Saudi Arabia rewrites the rules of government procurement -new law

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The new Government Tenders and Procurement Law (نظام المنافسات والمشتريات الحكومية) was published in the Official Gazette (Umm Al-Qura, Issue 5180) on 4 September 2026, issued by Royal Decree No. M/76 dated 27/2/1448H, replacing the 1440H law (Royal Decree No. M/128). It takes effect 120 days from publication (Article 101), with the Implementing Regulations due within the same period (Article 99).

The Law is a comprehensive overhaul built on five statutory objectives (Article 2): (1) protecting public funds by regulating procurement procedures and preventing abuse of influence; (2) achieving best value for public money — with life-cycle cost, quality of execution, operational efficiency, and risk management as explicit criteria; (3) promoting integrity, competition, and equal opportunity; (4) ensuring transparency across all procurement procedures; and (5) promoting economic development. Priority in procurement is given to local SMEs, local content, and companies listed on the Saudi financial market (Article 9).

What changed?

• Direct purchase threshold: SAR 100K → 1M (Article 32(3)) — a 10x leap; more contracts awarded without public tender, with priority for local SMEs.
• Delegation ceiling: SAR 10M → 50M (Article 51(1)) — the head of a government entity may now delegate procurement decision-making authority for amounts up to SAR 50M, enabling faster award decisions.
• From “lowest price” to “best value” (Articles 2(2) and 24) — evaluation criteria must achieve best value for public funds, considering life-cycle cost, quality, and risk management. Price is no longer everything.
• Lower penalties (Articles 70 and 71) — delay penalties for non-supply contracts and continuous service contracts reduced from 20% to 15% of contract value. Supply contract penalties capped at 6% (Article 70).
• New negotiation benchmark (Article 45(1)(a)) — “estimated cost + reserve percentage” is the benchmark for negotiations. The entity head can award beyond it if a gross error in the estimate is proven, subject to reporting to the General Auditing Bureau.
• One committee instead of two (Article 43) — the Bid Opening Committee and Bid Examination Committee are merged into a single Bid Opening and Examination Committee, with members entitled to remuneration (Article 43(7)).
• No new award before settling old dues (Article 91) — entirely new: the Ministry of Finance notifies entities that have delayed paying contractor dues, and such entities are barred from issuing new award decisions until the situation is resolved.
• Clearer change orders (Article 67(1)) — three tracks: (a) new items added to the contract (up to 10% of contract value, with contractor consent); (b) increase of existing items (up to 20%, with contractor consent required for the portion exceeding 10%); (c) overall cap: combined increases from new and existing items must not exceed 20% of contract value (Article 67(2)). Decreases of existing items are also capped at 20%, with contractor consent required to exceed that limit (Article 67(1)(c)).

Contracting methods – what evolved?

The same seven methods are retained (Articles 28–35), with key updates:

• Limited tender (Article 30) — now includes freelance professionals (Article 30(4)); the former SAR 500K cap (which allowed limited competition solely based on estimated value) has been removed — entities must now justify why public competition is unsuitable.
• Direct purchase (Article 32) — new cases added: R&D and innovation (Article 32(6)); software licenses and electronic programs (Article 32(8)); exhibitions, events, and conferences (Article 32(10)); and employee training (Article 32(11)).
• Reverse auction (Article 33) — the law now describes this method without restricting it to a specific format, with details to be set out in the Implementing Regulations – noting that the new draft Implementing Regulations were subject to public consultation until recently.
• Industry localization (Article 34) — now governed by independent rules issued by the Ministry of Finance in coordination with the Local Content and Government Procurement Authority, not just the Implementing Regulations.
• Two-stage tender (Article 31) and Competition (Article 35 under the new law) — no material changes.

Bidder and contractor protections

• Standstill period (Article 50) — 3 to 10 business days after the award decision before contracting can proceed, reduced from the previous minimum of 5 days. Certain cases may be exempted per the Implementing Regulations (Article 50(2)).
• Grievance Committee (Article 84) — hears bidder and contractor grievances against award decisions, pre-award decisions, and performance evaluation decisions; decisions are binding on the government entity (Article 84(3)). Grievance fee set at 0.5% of bid value, or SAR 15,000 for pre-qualification grievances, refundable if upheld (Article 84(4)).
• Violations Committee (Article 87) — can ban contractors for up to 5 years, downgrade classification, or impose both (Article 87(3)); alternatively, may impose a fine of up to 10% of the total bid value in lieu of a ban (Article 87(4)). Decisions are appealable to the competent court within 60 days (Article 87(6)).
• Judicial recourse and arbitration (Article 94) — contractors can claim compensation before the competent court if the government entity breaches its obligations (Article 94(1)); arbitration is available with the Minister’s approval (Article 94(2)).

Why this matters – now

Higher thresholds, lower penalties, faster procedures, stronger protections. If you deal with the Saudi public sector, this is a game-changer.

The Implementing Regulations are due within 120 days (Article 99). Review your procurement strategies, update your contract templates, and prepare now.

Interested in understanding how the new Government Tenders and Procurement Law may impact your business? Feel free to reach out to our team Christine Khoury and Renad Alharbi.