The Georgetown Chamber of Commerce and Industry (GCCI) has lodged a complaint with the Local Content Secretariat over the practice here by foreign companies of bundling contracts for services in the oil and gas sector to the disadvantage of local companies.
GCCI President Timothy Tucker told Sunday Stabroek of the complaint in light of the recent revelation that US-based medical services provider RemoteMD charged large fees for COVID-19 testing after obtaining the contracts and then subcontracting the work to local companies.
He posited that while locals are fully capable of executing some jobs required by big oil companies and their subcontractors, the jobs are being lumped into contracts with other work that requires the prospective contractor to have years of oil and gas experience.
It is against this background that GCCI made the official complaint to the Local Content Secretariat.
“This is a situation that the private sector has been speaking about for the longest while. We have said that many occasions over the past years, since oil discovery, based on contracts, local companies are not awarded. Contracts are awarded to foreign companies because they have experience in the oil and gas sector. But then those same foreign companies that win the contracts, end up sub-contracting the work to locals when locals could have won those jobs from the beginning,” Tucker told Sunday Stabroek.
“If they have the capabilities and capacity to do the works, why is the oil and gas industry demanding that they have someone in the field who is charging them a lot more money and increasing the cost which will be recovered from government or the country, when locals can provide the service? This something we have pointed out over and over again,” he added.
Tucker said that he could not speak for the RemoteMD contract but noted that services continue to be lumped with others requiring oil and gas experience, even after Guyana’s local content legislation was passed in December of last year.
“Since the local content legislation, the GCCI has received complaints and information that even the logistics field, which the local content legislation has unbundled and singled out fields and identified specific areas such as customs brokerage and so on, company are still bundling their other services,” he said.
“They are putting many different fields, bundling them together and the companies that are bidding to do customs brokerage or immigration clearances respectively cannot do so because for example, they don’t do, say transportation, and are thus unable to compete, because everything is still being bundled under logistics. The local companies, although the local content legislation specifies requirements, are now still asked to produce their experience in the oil and gas industry and those are tools being used to keep locals out,” he added.
He said that since third party foreign companies will then subcontract locals for some of the fields required and have to also make a profit, it is understandable that there would be an increase in the cost.
“We have identified this and brought this to the attention of the Local Content Secretariat and they are now acting on the information we have given them and are going to the operators to say to them ‘ You need to stop doing this’. We have complained to the Secretariat,” he stressed as pointed out the first complaint was lodged last week.
“They are engaging us our compliant although it was only made yesterday. They have said they hear similar complaints and these concerns,” he added.
Tucker said it is for these reasons that locals have a regulatory body to turn to for redress that highlights the importance of the country protecting itself with local content legislation. “We think this is why the local content legislation is so necessary and even more reason why we need it. We are happy we have a flexible legislation that can be adopted for these kind of things,” he said.
Pointing to the RemoteMD example, Tucker questioned the logic of there being a local company doing the “actual work” and there being confidence in its results, but the contract going to a third party foreign company which charges more and rakes in a decent profit in the process.
He said that he was not sure of medical services requirements under the new local content legislation, but he is sure that “It is still going on. This is a case that was probably going on before the local content legislation.”
‘Not Gaico’
This newspaper reported last week that RemoteMD charged 15 oil services workers US$350 ($70,000) each for a rapid COVID test.
An invoice seen by Stabroek News showed that US-based medical services provider RemoteMD submitted a bill to Gaico Construction on February- 19 last year for 15 rapid tests totalling US$5,250 (just over $1 million).
Gaico’s CEO is adamant that the charges are not for his company. Disputing the invoice, Gaico’s Chief Executive officer Komal Singh has said that his company did not accept the services of RemoteMD and he would have to be “a madman to pay US$350 when COVID-19 rapid tests were $2,000 or given free by government.”
The New Orleans, Louisiana-based, RemoteMD told this newspaper said that the costs of those tests have since decreased as it is now charging between US$65 ($13,000) and US$85($17,000) per test and justified the US$350 charges by saying that it outsources lab services to local labs and all companies sign an agreement before they are billed .
“That invoice you see shows charges for services from last year February. We billed the client but was never paid so we recently re-sent the invoice because our audits showed it was outstanding,” RemoteMD Clinic Administrator, Tyrell (only name given), told Stabroek News.
This newspaper had reached out to RemoteMD for comment and its country representative, Shandelle Reid explained that she would have to first speak to her overseas superiors for guidance and later forwarded Tyrell’s name.
Reid later explained that the company had requested a meeting with Gaico and would not be able to respond until that meeting takes place.
It is unclear what has been the outcome of that meeting but Gaico’s CEO is adamant that the charges are not for his company. Disputing the invoice, Gaico’s Chief Executive officer Komal Singh has said that his company did not accept the services of RemoteMD and he would have to be “a madman to pay US$350 when COVID-19 rapid tests were $2,000 or given free by government.”
RemoteMD said that while charges to clients are currently US$65 to US$85, it pays the local labs they have outsourced between US$50 and US$60 for each test.
The labs used for COVID-19 testing, according to Tyrell, are Eureka Labs and Sheriff Medical Services.
His explanation raises the question as to why COVID-19 testing requires an overseas-based middleman like RemoteMD and why ExxonMobil’s contractors are not going directly to local labs for testing.
While the invoice figure in itself is not large, it should have been lower and will be eventually claimed as cost oil, thereby reducing profits due to Guyana. Up to 75% of each year’s oil revenue can be claimed by ExxonMobil and its partners as cost oil. The remaining 25% profit oil is split equally between Guyana on one hand and ExxonMobil and its partners on the other.
The costs being billed to this country under cost oil have been continuously raised and there has yet to be a completed audit of monies spent under the heading.
An audit for pre-contract costs, completed under the APNU+AFC government in 2019 by United Kingdom firm IHS Markit, is yet to be made public by the PPP/C government.
The government said in February that it is finalizing queries of “lumped” sums and investigating costs of items such as risers, and the process would have been completed in a matter of weeks.
But more than two months have elapsed and no word on the release has been forthcoming.
The IHS Markit audit will provide the first real insight into whether ExxonMobil has been making undue expense claims.
Following this, there is about US$9.5 billion in post-contract expenses still to be audited and the government has made heavy weather in having this exercise started.
