The Kingdom of Saudi-Arabia (KSA) is the largest economy in the Middle East & North Africa (MENA) region. The country’s public spending in infrastructure, health care, transport, and other government-driven sectors is among the highest the MENA region. In an unparalleled program of reform under its Vision 2030, the Kingdom tries to make its economic, social and legal landscape ready for coming generations. As part of this reform, KSA recently enacted a new Public Procurement Law that governs public tenders. This legal briefing gives an overview of the new Public Procurement Law and its key features.

1. What is the Public Procurement Law

(PPL) and who is concerned by it?

The New Public Procurement Law (“PPL” or “Law”) is the main legal regulation for all government procurement in the KSA. All government entities such as the State and its Ministries, Regional Authorities and Mu-nicipalities as well as Public Entities with an individual legal personality are subject to this new law.1 The Law regulates how these entities can cater to their needs in terms of procuring goods and services. It should be noted, however, that for certain sectors (especially in relation defence and secu-rity), many of the regulations are eased and facilitate an easier approach for the con-cerned government entities.

The Law establishes several new institu-tions for the Kingdom’s procurement struc-tures. The overarching responsible author-ity for the Law and its implication will be the Ministry of Finance (MoF). A new procure-

1 The PPL does not cover (fully or partly) government

owned companies and enterprises such as Saudi Ar-amco, Saudi Basic Industries Corporation (SABIC), Sau-dia Airlines, Ma’aden or any publicly owned Banks or fi-nancial institutions.

ment portal, named Etimad (www.eti-mad.sa) under the supervision and con-stant development of the MoF.2

The Law also establishes a Unified Purchase Entity (UPE). The UPE’s assumes several tasks. It is the unit directly interacting with the tendering parties in cases of more than one government entity being involved. It mainly provides background support such as research and guidance to government entities in procurement processes.

2. Why was the new Law introduced

now?

In the course of its encompassing reform agenda (especially the Vision 2030), the KSA is implementing a consequent policy line in matters of transparency and com-bating corruption. The field of public pro-curement has been identified as an area of potential enhancement in these matters.

2 Tenders will be announced under the following link: https://monafasat.etimad.sa.

Saudi Arabia’s New Public Procurement Law

LEGAL BRIEFING 6 November 2019 www.schlueter-graf.com

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Anticipated gains are twofold: The state will profit from an optimized allocation of re-sources and hopefully from an improved image with providers of goods and services.

In turn, the Law also enables providers without connections or “wāsta” especially those ones of SMEs to face an increased chance of success in the respective tenders, as long as certain core values of the KSA such as localization are respected.

3. What are the procurement methods

and tender procedures?

The PPL by default foresees a multiple stage system for procurement:

Demand and background research of

the concerned government entities, as

well as financial planning of every gov-

ernment entity (outlines of which have

to be published);

Tender procedure;

Standstill period for revision of the de-

cision initiated by one of the competi-

tors;

Contract negotiation and conclusion;

and

Performance of the contract.

The PPL includes the following tender pro-cedures:

a. General Tender (al-munāfasa al-

ʿāmma)

General tenders serve as the default proce-dure of all tenders and will be announced publicly through the Etimad portal. General tenders are open to anyone’s participation subject to meeting the necessary pre-qual-ification requirements.

b. Limited Tender (al-munāfasa al-

mahduda)

Limited tenders are directed to a limited number of participants upon invitation of the government entity. Limited tenders can only be carried out in one of the following cases:

A limited number of providers;

Tender value does not exceed SAR

500,000 (approx. EUR 125,000);

Time being of the essence;

Products and services provided by

non-profit entities; or

Consultancy.

c. Two-Round Tender

(al-munāfasa ʿalā marhalatayn)

In the first (general) round of this tender (announced in the Portal), products/solu-tions as per the specifications of the gov-ernment entity can be submitted without determination of the price.

In the second round (by invitation) suitable participants of the first round will bid by price.

d. Direct Purchase (al-shirā’ al-mubāshir)

Direct purchases are only allowed in one of the following cases:

Arms, military goods and respective

spare parts;

A monopoly of one provider;

Anticipated tender value of SAR

100,000 max (approx. EUR 25,000); the

award will be prioritized to local SMEs;

Necessities preventing the methods

mentioned under (a.) and (b.) due to

reasons of national safety;

Products and services provided by non-

profit entities; or

In a state of emergency. In the second

round (by invitation) suitable partici-

pants of the first round will bid by price.

e. Framework contracts (Ittifāqiya itāriya)

Framework contracts are foreseen for a continuous procurement of services most expectably for a maximum of 5 years. The procurement of framework contracts can be open or closed.

f. Reverse Electronic Auction

(al-muzāyada al-ʿaksiya al-iliktruniya)

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Purchases a threshold value not exceeding SAR 5,000,000 (approx. EUR 1,250,000) can be made through a reverse electronic auc-tion.

g. Competition (musābaqa)

The Law also includes a competition based tender procedure (relevant for design, modeling, etc.).

4. How are disputes resolved?

Bidders can contest the award as well as vi-olations of the tender procedures leading to the award. Complaints need to be filed with the concerned government entity within five working days after the relevant decision or in case the award is contested within the standstill period. The awarding entity shall decide about the complaint within 15 working days. In case of a nega-tive decision (assumed if the awarding au-thority has not decided within the time pe-riod), the complaining bidder has the right to approach the Ministerial committee for review of the decision within 3 days.

In government contracts, arbitration can be used as a means of dispute resolution. This,

however, requires the consent of the Min-ister of Finance. In case of no consent, ad-mirative courts will have jurisdiction to hear cases with regard to government contracts.

5. Conclusion

The PPL comes along with a number of par-adigm changes:

Establishment of a centralised pro-

curement portal (Etimad);

Establishment of a Unified Purchase

Entity (UPE) that assist governmental

bodies in preparing tender proce-

dures;

Introduction of innovative tender pro-

cedures and transparent criteria for

the selection of tender procedures;

Introduction of specialised commit-

tees for the resolving tender proce-

dure-related complaints; and

Inclusion of arbitration as a possible

dispute resolution mechanism in gov-

ernmental contracts.

It is expected that investors will have new and better chances under the PPL in engag-ing in economic activities with governmen-tal bodies. Therefore, the Etimad portal should be monitored closely.

SCHLÜTER GRAF The Citadel Tower, Offices 2001-2005 Business Bay, P.O. Box 29337 Dubai / United Arab Emirates Tel: +971 / 4 / 431 3060 Fax: +971 / 4 / 431 3050 Heinrich Köllisch (heinrich.koellisch@schlueter-graf.com) Dr. Constantin Frank-Fahle, LL.M. (frank-fahle@schlueter-graf.com) Andres Ring (andres.ring@schlueter-graf.com)

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