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PFD FAQs

On the 3rd February 2014. Any contract signed after this date is subject to the PFD Programme.
A Royal Decree is law issued by the Head of State; His Majesty Sultan Qaboos bin Said, the Sultan of Oman. Once it is officially issued in public, it comes into immediate effect.
Yes, like all other laws in Oman, it is mandatory.
Yes. It has a Board of Trustees, which is Chaired by a Minister and a CEO manages the Organisation and reports to the Board of Trustees.
It is set at OMR 5 million as per the Royal Decree. However, note that many countries set the offset at US$ 10 million (less than OMR 4 million).
The obligation value is not a sum of money but is an economic measurement of the performance of the Obligor, based on the contractors’ own business plan proposals against which input values are determined. Inputs are defined in the Regulations and can attract multipliers of between x1 and x5 of the actual financial value. There are additional multipliers available measured against performance, once again between x1 and x5 based on the level of achievement. A successfully delivered project could therefore achieve a multiplier of x10 – e.g. OMR 1 million invested in a project could achieve OMR 10 million in PFD credits (see the example attached to the Regulations).
Unless the Contractor is certain that the contract awarded to them is a one off, then the Contractor should assume that they could incur an obligation within the 24-month period and plan accordingly.
To achieve the first Milestone all a Contractor needs to have done is to have had a project approved; signed a Project Agreement; and commenced implementation - the value of which equals 20% of the Obligation value. Commencement can be defined in the Project Agreement and in the instance referred to in the question above, it could be simply be the calling for quotes, the appointment of specialists, etc.
No. Multipliers on both inputs and outputs are discussed and agreed before signing the Project Agreement and the level of Multipliers (between x1 and x5) will depend on the nature of the inputs and the achievement percentage on the outputs.
The PFD Regulations is a live document and clarifications will be added from time to time. However, the outputs are based on a weighting system reflecting the importance of projected activities (inputs) to Oman. In some instances technology transfer may be the most important; in others supply chain activities; in others Omanisation and job creation. Each project will differ and the weighting applied to each activity will be agreed with the Contractor at the time of agreeing the business plan and negotiating the PFD Project Agreement.
That is correct. The penalty is 10% of the outstanding obligation value and when paid by an Obligor, deemed PFD credits are awarded as set out in the Regulations.
The Regulations (of which a copy can be downloaded from our website) state clearly that PFD applies to both foreign and local companies. The only difference is that with local, it only applies to the imported contract value or foreign content of the procurement.
The Obligation is nominally 50% of the contract value. However, where the Obligor is a locally registered company then it is 50% of the value of the imported content. We won’t know what this value is until the contract has been awarded and we have sat down with the parties (including you) to determine the imported content value. The PFD Agreement which needs to be signed before the procurement/supply contract has no numbers or values in it. It is simply an undertaking to comply with the Royal Decree. The values are reflected in a Supplemental Agreement which is only signed after the contract has been awarded and the values have been determined.
Yes. A local company is a company registered in Oman and which has a valid CR number and has a local office and staff.
The Obligation is nominally 50% of the contract value. However, where the Obligor is a locally registered company then it is 50% of the value of the imported content.
The definition is set out in the Regulations (See Definitions). It also includes items imported on your behalf by a local Agent where there is no value-add in Oman. An Agent’s commission is not regarded as a value-add.
Both partners of the JV will sign the PFD Agreement and they will be jointly and severally liable to carry out the PFD Obligations. OAPFD prefer the international partner to be a participant in the PFD Project. However, the onus as to what percentage of the obligation will be fulfilled by each of the parties of the JV is on the JV partners to agree.
The Obligor (the contractor or JV who was awarded the contract) can propose to OAPFD participation of a third party (international contractor) who will carry out the PFD project when submitting the project concept but the contractor or JV will remain liable to ensure the PFD Obligations are successfully carried out in full by the third party (international contractor). Liability cannot be transferred
If the Contractor has no previous experience of the PFD Programme then at the time of issue of RFQ or Tender, otherwise no later than the down-select stage or issue of issue of Letter of Intent (LOI).
You need to understand the Royal Decree and PFD regulations and your obligations and if not clear you can seek clarifications from the Authority either formally, or by email or face-to-face or by telephone. You can find the Royal Decree, Regulations and FAQs at this website.
Upon being successful in tender and before signing the contract with the government entity, the successful contractor will need to sign a PFD Agreement with the Authority (sample can be found on this website). The PFD Agreement is signed only once as all future awards are captured in the Supplemental Agreement(s).
No. The PFD Agreement, which needs to be signed before the Contract with the procuring entity can be signed, is a standard document and can be signed anytime between issue of Letter of Intent (LOI) and the signing of the Contract. Therefore, no time is added to the tendering process as signing of the PFD Agreement falls in the period between down-select or issue of Letter of Intent (LOI) and signing of the Contract with the procuring entity.
Firstly, PFD is law as decreed by His Majesty. Secondly, over 80 countries around the world apply Offset (PFD) to their Government’s procurements with 26 of them applying to civil contracts. Thirdly, the Contractor is encouraged to present a strong ICV initiative which could deliver the PFD obligation. If there is any shortfall the Contractor can propose PFD project(s) that will both satisfy PFD Project requirements whilst also benefiting the Contractor (Obligor).
The PFD Agreement, needs to be signed before the Contract with the procuring entity can be signed. Any failure is therefore a breach of contract and the PFD Agreement sets out the remedies that the Authority has in such instances. It does not, however, impact directly on the Contract that the company has signed with the procuring entity though the entity will be informed of this breach.
The percentage of shareholding of the partners is not relevant when calculating the PFD Obligation. The level of obligation depends on whether the JV is foreign or local. For foreign JV - PFD obligation is 50% of the awarded contract value minus the In-Country Value (ICV) content, and for Local JV - PFD Obligation is 50% of the imported content.
Whilst paying a penalty is not the preferred way, the maximum amount is 10% of the outstanding PFD obligation.
It is the initial agreement (sometimes referred to as an “umbrella agreement”) that the Contractor/Obligor signs with the Authority and which must be signed before the contract with the procuring entity can be signed. It simply binds the Contractor/Obligor to adhere to Royal Decree 9/2014 and its Regulations and does not contain any specific contract or obligation details – these are set out in the Supplemental Agreements. The PFD Agreement is signed only once as all future awards are captured in the Supplemental Agreement(s).
It is a document that sets out the obligation details for each specific Contract that has been signed and sets out the values, milestone dates and achievement percentages and is attached to the PFD Agreement. So each PFD Agreement may have a number of Supplemental Agreements attached to it as multiple contracts are awarded.
No. The obligation relating to a particular Contract must be discharged within 8 years and meet the Milestones at years 2, 5 and 8. However, the Obligor may choose to submit a number of different projects to discharge its obligation, especially in the case of large obligations, and these may start at different times during the obligation period. These projects will also have individual milestones but whatever projects the Obligor choses to discharge its obligation, the combined total must meet the obligation milestones and deliver the total obligation within the 8 years. High quality projects could deliver the obligation ahead of time.
It is the first step in the project approval process and is a brief, high level document setting out the project details and containing sufficient information so as to be able to determine whether the project could be approved as an eligible PFD project. Once an “in principle” approval is given then the business plan process begins which is far more detailed and involves feasibility studies, etc. The use of Concept Notes is designed to save the project promoter or Obligor from spending a lot of time, effort and money on a project that might not fit with PFD from the outset.
There is no set approval time. However, if a project concept meets all the PFD project requirements and a clear and comprehensive business plan is presented it can take 30 to 45 days to be discussed and agreed with the technical committee.
Whilst the Authority does not deal directly with intermediaries, agents or third party providers there is a need for local companies and project owners to bring projects to the attention of the Authority. This can be done by downloading the Project Concept Template from the Authority’s website and sending this to the Authority for evaluation. In all other instances project promoters need to engage with Obligors directly and it is then their prerogative as to whether they engage with third parties or not. The Authority will only ever deal with the Contractor/Obligor that signs the PFD Agreement.
The Obligor (or the successful contractor) after signing the PFD Agreement with the Authority and the Supplemental Agreement(s), will discuss with the Authority and will be guided accordingly.
The Obligor (or the successful contractor) after signing the PFD Agreement with the Authority and the Supplemental Agreement(s), will discuss with the Authority and will be guided accordingly.
There is no difference. In-Country Value (ICV) is defined in the Regulations.
Because in the case of a Local Contractor the obligation is based on the imported/foreign content, the higher the ICV or Local content in the contract awarded by the government entity, the less the value of imported/foreign content that determines the obligation value. This will be closely monitored and adjusted should there be any changes in the value of the imported content.
ICV activity counts towards the PFD obligation discharge - it is not in addition to. Any shortfall needs to be addressed through PFD project(s) as shown in the Regulations.
ICV is an eligible PFD activity for discharging PFD obligation for foreign contractors and the Authority works closely with the various ICV Units to ensure that all ICV activities that meet the PFD criteria are taken into account when determining to what degree these ICV activities discharge PFD obligations. For local contractors PFD Obligation is on imported contents of the contract hence ICV has not been considered in the PFD Obligation amount.
We are not prescriptive as to how you discharge any obligation. Section 3 of the Regulations sets out the eligible activities.Click Here
A multiplier available on PFD activities (excluding the ICV included in the contract) is up to x10 depending on the nature of the inputs and the level of achievement. As the ICV included in the contract is a condition of contract we award a multiplier of x1 for ICV activities towards PFD obligation discharge for Foreign Contractors. See the example on this website.
Engaging of local subcontractor to carry out services in the contract is part of In Country Value (ICV) and ICV is an eligible PFD activity for discharging an obligation.
All ICV activities that meet the PFD criteria are taken into account when determining the degree to which these ICV activities will discharge the PFD obligations for Foreign Contractors. Procuring Omani products or products ‘Made in Oman’ and utilizing local manpower or subcontractor to carry out services under the contract are considered ICV and all ICV content will be taken into account when calculating the PFD Obligation. As to what level of PFD Obligation such ICV content will cover depends on what ICV you have proposed in your contract and that you will share with the Authority after being awarded the contract (LOI) and signing of the PFD Agreement.
Procuring Omani products or products ‘Made in Oman’ and utilising local manpower or subcontractor to carry out services under the contract are considered ICV and all ICV contents will be taken into account when calculating the PFD Obligation. As to what level of PFD Obligation such ICV content will cover depends on what ICV you have proposed in your contract and that you will share with the Authority after being awarded the contract (LOI) and signing of the PFD Agreement.
The level of obligation depends on whether the JV is foreign or local. For foreign JV - PFD obligation is 50% of the awarded contract value minus the In-Country Value (ICV) content, and for Local JV - PFD Obligation is 50% of the imported content. As to what level of PFD Obligation such ICV content will cover depends on what ICV the foreign contractor has proposed in your contract and that you will share with the Authority after being awarded the contract (LOI) and signing of the PFD Agreement.