Key points
- Supplier qualification assesses a company’s suitability for a specific category of products or services.
- Requirements and procedures vary depending on the buyer, the sector, the country and the risk level of the supply.
- Inconsistent documentation, irrelevant certifications and incomplete information can slow down the assessment.
- HSE aspects must be demonstrated through appropriate procedures, data and documentation, not merely declared.
- Passing the qualification makes the supplier eligible to be considered, but does not guarantee tenders, orders or contracts.
In large international projects in the energy sector, a technically sound product and a competitive bid may not be enough. End users and EPC contractors also assess the supplier’s ability to generate value in the country where the project is being carried out.
It is in this context that local content takes on importance. The term encompasses the involvement of local resources, suppliers, expertise and services. For an international company, this therefore means assessing not only where to offer its products, but also how to organise itself to operate effectively within the territory.
Contents
What is local content
Local content refers to the value that an international project generates within the country in which it is carried out. It may include the employment of local staff, the purchase of goods and services within the territory, collaboration with domestic suppliers, and the training and transfer of skills.
There is no single definition that applies in the same way to all markets. Local content may be governed by national regulations, programmes promoted by institutions or by leading industry players, tender conditions and contractual requirements.
In some projects, minimum percentages are set. In other cases, the local contribution is assessed through a scoring system or acts as a bonus criterion in the selection of the supplier.
Local content is therefore not simply the purchase of local products. It serves to gauge how much economic, industrial and professional value the project will be able to generate in the host country.
Why local content matters in international energy projects
Major projects in the energy and oil & gas sectors involve substantial investment, international supply chains and activities that can continue for many years. Host countries therefore seek to utilise these investments to develop local employment, businesses, skills and industrial capacity.
This approach is particularly relevant in the MENA markets and in countries such as Saudi Arabia and the United Arab Emirates, where the contribution generated locally is becoming increasingly significant in relationships with end consumers, EPC contractors and major industrial buyers.
The practical implementation varies from one market to another, but the principle remains the same: in major international projects, it is not enough simply to export a product; it is necessary to demonstrate what value the company is able to create locally.
Local content can serve various objectives:
- developing suppliers and businesses in the region;
- creating employment and skilled workforces;
- transferring technical and organisational knowledge;
- increasing national production capacity;
- making the supply chain more stable and accessible.
How local content affects supplier selection
Local content may be taken into account in the evaluation as early as the pre-qualification stage, the compilation of the bidder lists or the analysis of technical and commercial bids.
Its weighting depends on the country, the client and the individual project. It may represent:
- a necessary requirement for participation;
- a criterion used to award a score;
- a bonus factor compared to competing bids;
- a commitment to be fulfilled during the execution of the contract.
An international supplier must therefore demonstrate not only the technical compliance of the product, but also how it intends to manage activities, resources and services within the country.
This aspect does not replace supplier qualification. The two assessments can proceed in parallel, but they address different questions.
- Qualification verifies whether the company meets the required technical, organisational, financial and HSE requirements.
- Local content, on the other hand, assesses the contribution generated in the country through the execution of the project.
To explore the topic of supplier qualification in greater depth, read the article dedicated to errors in supplier qualification.
The role of local partnerships and services
A partnership with a local company can help the international supplier to integrate resources and capabilities that it does not directly possess in the country.
The collaboration may cover:
- distribution and supply;
- installation and commissioning;
- technical support;
- maintenance;
- training;
- production or local assembly.
However, the mere presence of a partner does not, in itself, guarantee an adequate local contribution. The company involved must possess skills, staff, equipment and qualifications appropriate to the activities to be carried out.
The same applies to local service provision. In complex industrial projects, the buyer must know who will be able to step in in the event of service requests, maintenance or operational issues. Claiming that a service is available without having a structure that can actually be mobilised can create difficulties when the project enters the implementation phase.
It is therefore necessary to clearly define:
- which activities will be carried out locally;
- who will be responsible for them;
- which resources will be available;
- what response times can be guaranteed;
- how technical standards and HSE standards will be maintained.
The partnership must reflect a genuine capability, not simply be included in the tender to demonstrate a presence in the country.
The challenges for international companies
For a European or non-European company, addressing local content requirements means adapting the project organisation without compromising quality, safety and economic viability.
A primary challenge lies in correctly interpreting the requirements. Each market may use different definitions, indicators and methods of verification. Before submitting a tender, it is therefore necessary to understand which requirements are mandatory, which elements are rewarded and what evidence must be provided.
A second obstacle concerns the identification of partners, technical experts and local suppliers capable of meeting the required standards. A local presence is not sufficient if there is a lack of experience, production capacity, certifications or adequate HSE procedures.
References gained in the country are therefore of particular importance. Having already completed projects in the same market demonstrates that the supplier is at least partially familiar with the operational, logistical and organisational conditions of the region.
For an end consumer or an EPC contractor, awarding a major contract to a company that has never operated in the country may entail a greater risk. The first assignment may be more limited in scope, but it allows the supplier to build the track record necessary to subsequently access more complex opportunities.
Local references do not replace any formal requirements regarding local content. However, they reinforce the credibility of the bid and demonstrate that the declared presence can translate into a genuine capacity for execution.
When the opportunity enters the tender phase, these aspects must be aligned with the documentation, specifications and commercial terms. Further information on this topic is also available in the in-depth guide dedicated to the management of complex industrial tender requests.
Frequently asked questions about local content
What does ‘local content’ mean?
Local content is the value generated in the country where a project is carried out through local labour, supplies, services, expertise and investment.
Is local content always mandatory?
No. It may be required by legislation, a national programme, the tender conditions or the contract. In other cases, it may serve as a bonus criterion in the evaluation of tenders.
How is local content measured?
The method varies depending on the project. Factors that may be taken into account include expenditure incurred in the country, local supplies, staff employed, training, services and investments made within the territory.
Can local content influence the choice of supplier?
Yes. In some projects, it can affect pre-qualification, the score awarded to the tender, or the commitments required during the performance of the contract.
Is a local partner sufficient?
Not necessarily. The partner must possess genuine operational capabilities and carry out activities recognised by the project’s rules. A purely formal presence does not guarantee compliance with the requirements.
Why are references in the country important?
They demonstrate that the supplier has already dealt with similar operational, logistical and organisational conditions. They can therefore reduce the risk perceived by the buyer and strengthen the credibility of the proposal.
Entering a new market with SI Company
Local content demonstrates the extent to which access to an industrial project depends on knowledge of the market and operational conditions, as well as on the quality of the product.
SI Company supports international companies in developing opportunities in the Italian and European markets, from the analysis of projects to the identification of key contacts, right through to the management of business relationships and negotiations with buyers and EPC contractors.
Discover SI Company’s business consultancy service and work with our team to assess the most suitable approach for presenting your company in your target industrial markets.
