- Backward Linkages (Supplying Extractives)
- Facilitating Linkages Between Extractive Companies and Local Businesses
- Qualification Processes and Standards Required of Suppliers
Qualification Processes and Standards Required of Suppliers
At a Glance
- Extractive industry companies have a wide range of options available to them to increase the participation of local businesses in the supply chain.
- These include: a prioritization matrix for local businesses tenders; creating a system of accreditation of suppliers; changing to tender classifications; reviewing anti-collusion mechanisms and steps to guard against corruption; unbundling contract sizes to permit the participation of local businesses; adjusting methods of communication; and setting up dedicated teams to simplify the tender process to reduce barriers and to improve communication.
To increase the participation of local businesses in the supply chain, extractive industry companies can ensure that the bidding process accommodates local suppliers as well as creates an open and transparent system to communicate with suppliers. To increase the participation of local businesses, extractive industry companies have several options (see IFC’s A guide to getting started in local procurement, pages 31-32, and page 37 in the key resources below), including:
- Using a prioritization matrix for local businesses when soliciting tenders for goods and services.
- Creating a system of accreditation of suppliers to verify they are ‘local’ (local business registration, local ownership, or local employee participation levels).
- Changing to tender classifications to account for the type of tender and use of different scoring sheet for local suppliers (for example, different scores for local provides related to price, service, safety, environmental practices as well as technical requirements such as ISO standards).
- Reviewing anti-collusion mechanisms as well as steps to guard against corruption.
- Unbundling contract sizes, including encouraging third party contractors to do so, to permit the participation of local, often small businesses.
- Adjusting methods of communication with local businesses about available opportunities, such as accommodation of paper submissions in addition to supplier portals (see Supplier Portals), and tender assistance to ensure local participation, including translation of tender into the local language. As an example, see the Expression of Interest page for opportunities at Rio Tinto’s Oyu Tolgoi mine; available in both English and Mongolian.
- Setting up dedicated teams to simplify the tender process to reduce barriers and to improve communication about upcoming tenders. This could include disclosure of the reason for not awarding a contract to local suppliers and the mechanism to facilitate the interaction of local suppliers with the company’s procurement department.
All of the methods mentioned above help to facilitate the connection between extractive companies and potential suppliers. The appropriate methods depend on a government’s local content policies, and the specific country context.
- Guide to Getting Started on Local Procurement (International Finance Corporation)
- Developing a Transparent System for Local Contracting, A Manual for Practitioners Based on the eProcurement Experience in Chad (International Finance Corporation, Esso Exploration and Production Chad, Inc.)
- Developing SMEs through Business Linkages, A Manual for Practitioners Based on the MozLink Mentorship Experience in Mozambique (Mozal Aluminum, International Finance Corporation)