In a strategic move aligned with the goals of Saudi Vision 2030, which aims to enhance the efficiency of government spending and develop the national economy, the Local Content and Government Procurement Authority a package of fundamental amendments to measurement and auditing mechanisms. These amendments aim to raise the level of transparency and accuracy of data submitted by establishments, thereby ensuring that government purchasing power is effectively directed towards strengthening local industry and services.
Context of promoting local content
This step complements the efforts the Kingdom has been making since the Authority's establishment, as the "local content" file is a fundamental pillar of the National Industrial Development and Logistics Program. Through these regulations, the Authority seeks to move from mere quantitative measurement to qualitative auditing, ensuring that funds spent on government projects contribute to creating genuine job opportunities for citizens and localizing industries, rather than relying entirely on imports.
Details of the new amendments: A precise classification of the workforce
According to the new regulations, the traditional classification of employees (Saudi/Expatriate) is no longer acceptable when submitting a total compensation analysis. The Authority has mandated that establishments provide detailed data including gender classification (male and female) within their payroll records. To ensure the reliability of this data, the analysis will undergo rigorous testing based on tracking a random sample of at least 40 employees, or 20% of the total workforce cost, to verify the accuracy of job classifications and allocated compensation amounts.
Combating the phenomenon of intermediary suppliers
In its efforts to bolster genuine domestic industry, the Authority has put an end to the practice of relying on intermediary suppliers without added value. The new regulations stipulate the necessity of disclosing the true "manufacturing factory" and its unified national identification number if the product is locally made but the supplier is not the manufacturer. This measure aims to directly support domestic factories and prevent the manipulation of origin data.
Strict measures on supply chains and capital spending
The amendments included stricter oversight of supply chains, requiring that at least 10 suppliers be disclosed, or that data cover 70% of the total cost of goods and services. Regarding capital expenditure, the authority mandated that any unspecified cost exceeding 30% of total expenditure be classified as "unauthorized," and that an asset register be submitted detailing what was produced locally and what was imported, particularly for critical assets such as factories and power plants.
Expected economic impact
These stringent measures are expected to increase the local content ratio in government contracts, positively impacting non-oil GDP. Furthermore, these regulations will foster a fair and competitive environment based on efficiency, quality, and genuine contribution to the national economy, encouraging both foreign and domestic investors to inject more capital into the Kingdom's industrial infrastructure.
