On August 1, 2019, Saudi Arabia introduced a new Government Tenders & Procurement Law (GTPL), set to apply to all government projects starting November 29, 2019. This law brings significant changes to the way public contracts are handled, aligning with the Saudi government’s Vision 2030 infrastructure goals.
Table of Contents
Historical Context: The Old GTPL
Before the new law, public procurement in Saudi Arabia was governed by a strict regime under the previous GTPL, which has been in place since 2006. This law imposed stringent rules on how government contracts were issued, often affecting the risk allocation for contractors and consultants working on Saudi government projects.
Key features of the old GTPL included:
- Coverage of all government bodies such as ministries and public institutions.
- Inflexibility in contract terms, limiting price increases and imposing penalties for delays.
- Mandatory use of standard contracts, such as the Public Works Contract, which was often rigid.
- Dispute resolution through the Board of Grievances, a Saudi court system.
- Strict control over contract modifications, with any variations requiring specific exemptions from the Royal Court.
Key Changes in the New GTPL
The new GTPL marks a significant shift in public procurement, promoting transparency, efficiency, and flexibility.
Centralized Procurement
- A newly established central entity will oversee unified procurement for multiple government bodies, allowing for better coordination and standardization across projects.
- Electronic reverse auctions and centralized frameworks will now be utilized to streamline tender processes, making it easier for multiple agencies to procure services.
- Framework agreements can now be used for projects where quantities or scope are uncertain, providing flexibility that was not available under the old GTPL.
Reduced Tender Requirements
- Limited tendering will be allowed in certain cases, particularly for consulting services. This means that public tenders won’t be mandatory for every project, speeding up the procurement process.
- A standstill period of 5 to 10 days is now required after a tender decision is made, giving unsuccessful bidders time to raise objections before contracts are awarded.
Flexibility in Contracting
- Government bodies are now allowed to tailor contracts to the specific needs of projects, moving beyond the one-size-fits-all approach previously mandated by the Public Works Contract.
- Dual-language contracts are now permitted, with Arabic serving as the official language for contract interpretation.
- The variation cap remains at 10%, but the delay penalty has been increased to 20% for works and services contracts.
Arbitration and Dispute Resolution
- Government entities may now agree to arbitration, provided they receive approval from the Minister of Finance, offering a new avenue for resolving disputes outside the Saudi court system.
Impact on Saudi Arabia’s Infrastructure Program
The new GTPL is a timely development in light of Saudi Arabia’s Vision 2030, a multi-billion dollar infrastructure program aimed at transforming the country’s economy. The increased focus on centralized processes and flexibility in contract terms will enhance transparency and predictability, making Saudi Arabia a more attractive market for international contractors and consultants.
Concluding Thoughts
The new GTPL offers a modernized, more transparent, and flexible framework for public procurement in Saudi Arabia. It is expected to better serve the nation’s growing infrastructure needs and encourage participation from international firms, ultimately benefiting the country’s ambitious development goals.
As the law’s Implementing Regulations are released, more details will clarify its application. However, the new GTPL is already being seen as a positive step forward, promoting a more competitive and efficient marketplace for government projects in Saudi Arabia.
