LONDON – Britain’s Oil and Gas Authority (OGA) has published its Stewardship Expectation 12 report, calling for strong contracting relationships to ensure the continued strength of the UK’s supply chain.
There are instances where relationships between companies and their suppliers have suffered due to non-commitment to industry standard payment terms, or over-complex, time-consuming tendering negotiations, the authority said.
These issues have been ongoing for years without noticeable significant improvement, and this has been the main factor behind introduction of the OGA’s Stewardship Expectation.
In future, companies will have to demonstrate compliance with the following:
- Adoption of industry standard payment terms, typically within 30 days.
- Publishing upcoming work and tenders for the supply chain through regular updating of the OGA’s Energy Pathfinder portal, including projects involving maintenance, brownfield, the energy transition and decommissioning.
- Where possible using standard and simplified tendering practices.
- Alignment with cross-industry initiatives, including the North Sea Transition Deal.
Remuneration models should reward contractors when cost/ time savings are achieved, the OGA added, and companies should reconsider their liability limitations to ease the burden on the supply chain.
The introduction of the Supply Chain Action Plan (SCAP) process in 2018 has improved collaboration, with a positive change in how operators approach the market, embrace innovation, and adopt incentivized contacts.
Many operators now acknowledge the supply chain are critical to unlocking projects and this is helping to add value to project delivery.
But there are also black sheep, with one operator tendering the same scope of work repeatedly only to later cancel the project. This cost suppliers significant sums in terms of tendering as well as weakening the standing of that operator for future tendering activity.
The OGA plans to monitor adherence to its expectations through SCAPs, operator engagement in the Tier Review process, and by checking participation on its Energy Pathfinder scheme.
Bill Cattanach, Head of Supply Chain at the OGA said: “Contractors at all levels should be afforded an opportunity to participate and be paid, both on time and fairly, for the work they do. The SCAP Report 2021 shows that when operators approach the market with the right mindset it can be a win-win for all parties.”