The procurement policy and principles of Mongolian mining company, Oyu Tolgoi, is open and transparent for all suppliers. The mine is committed to a special policy directed at international and national suppliers and suppliers from the Umnugobi region. B.Serjmaa, from the national procurement development department of Oyu Tolgoi spoke to us about the supplier policy for the Umnugobi region.
Why has Oyu Tolgoi LLC implemented a special policy directed at suppliers from the Umnugobi region?
Oyu Tolgoi is committed to the development and support of national suppliers, especially local suppliers from the Umnugobi region. In accordance with the Investment Agreement signed with Government of Mongolia, the mine gives preferential rights for local suppliers from the Umnugobi region and buys goods and services from these suppliers.
What is the Oyu Tolgoi LLC procurement policy and how is the policy implemented?
Oyu Tolgoi implements a special policy aimed at supporting and developing Umnugobi suppliers and businesses. To achieve this goal we have set up a Business Development Centre in Dalanzadgad, capital of the Umnugobi region. The centre provides a business development training and information for local businesses. The centre is designed to help local businesses and to grow and meet Oyu Tolgoi procurement requirements. Businesses can become suppliers to the mine and furthermore, meet expanding local market needs.
What other services and support does Oyu Tolgoi LLC provide for local suppliers from the Umnugobi region? Do these local businesses need more than just training and information to enable them to grow.
Oyu Tolgoi is implementing a micro-credit programme with the objective to support expansion of small and medium size businesses and help them to access financial resources. The micro-credit fund was set up with 1.5 billion MNT deposited at Xac and Khaan banks. The money is then given out in the form of soft-loans for businesses from the Umnugobi region. Over 50 small and medium size, local businesses have used these loans to start or expand their businesses.
What are the preferential rights for the Umnugobi suppliers compared to other suppliers?
If the Umnugobi supplier meets the requirements of the competitive selection process, Oyu Tolgoi is committed to give preference to Umnugobi supplier over national and international suppliers. This also allows for a 5-25 per cent price incentive for Umnugobi supplier depending on the type of goods or services and the supplier development policy.
Is there an opportunity for the Umnugobi suppliers to change the price proposal in some cases? This would be big opportunity for the Umnugobi suppliers?
Yes. If a Umnugobi supplier is participating in a tender worth more than US$100,000 and their products and services meet the technical requirements, their price proposal can be a maximum of 10 per cent higher than the price proposal of their rivals. We offer the right for them to revise and change their price proposal.
What are the criteria to qualify as a supplier of Umnugobi region?
Of course, there are certain requirements. The supplier has to produce goods and provide services in the territory of Umnugobi. The parent company or branch company entering into a contract with our company must be registered in Umnugobi. Also, more than 75 per cent of the company’s full-time staff must be Mongolian citizens living in Umnugobi. There are also requirements for the company to be a tax-payer and that transactions are done in Mongolian currency.
When will this policy be implemented? Where do businesses who want to qualify as Umnugobi suppliers access information?
We have been committed to supporting Umnugobi suppliers for a long time. This policy was approved by governing board of Oyu Tolgoi LLC in December 2011. It should be mentioned that this policy is part of the 'Procurement Policy documents' for Oyu Tolgoi LLC. If you would like review the Oyu Tolgoi LLC Procurement Policy and other relevant policy documents, visit the 'Procurement' menu on the www.ot.mn website.
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