Guidelines for the Local Content Plan

Template for Contracts (at Entity Level)

Version 2.0
 Guidelines for the Local Content Plan Template at Entity Level

1- Introduction

1-1 In the context of the Vision 2030, the government anticipates that government procurement
spends shall contribute to:

 Increasing the actual value contributed to the economy of the Kingdom of Saudi Arabia
(“Kingdom” or “KSA”) in labor and manufacturing of goods and the provision of services.

 Increasing the proportion of expenses on goods and services provided by in-KSA

suppliers.

 Training of Saudis to improve their experience, skills and competencies, thus, allowing
them to progress into higher job positions.

 Developing research and development capabilities and activities in the Kingdom.

 Promoting international competitiveness and exports of Saudi business.

 Increasing the employment opportunities for Saudi citizens in high value job positions.

2-1 Nothing contained in these Guidelines or the Local Content Template (the “Template”) shall
contradict or relieve the commercial entity from any legal obligation in accordance with the
relevant laws and regulations of the Kingdom of Saudi Arabia.

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 Guidelines for the Local Content Plan Template at Entity Level

2- Local Content Plan within Tender Submission

2-1 The commercial entity (“entity”) shall submit a Local Content Plan as an integral part of its
response to a Request for Proposal (“RFP”). The Local Content Plan shall constitute
quantification of the level of Local Content performance anticipated for the last financial year
prior to contract end with regard to contract execution for which an RFP is issued. In preparation
of the Local Content Plan, the entity shall closely adhere to the definitions in the appendix of
these Guidelines.

2-2 The entity shall submit its Local Content Plan as a single and stand-alone document that
contains all responses, supporting and qualifying information.

2-3 In the process of tender evaluation, if requested by the procuring body, the entity shall provide
additional information regarding the submitted Local Content Plan.

2-4 The entity should take into consideration that the procuring body shall convert the information
submitted in the contractor’s Local Content Plan into binding contractual commitments.

2-5 The entity shall retain a true, complete and auditable set of records pertaining to the information
in the submitted Local Content Plan, including the assumptions and calculations used to
generate the levels of anticipated Local Content performance.

2-6 The procuring body and the Local Content and Government Procurement Authority (the
“Authority”) have the right to verify and audit the information contained in the Local Content Plan
in accordance with the local content terms and conditions.

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3- General instructions

3-1 The entity shall provide a concise overview of its Local Content Plan, highlighting the quantified
performance levels of Local Content for the last financial year prior to contract end. As the entity
completes the Template, it should follow the below general guidelines.

3-2 All financial amounts shall be reported in Saudi Arabian Riyal (SAR).

3-3 Revenues and costs reported in the Template shall be consistent with the revenues and costs
the entity would report in accordance with the accounting standards that are endorsed in the
Kingdom of Saudi Arabia.

3-4 Amounts reported in Section 3 through Section 6 cannot be double counted. For example, if a
local training service provider’s costs are shown in Section 4, these costs cannot be counted
again in Section 5 under expense on Training of Saudis. The entity may only assign costs to a
single category.

3-5 The cells within the Template that are colored in white are the ones where the entity will be
required to input data. The grey cells are formulas and calculations that are derived from data
input into other areas of the spreadsheet.

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 Guidelines for the Local Content Plan Template at Entity Level

4- Local Content template

4-1 Section 1: General Information

4-1.1 This section contains general information about the entity and the types of products and
services offered.

4-1.2 The entity shall provide tender information including government entity, tender name and
contract start/end date (Section 1.1). In addition to the name of the entity, address and
the entity shall also provide its financial year end. Further, it shall list its commercial
registration number, if no such number is available, the entity shall enter “N/A" to indicate
it does not have a presence in the Kingdom of Saudi Arabia (Section1.2), and provide a
contact person in the entity’s organization who is the main point of contact for completing
the local content entity Template (Section 1.3).

4-1.3 The entity shall give a brief description of the goods and services the entity provides
(Section 1.4). This should be limited to just a few sentences.

4-1.4 At a high level, the entity shall highlight the its progress and support of the Local Content
development in KSA (Section 1.5).

4-2 Section 2: Evaluation

4-2.1 Section 2.1 will be populated automatically based on the information provided in the other
sections.

4-2.2 Section 2.1 contains the calculation of the Local Content Score, i.e. the contribution value
of the entity as a share of its expenses for the last financial year prior to contract end.

4-3 Section 3: Labor

4-3.1 In this section, the entity shall provide compensation information related to its labor.

4-3.2 The entity shall complete Section 3.1 with the compensation of Saudis and expats
employed in the entity’s labor for the last financial year prior to contract end, including
overhead employees. Compensation costs include all salaries, wages, bonuses and
benefits (e.g., commissions, overtime, transportation allowances, housing allowances,
leave, other allowances, end of service benefits and General Organization for Social
Insurance (“GOSI”) contributions). Entity costs related to healthcare, interns, trainers,
supplier development and research and development are excluded from Section 3 and
shall be included in Section 4 or Section 5.

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4-3.3 This section shall exclude contractors/sub-contracted employees (which shall be

accounted for in Section 4 as suppliers of services).

4-3.4 The calculation of the value to KSA within Labor captures 100% of compensation paid to
Saudi employees and 37% of compensation paid to expat employees to account for
remittances.

4-4 Section 4: Goods and Services

4-4.1 In this section, the entity shall capture its spent on goods and services that related to
operating activities for the last financial year prior to contract end, including in-KSA and
out-of-KSA suppliers. Below are the expenses to be excluded in this section:

Excluded

 Income taxes, Zakat, and related penalties

 Intercompany costs for consolidated entities

 Customs and duties (even if included in inventory costs)

 Government fees (e.g., visa fees)

 Non-cash transactions (e.g., provisions and any other losses)

 Costs associated with compensation for Saudis and expats (included under Section 3)

 Costs associated with training of Saudis (included under Section 5)

 Costs associated with supplier development (included under Section 5)

 Costs associated with research & development (included under Section 5)

 Depreciation and amortization (included under Section 6)

 Capital expenditure

4-4.2 Section 4.1 summarizes the entity’s total operational and overhead spent on goods and
services for the last financial year prior to contract end as well as the contributed value
from this spent to KSA.

4-4.3 Section 4.2 the entity shall List at least 70% or the top 50 suppliers of the total expenses
on Goods and Services in descending order.

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4-4.4 Section 4.2 the entity shall select the sector that best describes the procured Goods or
Services from the drop-down menu (Sector of Product or primary Goods / Services
procured from Supplier) as follow:
4-4.4.1 If the supplier has a verified local content score from the Authority,
the score shall be inserted.
4-4.4.2 If the supplier does not have a Local Content score and is not verified
by the Authority (or the supplier is not specified when the local
content plan is developed), referred to Appendix A in the Template
and specifying which sectors the supplier belongs to. The sector is
then selected from the list in the table "Sector of product or primary
Goods / Service procured from supplier".
4-4.5 The remaining of total expenses are calculated automatically.

4-5 Section 5: Capacity Building

4-5.1 In this section, the entity shall capture costs of KSA capacity development for the last
financial year prior to contract end in the following areas:
(a) training of Saudis
(b) KSA supplier development
(c) KSA research and development

4-5.2 The entity shall complete Section 5.1 for its spent on the training and development for the
last financial year prior to contract end, both on-site and off-site, of Saudis employed
directly by the entity.

4-5.3 The entity shall complete Section 5.2 for its spent on initiatives for the last financial year
prior to contract end for the development of in-KSA suppliers that related to developing
business processes, technologies, and access to market.

4-5.4 The entity shall complete Section 5.3 for its spent for the last financial year prior to
contract end on initiatives directed at research and development activities that take place
in KSA and benefit the Kingdom.

4-5.5 In Section 5.1 through Section 5.3, the entity shall not have duplicate entry with all
sections.

4-6 Section 6: Depreciation and Amortization

4-6.1 In this section Assets that are bought from In-KSA manufacturer, their Local Content
contribution in terms of depreciation and amortization is 100%, if Assets are imported,
their Local Content contribution is 20%, only if assets are operating within the kingdom.

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4-6.2 In Section 6.1 the entity shall report its total depreciation and amortization for the last
financial year prior to contract end in accordance with the adopted methodology that
reported in the financial statements.

4-6.3 In Section 6.2 the entity shall further break down its total depreciation and amortization
based on productive assets classes:

4-6.3.1 Report the productive assets for the last financial year prior to
contract end which are located and bought from In-KSA
manufacturer, and productive assets that are bought from out of KSA
manufacturer will be calculated automatically.
4-6.3.2 If productive assets from In-KSA manufacturer do not match any of
the productive assets classes, allocate the depreciation to “Other”,
and describe this productive asset class in a level of detail that
matches the descriptions of the existing productive asset classes,
which contributes 100% to Local Content.

4-6.4 The contribution to local content from each productive asset class is automatically
calculated.

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Appendix – KPIs and Definitions

Local Content Key Performance Indicators:

Value to KSA within labor (SAR): Value of the total compensation for the last financial year prior to
contract end of Saudi employees (100%) and expat employees (37%) in the entity workforce. Do not
double count with expenses that reported in other sections.

Value to KSA within goods and services (SAR): Value of national components of the goods and
services purchased for the last financial year prior to contract end across all suppliers for the
entity’s in KSA operations. Do not double count with expenses that reported in other sections.

Expenses on Training of Saudis (SAR): Total expenses by the entity for the last financial year prior
to contract end for the training of Saudis in the entity workforce, including both on-site and off-site
training, e.g., induction, and technical and professional skills, internships and apprenticeships;
scholarships are to be included. Do not double count with expenses that reported in other sections.

Expenses on KSA supplier development (SAR): Expenses by the entity for the last financial year prior
to contract end for the development of in-KSA suppliers that related developing of business
processes, technologies, and access to market. Do not double count with expenses that reported in
other sections.

Expenses on KSA research and development (SAR): Operational expenses by the entity on in KSA
research and development activities for the last financial year prior to contract end. Do not double
count with expenses that reported in other sections.

Value added to Saudi Arabia from depreciation and amortization (SAR): Depreciation and
amortization of productive assets within Saudi Arabia for the reporting period.

Local Content is defined as the total spending on Saudi components within Labor, Goods, Services,
Assets, Technology and other items of the sort within the Kingdom of Saudi Arabia.

Commercial Entity means an entity that has a commercial registration in KSA, or licensed to perform
a commercial activity in KSA.

A Contract is a document, service agreement, purchase order or other contractual agreement for
the purpose of purchasing the goods or services for which the terms and conditions document was
issued.

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Financial Statements are an Entity’s financial statements that have been prepared in accordance
with accounting standards that are endorsed in the Kingdom of Saudi Arabia, and have been audited
by an independent auditor in accordance with auditing standards that are endorsed in the Kingdom
of Saudi Arabia.

Labor means the internal workforce of the entity only, comprising employees and in-house
contractors.

Saudi means any person who holds Saudi nationality or who is treated as a Saudi.

Expat means an individual who is not a holder of Saudi citizenship or who is not treated as a
Saudi.

On-site Training means training to workers, taking place on a project site or the premises of the
entity.

Off-site Training means training to workers, taking place not on a project site or premises of the
entity.

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