Learning from AMEC's Oil and Gas Asset Support ... - CommDev

2. Look internally and catalogue the range of core business competencies – skills development,technology transfer, performance management, logistics management, design and engineering,contract management, etc.3. Assess the potential for deployment of these competencies to reduce the priority social risks ofthe client; and4. To help promote the efficiency of social impact management, seek collaboration from relevantpartners (e.g. clients, local NGOs, sub-contractors, local government).Strategies for how contractors might support their client in community investment include supportingcommunity skills development to enhance income earning opportunities and seconding designengineers to the local authority to assist in the development of community infrastructure. Morestrategies are described in Section 5 in relation to AMEC’s business interests in the Philippines.4.1.3 Meeting Local Content RequirementsA global trend, and one evident in the South East Asia region, is for transactions between the stateand joint venture partners of an oil or gas development to incorporate increasingly stringent ‘localcontent’ requirements. In some cases these requirements run close to, or even surpass thetechnical limits of the project; meaning that the in-country employee skills base and supply chaincapabilities are insufficient to meet the technical needs of the project within the schedules laid downfor employee succession and local sub-contracting. For large contractors, this means that those withan existing capacity for rapid staff competency development, along with networks of known subcontractorswith the necessary capabilities, should increasingly secure a competitive advantage whentendering.In some situations, such as in Indonesia where the foreign operators are entering into what waspreviously a state monopoly in the oil and gas sector, there is some resistance to outsourcing longertermasset support functions due to the fear of job losses. It is important for contractors to be able toalleviate these fears by demonstrating a capability in employee succession planning.A further problem for contractors in working to more stringent local content requirements is that ofreduced overhead income, i.e. where higher earning expatriate staff are replaced by lower earningnationals. For lump sum contracts these losses are compensated for to some extent by higherreturns on the overall contract, i.e. due to the lowering of wage costs over time. For unit ratecontracts, however, the losses are real, and may need to be compensated for through the negotiationof contract incentives that reward rapid staff succession. This potential dichotomy betweencommercial risk management and social performance needs to be addressed during contractnegotiations.22