Saudi Arabia gives government agencies limited options to contract with foreign firms

Saudi Arabia gives government agencies limited options to contract with foreign firms
Saudi Arabia gives government agencies limited options to contract with foreign firms

Saudi Arabia will prepare a list of companies that do not have regional headquarters in the Kingdom, according to information revealed by the official Umm Al-Qura newspaper. Some specific rules and circumstances allow Saudi government agencies to conclude contracts with companies that do not have regional headquarters in the Kingdom.

However, as per the Umm Al-Qura notification, it is not permissible for government agencies, when executing work and securing purchase orders, to contract with companies that do not have regional headquarters in the Kingdom. The Ministry of Investment, in coordination with the Ministry of Commerce and the General Authority for Foreign Trade, will prepare a list of companies that do not have regional headquarters in the Kingdom. The list, which is based on standards and regulations that are agreed upon, will be updated periodically or as often as needed.

Article Six of the regulations states that it does not prevent companies that do not have regional headquarters in the Kingdom or any related party from submitting offers for public biddings by any of these agencies, provided that these entities do not accept the submissions of these companies or related parties except on two occasions: The first is when there is only one technically acceptable offer, and the second is when the offer submitted by the company, which does not have a regional headquarters in the Kingdom or the related party, submitted the best offer after the overall evaluation from a technical point of view and is financially 25 percent more or less than the value of the second best offer.

Article Seven of the regulations stipulates that government agencies may not invite companies that do not have regional headquarters in the Kingdom or any related party to participate in the limited biddings they offer except in one of two circumstances: These are when there is no more than one qualified bidder other than companies that do not have a regional headquarters in the Kingdom to carry out businesses or secure the required purchases, or in the event of an emergency situation that can only be dealt with by companies that do not have regional headquarters in the Kingdom.

The articles oblige government agencies that contract with any company that does not have regional headquarters in the Kingdom or a related party to prepare a report that includes the reasons that prompted them to conclude such a contract. A copy of this contract will be supplied to the General Auditing Bureau and the Expenditure and the Project Efficiency Authority within a period not exceeding 30 working days effective from the date of signing the contract. In 2021, Saudi Arabia announced that it intends to cease contracting with companies and commercial institutions that have regional headquarters outside the Kingdom starting from Jan. 1, 2024.

The decision aims to incentivize the localization of businesses by foreign companies that deal with the Kingdom’s government or any of its agencies, institutions, and funds, in addition to creating more jobs, limiting economic drain, increasing spending efficiency, and guaranteeing that the main goods and services purchased by different government agencies are made in the Kingdom with appropriate local content. Since then, multinational companies signing deals to establish headquarters in Riyadh gained big momentum. Among confirmed companies that moved to the Kingdom are multinationals such as Unilever, Baker Hughes and Siemens. They operate in sectors including technology, food and beverages, consulting and construction.

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