Saudi Arabia’s Council of Ministers has approved a new Government Tenders and Procurement Law (GTPL), introducing changes to public procurement procedures and government contracting.

The Ministry of Finance announced the approval on 5 August.

The new law aims to strengthen governance and transparency, improve procurement planning and implementation, and promote fairness and equal opportunities in government contracting.

The changes give government entities greater flexibility in procurement while introducing new provisions that could affect contractors and suppliers, including contract variations, outstanding payments and procurement procedures.

Contract flexibility

According to a Ministry of Finance summary of the key amendments, one of the main changes allows government entities to increase existing contract items by up to 20% of the contract value. Contractor approval is required for increases exceeding 10%, while the total increase from adding new items or increasing existing items cannot exceed 20% of the contract value.

The amendments also introduce measures addressing outstanding payments to contractors. A government entity cannot make a new award when it has outstanding amounts owed to contractors for works or procurement and the required procedures have not been taken, after notification from the Ministry of Finance.

Exceptions apply where non‑payment relates to ministry procedures or where the government entity has taken the required action on a claim but does not have sufficient budget allocations.

Single committee

Under the new law, the committees responsible for opening and examining bids will be merged into a single committee.

The maximum value for direct procurement will rise from SR100,000 ($26,700) to SR1m ($267,000) while government entities will be required to explain and document their use of direct procurement.

Direct procurement will also be permitted in cases involving research, development and innovation and certain contracts with professional practitioners.

The amendments reduce the minimum standstill period following a procurement award from five working days to three working days. Government entities will also be able to negotiate where the best bid exceeds the estimated cost plus the permitted contingency.

Localisation

The new framework includes provisions covering industrial localisation and knowledge transfer. The Ministry of Finance said it will issue rules for contracting for these purposes in cooperation with the Local Content and Government Procurement Authority.

A new regulation will also cover research, development and innovation, including tendering and contracting provisions for these activities.

Other changes involve contractors’ exposure to penalties. The maximum delay penalty on contracts, excluding supply contracts, will fall from 20% to 15% of contract value. The maximum penalty for non‑performance in continuous‑performance contracts will also fall from 20% to 15%.

The value of purchases exempt from providing a final guarantee will rise from SR100,000 ($26,700) to SR300,000 ($80,000). Additional exemptions will apply to contracts with professional practitioners and emergency or urgent cases.