Saudi Arabia raises direct procurement threshold to 1 million riyals in new law
Saudi Arabia’s Cabinet has approved a new Government Tenders and Procurement Law, the Ministry of Finance announced on 5 August 2026 in a statement by the Minister of Finance, Mohammed bin Abdullah Al-Jadaan. The single change most likely to be felt by suppliers is a requirement that government entities process private sector dues within prescribed timeframes before they may enter into new contractual commitments.
| Principal changes announced | Detail |
|---|---|
| Direct procurement | Financial threshold raised to 1 million riyals |
| Committees | Bid-opening and bid-evaluation committees merged into a single committee |
| Limited tendering | Extended to contracting with practitioners of the liberal professions |
| Entity authority | Expanded powers for heads of government entities over procurement procedures and contract signature |
| Payment discipline | Private sector dues to be processed within prescribed timeframes before new commitments are entered into |
| Industrial policy | Strengthened regulation of industrial localisation and knowledge transfer |
The ministry framed the law around advancing governance and transparency, improving planning efficiency, ensuring fairness and equal opportunity in competition, empowering the private sector, and supporting the economic and development objectives of Saudi Vision 2030. It also states that the law strengthens the regulation of industrial localisation and knowledge transfer, and enables entities to advance localisation, capability building and the transfer of knowledge alongside support for research, development and innovation.
Several things the ministry’s announcement does not specify are worth recording, because they determine when any of this takes effect. It gives no commencement date or transition period. It does not mention implementing regulations or set a deadline for issuing them. It does not refer to small and medium enterprises or state any preference for them. It neither names nor dates the law being replaced, so the size of the change in the direct procurement threshold cannot be established from it. And it carries no figure beyond the 1 million riyal threshold, so no estimate of affected contract value should be attached to it. These are silences in the announcement rather than necessarily gaps in the enacted law.
Why it matters: of the six changes announced, five are procedural and one is financial in effect. Conditioning new commitments on the settlement of existing dues addresses working capital directly, and for contractors and suppliers dealing with government entities that is the provision with cash consequences. Our reading is that raising the direct procurement threshold to 1 million riyals and merging the two committees are aimed at cycle time rather than at cost, and that the industrial localisation language is where the law is likely to bear on foreign suppliers over the medium term. Companies across the Gulf that sell into Saudi government contracts have a clear reason to read the implementing regulations closely when they appear.
Looking ahead: the substance now depends on the implementing regulations, which the ministry has not yet scheduled. The prescribed timeframes for settling dues, the procedures under the merged committee, and the scope of the liberal professions provision are all matters those regulations will need to define before the law changes anything in practice.
Sources: Ministry of Finance of the Kingdom of Saudi Arabia, statement of the Minister of Finance on Cabinet approval of the Government Tenders and Procurement Law, 5 August 2026.
