Government Contract Violators Face Up to Five-Year Ban and 10% Fine

Saudi Arabia’s new Government Competition and Procurement Law gives authorities several ways to punish bidders and contractors who violate procurement rules. The measures include a ban on dealing with government entities for up to five years, a downgrade in classification, or both.

The law also allows a financial penalty instead of a ban. The fine may reach 10% of the bid’s total value, meaning the amount rises with the size of the government competition.

Under Article 87, one or more specialist committees will examine violations and issue decisions. The article says those decisions do not remove any additional penalties required under other laws.

Legal adviser Saud Al-Rumman said the impact of the law extends beyond the financial penalty. A company barred from government dealings could face commercial and professional consequences, particularly when government contracts account for a major part of its business. The supplied text ends while explaining the significance of linking the fine to the total bid value.

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The strength of the provision does not stop at the financial penalty, but extends to the commercial and professional consequences of barring an establishment from dealing with government entities, particularly for companies for which government contracts represent a major part of their business.