Almost 100% compliance with 45-day requirement to pay local suppliers – LCS Head

Almost all the companies operating in the oil and gas sector have complied with the Government’s new stipulation that they must pay local suppliers for goods and services within a 30- to 45-day period.
This is according to the Head of the Local Content Secretariat (LCS), Martin Pertab.

Last month, the Natural Resources Ministry, through the Secretariat, modified the five-year local content plan of major oil operators to ensure that contractors and sub-contractors issue payments to Guyanese suppliers within 30 to 45 days following the receipt of a correct invoice.
This was after numerous complaints were made on prolonged delays, as much as 90 days, in the payments for goods supplied or services rendered to major players in the oil and gas industry – an issue that had been engaging the Government’s attention.
However, Pertab told Guyana Times via telephone on Thursday that there was almost a 100 per cent compliance with this new payment requirement.
According to Pertab, there is no major issue with compliance by oil operators except for some companies needing time, due to their internal policies, to get on board.
“What happened is that some companies have internal policies; for example, some of them say that their internal policy is that they will make payments in 60 days, some say 75, and so on. So, in order for them to change and provide us with a commitment that they will make payments within that 45-day period, it would take some time for them to go back and have some managerial-kind of discussions at the higher level to make that adjustment. That is why some of them have been taking some time, but we’re approaching 100 per cent [compliance],” Pertab explained.
Following complaints from local suppliers of delayed payments that were affecting their operations, the LCS had informed companies operating in the petroleum sector that their five-year Local Content Master Plans, which were due for submission in May, must to updated to stipulate a 45-day payment period upon the correct receipt of an invoice to allow Guyanese companies timely and appropriate access to contract and payment terms that facilitate competitive funding and expansion.
According to the Natural Resources Ministry, this amendment to the five-year Local Content Master Plan is enforceable by law and will now see contractors and sub-contractors operating in the nation’s oil and gas sector issuing payment to Guyanese suppliers within 30 to 45 days following the receipt of a correct invoice.
Natural Resources Minister Vickram Bharrat last month underscored the importance of contractors and sub-contractors implementing this amendment. He reminded that the move promoted local suppliers’ competitive financing and growth through appropriate contract and payment terms, and was in keeping with Guyana’s Local Content Act.
At the time, the Ministry had approved the updated Local Content Master Plans of several tier-one contractors, including SBM Offshore and Halliburton, who have complied with this new condition.
The Local Content Master Plans outline the commitment of oil and gas contractors, sub-contractors and licensees to prioritise Guyanese nationals for employment; have policies aimed at non-discrimination and equal treatment of Guyanese nationals; implement training and other programmes to build the capacity of both their employees and the larger Guyanese workforce; coordinate with industrial and technical education training institutions in Guyana to provide sponsorships and/or internship opportunities; incorporate the requirements of the Act and the Procurement and Bid Evaluation Guideline issued by the Secretariat into their procurement strategy; outline the criteria for the supply of goods and provision of services relating to their operations; plan capacity-building activities for Guyanese nationals and Guyanese companies that supply goods and services to the industry, such as feedback sessions, supplier forums, etc, and project anticipated expenditure on local content values.
The LCS’s efforts to crack down on the issue of delayed payments to Guyanese companies come on the heels of complaints from the local business community.
One Private Sector organisation, the Georgetown Chamber of Commerce and Industry (GCCI) has been at the forefront of raising this and other misdemeanours by operators in the oil and gas sector, with its President, Timothy Tucker previously explaining that this delay in payment was causing local companies to lose profits.
The GCCI has since welcomed the inclusion of the 45-day payment period in the Local Content Master Plan by tier-one contractors. The Chamber also lauded the Guyana Government for creating the obligation and enforcement mechanism of the payment timeline.
The GCCI went on to call upon tier-one contractors to play their part in the development of local content and to operate both within the spirit and intent of the legislation.
The Government passed the Local Content Act in December 2021, and both President Dr Irfaan Ali and Vice President Bharrat Jagdeo have noted that the legislation would be continuously reviewed and updated over time in order to close loopholes that are being exploited by operators in the oil and gas sector.
This is significant especially since the passage of the local content laws, there have been numerous complaints about foreign companies engaged in acts such as contract bundling and using measures such as “fronting” to bypass requirements needed to qualify as a local company to tap into benefits tailored for locals.
Contract bundling, the practice of companies tendering for contracts in a way that excludes small and medium-sized companies, has been a topical issue for some time. The LCS has already warned that it was cracking down on companies who still engage in contract bundling and this includes denying them the compliance certificate they need to avoid a $50 million fine.
Companies failing to reach minimum local content requirements in the oil sector are liable for a $50 million fine.