Describes how major projects are secured and financed. Explains activities of the multilateral development banks in and other aid-funded projects.
There are many opportunities to sell to the public sector in the UAE. Commercial Advocacy, via the Advocacy Center at the U.S. Department of Commerce, is available to U.S. companies to level the playing field on public sector procurements. Please contact us for additional information.
The UAE has a two-tier government with federal and emirate levels. Each emirate has specific provisions regulating government procurement activities. Public sector work is generally awarded on the basis of Federal Regulation of Conditions of Purchases, Tenders and Contracts, Financial Order No. 16 of 1975 (the “Public Tenders Law”), which prescribes minimum standards in relation to government procurement across the UAE. Public defense contracts have their own set of industry-specific rules.
For any types of government procurement project, U.S. firms must have a legal presence in the UAE and acquire their goods and services on a prequalified basis individually with the various government departments for procurement tenders. It is possible for bids to be sole sourced or to be awarded to select, pre-qualified contractors rather than to be competed via public tender at the discretion of the relevant governmental party, generally in the case of urgent need. Federal purchases are administered through the respective federal offices located in Abu Dhabi and/or Dubai. At an emirate level, purchases for goods and services are done directly by the institution depending on its needs.
For most civilian purchases, government entities prefer to deal with firms registered in the UAE, or in their particular emirate, and will favor local products over imports. Federal Law No. 2 of 2014 gives preference to Emirati entrepreneurs, and is designed to help Emirati small-and-medium-sized businesses secure more business.
Only when goods or services of desired quality are not available locally will the procurement authority seek outside sources. The government continues to limit direct procurements and require companies to make the arrangements for a local presence. Invitations to participate in government procurement tenders are usually sent only to the pre-qualified companies, and some are advertised in newspapers.
In-Country Value (ICV)
As part of its efforts to grow and diversify its economy through nurturing local and international partnerships and opportunities, improving knowledge transfer and creating job opportunities for UAE nationals in the private sector, the UAE has implemented an In-Country Value (ICV) system when evaluating commercial bids and inviting companies to participate in government-issued tenders. The Abu Dhabi National Oil Company (ADNOC) launched its own ICV program in 2018, mandating all suppliers to declare their ICV scores for consideration on tenders (ICV Certificate). ADNOC requires an annual third-party verification of the numbers of the ICV Certificate to be conducted. Senior-level officials have signaled ADNOC’s ICV pilot program could be expanded across additional sectors, after purportedly retaining $4.9 billion in Abu Dhabi’s coffers in 2018. It is also important to mention that many of the emirates now ask for in-Emirate value (IEV), which sets more challenges for foreign companies.
Competition in the public sector is very strong. Aside from large military procurement projects, governments in the UAE invest heavily in infrastructure projects, such as roads, power generation and distribution systems, desalination facilities, sewage systems, public housing, recreational facilities, hospitals and other medical facilities and services, schools, national security projects, athletic facilities, refineries and other hydrocarbon facilities, airports, and government buildings.
The UAE partner of the U.S. company is usually responsible for registering the U.S. product or service with the UAE government. The following documents are usually required for the registration:
- Ministry of Economy Certificate
- Reference List
- Last 3 years audited bank statement
- ISO, or other relevant, certifications
- Quality and HSE manuals
- Questionnaire that will be provided by the U.S. company
Though the English language is widely used in the UAE, the ability to communicate in Arabic is mandatory when communicating with the government.
Financing of Projects
UAE publicly held corporations drive many major projects requiring project financing.
Mubadala Investment Company, the Abu Dhabi sovereign wealth fund created in the merger of Mubadala Development Company with International Petroleum Investment Company in 2017, has launched multiple projects in the UAE ranging from aerospace, renewable energy, petrochemicals, utilities, metals and mining, to healthcare, technology, real estate and infrastructure, finance, defense, and education. The three major holding companies wholly owned by the Emirate of Dubai: Dubai World, Dubai Holding, and Investment Corporation of Dubai, have launched projects in the UAE ranging from aerospace and air transport, maritime transport and logistics, real estate and urban development, investments and financial services, metals and construction material, to hospitality and leisure, retail, technology and communications, and energy and natural resources.
The development of projects requiring financing is broadening and the role of the private sector in large-scale projects is becoming more varied and important. Major international and local banks behind these projects are advising and arranging major parts of the financing using a variety of sophisticated instruments: bonds, sukuks (Islamic bonds), loans, syndicated loans, murabaha (Islamic loans), initial public offerings, etc. The proportion of financing and the transaction leadership is steadily shifting towards local and regional banks, including Islamic banks.
Participation in Tenders
UAE government entities follow a relatively transparent system for tendering and awarding contracts. All invitations to bid are made public and are accompanied by a set of guidelines that bidders must follow. In order to be able to bid for government contracts, all bidders must register on the respective eProcurement system. For Federal entities, the Ministry of Finance (MoF) has an advanced procurement system for all federal entities through which it announces purchases related to MoF or other ministries and federal entities. Through this system, it also invites tenders and announces contracts.
To bid for contracts of local entities in Abu Dhabi, the Abu Dhabi government requires that contractors and suppliers must have an established presence in Abu Dhabi and must possess the licenses needed to carry on business activities in Abu Dhabi.
To bid for contacts of local entities in Dubai, the Dubai government utilizes the online eSupply portal operated by Dubai eGovernment and Tejari. The eSupply portal has created an official eSupply procurement portal for Dubai Government.
To bid for contracts in Sharjah, the Sharjah government follows a similar procedure to register contractors and issue contracts. The government bodies will verify the company that applied for registration and on successful verification, the company will appear in its ‘list of approved suppliers’. This will entitle contractors to bid for tenders.
The UAE is not a signatory to the WTO Agreement on Government Procurement. Depending on the nature and scope of the work, government entities offer two types of tenders to select qualified vendors:
Public Tenders: Procurement and contracting processes in public tenders involve four main steps: announcement of tenders, evaluation of proposals, awarding contracts, and supplying items or performing work. Public tenders can be either global or local. Global tenders are open to suppliers and contractors from within the country and abroad and are advertised in the local as well as international media. Local tenders are restricted to suppliers and contractors within the country and are advertised in the local media only.
Restricted Tenders: For restricted tenders, calls for bids are sent only to suppliers and contractors (at least three) whose names are registered and are selected by the concerned entity. Except for public advertising, all the rules and procedures pertaining to public tenders apply to restricted tenders.
To be qualified to work with any government entity in the UAE, contractors and suppliers must register with the procuring entity by submitting a completed pre-qualification application form to the procurement department. Prior to that, they must have obtained all necessary licenses to practice the type of activity from the Department of Economic Development (DED), the Chamber of Commerce and Industry, and the competent authority in that Emirate. They should also be adequately staffed with qualified technical personnel having the necessary skills, equipment, workshops, and warehouses.
Since direct purchases from foreign suppliers are rare, it is important to work through a local agent or distributor that has the ability not only to supply and install goods but also provide proper and timely after-sales service.
Therefore, selecting a local partner can be a critical first step in operating in the UAE. A reputable agent with good contacts can provide timely information, which is often very important for foreign companies. In addition, in view of the increased importance of providing adequate after-sales service, choosing a competent agent who has the resources and ability to ‘qualify’ is of high importance. Not only do the local agents provide knowledge of the market, they greatly assist in managing technological and cultural differences, while sharing local marketing and sales support tools.
UAE federal law sets out preferences for hiring UAE nationals and for some administrative positions it requires that only UAE nationals be employed. If a non-free zone company has more than 50 employees, it must employ a minimum percentage of UAE nationals in accordance with the “Emiratization” policy of the UAE federal government. The Emiratization policy applies to both the public and the private sector, and both local and international companies operating in the UAE are subject to the Emiratization policy in the sectors for which such guidelines have been formulated.
In the past in a number of the emirates, some American companies were asked to sign a document to show that they actively boycott Israel and are not doing any business there. This violates the U.S. Export Administration Act (50 U.S.C. §§2401-2420 (2000)) and Export Administration Regulations (15 C.F.R. Parts 730-774 (2014)).
For more information and help with trade barriers please contact:
International Trade Administration
Enforcement and Compliance
Phone: (202) 482-0063
U.S. companies bidding on Government tenders may also qualify for U.S. Government advocacy. A unit of the U.S. Commerce Department’s International Trade Administration, the Advocacy Center coordinates U.S. Government interagency advocacy efforts on behalf of U.S. exporters bidding on public sector contracts with international governments and government agencies. The Advocacy Center works closely with our network of the U.S. Commercial Service worldwide and inter-agency partners to ensure that exporters of U.S. products and services have the best possible chance of winning government contracts. Advocacy assistance can take many forms but often involves the U.S. Embassy or other U.S. Government agencies expressing support for the U.S. bidders directly to the foreign government. Consult Advocacy for Foreign Government Contracts for additional information.
Multilateral Development Banks and Financing Government Sales
Price, payment terms, and financing can be significant factors in winning a government contract. Many governments finance public works projects through borrowing from the Multilateral Development Banks (MDB). A helpful guide for working with the MDBs is the Guide to Doing Business with the Multilateral Development Banks. The U.S. Department of Commerce’s (USDOC) International Trade Administration (ITA) has a Foreign Commercial Service Officer stationed at each of the five different Multilateral Development Banks (MDBs): the African Development Bank; the Asian Development Bank; the European Bank for Reconstruction and Development; the Inter-American Development Bank; and the World Bank.