Companies: Companies fully owned by the state - or any of its governmental agencies - or in which it owns more than (50%) of its capital, and whose commercial registration is in the Kingdom.

The Authority: Local Content and Government Procurement Authority.

Small and Medium Enterprises: Local enterprises (micro, small, and medium) according to the classification of the Small and Medium Enterprises General Authority.

Local Content: The total expenditure in the Kingdom through the participation of Saudi elements in the workforce, goods, services, assets, technology, and similar.

Qualification: Verification of the availability of the necessary qualifications and capabilities to execute works and supply procurements among competitors.

Mandatory List: A list of national products issued by the Authority and updated periodically, and companies - when applicable - must supply them according to the relevant provisions.

National Product: Any product produced in the Kingdom, including extractive, agricultural, animal, and industrial products, whether in its raw form or at any stage of subsequent assembly, preparation, or manufacturing.

Mixed Contracts: Contracts that contain clauses related to supply and other clauses related to works or services, such as supply and installation contracts or construction contracts and infrastructure development contracts in all their forms and types.

Targeted Local Content Ratio: The local content ratio that the competitor commits to achieving before the end of the contract when submitting the bid.

Gradual Local Content Plan: A mandatory plan prepared and submitted by the contractor to clarify the targeted local content ratio during the stages of contract execution.

Baseline: The local content ratio - approved by the Authority - for the competitor's establishment when submitting its bid.

Development of local content and small and medium enterprises in the operations and purchases of companies.

The provisions apply to the works and purchases of companies, except for the following:

• 1. Contracts of companies with any of the entities within the same group, according to specific controls; the most important of which are as follows:

  •   A- The contractor shall supply - when executing the works and purchases - the products listed in the mandatory list and apply the standard for the preference of small and medium enterprises and the standard for the preference of the national product not included in the mandatory list when comparing offers, in accordance with the relevant provisions.

  • B- In cases where subcontracting is necessary; the subcontractor shall supply the products listed in the mandatory list, and apply the standard for the preference of small and medium enterprises and the standard for the preference of the national product not included in the mandatory list when comparing offers, in accordance with the relevant provisions.

• 2.  Contracts of companies that pertain to their works outside the Kingdom.

• Contracts within the same group refer to contracts between an entity and a subsidiary entity or between two subsidiary entities of the same parent entity. An entity is considered a subsidiary of another entity if the latter owns (50%) or more of the capital of the former entity, either directly or indirectly.

1- Companies must ensure in advance that there is not more than one qualified local person to purchase or execute the required works when dealing with other parties to purchase or execute their works within the Kingdom.

2- Companies shall include in the competition documents the conditions of local content - as applicable - and its provisions.

3- Companies shall not aim, when setting the conditions and technical specifications for the proposed works and purchases, to exclude the national product that meets the actual need.

4- Companies shall ensure that both national and foreign products comply with the approved national specifications, or international specifications in cases where there are no approved national specifications.

5- Companies shall apply - when executing their works and purchases, and when applicable - the mandatory list, by requiring the contractor to supply national products that fall within the list, and this applies to all contracts that include products listed in the list, provided that the price difference between the national product and the foreign product does not exceed (10%), after inviting at least three local factories to supply or execute the required purchases. The authority shall set the necessary controls for exemption from the mandatory list. Companies may - in specified cases - supply national products that fall within the mandatory list that exceed the price difference of (10%) compared to the foreign product.

6- The contractor shall apply all the provisions mentioned when executing works and purchases on behalf of the companies.
 

Companies, when evaluating bids - where applicable - shall apply the following:

• 1- The mechanism for weighing local content in financial evaluation, applicable to all contracts with an estimated value of (fifty million) Riyals or more - excluding supply contracts - and the weight of local content in the financial evaluation shall not be less than (30%), and the price difference in the bid of the competitor with the highest final evaluation and the lowest price in the bid of any of the technically qualified competitors shall not exceed (10%). However, the company may, in circumstances specified, choose the bid of the competitor with the highest final evaluation even if the price difference exceeds (10%).

• 2- The criterion for the preference of small and medium enterprises, applicable to all contracts with an estimated value of less than (fifty) million Riyals - excluding supply contracts - by granting small and medium enterprises a preference represented by assuming that the prices of bids from other enterprises are (10%) higher than those mentioned in the bid documents. Companies may, in circumstances specified, increase this percentage.

• 3- The criterion for the preference of national products not listed in the mandatory list, applicable to supply contracts or mixed contracts, by assuming that the price of foreign products is (10%) higher than that mentioned in the bid documents. Companies may, in circumstances specified, increase this percentage.​
   

Companies must include a clear provision in their contracts requiring the contractor to supply the materials or tools needed for the execution of the contract from national products, in accordance with the mechanism for preferring national products not listed in the mandatory list stipulated in paragraph (3) of (Fifth) above.
 

When applying the mandatory list, companies must do the following:

• 1- Exclude the offer in which the competitor did not comply with the mandatory list. In the case where the competition is divisible, the items in which the competitor did not comply with the mandatory list shall be excluded.  

• 2- Establish mechanisms to monitor the contractor's performance in fulfilling their obligations regarding the mandatory list during the execution of the contract, and not to accept any supplied products that violate the mandatory list except in cases where the companies deem it in their interest to accept those products, with penalties imposed on the contractor in accordance with the companies' policies and the contract concluded with them, and this does not include the products exempted according to controls determined by the authority.  

When applying the local content weighting mechanism in financial evaluation, the competitor and the contractor must provide the following:

1- The baseline and the targeted percentage of local content at the contract level or at the entity level as stated in the competition documents. Companies must exclude any competitor that does not commit to providing this.

2- The gradual plan for local content, to be submitted within (sixty) days from the date of award.

3- Periodic reports - in accordance with the terms and conditions of the competition documents - to assess the extent of compliance with achieving the targeted local content percentage and the gradual plan for local content.

4- A final report that includes the percentage of local content achieved by the contractor - after approval by the authority - for the purpose of verifying its compliance with the targeted local content percentage.
 

Competitors and contractors must use the specific forms for measuring the baseline and the targeted percentage, as well as the periodic and final reports for local content prepared by the Authority. Companies are required to retain and document the forms upon receipt from the competitors and contractors.

Companies must prepare specific forms for evaluating competitors' offers that include the evaluation criteria and the weight assigned to each criterion in the evaluation process. The forms may be in paper or electronic format, provided that they are stored and documented.