New procurement law a remarkable feat of legal re-engineering

Earlier this month, the Saudi Council of Ministers issued a resolution approving the new Government Tendering and Procurement Law (GTPL).

The government is counting on the GTPL to solve many of the financial and technical deficiencies which existed under previous legislation.

The law is expected to help in achieving fiscal balance by enhancing the effectiveness of financial planning in the government’s procurement and tendering process, improving resource management, and elevating government procurement procedures.

Drawn up in line with international best practices, the new GTPL will work for the benefit of both local and foreign contractors by providing more transparency in tendering and procurement procedures — such as the submission and opening of proposals — through the unified portal called Etimad.

In addition, the law will bridge the shortcomings of the old legislation and maximize the spending efficiency of new and existing development projects.

The new GTPL will also enhance integrity and competition by preventing the impact of personal interests, thereby protecting public funds and giving fair and equal treatment to all bidders, while in the process fulfilling one of the Ministry of Finance’s (MoF) main objectives.

One of the most important aspects of the revised legislation will see the setting of a clear vision and direction with regard to financial compensation in the event of unforeseen increases in costs to government contracts. These could be due to price changes, a rise in the cost of raw materials, customs duties, taxes or a contractor facing unexpected justified difficulties.

Furthermore, the law provides the right for government entities to pay contractors and sub-contractors for any approved direct payments.

Support for local small- and medium-sized enterprises (SMEs) listed on the stock market is another positive element of the GTPL. SMEs will be given priority over larger competition and exempted from providing an initial guarantee in lieu of being asked to present a letter of commitment. This will not only promote sustainable development of SMEs but also encourage family businesses to participate in the financial market, preserving and protecting their future while increasing their contribution to the gross domestic product (GDP).

The law is expected to improve government procurement methods by using advanced ordering and tendering techniques to save time, reduce purchasing costs and increase market efficiency by reaching a larger global base of suppliers.

Saudi Minister of Finance Mohammed Al-Jadaan said: “The new law (GTPL) will maximize the efficiency of government spending by identifying the actual needs of government agencies, improving quality in works and procurement, and even enable evaluation of contractor performance.”

The GTPL is a remarkable national achievement in the field of re-engineering, touching on a very important government process that had many distortions which hindered the flow of the Kingdom’s procurement system.

The beauty of the matter is that the new law is in line with the development efforts taking place in the Kingdom to realize the goals of the Vision 2030 reform plan.

• Talat Zaki Hafiz is an economist and financial analyst.