws and institutions were established with the
public interest in mind. These laws and institutions include the National Anti-Corruption
Commission, also known as the Oversight and Anti-Corruption Authority, or Nazaha, the
Anti-Corruption Committee and the Saudi Combating Bribery Law (CBL), enacted by
Royal Decree No. M/36,43 as amended by Royal Decree No. M/4.44 They work together with
the anti-corruption provisions of the amended Procurement Law to safeguard the public
interest and public funds. For example, Article 51.3 of the amended Procurement Law allows
the government to cancel a tender if there are indicators of fraud, corruption or collusion
among bidders or among parties relating to the tender and Article 7.1(a) requires government
entities to cancel a contract if it is established that the contractor has attempted, either itself or
through third parties, directly or indirectly, to bribe any of the employees of the entity subject
to the provisions of the amended Procurement Law. Once a contract has been terminated, the
CBL can be used to prosecute the public official who solicited or accepted a bribe.
The risks of bribery increase exponentially when intermediaries are used in the
government procurement process. With this in mind, the amended Procurement Law,
along with its 2006 predecessor, provides special rules with respect to the use of agents
when contracting with government agencies and instrumentalities. Under Article 90 of
the amended Procurement Law, contracts must be directly signed with those authorised to
perform the contracted work. No mediation is permitted in this respect. The Law clarifies
that this prohibition on ‘mediation’ is not intended to prohibit the use of a distributor or
the agent of the product being sold. It does, however, prohibit an agent or ‘intermediary’
from signing a government contract on behalf of the party that is contracting with the
Saudi government.
Article 71 of the 2006 Procurement Law had a similar rule in place. It required contracts
with the Saudi Arabian government to be directly concluded with the companies and persons
licensed to carry out the work set out in the contract. Like the amended Procurement Law,
the 2006 Procurement Law prohibited the use of intermediaries when concluding contracts.
However, while both the 2006 Procurement Law and the amended Procurement Law
are clear in their prohibition of the use of intermediaries in concluding contracts, they state
nothing about the use of intermediaries in helping to bid on tenders, navigate the Saudi
market or win government contracts. While the term ‘intermediary’ is never defined in either
Law, we can draw certain conclusions from the original Arabic that is used in the text of
Article 90 of the amended Procurement Law and of Article 71 of the Procurement Law. Both
texts use the same term in the Arabic clause that prohibits the use of ‘mediation’ with respect
to the signing of contracts. That term, ‘wasata’, roughly means ‘mediation’ or ‘brokerage’,
and based on this and the normal context in which it is used in the Arabic language, we
42 Art. 77 PL of 2006.
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Saudi Arabia
can conclude that the aim of the rule is not to prohibit the use of agents from assisting in
the procurement of government contracts, but rather to prohibit the signing and execution
of contracts with the Saudi Arabian government by any party other than the party that will
carry out the contract. The purpose of this restriction is to keep the government contractor
fully liable for the performance of the duties set out in the contract, including the duty not
to engage in acts of bribery. It is the contractor, not the contractor’s agent or distributor, who
commits to the obligations set out in the government contract by signing the contractor’s
name on the contract. In this framework, agents and even distributors may assist in procuring
contracts, but they may not sign on behalf of their principals.
As with almost all areas of government contracting, the defence sector has its own
special rules, regulations and exceptions. While agents and intermediaries may be used for
market research and intelligence, and in bidding on government contracts, they may not be
paid commissions for contracts for the supply of armaments or military equipment under
Council of Ministers Resolution No. 1275.45
With respect to local content, the amended Procurement Law makes various references
to local content and domestic companies, particularly SMEs, which are given preference in
government tenders and procurements. For example, direct procurement rather than public
tender is permitted if the estimated cost of work and purchases does not exceed 100,000 riyals,
provided domestic SMEs are given priority in the invitation to tender.46 Similarly, a bid bond
is not required for contracts signed with domestic SMEs.47
Council of Ministers Resolution No. 124,48 which has come to be known as the
‘30 per cent Rule’, requires a certain percentage of government contracts to be performed
locally. Resolution No. 124 provides in part that ‘[a]ll non-Saudi Arabian contractors
are obligated to assign Saudi Arabian contractors at least 30 per cent of the works of any
government contracts which the non-Saudi Arabian contractor obtains. This applies to
public works, i.e., implementation projects.’ This provision, which applies to subcontracting,
has been interpreted to mean that only pure supply contracts are excluded from the scope
of the 30 per cent Rule. Other contracts are required to show 30 per cent local content to
qualify for government contracts.
VIII INFORMATION FLOW

Government agencies are required to perform advance planning for their projects and
purchases in coordination with the Ministry of Finance. At the beginning of each fiscal
year, they must publish plans commensurate with their budgets, disclosing their intended
purchases throughout the year, except where withholding this information is required for
national security.49 When processing tenders, the unified portal must provide the highest
levels of privacy, confidentiality, security and transparency.50 Pursuant to Article 9 of the
2019 Regulations, data submitted by bidders on the portal is subject to strict confidentiality.

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Saudi Arabia
However, data is anonymised, collated and published at the end of each financial year on the
portal as a list of direct purchases. The types of works and procurements and their total value
are disclosed in the annual publication.51
IX CHALLENGING AWARDS
i Procedures
Bidders may file a grievance against any decision taken by the government entity before
the award decision is issued, within five working days of the date of issue of the decision.
A bidder may also file a grievance with the government entity against the award decision,
within the standstill period. The relevant government entity must decide upon any grievance
filed within 15 business days. If this time frame expires without the issue of any decision on
a grievance, this will indirectly mean that the grievance has been rejected.52 A bidder may
then, within three business days of the date of being notified of the decision (or from the
expiry date of the time frame stated earlier), file a grievance with a dedicated government
tenders and procurement judicial committee, as discussed below.53
A government tenders and procurement judicial committee is dedicated to adjudicating
complaints and grievances filed by bidders. The committee is comprised of five members,
to be appointed by virtue of a resolution of the minister of the Ministry of Finance and
reappointed every three years. The committee reviews and adjudicates complaints and
grievances submitted and notifies claimants of its decision within no more than 15 working
days of the date of receipt of the grievance. In any case, the committee may, at its ultimate
discretion, extend this duration for another 15 working days if necessary. It is also important
to mention that when submitting a complaint to the committee, a bidder should provide
a guarantee equal to half of the bid bond’s value, which shall be refunded if the grievance is
proven valid.54
ii Grounds for challenge

The amended Procurement Law does not outline particular grounds upon which a challenge
may be brought, but rather Article 87.1 of the amended Procurement Law explains that
a bidder may file any grievance with the government entity (and the grievance may be raised
to the level of the judicial committee).
In this context, it may be relevant to observe the powers and authorities granted to the
judicial committee, which shall:
a review the bidders’ grievances against the award decision or any other decision or action
taken by the government entity prior to the award decision;
b review the contracting parties’ grievances against the performance evaluation
decisions; and
c review the price adjustment requests under the provisions of Article 87.2 of the
amended Procurement Law.55
51 Art. 48 2019 Regulations.

52 Art. 87.1-2 amended PL.
54 Art. 86.4 and Art. 87.3-4 amended PL.
55 Art. 68 of the 2006 Procurement Law.
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Saudi Arabia
iii Remedies
Article 87.5(b) of the amended Procurement Law indicates that, where a grievance is found
valid, the action in violation of the provisions of the amended Procurement Law will be
rectified, if possible. Otherwise, the offered tender shall be cancelled. If a government entity
(upon its own decision, following a bidder’s grievance, or that of the judicial committee)
rectifies an act and the rectification results in awarding the tender to a different bidder, the
disqualified bidder shall be granted an opportunity to file another grievance arising from the
government entity’s award of the tender to a different bidder.
X OUTLOOK
The amended Procurement Law, together with announced reforms in the areas of arbitration
and dispute resolution, is expected to increase foreign investor confidence in Saudi Arabia,
draw the world’s leading multinational companies to partner with the Saudi government
and help modernise and transform Saudi Arabia. The impact of the amended Procurement
Law will, in our view, be a positive one for the Saudi economy. It will encourage foreign
investment in the health, education, infrastructure, military, recreation and tourism sectors,
while facilitating employment in, and the transfer of knowledge to, local Saudi businesses
and individuals. All this is, of course, in line with Vision 2030, the plan first announced by
Crown Prince Mohammad bin Salman on 25 April 2016.
We expect that the adoption of a unified e-portal, supervised by the Ministry of Finance
and through which all government tenders and procurements must be announced, will
broaden the scope of potential tenderers globally and drive price elasticity. Value for money
will also be enhanced by the electronic reverse tender regime. Bidders will have the chance to
submit successively lower bids during a specified bid period. Direct purchase tender process
waivers and performance bond exemptions for low-value contracts will also drive efficiency
in the market, with the speedier procurement process in this sector likely to result in the
expedited roll-out of smaller projects and procurement attentions diverted to larger, more
complex undertakings.
The not insignificant reforms found in the amended Procurement Law in the areas
of dispute resolution should also increase foreign investor confidence in Saudi Arabia. The
Saudi Center for Commercial Arbitration intends to be at the forefront of procurement
evolution in Saudi Arabia, providing technical expertise to assist in the resolution of disputes
in 15 specialised technical areas. No doubt this will be welcomed by international bidders.
Further efficiencies generated by framework agreements are expected to be developed
by the Unified Procurement Competent Entity. The adoption by public entities of these
framework agreements should reduce cost, maintain uniformity and deter duplication.
In summary, the amended Procurement Law is a welcome addition to the Saudi
regulatory regime, centralising government procurement and providing a transparent
and value-driven platform that will lead, from the government’s perspective, to greater
competition, speedier procurement processes and, ultimately, better value for money for the
people of Saudi Arabia.
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Appendix 1
ABOUT THE AUTHORS
NICK SIMPSON
The Law Firm of Wael A Alissa in association with Dentons & Co
Nick Simpson is the head of Dentons’ Saudi Arabia practice and is based in Riyadh. Formerly
the managing partner of the firm’s Muscat, Oman office, he has over 20 years of experience
advising clients across a variety of sectors on the full range of their corporate and commercial
requirements. This includes company establishment, mergers and acquisitions, joint ventures,
company flotations and offerings.
As a trusted adviser to local companies, funds, conglomerates and major international
corporates, Nick was recognised in the market as a ‘leading individual’ in The Legal 500
2018 guide. He also received accolades in the Chambers Global 2019 guide, which noted
that clients are impressed by his ‘excellent knowledge, patience and communication skills’.
Under his leadership, the Band 1 ranked corporate team was regarded as ‘highly sought after
for its multi-jurisdictional capabilities’ and described as a ‘leader in Oman’ and as being ‘well
equipped to advise both domestic and international clients’.
Nick was admitted to practise in England and Wales in 1999 and New South Wales,
Australia in 2004. Nick worked for Dentons in London and then for a leading international
firm in Australia prior to joining the Dentons Middle East offices.
JOHN BALOUZIYEH
John Balouziyeh advises companies, NGOs, contractors, and individuals on international
law, rule of law, transitional justice and foreign investment matters. He has advised clients on
investing in the Middle East, public–private partnerships, joint ventures, legal and legislative
reform, treaty law, customary international law, and government contracts and procurement.
He has represented multinational healthcare, defence, education, and energy companies
in government contracts with the Saudi Ministry of Health, the Ministry of Defense, the
General Authority for Military Industries, the Ministry of Education and Saudi Aramco.
An active member of the Middle East CSR committee, John leads Dentons’
award-winning pro bono partnership with the Norwegian Refugee Council (NRC), which
advises Syrian refugees on the laws of Lebanon, Jordan, Turkey and Iraq. John serves as an
officer in the Judge Advocate General’s Corps of the US Army Reserve (JAG), where he has
held a number of billets, including legal adviser, prosecutor and defence counsel.
181
About the Authors
BSHAYER BINYAMIN
Bshayer Binyamin is a trainee lawyer at Dentons, based in Jeddah, Saudi Arabia. Her work
focuses primarily on assisting multinational and local companies on various corporate
matters, incorporating foreign investments, and advising on ADR options.
Before joining Dentons in January 2020, Bshayer worked for a leading regional law firm
and a US international law firm, where she advised on international commercial arbitration,
litigation, foreign investment and capital market matters in Saudi Arabia.
Bshayer studied at Dar Al-Hekma University (LLB, law, first class honours) and
Harvard Law School (LLM, exp.). She is fluent in Arabic and English.
THE LAW FIRM OF WAEL A ALISSA IN ASSOCIATION WITH DENTONS &

CO
Al Murjana Tower, Level 7
Corner of Prince Sultan St. and Alkayyal St.
PO Box 48271
Jeddah, 23423
Saudi Arabia
Tel: +966 12 601 7731
Fax: +966 11 200 8679
[email protected]
Tatweer Towers, Tower 1

Level 8, King Fahad Road
PO Box 59490
Riyadh, 11525
Saudi Arabia
[email protected]
[email protected]
Tel: +966 11 200 8678 ext. 202/220
Fax: +966 11 200 8679
www.dentons.com
182
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Nick Simpson, John Balouziyeh and Bshayer Binyamin1

6 Art. 2 amended PL.

III SCOPE OF PROCUREMENT REGULATION

7 Art. 10 and Art. 1 amended PL.

IV SPECIAL CONTRACTUAL FORMS

13 Art. 70 amended PL.

16 Art. 32.1 amended PL.

18 Dated 3/8/1439 H., corresponding to 19/4/2018 G.

V THE BIDDING PROCESS

iii Amending bids

27 Art. 68 amended PL.

31 Dated 21/8/1441 H., corresponding to 24/4/2020 G.

iii Foreign suppliers

34 Art. 37 amended PL.

ii National interest and public policy considerations

38 Art. 61.4 amended PL.

VIII INFORMATION FLOW

45 Dated 12/9/1395 H., corresponding to 18/9/1975 G.

ii Grounds for challenge

51 Art. 48 2019 Regulations.

ABOUT THE AUTHORS

THE LAW FIRM OF WAEL A ALISSA IN ASSOCIATION WITH DENTONS &

Tatweer Towers, Tower 1

© 2021 Law Business Research Ltd

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