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Companies that fail to meet local content targets to pay $50M fine
Bundling of contracts…
– Local Content Secretariat Director
Kaieteur News – Under the legal provisions established to safeguard local content, companies which indulge in bundling of contracts are liable on summary conviction to pay a fine of $50 million.
Director of the Local Content Secretariat Martin Pertab
This is being emphasized by Director of the Local Content Secretariat Martin Pertab. His comments followed on close heels of a statement by the Georgetown Chamber of Commerce and Industry (GCCI) which pointed to the recurrent contract bundling practices within Guyana’s petroleum sector. In a statement issued last week, the GCCI explained the harsh impacts contract bundling have had on small and medium-sized enterprises (MSMEs). According to GCCI, MSMEs are unable to compete in the space since the ‘bundling’ practice will set an artificial barrier to their participation.
According to the GCCI, the consolidation of the procurement of various goods and services under one contract has seemingly become a practice of companies within the petroleum sector.
The Chamber noted that the sum-effect of this practice is that Micro, Small And Medium-Sized Enterprises (MSMEs) are unable to compete in the space since the ‘bundling’ practice will set an artificial barrier to their participation.
Apart from its obvious hindrance to MSMEs wishing to service the sector, the Chamber said that contract bundling works against the spirit and intent of Guyana’s Local Content Act (2021) thereby, defeating the objectives of the Act as it relates to private sector development.
Pertab in an invited comment said that the Local Content Secretariat sees bundling of contracts as a direct contravention to the First Schedule of the Local Content Act which speaks to “maximum participation of Guyanese companies supplying goods or providing services in the Guyanese petroleum sector and local capacity development”.
“Furthermore,” he stressed that this practice also does not align with the section 3.4 of the Procurement and Bid Evaluation Guideline published by the Secretariat which explicitly states that, ” A Contractor, Subcontractor, Licensee shall, as far reasonably possible, unbundle the proposed scope of works/services into smaller units so as to enable Guyanese companies and Guyanese nationals to participate in the tender; To ensure verification of compliance to the requirements of the Act, Contractors, Sub- Contractors, or Licensees should ensure that the Sectors and Sub-sectors specified in the First Schedule of the Act are not bundled during the planning process.”
The Director said therefore that the Local Content Secretariat remains firm that any contract awarded after the operationalization of the Act, and in which there is bundling of services stated on the First Schedule of the Act, will not be recognized or counted towards the measurement for the purpose of compliance with the minimum local content levels as set out in the First Schedule.
“Critically, a Contractor or Sub-Contractor who carries out petroleum operations without the minimum local content requirement commits an offence and is liable on summary conviction to a fine of fifty million dollars,” he said.
In the meantime, the Director noted that the Government of Guyana through the Ministry of Natural Resources (MNR) has publicly signalled its disapproval with the practice of contract bundling within the oil and gas sector.
Back in May, Minister of Natural Resources, Vickram Bharrat had put oil companies on notice that the Government of Guyana will not tolerate the shortchanging of citizens in their own country after it was brought to the attention of the administration complaints of unfair competition and other issues in the industry. Bharrat listed a number of issues he said are raised with him daily. To this end, he explained that local businesses have complained that oil companies have been bundling services for catering, security, garbage collection and other technical offshore support systems as part of one contract. This, Bharrat said, has been posing significant challenge to locals, as they are burdened to offer a service they are not registered to. In fact, this often lends to the oil company failing to achieve the local content targets. To ensure that the breach of the fresh law is not the outcome, the Minister had urged that the practice be stopped.
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