Key Changes to Saudi Arabia’s Newly Adopted Government Tenders and Procurement Law

On 4 August 2026, the Saudi Council of Ministers approved a new Government Tenders and Procurement Law (the “New GTPL“), intended to replace the law issued under Royal Decree No. M/128 dated 13/11/1440H. The New GTPL was published in the Official Gazette on 4 September 2026, and its reform covers procurement planning, tender procedures, direct purchasing and limited tendering, contract variations, penalties, guarantees, payment discipline, local content and innovation. It positions public procurement as a tool for more efficient project delivery, private sector participation, innovation and knowledge transfer, in line with the broader objectives of Vision 2030.

This article provides a brief overview of the key announced changes relevant to businesses participating in Saudi government procurement.

Faster decisions and revised tender procedures

A key focus of the New GTPL is to streamline procurement procedures and reduce the time required for internal approvals, bid evaluation and contract award.

The threshold up to which the head of a government entity may delegate authority to decide procurement procedures and take related decisions increase from SAR 10 million to SAR 50 million (Article 51/1). The head may also delegate authority to sign contracts and related documents The Ministry of Finance’s maximum contract review period is reduced from 15 working days to 4 working days (Article 57/1).

The former bid-opening and bid-evaluation committees are combined into a single committee (Article 43/1). Representatives of the Local Content and Government Procurement Authority may participate in bid evaluation with the same powers as committee members, and remuneration may be paid to committee members and secretaries. The bid-validity period changes from 90 calendar days to 90 working days (Article 39/1), and the minimum standstill following an award is reduced from 5 to 3 working days (Article 50/1). The executive regulation will identify cases exempt from the standstill requirement.

Direct purchasing and limited tendering

Although public tendering remains the general method for awarding government contracts, the New GTPL revises the circumstances in which government entities may use direct purchasing and limited tendering.

The maximum estimated value for direct purchasing increases from SAR 100,000 to SAR 1 million (Article 32/3). Government entities must explain and document the use of this route consistently with competition and spending efficiency principles. Direct purchasing is also permitted in specified cases involving research, development and innovation; independent professionals; electronic licences and software or subscriptions to websites; specialist scientific journals; the reservation and rental of space at exhibitions, events and conferences; and training for government employees (Article 32/6).

For limited tendering, the former ground based solely on an estimated value not exceeding SAR 500,000 is removed. Government entities must explain why an open tender is unsuitable. Limited tendering may also be used where the relevant works or services are available from independent professionals.

Contract changes, penalties and guarantees

The New GTPL introduces more detailed rules governing contract variations and revises certain penalties and guarantee requirements applicable to the award and performance of government contracts.

The revised change order rules distinguish between different forms of variation. New items may be added up to 10% of the contract or purchase order value of the framework agreement, subject to the contractor’s consent. Existing items may be increased by up to 20%, with the contractor’s consent required for the portion exceeding 10%. The aggregate value of increases resulting from the addition of new items and increases to existing items may not exceed 20% of the contract or purchase order value. Existing items may be reduced by up to 20%, and any greater reduction requires the contractor’s consent. The parties may also agree to amend non financial provisions of the contract (Article 67/1/a).

The maximum delay penalty for contracts other than supply contracts is reduced from 20% to 15% of the contract value (Article 70). The maximum penalty for deficient performance under continuous performance contracts is likewise reduced from 20% to 15% (Article 71). The value threshold for exemption from the final guarantee requirement increases from SAR 100,000 to SAR 300,000 (Article 59/2/a). Additional exemptions apply when contracting with independent professionals and in urgent or emergency cases, while the existing exemption for companies in which the Kingdom owns at least 51% of the share capital is removed.

A bidder exempt from providing an initial guarantee is required to pay a penalty equal to 2% of its bid value if an event occurs that would otherwise result in forfeiture of the guarantee (Article 42/2). Similarly, a successful bidder exempt from providing a final guarantee is required to pay a penalty equal to 5% of its bid value if it fails to sign the contract within 10 working days following a formal warning, subject to the procedures set out in the New GTPL (Article 56/2).

Payment discipline, local content and innovation

The New GTPL introduces measures addressing outstanding contractor payments while strengthening the role of local content and innovation in government procurement. All government entities are prohibited from issuing a new award decision where contractor payments remain outstanding and the entity fails to act despite notification by the Ministry of Finance, subject to specified exceptions (Article 91/2). The New GTPL also permits full advance payment in accordance with the executive regulations, which also exempt certain cases from the corresponding bank guarantee requirement (Article 64).

Government entities must coordinate with the Local Content and Government Procurement Authority during advance procurement planning (Article 12/2). Separate rules govern industrial localisation and knowledge transfer contracts, and a dedicated regulation governs procurement and contracting for research, development and innovation.

Practical implications

The New GTPL is expected to create a faster and more flexible procurement environment. Businesses should be aware of the higher delegation thresholds, revised tender procedures, shorter standstill period, expanded direct purchasing and limited tendering options, amended initial and final guarantee requirements, reduced penalty caps, new rules governing contract variations, and the prohibition on new award decisions where contractor payments remain outstanding. The reforms may also create opportunities relating to local content, industrial localisation, knowledge transfer, and research, development and innovation.

This article is based on the official information currently available and is provided for general information only and does not constitute legal or other professional advice.