Saudi Arabia Softens Foreign Firm Requirements for Government Contracts

Riyadh – In a shift from strict regulations implemented in 2024, Saudi Arabia is now permitting conditional exemptions for foreign companies lacking a regional headquarters within the Kingdom to participate in government projects. This adjustment introduces a more flexible framework whereas still aiming to deepen the integration of foreign businesses into the Saudi economy.

Initial Regulations and the Shift in Policy

Beginning in early 2024, Saudi government bodies were barred from contracting with foreign companies whose regional headquarters were not located within Saudi Arabia [1]. This directive encompassed all government agencies, institutions, funds, and their affiliated entities. The recent revisions, however, introduce a structured pathway for exemptions, acknowledging the need for specialized expertise and competitive bidding.

How the Exemption Process Works

Government entities can now request exemptions from a designated committee for:

• A specific project
• A group of projects
• A defined time period

Requests must be submitted before issuing a tender or initiating direct contracting procedures. The Local Content and Government Procurement Authority has formalized the regulatory framework governing these contracts, including those involving related parties. An electronic service, launched in November 2025 via the “Etimad” digital platform, streamlines the exemption process for government entities publishing tenders through the platform [2].

Conditions for Accepting Bids from Non-Headquartered Firms

Companies without a regional headquarters in Saudi Arabia can have their bids accepted under specific circumstances:

• If no more than one technically compliant bid is submitted.
• If, after a comprehensive technical evaluation, the bid is deemed the most advantageous and is at least 25% lower than the second-best offer.

Projects with an estimated value not exceeding SR1 million are exempt from these restrictions.

Progress on Regional Headquarters Relocation

Despite the new exemptions, Saudi Arabia has seen significant success in attracting companies to establish regional headquarters within the Kingdom. By early 2026, over 700 international companies had relocated their regional headquarters to Saudi Arabia, exceeding the original target of 500 by 2030 [4].

Rationale Behind the Policies

The initial policy to require regional headquarters was designed to foster deeper integration of foreign companies, generate employment, reduce economic leakage, enhance spending efficiency, and ensure domestic delivery of key products and services with appropriate local content [3]. The latest exemption mechanism aims to balance these objectives with the need for specialized expertise and competitive advantages.