INDUSTRIAL BENEFITS INFORMATION BULLETIN SEISMIC/EXPLORATORY DRILLING BENEFITS PLAN DATABASE REQUIREMENTS EXPRESSIONS OF INTEREST, PREQUALIFICATION OF SUPPLIERS/CONTRACTORS, BID LISTS AND INVITATIONS TO TENDER GENERAL PRINCIPLES, DEFINITIONS AND INTERPRETATIONS REGARDING BENEFITS PLAN CONTENT CALCULATIONS INDUSTRIAL BENEFITS INFORMATION BULLETIN Prepared December 1999 Befre the Canada Nva Sctia Offshre Petrleum Bard ("the Bard") may authrize any wrk r activity in the Nva Sctia Offshre area, including seismic and/r explratry drilling, a Canada-Nva Sctia Industrial Benefits and Emplyment Plan ("Benefits Plan") must be prepared by the peratr and apprved by the Bard. In rder t prvide guidance t peratrs in preparing the required Benefits Plan, the Bard has established Industrial Benefits and Emplyment Plan Guidelines. These Guidelines identify that each Benefits Plan submitted t the Bard shall have the fllwing bjectives: The emplyment f Canadians and, in particular, residents f Nva Sctia; and The participatin f Canadian and, in particular, Nva Sctian businesses in the prvisin f gds and services This Infrmatin Bulletin supplements the Industrial Benefits and Emplyment Plan Guidelines by prviding specific infrmatin the Bard requires f peratrs when: 1. preparing Benefits Plans relating t seismic and/r explratry drilling prgrams, 2. submitting Expressins f Interest, Bid Lists and Ntices f Cntract Award, and 3. calculating Canada-Nva Sctia cntent. With respect t item (3), the General Principles, Definitins and Interpretatins which peratrs shuld incrprate int their Benefits Plan cntent calculatins are cnsistent and cmply with Generally Accepted Accunting Principles, Canadian General Standards Bard definitins and the Bard's Guidelines fr calculating industrial benefits cntent.
SEISMIC/EXPLORATORY DRILLING BENEFITS PLAN DATABASE REQUIREMENTS Database Requirements Dllar Value f Emplyment Ttal emplyment expenditure fr the prject, brken ut int Nva Sctian, Other Canadian and Freign cmpnents. Must be in Canadian dllars. Seismic/Prfessinal Crew Ttal number f seismic/prfessinal crew n the prject, brken ut int Nva Sctian, Other Canadian and Freign cmpnents. Marine/Rig Crew Ttal number f marine/rig crew n the prject, brken ut int Nva Sctian, Other Canadian and Freign cmpnents. Prcurement - General Supplies Itemized prject prcurement expenditures under a General Supplies categry, brken ut int Nva Sctian, Other Canadian and Freign cmpnents. Must be in Canadian dllars. Prcurement - Service and Maintenance Itemized prject prcurement expenditures under a Service and Maintenance categry, brken ut int Nva Sctian, Other Canadian and Freign cmpnents. Must be in Canadian dllars. Prcurement - Vessel Itemized prject prcurement expenditures under a Vessel categry, brken ut int Nva Sctian, Other Canadian and Freign cmpnents. Fuel acquisitin csts shuld be a separate item. Must be in Canadian dllars. Ttal Prject Expenditure Shuld agree with the ttal f the abve Emplyment and Prcurement expenditures. Must be in Canadian dllars. Include Prject R & D Initiatives and Expenditures Include Prject Training and Technlgy Transfer Initiatives and Expenditures Include Vessel Name and Anticipated Prject Start and End Dates
EXPRESSIONS OF INTEREST, PREQUALIFICATION OF SUPPLIERS/CONTRACTORS, BID LISTS AND INVITATIONS TO TENDER Operatrs are required t ntify the Bard f their intentins regarding Expressins f Interest, Prequalificatin f Suppliers/Cntractrs, the develpment f Bid Lists fr prcurement purpses and Invitatins t Tender. The ntices shall include: A descriptin f the service/item t be purchased, Anticipated dates fr award and cmmencement and cmpletin f wrk, and Estimated value. The peratr must receive prir apprval f the Bard fr all activities related t the purchase f gds and services fr a prject, and having a value in excess f $50,000, as identified in the Bard's Industrial Benefits and Emplyment Plan Guidelines. The $50,000 benchmark may be increased at the CEO f the Bard's discretin, having regard t the verall prject expenditure. Expressins f Interest, Prequalificatin f Suppliers/Cntractrs, Bid Lists and Invitatins t Tender must be prepared by the peratr in accrdance with requirements set ut in the Guidelines. CONTRACT AWARDS Operatrs are required t ntify the Bard f their intentins regarding the awarding f cntracts. The peratr must receive prir apprval f the Bard fr cntract awards having a value in excess f $50,000, as identified in the Bard's Industrial Benefits and Emplyment Plan Guidelines. The $50,000 benchmark may be increased at the CEO f the Bard's discretin, having regard t the verall prject expenditure. The peratr must include a review f the analysis f the prpsals, justifying the selected cntractr. Ntices f Cntract Award must be prepared by the peratr in accrdance with requirements as set ut in the Guidelines. GENERAL PRINCIPLES, DEFINITIONS AND INTERPRETATIONS REGARDING BENEFITS PLAN CONTENT CALCULATIONS General Principles Cntent is calculated n a pre-incme tax basis. Fr calculating cntent, use either the principle f "Canadian cst incurred plus Canadian prfit" r "selling price less freign csts". The same principle is applied t "Nva Sctian" and "Freign" calculatins. Reasnableness and materiality shuld always be cnsidered.
All infrmatin shuld be derived thrugh generally accepted accunting principles (GAAP) and relate back t the cntractr s financial statements. Freign exchange shuld be calculated using actual transactin exchange rates as ppsed t a fixed rate calculatin. Fr majr suppliers f material, cntent is fixed nly n cntract cmpletin. Fr majr cntracts, the cntent infrmatin must be updated thrughut the life f the cntract. Pre-sanctin csts shuld be reprted in benefit cntent reprts. Cntractrs must btain benefit reprts frm subcntractrs, including persn hurs. Definitins Canadian Citizen Nva Sctia Resident Nn-Canadian A Canadian citizen is a persn wh was brn in Canada and has nt relinquished his r her Canadian citizenship; r a persn wh has been granted Canadian citizenship; r a persn wh has been granted landed immigrant status. Canadians wh have resided in Nva Sctia shuld be reprted fr the first six mnths f the prject as "Other Canadian" and after six mnths n the prject, shuld be reprted as "Nva Sctian". Nn- Canadians shuld always be reprted as "Freign" regardless f the length f time n the prject. A Nva Sctia Resident is a Canadian citizen r landed immigrant wh meets the residency requirements fr vting in a prvincial electin, as defined in The Electin Act f Nva Sctia, which states " a Canadian citizen r landed immigrant wh has resided in the prvince fr the immediately preceding six mnth perid ". A nn-canadian is a persn wh was nt brn in Canada and wh has nt been granted landed immigrant status. Nva Sctian Persn Hurs This represents the number f Canadian citizens r landed immigrants wh were residents f Nva Sctia times the number f hurs in a nrmal wrk week, times the number f weeks the persn has been emplyed n the prject. Hurs wrked n the prject by a Nva Sctian wh has temprarily relcated utside f Canada r utside f the prvince while retaining Canadian citizenship, are cnsidered Nva Sctian persn
hurs. Freign emplyees wrking n the prject in Nva Sctia wuld nt be classified as Nva Sctian persn hurs. Persn Year Nva Sctian Cmpany Other Canadian Cmpany One persn year equals ne persn wrking a full year r 2,080 hurs. T translate persn years int jbs, the number f persn years is multiplied by a factr f 1.10 t 1.35, based n the types f activities and the average duratin f jbs required t carry them ut. Fr a Nva Sctian cmpany, cntrlling sharehlders must be residents f Nva Sctia, it must have an perating ffice in the prvince, and it must be registered with the prvincial Registry f Jint Stcks. Fr an Other Canadian cmpany, cntrlling sharehlders must be residents f Canada, it must have an perating ffice in Canada, and it must be registered with the apprpriate authrities t cnduct business in Canada. Interpretatins Canadian Cntent Labur Expenditure Cntent Canadian cntent is that prtin f the cst f a prduct r service assciated with the wrk perfrmed in Canada by cntractrs, subcntractrs and suppliers. The same interpretatin is applied t "Nva Sctian" cntent r "Freign" cntent. Labur expenditure cntent is based n the lcatin f labur perfrmed and reprted in dllars. Expenditures fr labur by Freign citizens, residents f ther prvinces r Nva Sctians perfrmed in Nva Sctia represent Nva Sctian cntent. Labur perfrmed in ther prvinces wuld be Other Canadian cntent. Labur perfrmed in ther natins wuld be Freign cntent. The exceptin is when the labur is perfrmed ffshre n a rig r vessel n which the crew lives in islatin. In that case, the cntent is based n the permanent residency f the labrer, t which he r she will return at the end f the shift. Labur Emplyment Cntent Labur emplyment cntent is based n the residence status and citizenship f the emplyee and reprted in persn hurs.
Nte that Labur Expenditure Cntent and Labur Emplyment Cntent are tw separate reprting items. Temprary Labur Services (i.e. Kelly Office Services, Depreciatin Cntent Dnatins Cntent Office Overlad, etc.) Cntent Temprary labur services shuld be classified using the lcatin f labur in determining the cntent f labur expenditures reprted, and the residence status fr determining cntent f persn hurs reprted, in the same manner as ther prject labur is accunted fr. The calculatin f the cntent fr depreciatin f ffice equipment and cmputers is based n the pint f purchase and where the cmpnents are surced frm and manufactured. Fr example, where a cmputer is manufactured r assembled utside f Canada the percent f Freign cntent wuld als apply t depreciatin. Dnatins shuld be attributed t the regin where they were dnated. Equipment Rental r Purchase Cntent Fd and Catering Cntent Large rentals r purchases f equipment which are usually manufactured elsewhere shuld be classified 100% Freign r 100% Other Canadian r sme split between the tw categries. If sld r rented frm an ffice in Nva Sctia, usually abut 15% Nva Sctian cntent wuld be apprpriate. The supplier r cntractr is required t reprt cntent. As a general guideline, the cntent fr fd and catering can be brken dwn as 75% Nva Sctian, 25% Other Canadian and 0% Freign. There shuld, hwever, be supprting evidence in the way f industry statistics r ecnmic mdels which prvide audit evidence. In additin, where fd and catering are a high value prcurement ($ Millins), anther percentage split may be acceptable if the vendr is supplying an actual benefits split with a reasnable explanatin f variance frm industry average. General Cnsumables (i.e. safety equipment, electrical supplies, valves, fittings, etc.) Cntent As a general guideline, the cntent fr general cnsumables purchased thrugh a Nva Sctian based cmpany can be brken dwn as 35% Nva Sctian, 35% Other Canadian and 30% Freign. There shuld, hwever, be supprting evidence in the way f industry statistics r ecnmic mdels which prvide audit
Insurance Csts Cntent Lease/Charter Cntent Materials Cntent Overhead Cntent evidence. In additin, where general cnsumables are a high value prcurement ($ Millins), anther percentage split may be acceptable if the vendr is supplying an actual benefits split with a reasnable explanatin f variance frm industry average. Insurance csts will nt likely be 100% Nva Sctian cntent. There culd be a Nva Sctian brker, hwever, the cntent has t take int accunt where the risk is cvered, i.e. Llyd s f Lndn. The cntent f leased premises is determined by the lcatin f the building and the wnership f the lessee. If lcated in Nva Sctia and leased frm a Nva Sctian cmpany, it wuld be 100% Nva Sctian cntent. If wned by Other Canadians r Freigners, then sme reasnable prtin shuld be classified as Other Canadian r Freign, representing the mark up fr prfit and nn-nva Sctian verhead f a nn-nva Sctian cmpany. The cntent fr a supply vessel leased r chartered frm a Freign cmpany wuld have Canadian r Nva Sctian cntent nly with relatin t perating csts, the rest wuld be cnsidered freign csts. If the vessel was purchased frm a freign surce, the value f the depreciatin cmpnent f cst wuld be classified as Freign. If the vessel was leased frm a Nva Sctian cmpany and was built in Nva Sctia, this wuld be calculated as Nva Sctian cntent. The cntent f materials depends n where the materials are surced frm r manufactured. A prduct r material purchased frm a vendr with a Nva Sctian address, culd nt be 100% Nva Sctian cntent if the material was nt manufactured in the prvince. Only the mark up and verhead fr the Nva Sctian vendr wuld be Nva Sctian cntent. The rest wuld be Freign r Other Canadian. Vendrs are required t reprt cntent t prpnents, cntractrs and subcntractrs. Overhead includes all cntractr s indirect expenses such as expenses nt directly chargeable t jbs. (Overhead is usually prrated t jbs n sme acceptable base. Ensure cnsistency f applicatin, i.e. equitable amng jbs.) Reprted Overhead expenditures shuld be cnsistent with thse reprted in the cntractr's bks f accunt and financial statements. Fr verhead csts charged by a cntractr, the cntent classificatin is based n where the expense was incurred, rather than the cuntry f incrpratin. The cntent f the prtin f verhead representing recvery f head ffice wages fr management, administratin r supervisin is based n where these emplyees perfrm their duties.
Overhead csts incurred by Freign cmpanies perating in Canada r Nva Sctia and incurring verhead csts at these lcatins will have sme Canadian r Nva Sctian cntent fr verhead csts regardless f cuntry f incrpratin r lcatin f head ffice. Specific verhead csts fr rent, supplies, equipment purchases, etc., shuld be classified n the same basis as direct csts. When the charge is fr an allcated cntributin fr verhead f a certain ffice r head ffice, then the cntent is based n where the ffice is lcated and the csts incurred. Payment t Gvernments Cntent Prfit Cntent This des nt include HST, GST r incme taxes, all f which are nt cnsidered fr cntent. Payment f prperty taxes, duties, licenses, fees, etc., will be classified as Nva Sctian cntent fr Prvincial gvernment and municipalities in Nva Sctia; Canadian cntent fr prvincial gvernments and municipal gvernments utside f Nva Sctia; Canadian cntent fr payments t the federal gvernment; and Freign cntent fr payments t nn-canadian gvernments. Prfit is the actual prfit bked by the cntractr n the prject and is cnsistent with the cntractr s financial statements. Prfit has t be reflected as it is earned, nt calculated at the end. When calculating the cntent breakdwn n a cntract, it is necessary t include prfit in the ttal prject expenditure calculatin. This can be cmbined with verhead when submitting reprts, s it des nt stand alne. Prfit is based n the wnership f the cmpany. Prfit earned by a cmpany cntrlled by Nva Sctians is deemed Nva Sctian cntent; prfit earned by a cmpany cntrlled by ther Canadians is deemed Other Canadian cntent; prfit earned by a cmpany cntrlled by nn-canadians is deemed Freign cntent. Therefre, if a subcntractr is reprting 100% Nva Sctian cntent, but is nt wned by Nva Sctian residents, there is likely an errr, as in that case, there wuld be Freign r Other Canadian prfit (and verhead) invlved. As a guideline, while crprate incme taxes are excluded frm cntent calculatins, if there is Canadian crprate tax paid, there is Canadian prfit cntent. The same principles are applied t calculate the prfit prtin f cntent in a Jint Venture scenari, i.e. prfit cntent relates back t where cntrlling sharehlders are lcated and what the jint venture prfit-sharing arrangement is. Even if there is an agreement t leave the entire prfit in Canada r Nva Sctia t grw the cmpany, eventually it will be allcated and, therefre, the prfit cntent calculatin has t reflect that. Fr example, in a Jint Venture arrangement between a Freign cmpany and a Canadian
Refined Fuels Cntent Service Csts Cntent cmpany, where they have agreed t split prfit 50-50, the same split must be applied t the prfit cntent. Overhead in the Jint Venture scenari wuld be calculated pursuant t "Overhead Cntent". As a general guideline, the cntent fr refined fuels can be brken dwn as 32% t the refining prvince, 18% Other Canadian and 50% Freign. There shuld, hwever, be supprting evidence In the way f industry statistics r ecnmic mdels which prvide audit evidence. In additin, where fuel is a high value prcurement ($ Millins), anther percentage split may be acceptable if the vendr is supplying an actual benefits split with a reasnable explanatin f variance frm industry average. The cntent f service csts is calculated at the lcatin where the expenses are incurred, rather than lcatin f head ffice. The supplier r subcntractr is required t reprt cntent. Subscriptins, Publicatins, Fees and Dues Cntent The cntent f these items is attributed 100% t the regin r lcatin f the invice. Transprtatin Csts Cntent Travel Csts Cntent Transprtatin csts cntent wuld be reflected by the wnership and lcatin f the carrier invlved. A Nva Sctian cmpany perating frm Nva Sctia wuld be 100% Nva Sctian cntent. A Canadian cmpany perating frm utside Nva Sctia wuld be 100% Other Canadian cntent. A Freign cmpany perating in Nva Sctia wuld be Nva Sctian cntent except fr mark-up fr Freign prfit and verhead. If an item was purchased in Eurpe and freighted, cntent wuld be 100% Freign. If the item was purchased in Eurpe then trucked by a Nva Sctian trucking firm, the trucking csts wuld be Nva Sctian cntent, the rest wuld be Freign cntent. If the item was purchased and marked "FOB destinatin", the distributin trail f materials invlved wuld have t be fllwed, i.e. if the cntent breakdwn n the materials was 65% Other Canadian and 35% Nva Sctian, then the freight transprtatin wuld be the same. The benefit shuld be classified based n where the travel cst is incurred. Fr example, if the cntractr incurs significant airfare in Calgary t fly staff t Nva Sctia and return, this shuld be classified as
"Other Canadian" cntent. The meals and htels, etc, wuld be Nva Sctian cntent. Cntractr/Subcntractr Expenditure Reprt Elements Operatr and cntractr/subcntractr expenditure reprts shuld cntain these elements: Prfit and verhead are built int cntent calculatins. Fr the purpses f benefits reprting, they can be bundled tgether t maintain cnfidentiality f prfit numbers. Cntent achievement shuld be supprted by apprpriate dcuments and recrds maintained and cnsistent with the cntractr s financial statements. Reprted persn hurs wrked is supprted by cntractr recrds, and determined in accrdance with the residency definitins. Current and cumulative Nva Sctian, Canadian and Freign cntent are detailed. Invice amunts by expenditure categry such as "Labur", "Materials", "Services", etc., are included. The reprt includes the cntractr s name, invice numbers, cntract number, mnth, year and cntact infrmatin fr the cntractr. An fficer f the cntractr s cmpany must certify n the reprts that the reprted expenditures by cntent classificatin have been recrded in accrdance with the criteria set ut by the Canadian General Standards Bard and the Canada-Nva Sctia Offshre Petrleum Bard, generally accepted accunting principles and the reginal benefits reference manual (if applicable); are recnciled t the accunting recrds f the cntractr, and have been verified t supprting evidence f cntent classificatin. The reprt is signed by an fficer f the cntractr s cmpany.