North Sea Oil (Hansard, 6 November 1975)

§ 1975. Mr. Benn

There have been a number of meetings with representatives of UKOOA to discuss a memorandum of understanding and associated code of practice setting out the procedure to be followed by all operators and their contractors with a view to ensuring that British industry has a full and fair opportunity to supply goods and services to the United Kingdom offshore market. I am pleased to say that agreement has been reached with the Council of the UKOOA on the text of these two documents and the council has recommended to all member companies that they should now be formally accepted. This agreement is a significant step forward in the Government's objective to ensure that British industry provides on a competitive basis an increasing share of our domestic offshore market. The texts of the documents is given below.

MEMORANDUM OF UNDERSTANDING BETWEEN DEPARTMENT OF ENERGY AND UNITED KINGDOM OFFSHORE OPERATORS ASSOCIATION LIMITED

1. It is the declared intention of the Government that the United Kingdom offshore industry should provide, on a competitive basis, a major and progressively increasing share of the goods and services required for the development of our continental shelf, and should establish a growing export market. For this purpose, the Government has made it clear that United Kingdom industry should be given full and fair opportunity to compete and Members of the United Kingdom Offshore Operators Association Limited (UKOOA) fully support this policy.
2. The Offshore Supplies Office (OSO) of the Department of Energy is responsible to the Secretary of State for ensuring the maximum possible involvement of United Kingdom manufacturers, consultants, contractors and service companies in the provision of supplies and services to the offshore hydrocarbon industry. This includes the creation of new industrial capacity to meet existing and emerging needs and measures to ensure that such new capacity is as fully and continuously utilised as possible. For this purpose, the Government stands ready, 310 in selected cases, to make use of the resources of the Industry Act 1972, the new powers to be granted by the Industry Bill now before Parliament and the proposed Scottish and Welsh Development Agencies.
3. Members of UKOOA have undertaken to give United Kingdom industry a full and fair opportunity to manufacture and supply the goods and provide the services necessary for the programme of exploration, field delineation and the development of a field and associated facilities to full production and beyond. Further, individual Members recognise the potential benefits of encouraging, through appropriate technical and contractual support, the creation of United Kingdom capacity to meet the mutually agreed needs, both existing and emerging, of their respective offshore activities. The Members shall use goods and services of British origin in these activities whenever they are competitive in regard to specification, service, delivery and price.
4. To satisfy the Secretary of State for Energy that the procedures and practices adopted by all Members are such as to support the Government's policy described above, the Members of UKOOA (detailed in Appendix A of this Memorandum) have individually agreed to comply with the Code of Practice set out in the attached annex and to make available to officers of the OSO such information as those officers may reasonably require to satisfy them selves that the Government's objectives are being met.
5. Her Majesty's Government and OSO recognise that Members remain fully responsible for the safety and commercial success or failure of their operations and will take all reasonable steps not to delay the Members' decision-making processes and commercial practices (consistent with the other obligations in this document). Further, the strictest confidentiality will be maintained by the Department in respect of competitive commercial information submitted to OSO under the terms of the Code of Practice.
6. This Memorandum shall be interpreted and applied in a manner consistent with the pro visions of the Treaty establishing the European Economic Community.

3rd November

ANNEX TO MEMORANDUM OF UNDERSTANDING

CODE OF PRACTICE FOR PURCHASERS OF GOODS AND SERVICES FOR OIL RELATED ACTIVITIES ON THE UK CONTINENTAL SHELF.

Introduction

This Code of Practice defines the procedure which Members of UKOOA have undertaken to apply in the procurement of materials and services required to support oil related activities on the United Kingdom Continental shelf. While this Code of Practice applies to all purchases, the principle of prior information of intent to make a purchase or place a contract outside the United Kingdom will not normally apply to orders for materials and manufactures 311W below £100,000 and to construction and services contracts below £500,000, except in those cases in which OSO has a special interest as agreed in discussion with the operators.

In accordance with the associated Memorandum of Understanding between the Department of Energy and UKOOA dated 3rd November 1975 the Department undertakes to observe the strictest confidentiality on all aspects relating to the commercially competitive data submitted to them under the terms of this Code of Practice, and operators undertake to maintain strict confidentiality on such discussions with OSO.

Code of Practice

1. To ensure that United Kingdom organisations are given a full and fair opportunity on each and every contract, the operator will ensure that:

(a) all potential suppliers selected to bid receive a fully definitive enquiry specification in the English language for the goods and/or services required;
(b) the specification is in accordance with the accepted oil industry standards or British standards, it indicates a willingness to accept equivalents and states the equivalent whenever possible;
(c) the specification is drawn in a manner which does not deliberately preclude United Kingdom suppliers from tendering or diminish their prospects of submitting a successful tender;
(d) any amendments to the specification that emerge during the course of the tender preparation are notified to all bidders so that there is full equality of information;
(e) all potential suppliers selected to bid are given an equal and adequate period in which to tender, such period to take into account the need to meet demonstrably unavoidable critical construction or production schedules of the operator;
(f) any special conditions attached to the materials, the source of supply of components and materials, and the inspection of goods are stated in the specification or enquiry documents;
(g) stated delivery requirements are not more stringent than is necessary to meet the construction and/or production schedules of the operator;
(h) where the requirement includes the need to develop equipment or proposals in conjunction with the operator, all bidders are given equal information at the same time;
(i) when the operator is unable to identify a reasonable number of suitably qualified United Kingdom suppliers for his invitation to tender, he will consult the OSO before issuing enquiries;
(j) the enquiry documents require the potential bidders to estimate the value of the United Kingdom content of the goods and/or services to be supplied.

2. At the tender evaluation stage, the operator will ensure that:—

(a) anomalies or inequalities between the submissions and the enquiry documents are fully resolved relative to the short-listed bidders;
(b) delivery promises of all bidders are assessed for their reality in the light of past performance and an assessment of current performance;
(c) when costs are compared, account is taken of financial assistance available to buyers;
(d) the foreseeable impact of currency fluctuations and the effects of escalation clauses are taken into account.

3. When the operator has determined his decision for the award of contract, in the case of non-United Kingdom award he will inform OSO prior to notifying selected suppliers and will give OSO a reasonable time, in the circumstances applying, for representation and clarification. This procedure will be followed in the case of sub-contracts referred by main or subcontractors to the operator for approval. Where the operator does not intend to call for prior approval of sub-contracts the procedure for adherence to the Memorandum of Understanding and this Code of Practice will be agreed between the operator and OSO. Where this gives OSO access to the operator's contractors and sub-contractors this procedure will not diminish the direct and normal contractual relationship between the operator and his suppliers. The principle shall be adopted that following disclosure of prior information to OSO on intended awards no subsequent representation to the operator by a potential supplier, other than at the express request of the operator, shall be entertained.
4. To satisfy the OSO that full and fair opportunity is being given to United Kingdom suppliers operators will, on request, make available to officers of the OSO such information as they may reasonably require about:

(a) the programme of intended enquiries to industry necessary to implement the anticipated overall programme of exploration and/or development to the extent that this information has not already been made available to the Department of Energy. (The operators may supply this information in any format convenient to themselves provided it is sufficiently comprehensive to enable OSO to assess the potential opportunity for United Kingdom industry);
(b) the specifications and tender documents at the earliest possible time and, prior to the issue of the documents to the suppliers, the list of suppliers to whom it is intended to issue invitations to tender;
(c) the bid summaries so that when necessary and reasonable OSO may request sight of bid summaries and all relevant documents for examination;
(d) the names of appropriate representatives within the operaors' organisation with whom OSO can make contact should further discussions be required.

3rd November

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Appendix A