With communities demanding a bigger share of the wealth from Australia’s natural resources (employment and business), companies must maximise local engagement and content without
compromising on quality and costs, and avoiding negative publicity.
The benefits for resources companies that do have the right approach to local engagement include; having a positive image in local industry, helping build sustainable business and operational support around their plant, and better community engagement, which in turn provides a readily available employment pool.And, accordingly, there are many benefits for local industry and community.
Through the multiplier effect of investment, the local industry will contribute to skills and employment development, enterprise development and gain access to international supply chains.
BEST PRACTICE FRAMEWORKS
There are a number of regulatory frameworks in Australia designed to help resource companies to achieve the aforementioned benefits. And rather than simply stipulating a minimum local content requirement, these frameworks call on companies to ensure local industry receives full, fair and reasonable opportunity to participate in major resource projects.
These frameworks aim to achieve the following broad outcomes:
» Encouraging industry to meet world’s best practice through capability building;
» Early identification of opportunities for Australian industry participation, both domestically and overseas;
» Promoting Australian capability and integrating industry into global supply chains; and,
» Enhancing project facilitation and Australian industry participation.
On 27 December 2013, the Australian Jobs Act 2013 commenced, requiring major projects in Australia with a capital expenditure of $500 million or more to prepare and implement an Australian Industry Participation (AIP) Plan. It also Requires ongoing compliance reporting on the AIP plan during the project’s construction phase and two years into the operations phase.
In recent years there has been increased interest in local industry participation and local content in gas resources projects.
SEVEN STEPS TO LOCAL ENGAGEMENT
Through engagement on many major projects across a wide range of industry sectors, it is clear there are seven critical areas that a project must address in order to maximise local industry participation.
They include having:
1. The correct procurement processes in place;
2. Having knowledge of the local industry;
3. Proper communications;
4. Having correctly structured packages;
5. Making sure you select the best for the job;
6. Creating opportunities for lower-tier suppliers; and,
7. Providing access to supply chains.
For procurement processes, it is important to have a local presence, utilise local expertise and empower local decision making in order for industry to be able to engage with the procurement team.
The procurement process itself must be clearly defined and documented, agile enough to adapt to the local market’s capabilities and needs when required, and must be monitored and managed by dedicated personnel on an ongoing basis. Local industry has been assessed before the procurement processes are designed and finalised.
However, most important of all those processes must be the way firms communicate to industry. Industry should have a clear understanding of how to pursue opportunities and how to manage their expectations.
The project must gain accurate local knowledge in order to understand the available skills and capabilities. It also must attempt to identify capability gaps and future growth, and encourage industry partnerships to fill those gaps.
The project will have quick and easy access to services and technical support by gaining local industry knowledge and encouraging capability building. Work packages must be structured correctly in order to provide local industry with the best possible opportunities within their capabilities and to ensure competitiveness. This means that large and complex packages will sometimes need to be broken down into multiple packages to match the capabilities of local industry.
It is also important to identify appropriate subcontract opportunities so that companies incapable of competing for the complete package can find work as subcontractors or suppliers. Work packages should also be tailored and expanded to suit the businesses and services available in the concerned community.
Proper communication of the project and its processes and opportunities to local industry is critical. Communications must be clear and timely so industry has a good understanding of what to expect and has time to prepare.
Communication must also be a two-way street, allowing local industry to respond to opportunities with queries and expressions of interest. The process for doing this must be clearly defined and communicated, and it is important to manage expectations realistically.
In order to guarantee a successful outcome at the end of the process, it is important to research the best possible suppliers in the initial stages of your project and give them the best chance of winning. And where they have the capability and capacity to compete, those suppliers should be given opportunities to access global supply chains. The process must also include a mechanism to provide feedback when a supplier is not successful and where possible give guidance and advice on ways to improve their competitiveness in future opportunities.
The project must create lower tier opportunities for smaller suppliers as well.This can be achieved by cascading the local content requirements down to contractors. The same principles must apply to as many opportunities as practical no matter what tier of supply is involved.
Access to the complete supply chain of the project can be facilitated by informing industry who is doing what. This allows industry to pursue supply opportunities through their own effort allows them to create their own sustainable networks. To achieve this, the project must provide appropriate and correct contact points with all contractors and suppliers.
Following these seven principles will help to build a strategy and plan that will achieve the best results in local industry participation on projects.