In brief
The Saudi Arabian Government published a new Government Tenders and Procurement Law on 4 September 2026 (“New Law”). The New Law replaces the Government Tenders and Procurement Law published in 2019 (“2019 Law”) and will take effect 120 days after publication, on 2 January 2027.
On or before the New Law takes effect, it is expected that new Implementing Regulations (“New Regulations”) will be published to replace the 2019 version (“2019 Regulations”). To date, only a draft of the New Regulations has been published for public consultation (“Draft Regulations”).
Key developments of the New Law
1. Increase in procurement delegation limit
The contract value limit within which the Head of a Government Agency may delegate the authority to decide on procurement procedures has increased from SAR 10 million to SAR 50 million (Article 51).
2. Delegation of contract-signing authority
The Head of a Government Agency may delegate to other officials the authority to sign contracts without any financial limit (Article 51).
3. Reduction of Ministry of Finance review period
The Ministry of Finance’s (“Ministry”) review period for government procurement contracts has been reduced from 15 working days to four working days (Article 57).
4. Increased direct purchase threshold
The New Law increases the financial threshold for using the direct purchase method from SAR 100,000 to SAR 1 million (Article 32). It also adds a number of cases where direct purchase may be used, including certain research, development and innovation procurements, software licences and electronic subscriptions, specialist scientific journals and employee training.
5. Reduction in maximum delay fines
The New Law reduces the maximum delay fine from 20% to 15% of the value of the contract, other than supply contracts, which remain capped at 6% of the contract value (Article 70). The maximum fine for deficient performance under continuous service contracts is also reduced from 20% to 15% (Article 71).
6. Reduction in Government payment periods
Under the 2019 Regulations, the maximum payment period from the time the contractor submits a payment claim to the Government Agency is 70 working days (Article 109). The Draft Regulations propose reducing this period to 47 working days (Article 131). This should be confirmed once the final New Regulations are issued.
7. Assignment of government contracts
The New Law provides that Government Agencies may assign their contracts to other Government Agencies in the manner set out in the New Regulations (Article 89). The Draft Regulations do not appear to include a detailed mechanism for this, so this should be checked again once the final New Regulations are issued.
8. Committee restructuring
The New Law replaces the bid opening committee and bid evaluation committee with one Bid Opening and Evaluation Committee (Article 43).
9. Increased role of Local Content & Government Procurement Authority
There are a number of provisions in the New Law which strengthen the role of the Local Content and Government Procurement Authority (LCGPA) in the Government procurement process. These include Government Agencies being required to coordinate with the LCGPA when conducting advance planning for their works (Article 12), the Ministry being required to coordinate with the LCGPA when setting policies and guidelines in relation to the New Law (Article 13), and the LCGPA being entitled to delegate a representative to participate in bid evaluation discussions (Article 43).
10. Government payment default
Although there may be no change from the 2019 position, depending on the final version of the New Regulations, parties contracting with Government Agencies should keep in mind that Article 98/2 of the 2019 Regulations provides that a contractor may not refuse to carry out its obligations on the basis that the Government Agency is in breach of its obligations. This is generally understood to mean that a contractor may not suspend work even where the Government Agency has failed to make payment. A similar provision is included in Article 121/2 of the Draft Regulations.
11. Outstanding contractor payments
The New Law prevents a Government Agency from issuing a new award decision where amounts due to its contractors remain unpaid and the Agency has not taken the required action despite notice from the Ministry, subject to certain exceptions (Article 91).
Developments to watch out for
In addition to the final version of the New Regulations, the New Law requires the Ministry to prepare a number of supporting regulations. These include:
- Regulations regarding conflicts of interest;
- Regulations governing the conduct and ethics of persons responsible for implementing the New Law;
- Regulations on support for research, development and innovation; and
- The Preference Regulations, including the methods for prioritising and calculating local content and any mandatory local content percentages.
The final New Regulations should also be checked for the detailed rules on payment periods, assignment between Government Agencies, standstill exemptions and advance payments.
Baker McKenzie will closely monitor the development of the anticipated new laws and will update our clients on any significant developments in future Client Alerts.
Abdulrahman AlBassam, Associate, has contributed to this legal update.