The Local Content and Government Procurement Authority (LCGPA) oversees the mechanisms behind this shift. These mechanisms are designed to increase spending within the Kingdom, encourage national supplier participation, and strengthen domestic businesses' contribution to economic development, in support of Saudi Vision 2030.
Depending on the procurement mechanism, a company’s local content position can influence how its bid is evaluated and, in some cases, whether its bid can proceed through the evaluation process. That makes it a strategic variable to be managed as part of tender strategy, rather than a certificate to be renewed and filed. Companies that understand how the score is built, and how procurement rules apply it, will be better placed to compete.
How local content shapes bid evaluation
Saudi Arabia’s procurement framework uses several mechanisms to favour local economic participation. Which one applies depends on the nature and value of the procurement, the relevant regulations and the requirements set out in the tender documents.
The most commercially significant is the weighting of local content in financial bid evaluation. Where the Local Content Weighting Mechanism applies, the standard financial evaluation formula allocates 60% to price and 40% to local content-related factors: the bidder’s local content baseline, its targeted local content percentage and, where applicable, additional points for companies listed on the Saudi capital market.
The consequence is significant. A company with a stronger baseline and a credible target can outscore a competitor offering a lower price but a weaker local content position. Price still matters, but it is no longer the only lever.
Weighting is not applied uniformly, however. Other mechanisms include price preferences for national products, mandatory local product requirements and minimum local content thresholds. Before deciding on bid structure, establish which mechanism applies and verify the precise calculation against the governing regulations and tender documents. From there, local content needs to inform tender pricing, supplier arrangements, and workforce and investment planning.
What drives the score
A company’s local content percentage reflects the contribution of qualifying Saudi-based economic activity to its overall operations, measured under the LCGPA methodology. The framework considers four components: employee compensation, goods and services, capability development and asset depreciation. Each draw on data held in a different part of the business, so understanding the inputs is the first step toward improving them.
1. Employee compensation and workforce composition
Employee compensation is an input to the company-level measurement, so payroll records must be complete, correctly classified, and properly documented. Inconsistent employee records, incomplete payroll information or differences between payroll, finance and HR systems are common sources of measurement difficulty and certification delay.
Recruitment, employee development, and responsibility allocation within the Saudi operation can also shape the company’s domestic footprint, depending on the methodology. Workforce decisions should nonetheless be driven by operational need, employment requirements and long-term talent strategy. The aim is a sustainable Saudi operation in which eligible compensation is accurately captured, not a headcount exercise designed around the score.
2. Goods and services purchased within Saudi Arabia
Procurement often offers the clearest opportunities, and assumptions cause the most problems. Expenditure on qualifying goods and services contributes to the measurement, but its treatment depends on the methodology, the nature of the spend and the supporting information available.
Procurement teams should review the supplier base, including professional services, logistics, maintenance, facilities management, and technology services, to determine which purchases qualify and whether supplier documentation supports the reported figures. A supplier’s Saudi address alone does not establish eligibility, and higher spending in the Kingdom does not automatically produce an equivalent improvement in the score.
Where commercially appropriate, sourcing goods and services that generate qualifying local content under the applicable methodology can strengthen the company’s position, provided quality, cost, availability, contractual performance and operational risk are considered alongside it.
3. Capability development and investment in people
Capability development forms part of the official framework. Investment in employee training, professional development and organisational capability supports the long-term strength of the Saudi operation. Identify, document, and check relevant expenditure, from training programmes and professional qualifications to technical development initiatives, against the methodology rather than assuming it qualifies.
The value extends beyond the score. Building local capability strengthens operational resilience, reduces reliance on external resources in certain areas and supports knowledge transfer within the organisation.
4. Asset depreciation and the Saudi operating footprint
Asset depreciation is the fourth component and is particularly relevant for companies with substantial operations in the Kingdom. Fixed asset registers and depreciation schedules should be accurate, complete and consistent with the accounting records, with asset classifications, acquisition details and calculations supported by documentation.
Finance teams should note that accounting treatment and local content treatment are not necessarily the same. The question is which asset values and depreciation amounts qualify, not simply what appears in the financial statements. A well-maintained register serves both purposes.
Baseline and target: two numbers, two purposes
Tender planning turns on the difference between two figures. The baseline is the company’s measured local content position under the applicable methodology. The targeted local content percentage is the commitment made for a specific tender or contract, where required.
Holding a certificate does not settle the matter. A company may still need to set a separate target for a particular contract, based on a realistic assessment of the proposed delivery model, anticipated expenditure, staffing, and procurement arrangements. Where the mechanism incorporates both figures into financial evaluation, each affects the outcome.
The temptation is to set an ambitious target to lift the evaluation score. That carries real risk. If the company wins, it may have to demonstrate through the prescribed reporting and verification process that it met the commitment, and an undeliverable target can create contractual, financial, and reputational exposure. The right target is commercially competitive, backed by a credible delivery plan and consistent with the procurement requirements.
When local content becomes an eligibility issue
In some procurement exercises, local content does more than influence the score: it determines whether a company can compete at all. Where a minimum baseline or local content requirement applies, a bidder that falls short may be excluded under the tender conditions and regulations, regardless of its price or technical credentials. Weighting rewards a stronger position; a threshold can end a bid before evaluation begins.
On 17 April 2026, the LCGPA announced changes affecting management consulting and IT services. For management consulting tenders valued at SAR10 million or more, a minimum company-level local content baseline of 30% is scheduled to take effect from 1 April 2027, expanding to tenders valued at SAR5 million or more from 1 January 2028. For IT services contracts valued at SAR10 million or more, local content weighting in financial evaluation will begin on 1 April 2027, without the same minimum company-level threshold under that announcement.
For consulting and IT businesses pursuing public-sector work, the time to prepare is now. They should assess their current company-level position, close any gaps in the information required for certification and test whether their operating model can meet the requirements before the new measures take effect. Dates and thresholds should be confirmed against the relevant LCGPA announcements and individual tender documents, as requirements may differ by category and remain subject to further regulatory developments.
From compliance exercise to planning tool
Because the score draws on data held across the business, neither finance nor procurement can manage it in isolation. The starting point is a reliable baseline and a clear view of each component’s contribution.
Finance reviews expenditure and asset information. Human resources validates compensation and workforce records. Procurement assesses supplier data and purchasing patterns. Operations tests whether changes to sourcing, staffing or delivery are commercially feasible. Together, this review should surface both data-quality issues and genuine opportunities to increase the company’s domestic economic contribution.
Model changes before implementing them, whether that means sourcing eligible services locally, investing in workforce capability, or adjusting the delivery model for a specific contract. Test each scenario against the official methodology, commercial cost, operational requirements, and contractual obligations. The result should be a realistic improvement plan, not a target built on unsupported assumptions.
Certification, evidence and tender readiness
A local content percentage is only of value in a tender if it can be evidenced. The LCGPA’s certification service requires measurement information and supporting evidence, and involves engaging a qualified audit firm, preparing the local content measurement report and agreed-upon procedures, submitting to the Authority and subsequent review. Data should therefore be prepared well ahead of tender deadlines and reconciled to payroll records, procurement schedules, financial statements and fixed asset registers.
Companies should also confirm that their certificate is appropriate for the intended tender, and whether the competition documents call for a targeted local content percentage document or other submission. The LCGPA issues these documents for tenders requiring a declared target, and the application must align with the relevant competition and mechanism. Tender readiness, in short, means the right documentation, the correct calculation and a clear understanding of what each opportunity demands.
A practical action plan for finance and commercial leaders
Establish the current position. Review the existing certificate, measurement methodology and underlying data, and identify the factors driving the current result.
Validate the inputs. Reconcile employee compensation, goods and services expenditure, capability development and asset depreciation information with the relevant source records.
Identify commercial opportunities. Assess whether supplier arrangements, workforce development, operational investment or contract delivery plans offer realistic scope for improvement.
Map upcoming tender requirements. For each opportunity, confirm the procurement mechanism, evaluation formula, minimum thresholds, certificate requirements and any targeted local content commitment.
Set a deliverable target. Model the commitment against the expected cost base and delivery arrangements, without compromising quality, contractual obligations or commercial viability.
Own the evidence. Assign clear ownership of the relevant records so you can reconcile, review, and submit information within the required timeframe.
Monitor throughout the contract. Where a contract carries a local content commitment, track actual performance against the target and address emerging gaps before the final reporting stage.
Local content belongs on the commercial agenda
Saudi Arabia’s local content framework ties domestic economic contribution directly to competitiveness in public procurement. Depending on the mechanism, a company’s baseline, contract target, supporting evidence and ability to meet thresholds may all shape its tender position.
The organisations that compete most effectively will treat local content as a shared business responsibility: finance providing reliable data and reconciliations, procurement maintaining visibility over supplier spend, human resources ensuring compensation information is accurate, and commercial leaders understanding how requirements affect eligibility, evaluation and delivery.
Managed in this way, the score is more than a compliance measure. Where the relevant mechanism applies, it becomes part of the company’s commercial proposition and a genuine source of advantage in Saudi Arabia’s evolving public procurement market.
How Grant Thornton Saudi Arabia can help
Grant Thornton Saudi Arabia supports businesses with the financial, operational and reporting considerations associated with local content requirements. Our professionals help organisations review their local content data, assess the inputs that shape their measured position, strengthen supporting documentation and evaluate the implications for tender planning.
By embedding local content in broader financial and commercial planning, businesses can improve tender readiness, strengthen internal coordination and make better-informed decisions about competing for government contracts in the Kingdom.