Local Content in Saudi Public Procurement: Key Considerations and the Broader Localisation Landscape

Saudi Arabia has established a comprehensive legal framework governing local content in public procurement. As a result, local content has become an increasingly important consideration for businesses seeking to participate in government tenders and public sector projects, alongside more traditional factors such as pricing, technical capability and project delivery experience.

The framework is principally derived from the Government Tenders and Procurement Law (GTPL) issued by Royal Decree No. M/128 dated 16 July 2019 and its implementing regulations and is administered by the Local Content and Government Procurement Authority (LCGPA). Following the approval by the Council of Ministers of a new GTPL on 5 August 2026, Saudi Arabia's public procurement framework continues to evolve, reinforcing the importance of understanding the local content regime and its practical implications for businesses engaging with government entities.

While the focus of this article is the local content regime, it should be considered within the broader context of Saudi Arabia's localisation landscape, which also includes initiatives such as the Made in Saudi programme, Saudisation (Nitaqat), the Regional Headquarters (RHQ) programme and various sector-specific localisation initiatives.

Local Content

Saudi Arabia's local content regime is principally governed by the GTPL and the Regulations on Preference for Local Content and Local SMEs and Companies Listed on the Capital Market (Council of Ministers' Resolution No. 245 dated 26 November 2019) (the "Regulations"). Together, they establish a number of mechanisms through which local content is reflected in government procurement activities, including the Mandatory List of National Products, national product price preference mechanisms, local content evaluation criteria and minimum local content requirements for designated procurements.

One of the most common misconceptions is that local content is synonymous with workforce localisation or Saudisation. While workforce participation forms part of the local content framework, the concept is considerably broader and is defined under the Regulations as expenditure within the Kingdom through national elements, including goods, services, assets, technology and workforce. Accordingly, local content considerations may affect procurement strategies, sourcing decisions, manufacturing activities, supply chain structures and broader operational activities undertaken in Saudi Arabia.

A particularly important aspect of the framework is the Mandatory List of National Products maintained by the LCGPA. Government entities are generally required to comply with the Mandatory List when undertaking procurements, and bids that fail to comply with applicable requirements may be excluded from relevant tenders. For contractors and suppliers operating in the public sector, understanding whether products fall within the Mandatory List may therefore become a threshold procurement consideration.

In addition to the Mandatory List, the Regulations provide for a price preference mechanism for national products that are not included on the Mandatory List. Under this mechanism, national products may benefit from a preferential evaluation by treating competing foreign products, for evaluation purposes, as if they were priced 10% higher than their stated bid price. The Regulations also provide, in certain designated procurements, for evaluation mechanisms that take account of a bidder's local content profile, including its local content baseline and targeted local content percentage. Accordingly, local content considerations may influence not only sourcing decisions, but also the competitiveness of a bid during the procurement process.

The framework extends beyond product sourcing and procurement evaluation. In certain designated procurements, bidders may be required to disclose their existing local content baseline, commit to achieving a targeted local content percentage during contract execution and demonstrate compliance with those commitments throughout the life of the contract. The Regulations contemplate ongoing compliance obligations, including local content plans, periodic reporting requirements and final reporting obligations, with government entities monitoring performance during contract execution and, in certain cases, such reporting being subject to review by the LCGPA. As a result, local content may influence both bid evaluation and contract performance.

The regime is also supported by an enforcement framework. The Regulations provide for financial penalties in relation to certain breaches of local content obligations. In addition, certain serious or repeated violations may be referred to the committee established under the GTPL, which may impose sanctions, including prohibiting a contractor from contracting with government entities and, where applicable, reducing its contractor classification.

Other Localisation Initiatives 

Launched in 2021 under the National Industrial Development and Logistics Programme, the Made in Saudi programme is intended to promote products manufactured in the Kingdom and enhance the visibility of Saudi industry in domestic and international markets. Unlike the local content framework, the programme is not a government procurement mechanism. Rather, it operates as a product branding and promotional initiative aimed at supporting local manufacturing and value creation within Saudi Arabia. 

While operating under a distinct framework, the Made in Saudi programme complements broader localisation initiatives in the Kingdom, including the local content regime, by encouraging domestic manufacturing and investment in local capabilities.

Alongside the local content regime and the Made in Saudi programme, Saudi Arabia has introduced a number of other localisation-related initiatives, including Saudisation (Nitaqat), the Regional Headquarters (RHQ) programme and sector-specific localisation programmes.

Looking Forward

The Saudi local content framework has become an established component of the Kingdom's public procurement regime. While the impact of the newly approved Government Tenders and Procurement Law on the Kingdom's local content framework remains to be seen, local content is expected to remain a significant consideration for businesses participating in government procurement and public sector projects in Saudi Arabia.