Local content guide · Saudi government tenders
Local content preference regulation in Saudi Arabia: how the price preference for national products works
The local content preference regulation in Saudi Arabia is the Council of Ministers regulation that tells government agencies how to favour local content, local SMEs and companies listed on the capital market in their tenders and purchases. Its price preference applies to national products that are not on the mandatory list: when bids are compared, a foreign product is treated as if it cost 10% more than quoted. In supply tenders this is done with an adjusted bid value based on each bid's share of national products. This guide summarises the regulation from the Ministry of Finance text, works through the formula, and explains what it means for a bid that includes network devices.
What the local content preference regulation in Saudi Arabia covers
| Part | Articles | What it sets |
|---|---|---|
| Definitions and general provisions | 1–9 | Definitions, the 10% preference for local SMEs, the local content portal, LCGPA's role, what tender documents must include, and the mandatory list |
| Price preference for national products | 10–13 | The 10% preference, the adjusted bid value in supply tenders, national products in contract execution, and the final origin report |
| Local content weight in financial evaluation | 14–22 | Baseline and target local content scored with price in high-value contracts, then plans and reports during the contract |
| Minimum local content requirements | 23–27 | A minimum target set for designated contracts |
| Fines | 28–34 | Fines of up to 10% for shortfalls in national products, local content or reporting, and a cap on total fines |
| Final provisions | 35–39 | Including referral of serious or repeated local content shortfalls to the committee under the procurement law (Articles 37–38) |
The regulation defines a national product as any product manufactured in the Kingdom, whether extractive, agricultural, animal or industrial, raw or processed at any stage. It defines local content as total spending in the Kingdom through national elements, such as goods, services, assets, technology and workforce.
The price preference for national products
Under Article 10, government agencies must apply a price preference to national products that are not on the mandatory list, in all contracts. The price of a foreign product is assumed to be 10% higher than the price in the bid. LCGPA and EXPRO may agree to raise the percentage, and the adjusted figure must be stated in the tender documents.
Products that are on the mandatory list follow a stricter rule: agencies must buy them as national products, and in supply tenders a bid that does not comply is excluded.
How supply tenders compare bids: the adjusted bid value
Article 11 tells agencies to compare the shares of national products in supply tenders, using this equation:
Adjusted bid value = bid price + 10% × bid price × (1 − share of national products)
If a bidder does not state whether its products are national or foreign, they are treated as foreign.
| Bid | Price quoted (SAR) | Share of national products | Adjusted bid value (SAR) |
|---|---|---|---|
| A | 1,000,000 | 0% | 1,100,000 |
| B | 1,060,000 | 100% | 1,060,000 |
| C | 1,040,000 | 50% | 1,092,000 |
Bid B quotes the highest price but has the lowest adjusted value, so it ranks first on price. Bid C gains half the benefit because half of its products are national.
After award: national products in the contract
- Materials and tools. Contractors must give preference to national products when buying materials or tools to carry out the contract, using the same equation (Article 12).
- Final origin report. In supply contracts, the contractor submits a final report within 30 days of the contract end date proving that the products are of national origin. The agency reviews it within 10 working days, after which it is deemed approved, and a copy goes to LCGPA through the local content portal (Article 13).
- Fines. If a supply contractor does not meet the share of national products stated in the tender documents, the agency may fine it up to 10% of the supply contract value (Article 29). A breach of the materials rule allows a fine of up to 10% of the value of the affected item (Article 30). Total fines are capped at 20% of the contract value, and with the Minister of Finance's approval the percentages may be raised if bidders are told before they submit (Articles 33 and 34).
Other preferences in the same regulation
| Mechanism | When it applies | Effect |
|---|---|---|
| Mandatory list (Articles 8–9) | Products on LCGPA's list | Agencies must buy listed national products; a non-compliant bid or item is excluded from supply tenders |
| Price preference for national products (Articles 10–11) | National products not on the mandatory list | Foreign products are treated as 10% more expensive |
| Preference for local SMEs (Article 4) | Contracts that are not high-value, except supply contracts | Other bidders' prices are treated as 10% higher |
| Local content weight (Articles 14–22) | High-value contracts, except supply contracts | Price 60%, local content 40%, with 5% added for companies listed on the capital market |
| Minimum local content requirement (Articles 23–27) | Contracts designated by LCGPA with EXPRO | The bidder's target may not be lower than the minimum in the tender documents |
Where network devices fit
A network device is a national product under the regulation's definition if it is manufactured in the Kingdom. In practice, manufacturing a network device covers different amounts of local work: at the SKD stage the device is completed, tested and packaged locally from partly built sub-assemblies, and at the CKD stage the circuit boards are also assembled locally. Chips are made by a separate industry.
How a specific device is treated in your tender, and which documents prove its origin, is decided under the regulation and LCGPA's rules for that product. Ask the supplier which documents it can provide, and confirm with the tender documents before you count a device as national in your price.
Pricing a bid that includes network devices
- Declare the origin of every item. An item without a declared origin is priced as foreign.
- Check the mandatory list first. If the device category is listed, the preference does not decide the outcome: compliance does.
- Run the adjusted bid value. Work out your share of national products and compare your adjusted value, not only your quoted price.
- Read the tender's percentage. The 10% may be raised if the tender documents say so.
- Plan the evidence. In a supply contract you will need to prove national origin within 30 days of the contract end.
Network devices assembled in Riyadh by IK Semiconductor
IK Semiconductor (Interkey Semiconductor) is an Interkey group company that assembles network devices in Riyadh under OEM contracts.
- Today, at the SKD stage: partly built sub-assemblies are completed, tested, loaded with firmware and packaged in Riyadh.
- Planned for 2028, the CKD stage: complete assembly from individual components, including SMT and DIP board processes.
- Device families: 5G CPE, Mesh Wi-Fi and ONT are the factory's SKD product lines, ready for manufacturing partnerships; 5G MiFi is a planned line.
- Local content certificate: IK Semiconductor holds a local content certificate issued by LCGPA; ask us for a copy.
- Mandatory list: IK Semiconductor is listed on LCGPA's mandatory list for government procurement.
Tell us the device and the tender, and we will tell you which steps of the work take place in Riyadh and which documents we can provide.
Questions bidders ask
Is the price preference always 10%?
10% is the rate in the regulation. LCGPA and EXPRO may agree to raise it for a tender, and the higher figure must then be stated in the tender documents.
Does the price preference apply to products on the mandatory list?
No. Article 10 applies it to national products that are not on the list. Listed products must be bought as national products.
Is there an official PDF of the regulation?
Yes. The Ministry of Finance publishes an English translation, linked below, and the Arabic text is the one that governs.
Can a supplier confirm that its device is a national product for our tender?
A supplier can tell you where and how the device is made and provide documents. How the device is treated in your tender follows the regulation, LCGPA's rules for the product and the tender documents.
Discuss locally assembled devices for your bid
Tell us the device, the quantities, the delivery dates and the tender the devices are for. We will reply with what the Riyadh line can assemble at its current stage and which steps take place in the Kingdom.
info@interkey-sc.com.sa · +966-11-2180999 · +966-55-3475469 · Riyadh, Saudi Arabia
Sources (checked 2 November 2026)
- Regulations on Preference for Local Content, Ministry of Finance (English translation; the Arabic text governs)
- Regulations on Preference for Local Content, consolidated Arabic text and status (in force), Bureau of Experts at the Council of Ministers
- Council of Ministers Decision No. 199 approving the Government Tenders and Procurement Law, Umm Al-Qura, 4 September 2026 (Arabic)
- Local Content and Government Procurement Authority