As we reported last year, the Omani Authority for Partnership for Development (OAPFD) was established in 2014 to oversee and manage Oman's offset regime, the Partnership for Development (PFD) programme. On 3 June 2015, the OAPFD published new regulations governing this programme.

At the heart of the PFD programme is the promotion of the social and economic development of Oman. To this end, foreign companies that contract with the Oman government, or with a company in which the Oman government holds more than 50% of the shares, must invest part of the value of that contract back into projects that will benefit Oman. There is a strong emphasis on the need for sustainability of such projects, so that the value they add will continue after the foreign contractor has been discharged.

Key elements of the newly published PFD regulations:

Application
  • All contracts and subcontracts between the government/government companies and foreign companies with a value of more than OMR (Omani Rial) 5 million (approximately US$ 13 million)
  • Also applies to: (i) a foreign contractor that receives more than one contract in a 24-month period and the cumulative value exceeds OMR 5 million (ii) running contracts where the total estimated value of the entire contract exceeds OMR 5 million (iii) single contracts with multiple suppliers of the same products or services and the value of the imported content exceeds OMR 5 million (on a pro rata basis) (iv) all contracts with nationally registered contractors where the value of content sourced from outside of Oman is in excess of OMR 5 million
Obligation
  • The foreign contractor must contribute, in the form of one or more PFD project(s), 50% of the value of the imported content of a qualifying contract
  • The PFD project must be completed within 8 years
PFD project objectives
  • 4 key areas for development are identified: (i) Defence and security capability (ii) Technology in certain strategic sectors, including utilities, transport and healthcare (iii) Human resources (iv) Private sector
PFD project approval and implementation
  • The OAPFD should be engaged with from the tender process onwards and its approval is required for all PFD projects
  • The PFD Agreement (in standard form) must be signed before the signing of the supply agreement by the foreign contractor
  • The OAPFD will review the PFD project every 6 months
  • There are milestones for completion within the 8-year obligation period: 2 years (20%), 5 years (60%) and 8 years (100%)
  • Penalties are payable if these milestones aren't met

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