Discover how the Local Content Certificate in Saudi Arabia boosts your eligibility for government projects. Learn the process, requirements, and how BMS Auditing can support your certification journey.
Do you know your company can miss great opportunities and cannot qualify for government tenders if it doesn’t obtain a Local Content Certificate in Saudi Arabia? It is crucial to be updated about all the legal frameworks to keep your company safe from risks or penalties. If you don’t know where to get the Local Content Certificate, don’t worry. We got you!
This guide provides a detailed overview of the significance of the Local Content Certificate in Saudi Arabia.
What is the Local Content Certificate?
The Local Content Certificate is an official document issued by the Local Content and Government Procurement Authority (LCGPA) in KSA. It indicates the percentage of a company’s contribution to the local economy through its services, goods, and workforce. It serves as proof that your company is compliant with local content regulations.
Why is the Local Content Certificate Important?
This certificate is significant for companies that aim to bid for government projects or want to work with entities that prioritize local content in procurement. This certificate validates the efforts of a company in supporting Saudi Arabia’s economy and human capital development.
The primary purpose of the Local Content Certificate is to promote accountability and transparency in local content measurements. It standardizes how contributions to the local economy are quantified and makes it easier for government entities to evaluate contractors and suppliers.
Who is Responsible for Issuing the Local Content Certificate in KSA?
The main governing body involved in the issuance of Local Content Certificates is the Local Content and Government Procurement Authority (LCGPA). It was established to set standards, policies, procedures, and regulations that support the local content across multiple sectors. In some cases and sectors, third-party agencies are also involved in the issuance of this certificate.
LCGPA collaborates with several private and public stakeholders including the Ministry of Industry and Mineral Resources, the Ministry of Investment, and various chambers of commerce. The collective goal of these entities is to make sure that local content initiatives are implemented across Saudi Arabia consistently.
Eligibility Criteria for Companies
You must be wondering whether your company is eligible or not. In Saudi Arabia, any company that is involved in government or semi-government procurement can apply for a Local Content Certificate. Here are the following requirements that a company must fulfill:
- Being legally registered in KSA
- Maintaining valid commercial registration
- Having proper financial records
Types of Local Content Certificate
Generally, there are two types of Local Content Certificates. Self-Declaration Certificate and Verified Certificate. The Self-Declaration Certificate is based on data submitted by the company, and it is majorly used for early-stage qualification or lower-value contracts.
On the other hand, a Verified Certificate requires third-party validation, and it is used for high-value contracts. This certification is required in sectors with stricter regulations. The requirement of a certificate also depends on the value of a project and the entity issuing the tender.
How to Apply for a Local Content Certificate?
Here are the following steps on how to apply for a Local Content Certificate:
Step 1:
The first step is to get your company registered on the official portal of the Local Content and Government Procurement Authority (LCGPA).
Step 2:
Now you have to fill in a form providing authentic and thorough information about your company’s financial records, operations, employee statistics, local procurement activities, and other relevant data.
Step 3:
To prevent any delays or rejection, it is important to double-check all the submitted information for completeness and accuracy.
Step 4:
Along with all the required documents, submit the application form through the portal.
Step 5:
Now wait for the initial review by the LCGPA or any other authorized entity. They will request additional documentation if needed.
Step 6:
You must be prepared for site visits, interviews, and physical audits by the assessors for data validation.
Step 7:
After successful evaluation of the submitted data, the Local Content Certificate will be issued. The timeframe for issuance may vary depending on the complexity of the company’s operations and the application completeness.
Required Documents and Information
While applying for the Local Content Certificate, it is crucial to know which documents are required in the process. Here is the list of documents you may require to apply:
- Commercial Registration (CR) – A valid and updated copy.
- Supply Chain Details – List of local and international suppliers.
- Audited Financial Statements – Typically for the last three years.
- Manpower Records – Provide a detailed breakdown of Saudi and non-Saudi employees.
- Procurement Lists – Records that show purchasing from local vendors.
- Sector-specific Data – Any additional documents requested by the LCGPA.
- Evidence of Training Program – Documents proving investment in employee development.
Local Content Certificate Assessment and Evaluation Process
In Saudi Arabia, the evaluation process involves calculating a company’s local content score based on a standardized formula. The score is based on various elements including local purchases, capital assets, Saudi employee wages, and community investment.
Whereas for a verified certificate, the third-party auditors conduct a thorough investigation of financials and operations. They may visit your physical site, interview HR departments, and check whether the provided data aligns with the submitted forms.
Benefits of Local Content Certificate for Companies
Here are the key benefits of the Local Content Certificate for companies:
1- Enhanced Reputation
This certificate showcases your company as a trusted and locally committed brand in Saudi Arabia leading to a better and profitable business.
2- Competitive Edge
This certificate increases the chances of getting government projects, tenders, or contracts. It also helps with getting public-private partnership projects.
3- Access to More Opportunities
Another key benefit of obtaining this certification is opening doors to exclusive bids and projects that require a high local content score.
4- Stronger Local Partnerships
It boosts credibility with Saudi suppliers, business partners, and investors.
5- Attracts Investment
As this certification improves the credibility, transparency, accountability, and position of your company, the local and foreign partners get attracted, and the chances of investment increase.
6- Boost Market Sustainability
The growth of businesses is the growth of the country. This certification contributes to long-term growth and sustainable business operations in Saudi Arabia.
Challenges and Considerations
Here are some challenges that you may face during the Local Content Certification application process:
- Complex Data Collection: Gathering and organizing detailed records can be time-consuming and tough.
- Limited Resources: It can be difficult for small companies to afford the cost and expertise needed to complete the application process.
- Continuous Monitoring: To stay compliant, businesses must track and improve their local content score regularly. Continuous monitoring can be challenging sometimes.
- Investment in Workforce Development: It becomes difficult for companies to stick to the commitment of training and upskilling Saudi employees.
- Local Suppliers: Companies may need to restructure their supply chains and prioritize local suppliers.
- Strict Financial Transparency: To pass audits and renewal certifications, it is crucial for the companies to maintain strict financial transparency and accountability.
Role in Vision 2030 and Saudization
The role of Local Content Certification aligns with Vision 2023 as it helps in promoting economic diversification. Increasing participation in local services and industries supports sustainable development and decreases the dependency on foreign investment, imports, and foreign labor.
It also contributes to Saudization by increasing employment among Saudi nationals. Companies are encouraged to prioritize their businesses with local suppliers and employee Saudi nationals which directly leads them to achieve better local content score and compliance with rules and regulations.
Common Mistakes to Avoid
Here are some common mistakes that you must know beforehand to avoid them:
- Submitting Incomplete or Incorrect Details
- Underestimating Process Complexity
- Lack of Proper Internal Systems
- Poor Data Management
- Overreliance on Imported Goods
- Low Saudi Workforce Employment
- Failure to Strategically Plan
Empower Your Business with Local Content Compliance
Securing a Local Content Certificate in KSA is not just a regulatory requirement; it's a strategic move that opens doors to lucrative government tenders, enhances your company’s reputation, and supports Saudi Arabia’s Vision 2030 goals. While the process may seem complex, having expert guidance makes all the difference.
At BMS Auditing, we specialize in helping businesses navigate the certification process from documentation to audits, ensuring full compliance and maximized benefits. Let us handle the technicalities while you focus on growing your business in the Kingdom.
Contact BMS Auditing today to start your Local Content Certification journey with confidence.
