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Solutions

Assuring that contracts are awarded and performed to international standards of competitiveness on price, delivery and quality is the key to effective Local Content management. This is the win-win solution that meets the underlying interests of both companies and Governments

To meet their concession obligations to Government, and for their bottom line and reputation, companies need domestic suppliers to be competitive on price, delivery, quality controls and worker safety, and to avoid unethical behaviour.

Likewise, Governments need their industries to be competitive in order to create sustainable jobs and grow their economies, and are increasingly conscious of the need for transparency and accountability in processes of procurement and contract execution.

So how is this goal of building competitive local supply chains to be achieved? There are a number of solutions:

• Local Content strategies - country or project-specific Local Content development strategies founded on robust local economic and supplier market analysis, and designed to concurrently manage investor risks (to quality and schedule/delivery); bring business benefits (lower logistic costs etc.) and align with Government industrial and economic priorities (in particular competitive exports and competitive import substitution).
• Procurement - contracting strategies that bring considerations of Local Content targets and supplier/sub-contractor risk management into the choice of contract types (EPC/EPIC/Cm, continuity contracts, frame-agreements, strategic partnering etc); bid packages designed to incentivise lead contractors to play a pivotal role in employment creation, skills development, technology transfer, and local supplier competitiveness; and choice of payment methods (fixed, costs plus, target costs, continuity performance etc.) matched to the level of risk posed by domestic suppliers.
• Optimal regulations – Local Content regulations that balance the 'stick' of local content targets and quotas with the 'carrot' of rewarding clients and lead contractors who structure their supply chains and procurement procedures to stimulate national supplier competitiveness (rather than fuelling protectionism;)
• Ethical procurement - corporate controls for identifying and mitigating reputational and ethical risks within procurement and contract management, such as ethical risk assessment as part of pre-qualification, and contract provisions that facilitate joint company-contractor ethical risk mapping and the reporting of material breaches.