The In-Kingdom Total Value Add (IKTVA) Program (https://www.iktva.sa) launched on December 1st, 2015 is designed to drive domestic value creation and maximize long-term economic growth and diversification.
The IKTVA works to drive increased investment, economic diversification, job creation, and workforce development within the Kingdom. By 2021, Saudi Aramco aims to achieve 70% localization of all spending, creating a business environment that will provide 500,000 new jobs, and enable 30% export of Saudi energy sector products.
As well as enabling a sustainable Saudi energy sector, IKTVA provides a level playing field for suppliers through consistency and transparency in application and process. Uniform evaluations for both service and material suppliers will be consistent across the company, creating supplier-focused partnerships, and investment stability and assurance achieved through annual assessments.
The program works by first establishing an IKTVA baseline score for each supplier measured against key metrics for local value creation. Jointly with the supplier, an action plan is consequently developed to increase the IKTVA score. Thirdly, performance progress is measured to ensure the relationship results in continued local value creation.
The parameters to measure IKTVA are the following:
- Localized goods and services
- Salaries paid to Saudis
- Training and development of Saudis
- Supplier development spending
- Research & Development
- Company revenue (spend from Saudi Aramco only)
Times have changed as the value proposition is now more focused on the future. While historically awarded contracts were mainly based on technical compliance and lowest cost. Moving forward, participation in IKTVA will be one of the components used to evaluate any supplier proposal.
Even at a corporate level, a new function – the Industrial Development & Strategic Development Supply Department – has been created within Saudi Aramco Materials Supply to champion and integrate the IKTVA program and optimize the supply chain.
IKTVA is underpinned by mandatory ‘local content development’ of suppliers and contractors that prioritizes the purchase of goods and services from a local supplier base. Three critical objectives guide the program:
- Doubling the percentage of locally-manufactured energy-related goods and services to 70% by 2021;
- Helping raise the export of Saudi-made energy goods and services to 30% over the same time frame;
- Creating direct and indirect jobs within the energy related sector for a growing and talented Saudi population.
In Dec-2015, a list of all Saudi Aramco registered manufacturers regardless of their iktva status has been published on the program website: about 700 local companies with a prevalence on Civil and Structural Materials, Electrical Components and Systems, Pipings Fittings and Flanges, Instrumentation, Chemicals and other equipment and services.
The Local Content is also focusing on semi finished works that foster the entire supply chain of related works. For example, in June 2016, Saudi Aramco has signed a MoU with General Electric and Cividale of Italy to build the Middle East and North Africa’s first-of-its-kind high-end forging & casting manufacturing facility that will serve the region’s maritime and energy industries.
In Mar-2017, SPSV, a diversified manufacturer of manufacturer of forged and casted steel valves acting as a joint venture of OMB Valves (Italy), IVM (Saudi Arabia), and Orion Valves (Italy) – inaugurated a new workshop with the purpose to meet the surging demand of the Saudi and gulf oil & gas industry.
In Dec-2017, Saudi Aramco signed MOUs worth around $1.68 billion with local and foreign companies as part a drive to expand the Kingdom’s industrial base and manufacture a bigger share of products domestically: among other Sinopec, Dalma Gulf Drilling Co. and National Petroleum Technology.
