Saudi Gazette report

RIYADH — The Saudi authorities revealed that there are six circumstances under which government agencies can conclude contracts with multinational companies, which do not have a regional headquarters in the Kingdom, and other relevant parties for the year 1445AH. The regulations impacting government contracts with companies lacking regional headquarters in the Kingdom came into force on Monday, Jan. 1, 2024. This is based on a decision taken by the Council of Ministers on Dec. 26, 2023.

According to the regulations, adopted by the Cabinet, it is not permissible for the government agencies to contract with companies that do not have a regional headquarters in the Kingdom or any related party. However, there are certain exemptions for this and that is in accordance with the provisions of the approved regulations.

It is mandatory on the part of all government agencies to comply with the regulations, whether they are subject to the provisions the Government Competitions and Procurement Law or any other regulations. These regulations are complementary to the provisions that government agencies must apply when implementing their works and securing their purchases.

The circumstances under which exemptions given for companies that do not have a regional headquarters include the following: Businesses and purchases that are implemented outside the Kingdom; and the works and purchases whose estimated cost does not exceed SR1 million. However, the minister of finance can approve a decision to make amendments regarding this amount or cancel this exemption or stop working with it temporarily, and that is in accordance with serving the public interest.

The companies that do not have regional headquarters in the Kingdom can submit tenders for any public competition offered by government agencies under one of the two occasions. The first is that there is no more than one technically acceptable tender, and the second is that the tender submitted by the company that does not have a regional headquarters in the Kingdom is the best one after the overall technical evaluation and its quoted amount is 25 percent less than the quoted second best offer.

According to the regulations, the government agencies may not invite companies that do not have a regional headquarters in the Kingdom to participate in limited competitions or direct contracting except in the following two cases. First, the absence of more than one qualified competitor from companies that have a regional headquarters in the Kingdom or that businesses or purchases are exclusively available with only those companies that do not have a regional headquarters in the Kingdom so as to carry out works or secure the required purchases. Second, the existence of an emergency case that can only be dealt with through an invitation to submit bid, or direct contract with companies that do not have a regional headquarters in the Kingdom.

It is mandatory on the part of the government agencies that conclude contracts with companies that do not have a regional headquarters in the Kingdom to prepare a report that includes the reasons that necessitated concluding the contract. A copy of the report shall be supplied to the Supreme Committee of the Saudi Program to Attract Regional Headquarters of International Companies as well as to the general secretariat of the committee within a period not exceeding 30 working days from the date of signing the contract.

The regulations approved the formation of a committee called the Exemption Committee from the Regulations of government agencies with companies that do not have a regional headquarters in the Kingdom and relevant parties. This committee, which will be associated with the Local Content and Government Procurement Authority, is tasked to examine the requests of government agencies with regard to giving exemption to companies that do not have a regional headquarters in the Kingdom from the regulations and take a decision on them.

The regulations stipulated that an exemption request to contract with the company that does not have a regional headquarters in the Kingdom shall be submitted before inviting tender or starting direct contracting procedures. The government agency may submit the application to attend the committee’s meeting to consider its request to discuss the request without having the right to vote on the decision that will be taken regarding it.

Under the regulations, the agencies that submit the application are entitled to object to the committee’s decision before the Supreme Committee of the Saudi Program to Attract Regional Headquarters of International Companies and the committee’s decision on the objection will be final and binding.