Public procurement: transforming Saudi Arabia’s Vision 2030 into reality

7 Jul 20

Saudi Arabia has begun the process of implementing Vision 2030: a plan to transform the nation into a major global economy. This programme was founded upon three key themes: a vibrant society, a thriving economy and an ambitious nation.

Key takeaways

  • The Government Tenders and Procurement Law (GTPL) aims to enable public sector procurement to function successfully in a modern commercial environment
  • The GTPL is applicable to all contracts procured by government bodies
  • The Saudi Arabian government is also taking a number of other steps to encourage flexibility and transparency in procurement
  • In the future, the GTPL will create new opportunities for the younger generation and for small and medium-sized enterprises (SMEs)

 

What is the Government Tenders and Procurement Law (GTPL)?

In November 2019 the GTPL came into effect, replacing previous legislation in place since 2006. Covering all government projects, this law aims to streamline procurement and promote the use of local companies in the public sector’s purchase of goods, works and services.

 

How will the GTPL support Vision 2030?

It is hoped that the GTPL will support ambitious targets to increase SMEs’ GDP contribution from 20% to 35% by 2030.

Procurement projects in Saudi Arabia, as in other parts of the world, experience the same issues with budget and cost overruns and adversarial relationships with contractors. The GTPL will promote greater flexibility and transparency in procurement, making the rules fit for a modern commercial environment that attracts highly- esteemed international companies and consultants.

 

How will the GTPL operate?

The GTPL mirrors many of the provisions contained in the UK’s Public Contracts Regulations 2015 (transposed from Directive 2014/24/EU). It will apply to all contracts procured by government bodies, including government ministries, regional authorities/municipalities and public entities (ie any special body financed by the state) with an individual legal personality. The Ministry of Finance (MoF) will act as the standard bearer under the direction of Mohammed Al-Jadaan, Minister of Finance.

A public procurement portal named Etimad has been created to provide online services to government entities and private sector contractors to boost transparency, improve performance and minimise administrative and procedural delays.

 

What other procurement-led initiatives are the Saudi Arabian government taking?

  • Similar to the UK’s Crown Commercial Service, a centralised procuring entity will establish framework agreements (maximum five years) accessible by other public bodies. It will also generate standard templates, contract forms and be the main point of contact for guidance.

  • The government has clarified whether general or limited tender process can be used. General tenders that are advertised and accessible by all bidders will be the default process. Where the tender is valued at less than £105,000 in a restricted market or time is critical and the likely supplier will be a charitable organisation, a limited tender process will be available.

  • A standstill period (up to 10 days) will act as a cooling off period between tender decision and award to enable any unsuccessful bidder to raise objections. This will provide an appropriate objection process where rules have not been complied with. This mirrors the procedure in the UK, where public bodies apply the standstill after every procurement above a certain limit. It allows any aggrieved supplier to demand review of the decision and consider further legal steps in exceptional circumstances.

  • ‘Electronic reverse auctions’ for particular works or services.

  • There will be a two-stage tender process akin to the restricted procedure for more complex requirements and direct purchases in controlled situations (eg for emergency situations or defence contracts). A key feature here will be ringfencing low-level requirements (£20,000 to local SMEs).

  • A restriction on limiting contract modifications to 10%.

  • The power for governmental authority to pay the subcontractor directly in case of disputes with the main contractor.

  • The opportunity to terminate procurements when bids are unaffordable or to execute contracts at the contractor’s expense if there have been incessant delays.

  • The availability of arbitration as a dispute resolution mechanism.

 

What does the future hold for Saudi Arabia?

These changes herald a major shift in policy that will help the Kingdom achieve its long-term plans for the economy and society. The focus on helping SMEs will provide much needed employment to Saudi Arabia’s large young population (60% of the population is under the age of 30), and there will also be opportunity for a new breed of procurement professionals to develop their careers.

 

Questions for you

  • What is the legislative equivalent to the GTPL in your country?
  • What challenges could the Saudi Arabian government face in implementing the changes discussed?

 

Further information

Saudi Vision 2030

New Government Tender and Procurement Law in Saudi Arabia

The Public Contracts Regulations 2015

Directive 2014/24/EU

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