3. Implementing RBC Objectives in Practice
This section describes the implementation of RBC objectives in public procurement, focusing on the practices of Central Purchasing Bodies (CPBs). It examines whether and how RBC objectives are applied to subcontractors and the extended supply chain by CPBs. The section also addresses role of other stakeholders in the greater uptake of RBC objectives in public procurement.
As seen in section 2, many countries have developed regulatory or strategic frameworks to support RBC objectives. Large public buyers such as Central Purchasing Bodies (CPBs) have a strategic role in implementing national policy objectives and can promote the attainment of RBC objectives significantly.
CPBs are public purchasers who (OECD, 2011[1]):
acquire goods or services intended for one or more contracting authorities;
award public contracts for works, goods or services intended for one or more contracting authorities;
negotiate framework agreements for works, goods or services intended for one or more contracting authorities.
The OECD Recommendation of the Council on Public Procurement (OECD, 2015[2]) points to the role of centralised procurement in creating efficiencies and spill-over effects in the procurement system (Principle on efficiency, paragraph VII). CPBs have different legal statuses across OECD countries. Some operate as part of a ministry, while others are independent government agencies or even corporations. These different forms and degrees of independence provide opportunities for CPBs to implement different procurement strategies.
CPBs can realise economies of scale through their aggregate purchasing power and influence the business sector towards more responsible behaviour by integrating RBC objectives into procurement expectations. CPBs conduct repeated purchases. This has two effects: 1) it provides incentives to businesses to “win and maintain” contracts with CPBs, supporting RBC uptake by rewarding responsible business behaviour. 2) CPBs can develop a strong expertise on the best strategies to procure, enhancing the results in terms of efficiency and impact (OECD, 2017[3]) (OECD, 2019[4]).
To understand how CPBs are implementing RBC objectives in their purchasing practices, the survey was sent to CPBs in the Adherent countries to the OECD Recommendation on Public Procurement and OECD Guidelines for Multinational Enterprises (MNE Guidelines). As with the survey to public procurement policy makers, the scope was limited to the eight RBC objectives.1 The survey sought information on i) current frameworks in place within CPBs to promote RBC objectives, ii) how CPBs implement RBC objectives in the procurement cycle and iii) existing implementation tools within CPBs to support the promotion of RBC objectives.
Responses were received from 20 CPBs in total. Seventeen CBPs represented OECD member countries2, and three responses came from non-OECD countries3. Unless otherwise noted, information in this chapter results from the survey to CPBs.
The survey also solicited perspectives from stakeholders from business, trade unions and civil society regarding the practical application of the regulatory and strategic frameworks presented in section 2. The questions to stakeholders focused on how stakeholders interact with public procurement practitioners, and sought information from stakeholders on challenges in the implementation of RBC objectives in public procurement procedures. Stakeholders were asked to provide examples of good practice cases or approaches they have identified. The survey asked about specific initiatives by stakeholders to enhance the uptake of RBC objectives in public procurement. The following stakeholders provided responses to the survey: seven companies (from the ICT, pharmaceutical and medical technology sectors), six industry organisations, three civil society organisations and two trade unions (see Figure 3.1).
Source: OECD Survey, Leveraging Responsible Business Conduct through Public Procurement
To support implementation of RBC objectives, many CPBs complement national regulatory or strategic frameworks with their own policies and strategies. Availability of frameworks for the different RBC objectives differs greatly. The majority of CPBs (85%) have at least one organisational policy or strategic framework to promote RBC objectives (see Figure 3.2).
Labour rights and environmental considerations are the most prominent RBC objectives amongst CPBs’ policies and frameworks, with 70% of CPBs having a policy or strategic framework in place. 65% of CPBs have frameworks referring to human rights and integrity considerations, and 60% include considerations related to disabled people.
This is not surprising, as section 2 demonstrated that most countries have a national level strategic or regulatory framework that include objectives related to the environment, labour rights, disabled people, integrity and human rights. As such, it follows that a high number of CPBs correspondingly have established organisational-level strategies that mirror these national frameworks. When CPBs have obligations by law to fulfil specific objectives, these are expected to be included in subsequent policies and strategic frameworks.
Areas where relatively few CPBs have policies or strategic frameworks include minorities (only 20% have strategies or policies at the CPB level), and the long-term unemployed (25% indicated policies here.) This mirrors the findings in section 2, where these RBC objectives were rarely included in regulatory or strategic frameworks at the national level.
3.2.1. How CPBs’ strategies and policies apply to the full supply chain
CPB’s public procurement policies or strategy cover the supply chain to varying degrees. The survey asked those CPBs that have internal policies or strategies reflecting the eight RBC objectives if these are extended to the full supply chain including main contractors, subcontractors and suppliers further along the supply chain.
The majority of CPB’s do not extend their policies or strategies for RBC objectives to the full supply chain (Figure 3.3). However, it is reassuring to see that across RBC objectives, between 20% to 25% of CPBs apply polices and strategies to suppliers beyond subcontractors in the areas of environment, human rights, integrity and labour rights.
Note: Share of CPB’s policies or strategies covering different tiers of the supply chain for the different policy areas. The figure is based on data from 20 Central Purchasing Bodies.
Source: OECD Survey, Leveraging Responsible Business Conduct through Public Procurement
As described in section 2, national regulatory and strategic frameworks are most likely to apply to the supply chain for RBC objectives related to labour rights, the environment, and integrity. The survey results show that CPB strategies and policies also reflect these objectives. However, although there is progressive development, the data shows that even for integrity issues, 43% of respondents do not extend their policies or strategies beyond the subcontractor level. This may be because traditionally CPBs have not been expected or obliged to consider RBC objectives beyond their main contractors and subcontractors.
CPBs increasingly use risk management frameworks in relation to RBC objectives, but emphasis on different RBC objectives varies. CPBs pay strongest attention to integrity and the environment. A risk management framework encompasses a methodology for assessing risks. This includes an assessment of the nature, causes and the consequences of risks as well as mitigating them (OECD, 2019[5]). The Recommendation of the Council on Public Procurement (OECD, 2015[2]) calls on Adherents to integrate risk management strategies for mapping, detection and mitigation of risks throughout the public procurement cycle (Principle on Risk, paragraph XI). Results from previous studies also show that countries are increasingly developing risk management frameworks that are integrating both environmental and social considerations. The progress report on the implementation of the OECD Recommendation of the Council on Public Procurement found that 52% of the responding countries have a strategy for the assessment, prevention and mitigation of public procurement risks. In other countries, a general risk management policy might apply (OECD, 2019[4]).
Public procurement can be subject to many different risks potentially affecting the outcome of procurement processes. Risks can arise at any stage of the public procurement cycle.
The survey investigated whether CPBs have a risk management framework in place and if the risk management framework takes into account RBC objectives.4 The majority of CPBs (80%) have developed a risk management framework. However, as expected, the extent to which they integrate all RBC objectives varies (Figure 3.4).
Notes: Share of CPBs that consider different policy considerations as part of their risk management framework (“yes” or “yes, in specific cases”). The figure is based on data from 17 CPBs
Source: OECD Survey, Leveraging Responsible Business Conduct through Public Procurement
Out of the 17 CPBs that responded to this question, 10 (59%) included integrity and environmental considerations in their risk frameworks, and 8 (47%) integrate labour rights. Similar to findings in previous sections, social RBC objectives, notably those related to long-term unemployed, gender and minorities, are less represented in risk management frameworks. Overall, less than a third of CPBs took disabled people, the long-term unemployed, gender or minority considerations into account in their risk management frameworks.
The Chilean CPB (ChileCompra) has a system to detect integrity risks. The tool serves to detect errors in tender documents, such as notices, and errors in the procedures. The framework includes a monitoring and alert system that flags when violations of rules are detected. This mechanism also serves to flag opportunities to improve processes. In addition, it has a “whistle blower” channel, to enable civil society, suppliers or public officers to inform of any situation that may infringe the transparency or integrity of the public procurement process.
As described in section 2, several governments have developed risk assessment tools that can assist public procurement authorities in identifying risks in supply chains for specific categories. The supply chain risks covered by these assessment tools include risks linked to RBC objectives (see section 2). The OECD Due Diligence Guidance for Responsible Business Conduct (OECD Guidance for RBC) recommends that companies map the structure of their supply chains and identify general areas of risks based on “specific geographic, sectoral, product or enterprise factors”5. Considering risks along these dimensions (see Table 3.1) can help scope risks, serving as a broad, initial exercise to enable prioritisation.
Tools used in the private sector to aid in scoping include market research services, civil society reports, National Human Rights Institute (NHRI) reports, reports from government agencies, information from trade unions, employers or business associations, media reports, grievance mechanisms and direct engagement with stakeholders on the ground. These resources may also be of use to public procurement practitioners, such as procurers in CPBs.
Once a broad prioritisation or scoping of risks has taken place, the OECD Guidance for RBC recommends a more detailed risk assessment to identify and evaluate prioritised risks and potential negative impacts. In the private sector, many enterprises do this through self-assessments and external audits or inspections. In some cases, such assessments are regulated by domestic law. Common examples are labour inspections, environmental inspections required for licensing, environmental impact assessments, anti-corruption compliance management systems, know-your-counterpart (KYC) processes, financial audits, human rights impact assessments, and product-licensing processes.
Risk assessment tools which focus on identifying risk associated with the environment, human rights, labour rights and integrity could also explain why CPBs take these RBC objectives into greater account in their risk management frameworks. By comprehensively identifying the various sustainability risks related to RBC objectives in the supply chain, CPBs can increase their ability to make decisions in line with national and international sustainability objectives.
In the last five years, 85% of CPBs have identified high-risk sectors in relation to their procurement activities. Table 3.2 describes examples of the categories that CPBs have identified.
A risk management approach that prioritises the supply chain for specific product categories helps CPBs understand the provenance of raw materials and the conditions under which goods are produced, manufactured and transformed. A small number of CPBs are starting to integrate a due diligence approach as recommended by the OECD into their procurement process to identify, prioritise and mitigate risks (see Box 3.1).
The case of the Danish Central Purchasing Body
The Central Purchasing Body of Denmark (SKI) requires suppliers to conduct due diligence in relation to child labour, forced labour, freedom of association, and migrant labour. Suppliers are obliged to identify and mitigate human rights risks in connection with their own business activities and in their supply chain. The purpose of including these requirements is to ensure decent work and environmental conditions for the production of the products which are procured by the public procurement authority. The agreements include requirements based on internationally recognised principles and international initiatives, such as the UN Guiding Principles on Business and Human Rights (UNGPs), and the OECD Guidelines for Multinational Enterprises (MNE Guidelines).
SKL Kommentus in Sweden – due diligence support for regional authorities
SKL Kommentus is a Central Purchasing Body owned by the Swedish Association of Local Authorities and Regions (SALAR). Members of SALAR are Sweden’s 290 municipalities and 21 regions. SKL has developed human rights due diligence support for their members. The system starts with a mapping of supply chains, identifying adverse impacts in the supply chain related to human rights, labour rights, environment and integrity based on public available information such as MVO Netherland’s CSR Risk Check. The risks are then prioritised according to their severity, which steers the development of award criteria and contract clauses for the central purchasing agreements.
Source: (SKL Kommentus, 2020[6])
Throughout the procurement cycle, the RBC objectives that receive the most consideration are environmental considerations. Most attention to RBC objectives is paid in the tender specifications. This is an indication that public buyers could expand the breadth of tools used to pursue strategic public procurement. To understand how RBC objectives are implemented, the survey analysed how CPBs applied the eight RBC objectives throughout the procurement cycle.
The procurement cycle includes a pre-tender phase, a tender phase and a post-tender phase. Figure 3.5 presents a generic schema outlining these phases and the policies and strategic frameworks that typically guide the procurement process.
3.4.1. Integrating RBC objectives in the pre-tender phase
Market engagement on RBC objectives is relatively rare in the pre-tender phase, and most emphasis is given to environmental considerations. The pre-tender phase refers to activities involved in the tendering process prior to award of a project. This includes for example defining the organisation’s internal needs, preparing the budget, designing the procurement strategy, scheduling the project, researching or analysing the market, defining the requirements and award criteria as well as developing the tender documents. If it is a repeated purchase, the pre-tender phase should also be used for evaluating the performance of the previous tender and contract for the same purchasing category.
In the pre-tender phase, contracting authorities can engage in dialogue with suppliers and other key stakeholders on the objectives of the planned procurement to understand if suppliers are able to meet the requirements. Suppliers often have a more up-to-date and comprehensive understanding on new products and services including information on the price, market trends and risks associated with the product, service or sector. Engaging or consulting with suppliers and stakeholders at this pre-tender phase often results in the ability for more suppliers to participate in the tender procedures and for CPBs to build their knowledge of the market, product and relevant risks.
The pre-tender phase is important to establish the ability of potential suppliers in meeting RBC objectives and addressing risks. Engagement at this stage of the procurement cycle can help CPBs (and in general public buyers) to understand the types of measures and actions suppliers have put in place to identify, prevent and manage risks, including lessons learned in working with the wider supply chain and sector. The pre-tender market consultation can help public buyers identify actions and risk mitigation measures in a specific industry. It can also help identify stakeholders CPBs may wish to engage to mitigate any potential negative impacts. Public buyers can test their approach with the market to ensure that their RBC-related requirements will not deter bidders, or create unnecessary burdens during the bidding process or contract delivery.
The survey asked CPBs how often they engage with companies when incorporating RBC objectives into procurement opportunities (see Figure 3.6).6
A minority of CPBs consult with business “always or often” in the pre-tender phase across RBC objectives. Environmental aspects are the only objective where more than half of CPBs (53%) indicated that they always or often consult with businesses during the pre-tender stage. In the survey, UGAP France stated that market consultations are an important part of the procurement process to ensure that the purchasing categories meet the regulatory obligations and the strategic goals of the government. Centrale de Marchés FORCMS Belgium conducts market consultation in the procurement of ICT products to help develop relevant environmental requirements.
In contrast, for all other RBC objectives, only 12-18% of CPBs always consult with companies. In the case of labour rights, this figure is slightly higher when adding CPBs that consult with businesses “often”, but it reaches 40% at most for labour rights (consulting “always or often”). For people with disabilities, long-term unemployed, gender and minorities around 70% of CPBs replied that they “never or seldom” consult businesses during the pre-tender phase.
Feedback from business stakeholders indicated that one of the three most significant challenges perceived in incorporating any RBC objective in government contracts was the lack of market engagement from contracting authorities, including CPBs. In relation to fulfilling human rights obligations, many contracts include requirements that apply throughout the supply chain. For businesses, violating these requirements can result in fines or contract termination. In certain cases, business noted that CPBs did not have clear specifications on what are sufficient processes and routines in order for business to fulfil these requirements.
Engagement with civil society organisations and worker representatives and trade unions, as well as business representatives or industry associations is a useful source of information to identify risks related to a specific product, service or geography. The survey addressed trade unions, civil society organisations and industry associations to see if and how they are consulted by contracting authorities on the integration of RBC objectives.
Civil society and trade unions highlighted the importance of social dialogue and the value of including non-commercial stakeholders during market consultation (pre-tender phase). Non-commercial stakeholders can provide valuable expert advice and input on specific risks such as forced labour, child labour, migrant labour or the use of toxic chemicals in products. As they do not stand to gain commercially from a contract, civil society and worker representatives can provide an additional perspective and help CPBs ask suppliers the right questions about risks and about their due diligence practices.
The UGAP France and the Swedish Legal, Financial and Administrative Services Agency engage with trade unions early in the procurement process to receive input on issues such as labour rights or collective agreements. Public Procurement Service Korea consults organisations representing disabled veterans in order to include their perspectives in procurement opportunities. When the guidelines related to socio-economic considerations were developed in Canada, civil society, trade unions, external experts as well as people with disabilities were consulted. The Canadian Ethical Procurement of Apparel framework also included feedback from civil society and trade unions in addition to business organisations. In the survey, two trade unions provided information on cases when they had engaged with contracting authorities (see Box 3.2).
Trade unions are increasingly recognising public procurement as a lever for promoting labour rights both nationally and internationally.
Since 2017, the CFDT Interco union has co-operated with the Bordeaux Metropolitan Region and engaged in an innovative approach for responsible public procurement practices. Their first pilot focused on laundry contracts for municipal workers’ uniforms. The local CFDT Interco team – involving agents from the public procurement department – developed a method based on the SDGs to identify and prioritise social and environmental risks in supply chains. The CFDT team initiated meetings with service suppliers and conducted on-site visits. The site visits were not inspections but supported the procurement department to identify any areas for improvement and to work with suppliers to improve sustainability performance. This model has assisted the procurement department to sharpen and develop procurement-specific RBC objectives and is now under development in other purchasing categories.
UNISON is the UK’s largest union with more than 1.3 million members in public services. It has developed a strategy to put supply chain workers at the heart of public procurement. It focuses on developing sustainable public procurement models, initially targeting local authorities. Aims are to advance sustainable purchasing practices and promote unionisation and collective bargaining through working in social partnership. Key to this work are regionally based tripartite training courses bringing together elected councillors, public procurement staff and union representatives to learn and trial new ways of working.
Source: (Public Services International, 2019[7]) (UNISON, 2020[8])
3.4.2. Integrating RBC objectives in the tender phase
More than two thirds of CPBs include environmental and integrity objectives in the tender phase. The tender phase is where tender requirements are presented to the market. It often takes the form of a Request for Proposal (RFP), which is a structured invitation to suppliers to submit a proposal or tender to supply products or services in line with the requirements of the procurement documents that were developed in the pre-tender phase.
The survey results show that CPBs either often or always incorporate RBC objectives into the general requirements for a tender for some RBC objectives, namely the environment (79%), integrity (75%), labour rights (60%) and human rights (50%) (see Figure 3.7). The frequency by which CPBs include the other RBC objectives is considerably lower (reaching 30% at most – for gender and disabled people).
When CPBs include human rights and labour rights considerations in the general requirements of a tender, they refer to the leading international frameworks on RBC such as the UNGPs, the ILO conventions and the MNE Guidelines. For example, the Finnish CPB Hansel Ltd. Finland has included requirements for the prohibition of forced labour and respect for freedom of association according to the ILO core conventions. Hansel Ltd. Finland has also included requirements on reduction in the use of conflict minerals in its procurement contracts for ICT equipment. The Danish Agency for Public Finance and Management and the Swedish Legal, Financial and Administrative Services Agency ask suppliers to demonstrate social responsibility by adhering to internationally recognised principles such as the UNGPs, the MNE Guidelines and the UN Global Compact.
Companies and industry organisations confirmed that they see an increase in public tenders that include environmental, human rights, labour rights and integrity considerations, from contracting authorities in both OECD countries and non-OECD countries. To further encourage this, the industry organisation Responsible Business Alliance (RBA) has developed tools that may be of interest to contracting authorities (see Box 3.3).
Responsible Business Alliance (RBA) is an industry coalition dedicated to responsible business in global supply chains. RBA has nearly 400 members with combined annual revenues in excess of 7.7 USD trillion with products manufactured in more than 120 countries. The RBA enables member companies and their suppliers to conduct human rights and environmental due diligence deep into their supply chains through an audit platform, risk assessments, training, corrective action support and high-impact programmes to address and mitigate risks and advance RBC globally.
The RBA has a number of tools to help address responsible procurement.
Due Diligence for Public Procurement: RBA developed tools and programmes that can support public buyers in addressing responsible business issues in the procurement cycle.
Transparency: RBA Practical Guide to Transparency in Procurement maps out a spectrum of maturity related to meaningful transparency that company buyers can use as a resource to assess companies’ disclosures on social and environmental responsibility and meet their own sustainable purchasing goals.
Engagement: Responsible Factory Initiative (RFI) is a unifying architecture for RBA factory-level tools and programmes for companies looking to assess and develop their supply chain partners and factories at all levels of maturity.
Source: (Responsible Business Alliance, n.d.[9])
Other coalitions such as Electronics Watch (see Box 3.4) also provide platforms which may be of use to public buyers.
Electronics Watch is an NGO whose members are contracting authorities such as municipalities, universities, national government agencies, and other public organisations that buy electronics products. Electronics Watch assists contracting authorities, and collaborates with civil society, to monitor factories in their ICT supply chains and conduct follow-up on contractual demands. They do this through worker-driven monitoring. This methodology builds on engagement with workers employed by electronics manufacturers through monitoring partners located near workers’ communities.
In addition, Electronics Watch assists contracting authorities to develop due diligence criteria for decent working conditions in electronics supply chains. To ensure these criteria are fulfilled, they conduct risk assessments and compliance investigations, and provide a platform for contracting authorities to promote social responsibility in ICT supply chains collectively.
Source: (Electronics Watch, 2020[10])
Collaboration with stakeholders includes pooling resources to obtain reliable and credible intelligence about supply chains and sectors. It can also include engaging suppliers and ultimately creating effective market demand for the implementation of RBC objectives. Through their activities, these organisations can help untangle the complexity of supply chains and help public buyers to understand, influence and transform business behaviour.
Companies and business organisations indicated that expectations by CPBs on RBC objectives varied between countries and from one procurement process to the next. For example, between two processes in the same country, contracting authorities requested different environmental criteria, varying levels of transparency and different levels of verification of labour rights compliance. There is a risk that when CPBs develop unique requirements, it increases the overall administrative burden and costs for both companies and CPBs. Given that a majority of procurement occurs at sub-national level, with limited resources and capacity, companies expressed a need for greater consistency. In addition, companies highlighted that where recognition of company verification schemes are in place which could be of use to contracting authorities as they conduct their due diligence of suppliers.
The use of qualification and award criteria and performance clauses
In implementing RBC objectives in the tender specifications, CPBs emphasise environmental and integrity concerns. RBC objectives can be incorporated into tenders as qualification criteria, award criteria or performance clauses. Qualification criteria are specifications that suppliers must meet to submit a tender for a contract. These mandatory requirements on the supplier are stipulated in the supplier’s technical and professional abilities and capacity. RBC objectives can also be incorporated as award criteria (evaluation criteria). The award criteria can be based on the lowest-price criterion or the Most Economically Advantageous Tender (MEAT) criterion. The MEAT criterion means applying criteria on the basis of both quality and price (SIGMA, 2016[11]). According to the EU Directive 2014/24, contracting authorities should apply award criteria corresponding to MEAT that enable the integration of environmental and social considerations. Unlike qualification criteria or contracting clauses, award criteria are not mandatory for suppliers to fulfil.
In addition to qualification criteria and award criteria, RBC objectives can also be incorporated into performance clauses over the contract period (see Figure 3.8). Performance clauses are terms which outline the specific performance criteria that a supplier must fulfil in order to successfully carry out the contract during the contract period and receive payment. Considerations included as performance clauses take effect after the contract is awarded. The fulfilment of the terms is evaluated during the contract period. A breach might lead to sanctions or even termination of the contract.
Note: The figure is based on data from 20 Central Purchasing Bodies. This graph represents the share of CPBs that responded they considered RBC objectives “always”, “often” or “sometimes” in the respective phase of the tender in the last three years. Other options for this question were “seldom” or “never”.
Source: OECD Survey, Leveraging Responsible Business Conduct through Public Procurement
Qualification criteria are requirements that suppliers have to fulfil in order to be considered for the winning bid in a public procurement procedure. 41% of CPBs use qualification criteria to promote RBC objectives in procurement procedures. This is the most used approach across all RBC objectives. Most CPBs consider environmental objectives (75% of CPBs), followed by labour rights and integrity objectives (60%). Qualification criteria are a strong signal to suppliers on expectations, as suppliers must meet these criteria to obtain the contract. Public Procurement Service Korea uses qualification criteria for integrity considerations. Italy uses qualification criteria for environmental considerations. In certain cases, qualification criteria are also used by CPBs when specific purchasing categories are identified as high risk. The Danish Agency for Public Finance and Management uses qualification criteria when procuring products containing minerals from conflict-affected areas. The Public Works and Government Services Canada uses qualification criteria when procuring apparel.
The award criteria constitute the basis on which a contracting authority chooses the best tender and awards a contract. These criteria must be established in advance by the contracting authority and must not be prejudicial to fair competition (SIGMA, 2016[11]). Award criteria are most likely to be used by CPBs for the environment (60%) and integrity (45%). For environmental considerations, the use of award criteria is often linked to the maturity of the market. The Finnish CPB Hansel Ltd. uses award criteria for environmental considerations and labour rights when they know, based on the market analysis, that suppliers would not be able to fulfil all requirements (i.e., that qualification criteria, which are mandatory, would not be feasible.) Hansel Ltd. Finland also use award criteria for labour rights to provide an advantage to suppliers who can demonstrate that they address specific labour objectives. For example, they give points to suppliers that pay a living wage at the final assembly factories of computers, as well as to suppliers that limit total working hours, including overtime, to no more than 48 hours per week on average.
Performance clauses are specifications (conditions) in the contract that determine how a contract should be implemented (i.e. performed). Aside from the qualitative specifications of the procured good, works or service, performance clauses allow promoting RBC objectives by specifying aspects of the implementation or delivery. For example, contracts can prescribe that a cleaning service should be performed under observation of ILO core norms. CPBs use performance clauses to pursue objectives related to integrity (70%) and the environment (60%).
Verification of requirements before the contract award
The survey asked how often, within the last three years, CPBs had verified that awarded suppliers would meet the requirements set by the compliance of qualification and award criteria before the award (i.e. signing) of the contract (see Figure 3.9). The results show that for human rights, the long-term unemployed, gender and minorities less than 16% of responding CPBs verify criteria “always or often”.
The frequency with which CPBs verify compliance of integrity, and environmental considerations is higher than other areas. Furthermore, 68% of CPBs responded that they always or often verify integrity-related criteria prior to contract award. 48% of CPBs verify labour rights objectives.
Mapping the supply chain
In the tender phase, just over half of CPBs ensure that a potential supplier can certify its entire supply chain in all or specific cases. This is important as RBC-related adverse impacts can occur at any point in the supply chain. In order to be able to identify and mitigate risks, suppliers must be able to map their supply chains. Supply chain mapping provides suppliers with information on a number of crucial aspects, such as:
which segments of the supply chain they are active in (e.g. production, aggregation, processing, distribution),
which segment of the supply chain could be a “control point”7,
dynamics in the supply chain which relate to workers (how workers are recruited for example),
percentage and location of women who work in the supply chain, among others.
Only 5% of CPBs expect potential suppliers to certify their full supply chain, with an additional 50% requiring certification of supply chain knowledge in specific cases. However, 45% (i.e. almost half) of CPBs do not require potential suppliers to certify they know their full supply chain (see Figure 3.10).
For those CPBs that do require suppliers to certify that their supply chain complies with certain RBC objectives, this was strongest in relation to integrity and environment, followed by human and labour rights concerns. In some cases the request for supply chain transparency is connected to specific categories, such as textiles and ICT, which have been identified as high risk categories by some CPBs (as seen in Table 3.2).
Hansel Ltd. Finland developed award criteria to reward those companies that could show transparency in their supply chain. Suppliers receive additional points if they include: a) a list of final assembly locations of computers; b) a list of final assembly locations and of component suppliers of computers; c) a list and proof that the trademark owner has openly published a list of final assembly locations of computers; or d) proof that the trademark owner had openly published a list of final assembly locations and of component suppliers of computers.
Business supported having more clarity from CPBs on types of information they would need. If CPBs explicitly stated how specific RBC objectives will be taken into consideration (i.e. additional points for high environmental performance in the tender evaluation, or for supply chain mapping), companies would know that this data is a priority for the contracting authority. Demonstrated performance on meeting RBC objectives or following OECD recommendations on due diligence for RBC could be rewarded and give suppliers who are able to meet these requests a competitive advantage.
There is scope for CPBs to ask for such evidence from suppliers. For example, the Swedish Legal, Financial and Administrative Services Agency requires that human rights objectives must be fulfilled by hired subcontractors in all parts of the supply chain and that the measures are to be taken in accordance with the UNGPs or similar frameworks.
The implementation of due diligence by CPBs
CPBs rarely set requirements on supply chain due diligence. If they do, these relate to environmental considerations or integrity. The survey asked whether CPBs require main contractors to conduct due diligence on their subcontractors and extended supply chain. In general, a minority of CPBs require contractors to conduct due diligence on subcontractors and the extended supply chain. The RBC objectives in which this level of extended due diligence is required is highest in labour rights (35% at least in specific cases), followed by human rights and integrity (30%) (See Figure 3.11).
As described previously, considerations related to social issues see the lowest share of due diligence requirements set by CPBs. This includes the long-term unemployed (required by just 5% of CPBs), disabled people, gender considerations and minorities (each required by 10% of CPBs.).
There are some CPBs that require due diligence in the extended supply chain. The Danish Agency for Public Finance and Management includes due diligence criteria in tenders. The agency requires suppliers to include a policy describing their commitment to responsible business conduct per the UNGPs and the MNE Guidelines. Requirements include responsible management of the supply chain, risk analysis of the full supply chain, implementation of the policy and risk analysis including activities based on these, as well as reporting on the implementation and its results. In Peru, the procurement legislation does not require contracting authorities to investigate subcontractors or the supply chain. However, a supplier is responsible for correctly performing all duties for the execution of the contract. For this, it must carry out all actions that are within its reach, using due diligence and supporting adequate contract implementation and administration development to achieve the expected public objectives.
3.4.3. Challenges in the post-tender phase
CPBs rarely verify tender specifications related to RBC objectives during contract management. Monitoring contracts is essential to establish accountability that RBC objectives are implemented in practice. It is the supplier’s responsibility to ensure that the requirements in the contract are met. However, CPBs need to monitor that the supplier fulfils the requirements of the tender documents and contract.
Follow up methods for contractual obligations during the post tender phase
CPBs employ a variety of methods to verify supplier’s compliance with the requirements related to RBC objectives in the contract during the post tender phase. CPBs have developed a range of verification methods to verify, for example, environmental considerations. CPBs responded that they use eco-labels, standards and certificates approved by third parties and test reports to verify environmental objectives. In Peru, suppliers provide a certificate issued by the National Water Authority that certifies the company abided to Peru’s Water Footprint Program. The International Organisation of Standardisation (ISO) 14001 certificate was also cited as another useful document. Technical documentation, surveys on specific indicators, or simply providing information on electricity consumption were mentioned as additional examples.
For verifying labour rights, the methods used by New Zealand’s CPB includes site visits. The State Shared Service Centre Estonia checks that salaries paid by the main contractor and that subcontractors fulfil the requirements in the tender. ChileCompra is obliged to verify the supplier’s performance related to labour obligations during the contract execution phase before any payments are distributed. In addition to other methods used, the Norwegian Digitalisation Agency meets with suppliers to discuss the fulfilment of requirements as a method for verifying compliance with labour rights requirements.
For integrity criteria, the government of Chile maintains a list of companies that have been convicted of bribery, money laundering and terrorist financing offenses and that are banned from contracting with the government. This list is publicly available on the website of ChileCompra and used by contracting agencies. In Peru, all suppliers need to certify they have an anti-bribery management system in place issued by an accredited certification body. In Finland and Korea, there is a digitalised service which enables CPBs to verify information. One CPB commented that even if integrity breaches are a mandatory exclusion ground and need to be verified, it can sometimes be difficult to find the appropriate information when there is no publicly available information provided.
Frequency of and methods to verify contract clauses
In the post-tender phase, CPBs often do not follow-up the majority of RBC requirements. If they do, environmental considerations and integrity concerns are most often verified. Indeed, when RBC criteria are included as performance clauses, the requirements should be followed-up during the contract period. CPBs often state in the procurement documentation when this follow-up should occur. In addition to exploring how often and what methods CPBs use to verify the implementation of contract clauses by main contractors, the survey also explored whether CPBs have oversight over subcontractors and suppliers in the extended supply chain, in relation to fulfilling requirements associated with RBC objectives during the contracting phase (as opposed to verifying ex-ante, during the award phase, discussed above).
During the contract performance phase, more than two thirds of CPBs verify the implementation of environment-, labour rights- and integrity-related contract terms by main contractors whereas just over half (55%) verify human rights criteria (see Figure 3.12).
With regards to the additional RBC objectives, even for main contractors, only 30% of CPBs verify criteria related to people with disability and long-term unemployed. 25% verify gender criteria and 20% verify minority criteria. Even when RBC objectives are part of contract performance clauses (which should be followed up during the contract period), there is a lack of follow-up with regards to requirements related to disability, the long-term unemployed, gender and minority considerations.
Considering that breaches of contract clauses can occur in the supply chain, CPBs were asked if they verify that subcontractors or suppliers in the extended supply chain fulfil the requirements (see Figure 3.13). As expected, answers were lower than that for main contractors.
Note: The figure is based on data from 20 Central Purchasing Bodies; it illustrates responses where CPBs verify fulfilment at least at subcontractor level
Source: OECD Survey, Leveraging Responsible Business Conduct through Public Procurement
In relation to oversight of subcontractors and beyond, integrity is the most advanced RBC objective, with half of CPBs verifying to at least the subcontractor level in all or specific cases. However, mandatory verification on the subcontractor level only takes places for integrity objectives and labour rights, and only in a few countries. Out of these, only two countries, New Zealand and Sweden, verify compliance in the supply chain beyond the subcontractor, and even then, only in specific cases. Sweden replied that they verify compliance with requirements related to environment, human rights, labour rights and integrity criteria in the supply chain.
CPBs were also asked to specify what methods they use for follow up (see Figure 3.14). To verify environmental considerations, 80% of CPBs ask for justifying documents, 53% use third party audit assessment or verification services and 20% conduct site visits. For verifying labour rights, CPBs use justifying documents most often (73%) followed by 53% that use third party audit assessment or verification services, as well as self-assessment questionnaires. For verifying human rights, the method most commonly used by CPBs was justifying documents (60%) followed by self-assessment questionnaires and third party audit (40%). For the social RBC objectives, relatively few responses were provided, with only one or two countries providing specific information on the mechanisms employed to track compliance.
Only the Norwegian Digitalisation Agency responded that they conduct site visits and commission third party audits. There are also a small number of cases where contracting authorities initiate their own site visits and factory audits (see Box 3.5).
The case of Denmark
Copenhagen Municipality in Denmark conducts unannounced site visits with suppliers. The decision to conduct such a visit is based on a risk-assessment whereby sites with a higher risk of subcontracting and reliance on migrant workers and other vulnerable groups are prioritised.
The case of Sweden
The Swedish central purchasing body SKL Kommentus audits suppliers under their framework agreements through third party audits. Each year, two or three high risk categories of goods within 11 priority product areas are chosen for further monitoring through a three-step process of supplier self-assessment, desktop audit and on-site factory audit. The results and corrective action plans are available to all municipalities and regions and are published on the SKL Kommentus website.
Source: (Rights, 2020[12]) (SKL Kommentus, 2020[6])
Peru Compra and Public Services Korea, mentioned that they use digital technology to verify compliance. Korea developed a digital system where government institutions, certification bodies and other organisations submit information on the compliance of suppliers, which is then accessed by the CPB, for example the number of employees or electricity consumption. This system aims to mitigate against the possibility that false documents are accepted. One CPB mentioned that it had decided to become a member of the NGO Electronics Watch (see Box 3.4) in order to be assisted in verifying compliance for specific purchasing categories.
CPBs are increasingly adopting risk management systems in their procurement practices. 80% of CPBs have risk management systems that take into account RBC objectives. These risk management systems are most developed for environmental considerations and integrity.
There are opportunities to apply risk-based due diligence throughout the procurement cycle and for all RBC objectives. These objectives do not currently feature in all stages of the public procurement cycle to the same extent – and not all RBC objectives are equally prominent.
A minority of CPBs consult with business on a regular basis (“always or often”) in the pre-tender phase across RBC objectives. While just over half of CPBs always or often consult with businesses regarding environmental considerations, there is a lack of consultation in regards to the other RBC objectives such as human rights, labour rights, minorities, long-term unemployed, people with disabilities, and integrity. Market engagement was perceived by companies and non-commercial stakeholders as one of the most significant untapped opportunities to incorporate RBC objectives in public procurement. Companies also highlighted that a lack of clarity of RBC requirements from CPBs, and often multiple requirements between and within countries, added to the challenge of meeting RBC objectives in public procurement.
Over two thirds of CPBs incorporate environmental requirements into qualification requirements, and more than half incorporate integrity or labour rights requirements. Other aspects – notably the inclusion of minorities, support for persons with disabilities or long-term unemployed – are incorporated considerably less. Uptake is lower for award criteria, but reflects the same picture: environmental and integrity considerations are considerably more frequently incorporated than other RBC objectives.
Verification of requirements focuses on the main contractor and the objectives that are well-covered by frameworks and in practice – environmental, integrity and labour rights. Almost 70% of CPBs replied that they verify compliance of integrity-related requirements prior to contract award. At the subcontractor level and beyond, integrity considerations are the criteria most followed up during contract implementation (just over half of respondents). However, mandatory verification at the subcontractor level only takes place for integrity objectives and labour rights, and only in few countries. To aid verification and compliance monitoring, some CPBs utilise digital technology.
3.6. References
[10] Electronics Watch (2020), “Electronics Watch”, http://www.electronicswatch.org.
[5] OECD (2019), Government at a Glance 2019, OECD Publishing, Paris, https://dx.doi.org/10.1787/8ccf5c38-en.
[4] OECD (2019), Reforming Public Procurement: Progress in Implementing the 2015 OECD Recommendation, OECD Public Governance Reviews, OECD Publishing, Paris, https://dx.doi.org/10.1787/1de41738-en.
[3] OECD (2017), Government at a Glance 2017, OECD Publishing, Paris, https://dx.doi.org/10.1787/gov_glance-2017-en.
[2] OECD (2015), “Policy Shaping and Policy Making: The Governance of Inclusive Growth”, https://www.oecd.org/governance/ministerial/the-governance-of-inclusive-growth.pdf.
[1] OECD (2011), Centralised Purchasing Systems in the European Union, OECD Publishing, https://doi.org/10.1787/5kgkgqv703xw-en.
[7] Public Services International (2019), “Les agents territoriaux et syndicalistes CFDT Interco s’engagent dans une démarche innovante sur les achats publics responsables à Bordeaux Métropole”, http://www.world-psi.org/fr/les-agents-territoriaux-et-syndicalistes-cfdt-interco-sengagent-dans-une-demarche-innovante-sur-les.
[9] Responsible Business Alliance (n.d.), Responsible Business Alliance, http://www.responsiblebusiness.org/focus-areas/public-procurement/.
[12] Rights, D. (2020), “Driving Change Through Public Procurement - A toolkit on human rights for procurement policy makers and practitioners”, https://www.humanrights.dk/sites/humanrights.dk/files/media/dokumenter/udgivelser/hrb_2020/dihr_toolkit_public_procurement_2020_72dpi.pdf.
[11] SIGMA (2016), Public Procurement Policy Brief 8 - Setting the Award Criteria, http://www.sigmaweb.org/publications/Public-Procurement-Policy-Brief-8-200117.pdf.
[6] SKL Kommentus (2020), SKL Kommentus Hallbarhetskollan, https://www.sklkommentus.se/om-oss/vi-tar-ansvar-for-hallbarhet/hallbarhetskollen/.
[8] UNISON (2020), Working internationally, https://www.unison.org.uk/about/what-we-do/working-internationally/.
← 1. The eight RBC objectives in this Report include environmental standards, human rights, labour rights, inclusion of minorities, long-term unemployed people and people with disabilities, gender mainstreaming and integrity standards (see chapter section 1 for detail.)
← 2. Belgium, Canada, Chile, Costa Rica, Denmark, Estonia, Finland, France, Germany, Iceland, Italy, Korea, Mexico, New Zealand, Norway, Slovenia, Sweden
← 3. Brazil, Peru, Ukraine
← 4. For the second question only 13 out of 20 CPBs responded.
← 5. OECD Due Diligence Guidance for Responsible Business Conduct, Section A2, Q. 19 and Q20
← 6. Seldom was defined as less than 25% of procurement opportunities, sometimes was defined as between 25% and 50% of procurement opportunities, often was defined as between 50% and 75% of procurement opportunities and always was defined as over 75% over procurement opportunities.
← 7. Control points or “choke points” are key points of transformation in the supply chain where traceability or chain of custody information may be aggregated or lost. The number of actors are relatively few, and are typically process or handle a majority of inputs that they then pass down the supply chain. Enterprises here typically have high leverage over upstream enterprises. This is also the point in the supply chain where schemes and audit programmes exist. Examples of enterprise at control points are refiners and smelters in the minerals supply chain