What is an ICV Score and What Does it do For You?
The ADNOC Group Companies announced the In-Country Value (ICV) Program in 2017. According to ADNOC, the motive behind this program was to increase their positive contribution to the UAE’s economy and society. The ICV program has 3 main objectives:
- To create job opportunities for Emiratis in the UAE’s private sector.
- Encourage GDP growth in the UAE by making an active effort to source a greater number of services and goods locally.
- Targeting critical parts of the UAE’s value chain for categories such as the Oil and Gas industry and localize them.
The program was originally announced by ADNOC. Ever since then, a number of other “participating entities” have embraced the program as well.
The ICV program aims to achieve its goals by encouraging local suppliers to improve their business practices in a manner that will be beneficial for the UAE’s economic and societal growth. The ICV program introduces an ICV Certificate. In order to obtain this certificate, businesses need to have their financial statements verified by certifying bodies. These bodies analyse their records and calculate their “ICV score”.
In order to encourage businesses to get ICV Certificates, ADNOC and other participating entities have included ICV score as a determining factor in the tender bid selection process. Suppliers with an ICV Certificate will have an edge over suppliers who aren’t certificate holders. This approach will encourage a greater number of suppliers to obtain certification.
What’s ICV Score and How is it Calculated?
The ICV Certificate obtaining process involves having your financial statements verified by a certified body. There are a number of empanelled certified bodies that you can go to in UAE. When submitted, your documents are verified against a checklist set by the ICV program. Each point has its own score that is calculated through a set formula. The total of all these points is your ICV score.
The following points are taken into account when calculating a company’s ICV score:
- Manufactured Goods (for suppliers with an industrial license).
- Third Party Spending (for suppliers with non-industrial license).
- Expatriate Contributions.
- Revenue from Outside the UAE
- Emirati Head Count
- Investment Growth
ICV Score Formula
The ICV Program has set formulas for calculating the score you get for each point. The more you contribute in every area, the more score you will get. Companies with a higher ICV score will have a better chance of winning tender bids.
ICV Certificate and Tender Bids
The ICV program is capable of changing the way suppliers are selected through the bidding process, without causing any disruptions. When applying for bids with participating entities, ICV Certificates aren’t a hard requirement. Suppliers can still take part in the bid without them. However, they will be at a disadvantage when compared to suppliers who have ICV Certificates.
Suppliers who have an ICV Certificate will have their ICV scores taken into account. Suppliers without a certificate will simply be awarded a zero in the ICV score section of the selection process. If a supplier is submitting a bid through an agent, then the agent and the principal (the supplier being represented by the agent) shall both have to submit their own ICV certificates. An average of their ICV scores will be calculated and counted in the evaluation.
If suppliers are submitting bid for consortia or for a joint venture, their ICV score will be calculated based on their percentage of equity in the joint venture.
In all scenarios, having a higher ICV score will put parties at an advantage.
ICV Improvement Plan
In some cases, the participating party (such as ADNOC) can ask suppliers to submit an ICV improvement plan along with their bid. An ICV improvement plan is basically a template filled out by the supplier, showing how does the supplier plan to improve their ICV score in the future.
Improvement plans can be company specific or agreement specific. In both cases, they are tied to the payment of a contract. A supplier’s ability to follow a submitted plan will have an impact on the payout of their contract. 5% of a contract’s value is tied to the supplier’s ability to fulfill its improvement plan.
The ICV program aims to stimulate local suppliers by providing them with incentives for making decisions that will increase their contribution towards In-Country Value Development. In doing so, the program will help in long term economic development in the UAE.
Applying for an ICV Certificate is quite easy. Companies need to produce financial statements that are checked and verified by an empanelled certifying body. The Body calculates its contribution towards ICV and presents it in the form of an ICV score. Depending on this score, suppliers can gain an edge when submitting bids to ADNOC and other participating entities.