Contract bundling serves a very useful function – ExxonMobil Guyana President

Aug 14, 2022 News

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Kaieteur News – Despite a downpour of complaints from small contractors in Guyana looking to cash in on the provision of goods and services to the oil and gas sector, President of ExxonMobil Guyana, Alistair Routledge has made it clear that the bundling of contracts serve as a very useful function, hinting at the same time that Guyanese should become comfortable with this norm.

During an interview with an online media outlet, Newsroom, Routledge was asked whether the company engages in contract bundling to which he answered in the affirmative.

He noted that ExxonMobil Guyana is an oil and gas operator, hence it does not specialise in other areas, pointing to the need for specialised services to be offered to the company. In offering a case in point, Routledge in the interview aired on Friday said it was only earlier in the week that the company convened a meeting with a group of local contractors, indicating that Exxon was in search of a company to assist in office management.

According to the subsidiary’s President, “We’re an oil and gas operator, now take for example of say running an office. We recently held a request for information (RFI) or interest session with a number of local companies earlier this week and we made the point that we are not an office management company; we’re an oil and gas operator. So, we are looking for a company that can help us to run an office.”

He went on to point out that this means, any client hired by the company to “run the office” will also have to offer janitorial and pest control services for example. “We then would expect that company will go looking for particular services like janitorial services, like ground maintenance services, pest control, that is normal,” Routledge indicated. Adding that “the benefit of us passing that, if you like, as a managed service to another company is they then will find those services with local companies as well and when they go and they manage other buildings, which is their business, they then will provide other opportunities for those sub-contractors in that chain.”

As such, he contended, “Yes, some people have criticised bundling, but it actually serves a very useful function in cascading opportunities through the supply chain whether it’s in running offices, whether it’s providing logistic services or whatever it may be, it is normal practice around the world to have this normal structure in any industry.”

Since the enactment of Guyana’s flagship Local Content legislation, passed in December last year, small contractors have been decrying the bundling of contracts by oil companies, complaining that this practice have been denying them an opportunity to benefit from contracts.

The Local Content Secretariat which is charged with oversight of this sector has strict guidelines in place already which is clear that  a Contractor, Subcontractor, Licensee shall, as far as 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, the Guidelines state that Contractors, Subcontractors, 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. These include, but are not limited, to the following: rental of office space, accommodation services (apartments and houses), equipment rental, surveying, pipe welding-onshore, construction work for buildings-onshore, waste management services, storage services, catering services, janitorial and laundry services, food supply, administrative support, medical services, security services, dredging services, local insurance services, and public relations work.

Although these provisions are already in place, the local organisations representing the business community such as the Georgetown Chamber of Commerce and Industry (GCCI) as well as the Private Sector Commission (PSC) have been condemning acts of bundled contracts on almost a weekly basis.

For instance, President of the GCCI, Timothy Tucker has argued that six months after the much vaunted Local Content legislation was passed, local small and medium-sized businesses are still facing barriers to benefit from the petroleum sector.

The Chamber in a statement said that it has taken note of recurrent contract bundling practices within Guyana’s petroleum sector and expressed its disapproval of this practice.  According to the GCCI, contract bundling, which is 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 said too 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 believes that contract bundling works against the spirit and intent of Guyana’s Local Content Act (2021) thereby, defeating the objectives of the legislation as it relates to private sector development.

Back in May, when the first consultation was held with the business community prior to the passage of the legislation, 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 that 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.

Last week, the Local Content Secretariat Director, Martin Pertab issued a stern reminder that under the legal provisions established to safeguard locals, companies which indulge in bundling of contracts are liable on summary conviction to pay a fine of $50 million.

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”.

“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 $50 million,” he said.

 

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