It is important to have a local content plan while bidding for oil & gas contracts 

Some oil companies have already  expressed displeasure on how companies are losing out on procurement deals over tendering shortfalls. Photo | file 

What you need to know:

The idea of using local firms fits well with the national content strategy with an aspiration to retain at least 40 percent ($6b) of the $15b dollar investment into the oil sector

Oil companies have for long indicated the desire to have the participation of local firms in providing goods and services. 

Several oil experts say it is cheaper and more logical to use firms that are on ground than foreign entities that may have huge markups.

However, during the April oil and gas convention in Kampala, oil companies expressed displeasure on how companies were losing out on procurement deals over tendering shortfalls.

The idea of using local firms fits well with the national content strategy with an aspiration to retain at least 40 percent ($6b) of the $15b dollar investment into the oil sector. 

Capacity development of local businesses to supply the oil and gas sector is one of the key objectives of the National Oil and Gas Policy of 2018.

So far, 16 categories of goods and services, among which include, transportation, security, foods and beverages, accommodation and catering, human resource management, office supplies, fuel supply and land surveying are ring-fenced for local companies. 

Others are clearing and forwarding, crane hire, locally available construction materials, civil works, supply of locally available drilling and production materials, environment studies and impact assessment, communications and information technology services and waste management services.

One can actually relate to this discussion with the Total Energies procurement plan for the third and fourth quarters, which lists services that are available through open and selective bidding. 

The plan largely falls into the third tier contracts, where majority of Ugandans are involved. 

Whereas the idea is to have more Ugandans involved, there are a number of shortfalls locking out local companies. 

In a recently published report by the Uganda Chamber of Mines and Petroleum, Ms Pamela Alinda, the Total Energies contracts and procurement manager, goes at length to discuss the challenges and lessons in bidding. 

Unfortunately, she says many firms miss vital information even when the needs are well structured and communicated as instructions to bidders.

Most of the time, Alinda says, participants are in a hurry to beat deadlines, which makes them skip important information. 

Quite often, submissions are classified as inadequate or insufficient if they miss information or respond totally differently to the questions that have been raised. 

It is also noted that their is lack of proactive engagement by bidders during the process, yet, “the more one engages, the faster they understand the scopes and needs of the contractor. 

It has also been observed that there is a missing link between how participants understand the scope and how they structure the methodology of how to get the work done. 

“The firms are technically driven so they focus on understanding the technical aspects but miss out on national content, which is ideally the heart of Total Energies,” Alinda says.

For instance, Total Energies demands that bids must illustrate how they intend to benefit communities and build capacity programmes for posterity.   

All this, she says, are simple processes if one takes the trouble to understand technical, safety, social, biodiversity and health – related national content aspects. 

“These aspects should be already prepared by all intending participants and having this ready beforehand would save so much time during the process,” she says.

The details do not substantially change and if prepared way ahead and only custom adjusted to meet a particular bid, would go a long way to save time. 

Timely filing of tax returns and complying with social security requirements, are the other challenges that participants need to comply with at all times.

Many local companies have placed bids that are wanting in terms of capacity and national content requirement. 

However, Alinda notes that it is important that such companies consider joint ventures as vehicles through which they can increase capacity and fulfil the national content requirement. 

“The industry is high end in terms of value so even a company that has been working in the industry for a while will need that boost. Establishing these relationships earlier will go a long way to boost the capacity,” she says. 

Its also emphasised that having a dedicated team of bid management personnel that understand how to put bids together would increase a firm’s chances of winning bids.

Whereas it is perceived as a fact that a company goes for the lowest bid, it may not entirely be true as there are other considerations such as national content maximisation.

To illustrate this, Alinda says, if there are two bids in line for award and one of them has a higher national content score, plan and commitment yet the price difference is about 5 percent, the one with the high national content score will be more desirable. 

Therefore, maximisation of national content remains a joint effort, but as Alinda says due attention must be given to every aspect of the bid because they are all important.

Local content 

Georgina Kirabo, a PwC senior associate tax, in an expert analysis on businesses winning oil contracts notes that every company that is looking to win a tender or retain a contract must incorporate national content within its business because this contributes a significant score when evaluating bids.   

Businesses, she says, should prepare a national content plan in time and shouldn’t wait for tenders and bids to be advertised. 

“The national content plan should address aspects such as the number of Ugandans you employ, the number of Ugandans in the management team, training opportunities and internships for fresh graduates, as well as research initiatives,” Kirabo notes.  

Shortfalls to avoid 

According to Ma Pexin, the CNOOC vice president, tendering shortfalls firms must avoid include submitting generic tender responses that don’t match responses to questions asked.

Proposals, he said during the oil and gas convention, must be separate, especially in regard to price from unpriced commercial proposal

Additionally, bid proposals must be completed and submitted on time complete with supporting details and where some information is not clear, one should not assume, but seek clarity. 

It is also important that rules are  followed while at the same time lobbying during the bidding is avoided. 

Welcome!

You're all set to enjoy unlimited Prime content.