The Saudi government must receive at least three bids for all contracts larger than one million riyals (US$266,667). For construction projects, at least five contractors must be asked to submit bids.
A committee of three or more people from the Ministry of Finance & National Economy, or from the government agency responsible for the project, must review the bids. The contract will be awarded according to a vote decided by a majority. These bids are open to the public. Companies with the lowest bids and also meeting all specifications will be awarded the contract. In most cases, the price is estimated by the Saudis and if all bids are significantly larger, then the project will be negotiated. This also applies if the lowest bidder does not meet the conditions of the project.
Tender regulations allow price increases for variations in transportation charges, insurance rates or the price of raw materials. If all bids significantly exceed the estimate, the government agency may cancel all such bids. The government insists that bids come reasonably close to practical estimates. Since January 1979, all contracts over 100 million riyals have required the personal approval of the King.
Foreign companies who wish to bid on projects supervised or undertaken by government ministries must be known to the ministry or agency. A list is compiled of these foreign companies and bidders will be selected from this list when projects are available. In order for a company to be properly registered in the Kingdom, a questionnaire must be completed in both Arabic and English. There must also be included the company's latest annual report along with two references and two copies of a list of completed projects. These documents must be submitted to:Director
Contractor's Classification Committee
Non-Saudi Contractors' Division
Riyadh, Saudi Arabia
Telephone: 404-3889 / 404-3990
In awarding contracts, the Saudi government is required by law to give preference to Saudi companies or to joint-ventures which are more than 50% Saudi-owned. Jubail Industrial City contracts for architecture and engineering, for example, are awarded only to 100% Saudi-owned companies. When a qualified Saudi company is not available, foreigners may then be awarded the contract. The foreign company, however, must have a local address.
Saudi Arabia's 'offset programme' is one approach for generating industrial investment. This policy requires contractors to reinvest a portion of the value of their major contracts within the Kingdom. The government may require foreign-owned consortiums involved in defence contracts to reinvest up to 35% of the value of the contract into high-technology service industries. Foreign contractors must also subcontract 30% of the value of a government contract to local subcontractors.