Saudi local content rules in government tenders

Saudi Arabia’s Government Tenders and Procurement Law gives priority to local small and medium-sized enterprises, local content and companies listed in the Capital Market, and leaves the method to a separate regulation. ^[2] This guide explains that regulation, Council of Ministers Resolution No. 245 of 26 November 2019, from the Ministry of Finance’s English translation. ^[1]

By GCC Tender Alerts editorial team · 20 Oct 2026 · checked against the official sources below.

The short version

1. Mandatory list: bids that do not comply with the national products mandatory list are excluded from supply tenders and from mixed tenders that include supply items. ^[1]
2. National products: in all contracts, the price of a foreign product is treated as 10% higher than the price in the bid documents, unless the tender documents state a higher agreed percentage. ^[1]
3. Local SMEs: in contracts that are not high-value, except supply contracts, the bid prices of other establishments are treated as 10% higher than stated. ^[1]
4. Local content score: in high-value contracts, except supply contracts, the financial evaluation weighs price at 60% and local content plus Capital Market listing at 40%. ^[1]
5. Minimum local content: where this mechanism applies, a targeted local content percentage below the minimum in the tender documents means disqualification at the technical evaluation phase. ^[1]

Where the rules come from

Article 9 of the Government Tenders and Procurement Law (GTPL) says priority shall be given to local small- and medium-sized enterprises, local content and companies listed in the Capital Market. ^[2] The regulations referred to in Article 96(3) determine the manner of prioritization. ^[2]

Article 96(3) calls for a regulation covering methods for prioritizing local content, a method for prioritizing local SMEs and listed companies, and fines on contractors who fail to comply with local content requirements. ^[2]

Under Article 4 of the resulting Regulations, a government agency tendering projects and procurements must comply with the mandatory list and grant local SMEs a price preference. ^[1] It must also adopt three local content mechanisms: the national product price preference, the local content weight in financial evaluation, and minimum local content requirements. ^[1]

LCGPA is the Local Content and Government Procurement Authority and EXPRO is the Expenditure Efficiency and Projects Authority. The amount of a high-value contract is determined by LCGPA in agreement with EXPRO. ^[1]

Key terms

• National product: any product manufactured in the Kingdom, including extractive, agricultural, animal and industrial products, in raw form or at any later stage of assembly, processing or manufacturing. ^[1]
• Local content: total spending in the Kingdom through national elements, including goods, services, assets, technology and workforce. ^[1]
• Local SMEs: local micro-, small- and medium-sized enterprises, as classified by the Small and Medium Enterprises General Authority, of which 50% or more of the capital is owned by Saudi citizens. ^[1]
• Targeted local content percentage: the percentage of local content a bidder, upon submitting its tender, undertakes to reach by the end of the contract. ^[1]
• Baseline: the local content percentage the bidder’s establishment has already reached when it submits its tender. ^[1]

The mandatory list

• LCGPA issues the mandatory list and updates it regularly, under inclusion and exclusion rules set in agreement with EXPRO and in coordination with the Ministry of Industry and Mineral Resources, the Saudi Standards, Metrology and Quality Organization and the Federation of Saudi Chambers. ^[1]
• Tender documents must include a list of the products within the mandatory list that apply to the project or procurement. ^[1]
• Bids that do not comply are excluded from supply tenders or mixed tenders which include supply items. If a bid is divisible, only the items that do not comply are excluded. ^[1]
• During the contract, the government agency must not receive supplied products that violate the mandatory list, except products exempted for that contractor. ^[1]

National product preference

Article 10 applies this mechanism in all contracts to national products that are not on the mandatory list. ^[1] A national product gets a price preference by assuming that the price of a foreign product is 10% higher than the price in the bid documents. LCGPA and EXPRO may agree to increase that percentage, provided the adjusted percentage is stated in the tender documents. ^[1]

In supply tenders, the financial evaluation uses the adjusted bid value: bid price (in riyals) + 10% × bid price (in riyals) × (1 − share of national products). ^[1]

• Share of national products: the value of national products a bidder undertakes to supply compared with the total bid value, excluding products on the mandatory list. ^[1]
• Declare origin: in supply tenders the bidder states its share of national products and marks in the bill of quantities whether each product is of national or foreign origin. If it does not, the products are deemed foreign and get no price preference. ^[1]
• Final report: a supply contractor provides a final report proving national origin within 30 days from the contract’s end date. The agency reviews it within 10 working days; if it does not respond, the report is deemed approved. ^[1]
• Buying for the contract: contractors must give preference to national products when purchasing materials or tools needed to execute the contract, using the same equation. ^[1]

Local content weight in the financial evaluation

This mechanism applies to high-value contracts, except supply contracts. A bid that passes the technical evaluation is scored with a 60% weight on price and a 40% weight on the baseline, the targeted local content percentage and whether the company is listed in the Capital Market. ^[1]

The Article 17 formula: (price of the lowest technically qualified bid ÷ price of the bid under evaluation) × 60% + (targeted local content percentage × 50% + baseline × 50% + 5% for a listed company) × 40%. LCGPA and EXPRO may increase the weight of the non-price elements. ^[1]

The bid with the highest evaluation wins, provided its price is no more than 10% above the lowest technically qualified bid; if the difference is larger, the award goes to the second-highest evaluation. A higher percentage agreed by LCGPA and EXPRO must be stated in the tender documents. ^[1]

LCGPA may also set a minimum local content baseline for projects it designates. A bidder must then show its baseline in the technical bid, and a bidder below the minimum is disqualified at the technical evaluation phase. ^[1]

LCGPA can extend this mechanism to supply contracts and to contracts that are not high-value. In those cases the agency uses the adjusted bid value after the national product or local SME preference. ^[1]

Minimum local content requirements

For high-value contracts designated by LCGPA in agreement with EXPRO, except supply contracts, the government agency studies and proposes a minimum local content level, which the Unified Procurement Agency approves in coordination with LCGPA. ^[1]

The bidder submits its targeted local content percentage with the technical bid, using the designated form on the local content portal. A target below the minimum stated in the tender documents means disqualification at the technical evaluation phase. ^[1]

Local SMEs

• Price preference: the bid prices of other establishments are treated as 10% higher than the price in the bid documents, in all contracts that are not high-value contracts, except supply contracts. ^[1]
• Limited tenders: an agency may use a limited tender when the estimated value does not exceed 500,000 riyals, inviting as many bidders as possible and not less than five, with priority to local small- and medium-sized enterprises. ^[2]
• Initial guarantee: the GTPL does not require an initial guarantee when contracting with local small- and medium-sized enterprises. ^[2]

After award: plans, reports, fines

• Gradual plan: within a period not exceeding 60 days from award, the contractor submits a local content gradual plan on the local content portal form, in line with its targeted local content percentage. ^[1]
• Reports: the contractor submits periodic reports on progress toward the target and a final report on the local content percentage reached. LCGPA approves the final report before it goes to the agency and responds within 15 working days, or the report is deemed approved. ^[1]
• Fines: missing the share of national products in a supply contract can bring a fine not exceeding 10% of the supply contract value. A difference of more than 5% between targeted and reached local content, or a late final report, can bring a fine not exceeding 10% of the contract value. ^[1]
• Cap on fines: total fines under the GTPL, its implementing regulations and these Regulations must not exceed 20% of the contract value, unless the Minister approves a higher percentage and bidders are informed before bid submission. ^[1]
• Bans: the violations committee may ban a contractor from contracting with government agencies or lower its classification, for example when the difference between targeted and reached local content percentage exceeds 15%. ^[1]

Practical tips

• Start with the tender documents. They must state the mandatory-list products, the local content mechanisms required, their terms and conditions, and the bid assessment criteria. The percentages above can be raised where the Regulations allow, so the tender documents decide what applies to a given bid. ^[1]
• Never leave the target blank. Where the weight or minimum mechanism is used, the tender documents must say a bid is excluded if the targeted local content percentage is missing from the technical bid. ^[1]
• Use the local content portal. LCGPA runs a local content portal linked to the procurement portal where bidders register, enter data to assess their local content and submit their local content obligations on LCGPA forms. ^[1]