FIELD NOTES · PROCUREMENT
In February, Saudi Arabia formalised a way for government entities to contract with foreign companies that have no regional headquarters (RHQ) in the Kingdom. When I wrote about it on LinkedIn at the time, I called it a shift rather than a reversal. Seven months on, that reading holds, and it matters more now than it did then.
The reason is timing. On 4 September 2026, an amended Government Tenders and Procurement Law was published in Umm Al-Qura. It takes effect 120 days later, around the start of January 2027. Read together, the two changes tell you how the state wants to buy: localisation stays the direction, but speed, price and capability now carry formal weight in the rules.
This issue covers what the RHQ rule is, how the exceptions work, what they do not do, and what firms and individuals entering the market should do about it.
The rule behind it
The policy was announced in February 2021, its regulations were approved in December 2022, and it took effect on 1 January 2024. From that date, government entities were generally barred from contracting with foreign companies that run their Middle East regional headquarters from outside Saudi Arabia. The bar also reaches those companies' related parties: agents, distributors, suppliers and service providers.
The aim was to bring multinational decision-making into Riyadh. By that measure it has worked. More than 700 companies had licensed regional headquarters in the Kingdom by early 2026, ahead of the 500 targeted for 2030.
What the policy also did was narrow the bidder pool. In specialist work, that sometimes meant one compliant bid, thin competition on price, or no qualified bidder at all. The February framework is the state's answer to that problem.
How the exceptions work
The framework was announced on 19 February 2026 by the Local Content and Government Procurement Authority. Exemption requests run through Etimad, the Ministry of Finance procurement platform, where the service went live in November 2025. There are three routes through which a non-RHQ company can be contracted.
Route | Condition | Who triggers it | When |
|---|---|---|---|
Low-value contracts | Estimated value below SAR 1 million | Automatic | Any time |
Competitive outcome | Only one technically compliant bid is received, or the non-RHQ bid is technically strongest and at least 25% cheaper than the runner-up | Arises from the evaluation | At award |
Pre-approved exemption | Entity justifies the need: a single project, a group of related projects, or a defined time period | The government entity, through Etimad | Before the tender is issued; no retroactive requests |
In every case, the contracting entity must document and justify why it contracted with a non-RHQ company. The exemption belongs to the entity and its project, not to the bidder.
Reading it correctly
The conditions themselves are not new. The 2022 regulations already exempted contracts below SAR 1 million, single compliant bids, and offers at least 25% cheaper than the next. What February added is a formal process: a defined way for an entity to request an exemption before going to market, and for that request to cover more than one tender.
That changes who controls the outcome. A foreign firm cannot apply for an exemption. The client has to decide, before the tender is issued, that it needs a wider field. If you are not part of that conversation early, the exemption will not be there when the tender lands.
The 25% test is a high bar. In construction and engineering services, a 25% price gap between technically strong bids usually points to a scope misunderstanding, not efficiency. Few firms should plan an entry around winning on that basis.
And the direction has not changed. The RHQ requirement still stands, and every exemption has to be justified on the record. Entities will use the route where the market is thin, not as a default.
What it means, depending on who you are
Foreign specialist firms without an RHQ. The door is open where your capability is scarce: specialist design, engineering, modular systems, smart-infrastructure technology, and niche delivery services. It is a way to test the market and build a track record before committing to a headquarters. It is not a long-term operating model.
Local firms and RHQ holders. Your protection is now conditional. If you are the only compliant bidder, or your price sits far above the field, the entity has a documented route to look elsewhere. Competing on price and technical quality matters more than holding the licence.
Individuals new to the Kingdom. If you are joining a foreign firm entering Saudi Arabia, ask how it intends to win public work. If the answer relies on exemptions alone, expect a narrow pipeline until an RHQ decision is made. If you are joining a government entity or a contractor, expect more international bidders on specialist packages.
What to do, and what to watch
Engage clients before the tender exists. Exemptions are requested before issuance. Your case for a wider field has to be made during market sounding and pre-qualification, not at bid stage.
Confirm the client is in scope. The rule covers government entities, authorities, institutions and government-affiliated funds. Procurement rules differ across clients, so check which regime applies to yours.
Map your related parties. The RHQ rule reaches agents, distributors and suppliers. Know how your local partners and supply chain are classified before you bid.
Treat an exemption as a window, not a plan. Use it to win reference projects, build partnerships, and decide on an RHQ with evidence.
Read the September law alongside it. The amended law raises the direct-purchase threshold from SAR 100,000 to SAR 1 million, with priority for local SMEs. It also lifts the change-order ceiling from 10% to 20% of contract value and cuts Ministry of Finance pre-signing review from up to 15 working days to four. Implementing regulations are due within 120 days of publication.
Two things are worth watching: how often entities use the pre-tender route in practice, and whether the implementing regulations change how exemptions interact with the new thresholds.
The short version
The barrier to public work in Saudi Arabia has not been removed. It has been moved earlier in the process, and the client now holds the key. Firms that understand that will use this period to build a presence. Firms that do not will wait for tenders that were never opened to them.
— Walid
Sources: Asharq Al-Awsat, Middle East Briefing, Enterprise, Clyde & Co, World Construction Network, Yahoo Finance. This is an analysis, not legal advice.
