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Supporting Local Product and National Companies at
Kuwait National Petroleum Company
Approved Recommendations
Kuwait National Petroleum Company (KNPC) is interested in supporting
the local product
and national companies by applying clauses of the “Local Industry
Support Recommendations” for the oil sector, which was issued by
Kuwait Petroleum Corporation (KPC) in February 2004, and also by
applying other supplement KNPC recommendations that are approved in
the annual reports presented to KPC.
First: “Local Industry Support Recommendations” for the oil sector –
KPC (February
2004)
(Notice: Some clauses of the recommendations were modified for
clarity without changing the meaning. Also, in order to focus on the
recommendation clauses, the following sections were removed from the
original document: “Introduction”, “Recommendations Preparation
Method” and “Appendices”.)
1.
Preparation of Specifications:
1.1
Special specifications should not be stipulated unless a clear
necessity
exists.
Specifications of the local product should be considered while
preparing the
requirements if that product was accepted by the purchaser
and if
its source is
qualified.
1.2.
Requirements should not state a specific trade mark or specify a manufacturer
name
or requirements pertaining to specific materials or brands
unless a clear
necessity exists.
a.
In case where it is not possible to accurately state the
requirements of some
materials or items, at least three brand names or three
manufacturers should
be
stated.
b.
If the number is less than three, the statement “or equivalent
specifications,
quality, and market reputation” should be stated alongside
the brand or
manufacturer name.
2.
Suppliers/Contractors limiting:
2.1.
In case of limiting the bidding to a selected list of qualified
contractors, a reasonable percentage of local
contractors or manufacturers should be included in such a list. And
if that limiting led to a monopolistic behavior, the tender should
be cancelled and
re-issued to the whole range of qualified suppliers and/or
contractors.
3.
Preparation of technical, commercial and contractual documents of a
tender and the qualified supplier/contractor list:
3.1.
All tender documents that are open to general contractors should
include lists
of local suppliers/contractors qualified as subcontractors.
3.2.
All tender documents should include a clause that requires a
commitment
from the supplier, the main contractor and/or the subcontractor to
give
priority
to local products over the similar imported products when the local
product
meets the required specifications, productivity and delivery deadlines;
and when the local product price does not exceed that of the imported
one
(by more than 10%)
under the same economic conditions.
In case the supplier/contractor violates this commitment, they shall
submit a justification
that is acceptable to the requesting party.
3.3.
All contractual documents signed with suppliers, contractors and/or subcontractors
should include a condition that requires:
a.
Commitment that the share of the local products and activities
assigned to local
suppliers/contractors, concerning the signed contract with respect
to contracts
of main projects, should be a reasonable percentage determined by
the requesting party not less than 20% of the signed contract’s
total without
violating any other clauses of the recommendations.
b.
Commitment, when bidding, to submit a list with the estimated
volume,
type and value of the local products to be used for the contract
execution, and
identifying the activities to be assigned to local suppliers and/or subcontractors.
4.
Tendering and receipt of bids from suppliers/contractors:
Null.
5.
Evaluation of bids by KNPC:
1.
If the total prices for all bids are close, preference should be
given to the
supplier/contractor with the highest estimated total proportion of
local products and
activities assigned to local suppliers/contractors with respect to
the total price of the
offer. This clause should also be included in the contractual
documents of the tender.
6.
Recommendation of tender awarding or contract signing:
Null.
7.
Execution:
7.1.
The supplier/contractor shall include in their progress reports a
periodical report that
illustrates the local products supplied and the activities
subcontracted to local
subcontractors with respect to the contract’s total materials and
activities.
7.2.
Internal Audit Department in KPC should verify the extent of the
KNPC's
commitment to the implementation of the recommendations.
8.
Recommendations:
8.1.
KNPC should issue annual reports illustrating its consumption of
imported materials
that can be manufactured locally for the purpose of providing
information to the
Kuwaiti private sector and encouraging it to invest in these areas.
8.2.
KNPC should issue a quarterly bulletin with the tentative projects
to be carried out so
that the national suppliers/contractors would be acknowledged and
able to follow-up.
8.3.
During the preparation of their budgets (capital and operating) and
the five-year
plans, KNPC should assess the expected value of work, and the
expected proportion
of supplies, assigned to local supplier/contractors. Also, at the
end of each fiscal
year, KNPC should submit to KPC a statistical report illustrating
the actual value and
proportion compared to the planned ones.
8.4.
External stakeholders (KUI & PAI) should be encouraged to:
a.
Develop the criteria that facilitate definition of the local product
that deserves
support and a list of suppliers who meet these criteria to be used
for suppliers’
qualification.
b.
Encourage local suppliers/contractors to apply for qualification at
KNPC and
offer their products to allow KNPC to ensure fulfillment of the above
mentioned
purpose.
8.5.
KNPC should speed up unifying the lists of qualified companies and
factories as well
as qualified suppliers and contractors, classifying them into Local,
Gulf and Global. his is to be used by KPC and its subsidiaries during materials
supply, project
implementation, maintenance and/or operation.
8.6.
Encourage local factories and companies to establish partnerships
with similar and/or
complementary foreign companies in terms of specialization in oil
projects
implementation. This is to be through casting projects and studies
to local companies
with a list of global companies qualified at KNPC, and then awarding
the tender
taking partnerships into account.
8.7.
Encouraging foreign contractors to cooperate and partnership with
local contractors
by giving them preference when evaluating offers. This to facilitate
transfer of
technical expertise.
8.8.
Providing incentives for the main contractor for using locally
manufactured materials
and assigning activities to local suppliers and contractors in their
project. This is to
be through following all or some of the following methods:
a.
Awarding non-monetary incentives
(e.g. trophies and appreciation letters)
to
contractors who have achieved a percentage of local products locally
assigned
activities higher than what is required by their contractual
obligations.
b.
Developing a list of suppliers/contractors who are committed to
using local
materials in order to give them priority in KNPC tenders, while on
the other
hand recommending the exclusion of contractors who do not commit to
this
requirement.
8.9.
Holding regular meetings with private sector companies to hear and
exchange views.
8.10.
Submitting an annual report to KPC on the extent of progress in the
implementation
of these recommendations and the pros and cons of their application
and the extent
to which suppliers and contractors are content with them.
8.11.
Reconsidering the recommendations after five years of
implementation.
9.
Additional Recommendations:
(The following recommendation arrived from KNPC in the report of May
2005 that was
submitted to KPC)
9.1.
Awarding long term contracts, based on value and volume of work, to
local
manufacturers and agents of generic materials, and dealing with
several suppliers at
the same time to allow for competition and equal opportunity.
9.2.
Reducing financing difficulties.
(Reducing financing difficulties through :
- Speeding up the bill payment process.
- Devising a mechanism to resolve bill payment conflicts.
- Providing a 10% or more advance payment on contracts and projects
to facilitate
financing for the implementing companies, in return for a financial
guarantee.
- Working to reduce deductions related to taxes and similar items,
in return for a
bank guarantee.)
9.3.
Reducing the qualification cycle of local suppliers and contractors
for projects up to
one million KD.
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