2. The Public Procurement Policy Environment and Responsible Business Conduct
This section describes the extent to which public procurement regulatory and strategic frameworks consider and enable Responsible Business Conduct (RBC). The section discusses the application of such frameworks to supply chains and describes mechanisms to support the uptake of RBC standards, especially supply chain due diligence in public procurement, and ways to monitor compliance with these frameworks. Analysis in this section is based on the findings from the OECD Survey on Responsible Business Conduct and Public Procurement conducted with public procurement policy makers.
The OECD conducted a survey to better understand how countries are integrating RBC, including the supply chain due diligence, into public procurement regulatory and strategic frameworks. The survey focused on eight RBC objectives covered by international frameworks on RBC and sustainable procurement1. Unless otherwise noted, information in this section results from this survey.
This section focuses on data collected from policymakers from 28 countries.2 It also integrates input from civil society, trade unions and business. These non-governmental stakeholders were asked to provide information on their interaction with public procurement policy makers to shed light on ways to enhance the uptake of RBC objectives in public procurement from the perspective of stakeholders outside of government.
2.1.1. Regulatory and strategic frameworks to incorporate RBC objectives in public procurement processes
Strategic and regulatory frameworks, beyond signalling political support, are a critical foundation for government agencies to apply RBC in public procurement. Without these enabling factors it can be difficult, or even impossible, for public buyers to procure socially and environmentally responsible products and services.
To capture a comprehensive analysis of country frameworks, a relatively broad set of definitions was used in the survey:
A regulatory framework is defined as a system of rules such as laws, decrees, cabinet directions or any other legal documents that governs and regulates specific policies.
A strategic framework is defined as a high-level document approved by national authorities, such as parliament and government, that sets out a country’s policy goals and ambitions for a specific sector or area of public policy such as health care or the environment. Strategic frameworks can also include targets, roadmaps and action plans.
Regulatory and strategic frameworks can be specific (frameworks focused on RBC and public procurement) or general frameworks. Specific frameworks narrowly focus on RBC in public procurement, without any other considerations included in the framework (e.g. a strategy to tackle modern slavery in public procurement or a sustainable public procurement strategy). General frameworks can take two forms: 1) frameworks on public procurement in general, which include references to specific RBC objectives; or 2) frameworks on RBC considerations which include public procurement-specific references. Table 2.1 illustrates this distinction with examples.
Most respondents have a framework related to many RBC objectives in public procurement, be it as regulation or as strategy (see Figure 2.1). Many countries have both a strategic and regulatory framework in place. This approach is common, especially for environmental objectives, where more than two thirds of countries have both a strategic and regulatory framework.
Encouragingly, all countries have either a strategic or regulatory framework to pursue environmental objectives. On the other hand, many “social” RBC objectives, including those related to human rights as well as long-term unemployed people, gender, and minorities, are relatively less supported by either regulatory or strategic frameworks. At the same time, these objectives are still fairly well-covered (by over 40% of countries). 57% of countries have a framework to support gender considerations. Minority issues are supported by frameworks in less than half of respondents. Surprisingly, only 68% of countries have a regulatory or strategic framework for human rights.
Across all objectives, regulatory frameworks are more commonly used than strategic frameworks to support RBC objectives in public procurement (see Figure 2.2).
Over 90% of countries have a regulatory framework that supports the uptake of environmental policy objectives, while 82% have a strategic framework in this area. This is unsurprising as governments have pursued environmental policy objectives through public procurement to accomplish their green goals for decades (OECD, 2015[1]) (OECD, 2019[2]). In addition, policy makers increasingly recognise that “green” public procurement can be a major driver for innovation as it provides industry with incentives for developing environmentally-friendly goods, services and works. This is the case particularly in sectors where public purchasers represent a large share of the market, such as construction, health services or public transport (European Commission, 2011[3]).
82% of countries have an integrity-related regulatory framework in place, while only 50% have a strategic framework in place. Integrity breaches include corruption, fraud, bribery and tax evasion.3 Integrity objectives are more likely to be based in legislation to allow countries to prosecute those who commit integrity-related violations.
The survey confirmed findings of other studies which have found that the use of public procurement as a tool for the promotion and protection of human rights in supply chains is underdeveloped both in theory and practice (Martin-Ortega, 2018[4]) (International Learning Lab on Public Procurement and Human Rights, 2016[5]). The inclusion of human rights policy objectives, within both regulatory and strategic frameworks, is lower than that of labour rights. For human rights, 64% of countries have a regulatory framework and 46% have a strategic framework. In contrast, 89% of countries have a regulatory framework on labour rights, and 61% a strategic framework.
A number of policy makers answered that they do not differentiate between labour rights and human rights-related policy objectives. This may provide an explanation for the lower result on human rights frameworks. Similarly, initiatives related to socially responsible procurement usually do not separate human rights from labour rights considerations. This is illustrated for example by the collection of good practice cases on socially responsible public procurement recently published by the European Commission (European Commission, 2020[6]).
There are also examples of legislative and strategic frameworks that address selected human rights issues rather than all human rights. For example, the UK Modern Slavery Act4, adopted in 2015, addresses modern slavery and human trafficking in supply chains of public sector customers. In the United States, the Federal Acquisition Regulation5 prohibits the sale of products sourced through federal contracts that are produced or manufactured with forced or indentured child labour. In Norway, the Public Procurement Act requires public authorities to implement appropriate measures to promote the respect of fundamental human rights in public procurement when there is a risk of such violations6.
A number of countries have programmes to achieve social objectives beyond the RBC objectives in this survey. In New Zealand, the Broader Outcomes Policy Programme encourages authorities to leverage their public procurement contracts to achieve a range of outcomes beyond the primary objective of the contract (see Box 2.1). The programme helps identify key priorities that authorities should target or prioritise in public procurement.
The Broader Outcomes Policy Programme in New Zealand
In 2018, the New Zealand Government agreed to a set of priority outcomes for contracting authorities. The government also identified specific contracts and sectors for focus.
New Zealand contracting authorities are expected to focus on four priority outcomes:
Access for New Zealand businesses – Increase access to government contracts for New Zealand businesses, particularly those less able to access opportunities and those working in priority sectors such as ICT, Maori and Pasifika businesses, and businesses in the regions.
Construction sector skills and training – Increase the size and skill level of the domestic construction sector workforce and provide employment opportunities to targeted groups.
Employment standards – Improve conditions for workers and future-proof the ability of New Zealand business to trade.
Reducing emissions and waste – Support transition to a zero net emissions economy and reduce waste from industry by supporting innovation.
To implement this work, the central purchasing body, New Zealand Government Procurement and Property, committed to:
Work with agencies and stakeholders to identify the best approach to put each outcome into practice.
Update the Government Rules of Sourcing, and develop guidance and support for agencies.
Develop a monitoring and reporting framework to track agency adoption and outcomes achieved. Results will be reported to the Cabinet annually and findings will inform practice improvements.
Source: (New Zealand Government Procurement and Property, 2019[7])
2.1.2. Drivers for developing regulatory and strategic frameworks on RBC objectives
Countries strive to achieve policy coherence and fulfil international commitments when they develop regulatory and strategic frameworks to incorporate RBC objectives in public procurement. The survey asked policy makers to indicate the three most important reasons why regulatory and strategic frameworks have been developed for each of the RBC objectives in scope.
Across all objectives, policy coherence and alignment with international obligations or commitments were the most important reasons for developing frameworks to support RBC objectives (Figure 2.3). Alignment with international obligations and policy coherence was the reason to create a framework in almost a third of the countries.
In particular, alignment with international obligations was a strong impetus for developing frameworks related to human rights (named by 44% of policy makers). Policy coherence was particularly important on frameworks related to gender (44% of policy makers) and minorities (33%). Frameworks on the social issue of disabled people are shaped mostly by policy coherence (32%) and international commitments (40%).
For regulatory and strategic frameworks on labour and minority-related policy objectives, civil society and media pressure was a driver in 24% and 25%, respectively. On average, across RBC objectives, 6% of policy makers cited country reputation and scandals. Human rights scandals were highest here at 11%. However, scandals and pressure by media and civil society often go hand in hand. Indeed, considered together, these two categories (scandals and country reputation, as well as demands by civil society or media) account for a fifth (21%) of the reasons why frameworks were developed.
In 2007, the Swedish NGO SwedWatch investigated the production conditions for surgical instruments procured by the Swedish regions for the public healthcare service. The investigation detected child labour, hazardous working environments and pay below the minimum wage in factories in Pakistan. In response to these violations, and the subsequent media critique, all 21 regions in Sweden committed to addressing sustainability considerations when procuring healthcare supplies. A Code of Conduct for suppliers was adopted by the political assemblies in the regions.
Finally, attracting investors as a reason to develop RBC-related policy frameworks was low. The idea of using sustainability frameworks and regulations to boost investment was only noted for the area of integrity (4%).
Policy makers also named initiatives linked to RBC objectives that did not refer to international obligations or commitments as other reasons for developing RBC frameworks. These included parliamentary or cabinet initiatives and strategies mandating the pursuit of specific RBC objectives as a national priority. This category also included mission goals of individual procurement authorities and older strategic frameworks that needed to be updated. ChileCompra recommends that procuring entities give additional evaluation points to companies employing long-term unemployed people.
2.1.3. Engaging stakeholders when developing frameworks to boost RBC objectives through public procurement
The OECD Recommendation of the Council on Public Procurement recommends that Adherents “foster transparent and effective stakeholder participation” (Principle VI.) (OECD, 2015[8]) To this end, governments should develop and follow a standard process when formulating changes to the public procurement system. Such standard processes should include public consultations, invite comments from the private sector and civil society, ensure the publication of the results of the consultation phase, and explain the options chosen in a transparent manner. Countries engage with various stakeholder groups in developing regulatory and strategic frameworks. However, opportunities remain to increase engagement with RBC stakeholders, notably the OECD National Contact Points for RBC (NCPs).7
The survey asked countries how they organise consultation processes when developing strategic and regulatory frameworks to enable RBC objectives. The survey targeted stakeholders, such as policy makers outside of public procurement in charge of the specific policy considerations (such as NCPs), businesses, contracting authorities, civil society, worker representatives and trade unions, experts, and end-users.
All responding countries consult with the relevant policy maker for the subject in question. For example, when a public procurement policy maker is developing a framework related to improving human rights, they work closely with human rights policy makers. This is a pre-requisite to ensure policy coherence. About two-thirds of policy makers consulted with both businesses and contracting authorities in developing frameworks. For frameworks relating to human rights, labour rights, long-term unemployed and people with disability, workers organisations were specifically consulted. A little over a third of policy makers consulted the NCPs when developing frameworks linked to RBC objectives.
Over 50% of countries asserted that consultations on such frameworks were openly advertised and promoted on government channels. As such, all interested stakeholders would have an opportunity to provide input. In Sweden, all regulatory acts (law, decree, rules) are published on the proposer’s website for a period of at least 30 days. This is to ensure efficient public consultations. The proposer may also highlight specific issues, which are, along with invitation to participate, accompanied by a draft regulation, addressed to a specific organisation, civil society entity or individual expert. All comments received have to be answered in writing, explaining the reasons why the proposals or opinions have not been taken into account. While creating guidelines and other soft-law documents, specific stakeholders (e.g., chambers of commerce and other business sector associations, labour unions, NGOs) are consulted.
2.1.4. Challenges in developing regulatory and strategic frameworks
A lack of knowledge on implementation is the most important challenge for governments in creating regulatory and strategic frameworks. The survey asked policy makers to describe the biggest challenges they faced in developing strategic and regulatory frameworks to include RBC objectives. Countries had to select the three most significant challenges from the following: lack of political support, lack of market readiness, financial barriers, lack of clear understanding of how to implement this policy through public procurement, existing regulatory measures preventing the inclusion of these considerations and other challenges.
Diverging numbers of responses were received for each RBC objective. Twenty-eight countries responded to this survey question, but not all countries listed a challenge for all RBC objectives. For example, 27 countries listed a challenge for environmental considerations, but only 14 countries (i.e., about half of the survey respondents) listed a challenge for the RBC objective “minorities”. This result in itself points to a lack of governments’ insight into potential barriers to adopting regulatory or strategic frameworks, notwithstanding the named challenges.
The top reason named by policymakers across the eight RBC objectives is “a lack of understanding as to how to implement this policy through public procurement”. Figure 2.4 provides a breakdown of which RBC objectives were the most challenging to implement. The area with the highest perception of lacking understanding on implementation is “social - minorities”. Here, 50% of countries stated that the lack of understanding on implementing the policy was the biggest challenge faced. This was followed by human rights (41% of countries) and long-term unemployed (38%). Integrity appears as the area where a lack of understanding on implementation seemed least problematic, with just 22% stating that a lack of understanding was the largest challenge in implementing the policy area.
Note: Based on data from 28 countries. The visualisation depicts the share of countries that named at least one challenge for this RBC objective
Source: OECD Survey, Leveraging Responsible Business Conduct through Public Procurement
In line with findings of previous OECD analysis (OECD, 2019[9]), respondents highlighted challenges related to the complexity of strategic public procurement and the need for increased capacity and training. Many respondents stated that delivering public procurement contracts is already difficult, and contains a number of intricacies. Given that the understanding on implementation is already weak, adding many RBC objectives heightens the administrative burden and work load for both contracting authorities and bidders. Public procurers are increasingly responsible for achieving a growing number of RBC objectives. These objectives have to be prioritised following the principle of balance. It also raises the question as to whether the right balance is being struck in the pursuit of RBC objectives through public procurement procedures. The progress report on the implementation of the OECD Recommendation of the Council on Public Procurement confirms this perspective. The report found that countries have been concerned about balancing a large number of policy objectives through public procurement, employing techniques to prioritise and balance different objectives according to their specific context (OECD, 2019[9]). This concept of balance or prioritisation is compatible with OECD recommendations on RBC. The OECD risk-based due diligence framework provides a set of parameters that can help prioritise due diligence actions.
While many countries have measures in place to enhance the uptake of RBC objectives, these are, in general, voluntary measures. In many countries, the decision to include RBC objectives in the tendering process depends solely on the contracting authorities. This is amplified when the public procurement system is decentralised. Here, contracting authorities take their own procurement decisions, rather than purchasing from centralised contracts.
Policy makers highlighted that the contract implementation phase is a key challenge in implementing RBC objectives in public procurement, notably ensuring that all contractual requirements are met during contract implementation. Encouragingly, a number of countries are deploying measures to ensure that the implementation of RBC objectives is reflected in the building blocks of public procurement, including contracts and contract implementation (see Box 2.2).
In Poland, the Public Procurement Office developed a broad information and training campaign for contracting authorities and representatives of control bodies to build their knowledge of what environmental objectives should be considered during the tendering process of a specific product/category group. This campaign also includes how this might be done in the course of the contract award procedure (i.e. subject-matter of contract, award criteria, contract performance clauses, qualification criteria with reference to economic operators). The information and training campaign covers not only public procurement provisions, but environmental-related legislation as well.
In Latvia, the Ministry of Finance, together with experts and the Procurement Monitoring Bureau, has organised training seminars for contracting authorities on how to incorporate sustainable policy objectives into award criteria. This includes good practice examples. The social entrepreneurship association in Latvia also organised conferences to educate contracting authorities on how to include sustainable policy objectives into public procurement contracts. Latvia also stated that in order to gain the budget to promote such sustainable policy objectives through procurement, it was important to secure political support by highlighting the benefits of the specific policy to Latvia.
The Public Procurement Authority of Hungary continuously monitors the draft legislation and initiatives related to the enforcement of sustainability aspects (including environmental, social and innovative considerations) in contract award procedures. One of the key objectives of the Authority is to raise awareness of the importance of taking sustainable policy objectives into account. It also provides information on the opportunities to promote sustainable public procurement and on the relevant regulations, updates and good practices. To this end, the Public Procurement Authority launched the program titled 2018 - Year of Sustainable Public Procurement and then Innovative Public Procurements in Focus 2019 - 2020. The programmes seek to draw attention to the importance of green and social public procurement by sharing relevant information and by publishing studies and other publications on its website and on a Daily Public Procurement mobile application.
Source: (Public Procurement Office, 2004[10]) (Ministry of Finance of the Republic of Latvia, 2019[11]) (Public Procurement Authority of Hungary, 2019[12])
The majority of countries have regulatory or strategic frameworks that are applicable to their main contractors. However, a major gap relates to the application of these frameworks to companies in the rest of the supply chain. As highlighted in section 1, international RBC standards expect due diligence to be carried out along the full supply chain.
2.2.1. How regulatory and strategic frameworks apply to subcontractors
The majority of countries do not set binding expectations for subcontractors in their regulatory and strategic frameworks. Subcontracting occurs when the main contractor entrusts another entity with the performance of part of the works or services within the contract. The contractor may use one or more subcontractors. For example, the main contractor holds a contract to clean a building. As the building is large and the main contractor cannot clean the whole building on its own, it can subcontract another entity to clean a small portion of the building. This second entity is the subcontractor (Segerstedt and Olofsson, 2010[13]). A subcontractor may also subcontract elements of the works or services it is required to deliver in accordance with the subcontracting arrangements with the contractor (further subcontracting).
The survey shows that regulatory or strategic frameworks that contain integrity-, labour rights-, and environment-related policy objectives are those most likely to apply to sub-contractors (Figure 2.5).
Just over half of countries expect that subcontractors apply both labour rights and integrity in all instances (54% and 55% respectively). For the other RBC objectives, less than 50% of countries require subcontractors to follow regulatory or strategic frameworks in all instances.
Policy makers are also prioritising the application of frameworks on specific RBC objectives. Some frameworks foresee application in specific cases. Counting these, indeed just over 90% of countries require application of frameworks by subcontractors for labour rights and integrity issues. For environmental considerations, 76% of countries require application of regulatory or strategic frameworks to subcontractors in all or specific cases.
Other social RBC objectives, such as minorities or disabled persons, are not associated with binding requirements for subcontractors in many countries. A relatively high share of respondents allow subcontractors to apply regulatory and strategic frameworks on a voluntary basis. This number is highest with regards to disabled people (43% of respondents foresee only voluntary application by subcontractors). For the remaining social aspects among the RBC objectives, the share varies at a relatively high level from around 29% to 42% of countries that foresee only voluntary application of frameworks for sub-contractors related to human rights, gender and minorities.
2.2.2. How regulatory and strategic frameworks cover the full supply chain
Regulatory and strategic frameworks that incorporate RBC objectives in public procurement are unlikely to apply to the full supply chain. Mandatory application is rare across all RBC objectives. Integrity considerations are those most likely to apply to the entire supply chain: in 41% of the countries, integrity-related frameworks apply in all cases to the supply chain (see Figure 2.6). Social RBC objectives are rarely applied to the full supply chain. Objectives related to the long-term unemployed are applied to the supply chain in only 10% of the countries, and gender considerations in only 7%. In some circumstances, the application of regulatory frameworks to the supply chain is only applicable in specific cases. For example, in Japan, the framework applies to the full supply chain for specific products such as paper (Ministry of the Environment of Japan, 2019[14]).
Overall, the objective with the largest extent of application is labour rights; 58% of countries require application of regulatory or strategic frameworks in the entire supply chain at least in specific cases. In all other RBC objectives, voluntary application is the norm (50% and more of countries). In 28% of the countries, frameworks on gender apply in at least specific cases, for example within certain sectors such Information Communications & Technology (ICT), construction and textiles.
In fifteen countries regulatory or strategic frameworks are applicable to supply chains that transcend national borders in at least one RBC objective. These countries answered that the global application of these frameworks concerns to environmental-, human rights-, labour rights- and integrity-related RBC objectives. Gender, disabled people, long-term unemployed people and minorities-related objectives were more likely to be related to national or domestic-level legislation, and were more difficult to monitor in an international setting.
2.2.3. Action taken against infringements on RBC standards
A number of countries have provisions within their regulatory or strategic framework that allow for action to be taken against suppliers if their supply chains infringe RBC objectives (see Table 2.2). Fourteen out of twenty-eight survey respondents (just under half) foresee sanctions for suppliers that infringe RBC objectives. Eight foresee that the supplier implements changes in its supply chain to mitigate the infringement (28%). Nine countries do not foresee any action in their frameworks if a supplier infringes upon RBC objectives.
Countries have enacted a wide range of escalating sanctions, from warnings to exclusion from contracts, in order to take action beyond subcontractors. In Switzerland, for integrity related breaches, sanctions include a ban from all procurements at central government level for a maximum of five years (Swiss Confederation, 2019[15]). In New Zealand, the regulatory framework does not mandate sanctions or prescribe specific sanctions, but procuring entities have discretion to apply appropriate sanctions.
Some breaches may result in action by other authorities, including for example criminal charges (New Zealand Government Procurement and Property, 2019[7]).
Another measure is requiring suppliers to make changes to the supply chain after a breach has been found. Countries such as Canada have certification frameworks in place for human and labour rights that identify breaches in supply chains. They have developed a system in which contract clauses place the responsibility for addressing any such breach with the main contractor (see Box 2.3) (Public Works and Government Services Canada, 2018[16]).
For human and labour rights abuses in Canada, an ethical procurement certification is incorporated into the bid solicitation on its closing date. This becomes a binding part of the contract. The main contractor must ensure compliance with the provisions of the ethical procurement certification that was signed during the bidding process throughout the duration of the contract.
An “origin of work” clause is also incorporated into the bid solicitation on its closing date, and forms a binding part of the contract. It is the main contractor’s responsibility to ensure continuous accuracy with the origin of work information provided with their bid. They must immediately inform the Canada Public Works and Government Services in writing of all changes affecting the information provided under the origin of work clause during the entire contract period.
The certification is subject to verification by Canada at any given time during the period of the contract. If the certification is found to be untrue, Canada may declare a bid non-responsive or may declare a contractor in default, whether it be knowingly or unknowingly during the bid evaluation period or during the contract period. The continuing obligation of maintaining this certification is a material obligation of the main contractor. Therefore, if at any time during the performance of the contract, the contractor no longer meets the obligations of the contract, the main contractor can be found to be in default of their contracting obligations. This could result in them being barred from contracting with the Government of Canada for a defined period.
Source: (Public Works and Government Services Canada, 2018[16])
2.3.1. Mechanisms enhancing implementation of frameworks to pursue RBC objectives in public procurement
Countries support and promote greater uptake of RBC objectives mostly through training, and awareness raising events and the development of guidance materials (guidelines). Support is strongest for environmental objectives, integrity, as well as labour and human rights.
Figure 2.7 provides an overview of the four most-used mechanisms to enhance the uptake of and compliance with RBC objectives. Other, less frequently used mechanisms include IT platforms to share information, sharing of audit results, specific tools to conduct audits (notably in the area of human and labour rights), and certificates.
On average, across the RBC objectives, the most used mechanisms are guidelines (available in 52% of the cases), events to raise awareness (applied in 49% of the cases) and training (available in 40% of the cases). In general, countries appear to have more guidelines than trainings in place to enhance uptake of RBC objectives.
Issues related to gender and minorities are the areas where the least number of countries have developed guidelines or training. Unsurprisingly, the policy objective related to minorities was also the area named most often when asked where a lack of understanding was hindering implementation, see above.
The RBC objective with most support are environmental considerations. 82% of countries have developed guidelines to enhance the uptake of this objective in public procurement. In Latvia, the Ministry of Environmental Protection and Regional Development has developed the Requirements for Green Public Procurement and Procedures for Application. These guidelines give instructions on where green criteria for groups of products, services or works can be included and applied within public procurement. The Ministry, in collaboration with experts and the Procurement Monitoring Bureau, has also organised training seminars with contracting authorities to support the application of these guidelines.
Belgium, the Netherlands and Germany have established knowledge and expertise centres that focus on sustainable development issues, which include a number of RBC objectives (see Box 2.4). Centralisation of expertise and resources on particular topics can be highly beneficial. This is the case especially in countries with highly decentralised public procurement systems or numerous smaller sized contracting authorities.
FIDO – The Belgian knowledge centre
In 2014, the Belgian Government established a knowledge centre, the Federal Institute for Sustainable Development (FIDO). It has developed a Sustainable Procurement Guide, a web-based guide which outlines the technical sustainability criteria to be included in specifications for the purchase of supplies and services. The guide matches the characteristics of the sector concerned, without losing sight of competition and price considerations FIDO continuously updates the Sustainable Procurement Guide and advises on the correct interpretation of technical specifications and other clauses contained within it. FIDO also conducts studies on methodologies such as life cycle costing.
In addition, a methodology was developed to reach out to businesses when compiling or updating technical specifications for products and services belonging to an industrial sector. FIDO established a standing working party. This working party consists of members of the community, regions, provinces and municipal councils, and industry associations. The industry associations mobilise companies that it believes are best placed to help establish technical specifications that match the capabilities of suppliers in the sector in question. This working method has helped establish realistic specifications that support improved levels of competition.
The Dutch expertise centre: PIANOo
The Dutch Minister of Economic Affairs is responsible for PIANOo which is a centre that supports contracting authorities with tools, training and fact sheets. It also distributes news and best practices, and develops practical guidelines including sustainable public procurement considerations. The aim of PIANOo is to enhance professional skills of purchasers regarding different markets, risks, innovative tendering and the interpretation of rules. The centre employs around 20 people to support the network of approximately 4 500 professionals in public procurement.
Competence centres in Germany: KNB and KOINNO
To support the implementation of strategic procurement in Germany, the government has established a number of dedicated bodies to house expertise in specific areas of strategic procurement.
The Competence Centre for Sustainable Procurement (KNB) plays a key role in the achievement of sustainability goals. The KNB was established in 2012 within the Federal Procurement Office of the Ministry of the Interior (Beschaffungsamt des Bundesministeriums des Innern, BeschA). The centre has the status of a federal authority. The KNB helps contracting authorities consider sustainability criteria in their procurement projects. It offers the approximately 30 000 contracting agencies of the federal government, as well as states and municipalities, information and training. It also develops new approaches for anchoring the sustainability principle in the activities of contracting authorities.
The Centre draws on the assistance of an expert body set up for this purpose. It uses a variety of channels for disseminating information and knowledge-building related to sustainable procurement, such as a telephone and email hotline to respond to questions, provide advice to procurement staff, including training. Many approaches have been developed in collaboration with stakeholders such as contracting authorities from across government, members of industry and NGOs.
The German Competence Centre for Innovation Procurement (Kompetenzzentrum innovative Beschaffung, KOINNO) supports innovation in public procurement. KOINNO is a registered association hosted by the Association of Materials Management, Purchasing and Logistics (BME) on behalf of the Federal Ministry for Economic Affairs and Energy (BMWi). KOINNO’s objective is to increase public procurement of innovative goods and services in Germany, and, by doing so, trigger innovation and increased competiveness in the German economy. In order to measure progress towards this objective, KOINNO has targeted a considerable increase in the percentage of procurement procedures for new technologies, products and services. The services provided by KOINNO are similar to those of KNB in that they provide contracting authorities with training, workshops, networking opportunities, on-call consulting and a website containing best practices, templates and guidance.
Both the KNB and KOINNO co-ordinate their work in order to learn from successes and challenges.
Several countries have also developed risk assessment tools to assist contracting authorities to identify and prioritise risks in their supply chains. Several include a focus on high-risk products and categories as a priority (see Box 2.5).This approach, to prioritise by product or category, is also recommended by the OECD risk-based due diligence framework.
The Norwegian High Risk List
In Norway, contracting authorities are obliged by the Norwegian Procurement Act (§5 LOA) to implement appropriate measures to promote respect for human rights where there is a risk of a negative impact. The Norwegian Digitalisation Agency (DigDir) provides all contracting authorities with information on high risk products such as ICT, textiles, medical consumables, and coffee. This high risk list extends to identifying risks throughout the full supply chain from raw material extraction to component production until finishing assembling (Norwegian Digitalisation Agency, 2020[19]).
The US Responsible Sourcing Tool (RST)
The US State Department has a risk assessment tool for contracting authorities and companies to identify, prevent, and address any risks of human trafficking in supply chains. The Responsible Sourcing Tool (RST) assesses country- and sector-based risks of human trafficking. The tool covers a number of categories such as ICT, textiles and apparel, construction and healthcare. It also includes sample vendor agreements and self-assessments for follow-ups.
Source: (The Norwegian Digitalisation Agency, 2020[20]) (The US State Department, 2020[21])
2.3.2. Monitoring and reporting frameworks for measuring uptake of RBC objectives
As highlighted by the 2019 progress report on the implementation of the OECD Recommendation of the Council on Public Procurement, countries increasingly develop evaluation mechanisms for public procurement systems. However, monitoring remains a challenge: 45% of countries have a performance monitoring framework established, and only 30% have an authority with a clear responsibility for monitoring of public procurement (OECD, 2019[9]).
a majority of countries have developed, or are in the process of developing, monitoring and reporting approaches to measure the uptake of at least specific RBC objectives in public procurement, as foreseen by their frameworks (see Figure 2.8).
Monitoring and reporting of the uptake of RBC objectives is not consistent. Of the surveyed countries, 86% monitor the uptake of environmental considerations at least partially. This is followed by the monitoring of requirements related to labour rights and disabled people (over 60%). The area of minorities is the least monitored, with 29% of countries responding that they conduct some form of monitoring. In Estonia, the use of environmental criteria in public procurement is monitored through the central public procurement register (Ministry of the Environment of the Republic of Estonia, n.d.[22]).
Some countries conduct ad-hoc reporting in the form of a survey, questionnaire or audit as part of their monitoring strategy. In November 2019, the National Agency for Public Procurement in Sweden carried out a survey on how Swedish contracting authorities apply the legislation on specific labour law requirements that came into force in June 2017.8 The survey included questions on human rights, labour rights, environmental protection and anti-corruption and integrity in the supply chain. In the Netherlands, the Ministry of Foreign Affairs evaluated the country’s policy on international responsible business conduct between 2012 and 2018. The report includes a substantial section on public procurement.9
Some countries have overarching monitoring frameworks that do not focus on RBC objectives, but rather the entire procurement system. The Italian Anticorruption Authority (ANAC) manages the National Database on Public Contracts, a unified database containing all information on the procurement cycle, including needs analysis, tendering and contract management. The data is publicly available on the ANAC official website.
Other jurisdictions have developed monitoring frameworks to monitor exclusively the uptake of their designated policy objectives. In Finland, the OECD supported Hansel, the Public Procurement authority, to create a productivity framework to monitor four policy objectives (see Box 2.6) (OECD, 2019[23]).
The OECD has worked with Finland to identify a path forward to measure the impact of public procurement on achievement of specific policy outcomes:
An OECD report identified gaps and further work required in collecting data to demonstrate that the outcomes have been achieved. A productivity framework was defined. As part of this framework, a set of performance indicators were suggested including some for measuring the impact of public procurement on achieving the goals related to secondary policy objectives. Examples of the performance indicators are set out below:
SME participation: Number of bids submitted for tenders by businesses categorised as SMEs.
Reduction in energy consumption: Comparison of energy consumption of historical goods and services bought by the government and new goods and services selected using Most Economically Advantageous Tender (MEAT) criteria or other criteria.
Reduction of emissions: Comparison between emissions from historical goods and services bought by government and new goods and services selected using emissions as criteria.
Improvement in air/water quality: Comparison between impacts on air/water quality of historical goods and services bought by government and new goods and services selected using environmental considerations as criteria.
Incorporation of social considerations in government contracts: Ratio of public contracts pursuing social objectives (including the aggregation of social outcomes secured through public contracts).
Skills/jobs creation: Number of jobs/training qualifications generated through public procurement.
Source: (OECD, 2019[23])
In Denmark, the NCP plays an important role in monitoring public procurement, see Box 2.7.
The mandate of the National Contact Point for Responsible Business Conduct (NCP) of Denmark includes the possibility to launch specific investigations related to responsible business conduct at the NCP’s own initiative. In 2018, the NCP initiated an investigation of the Danish Ministry of Defence’s procurement process after allegations of forced labour in relation to the procurement and construction of an inspection vessel. The investigation was focused on whether the Ministry had performed due diligence in accordance with the OECD Guidelines for Multinational Enterprises (MNE Guidelines) during their procurement process.
The enquiry concluded that the Ministry had not imposed requirements that respected human rights in connection with the monitoring of the contract. It also concluded that the Ministry did not systematically assess the potential for adverse impacts on human rights, labour rights and the environment nor the potential for corruption. On that basis, the NCP drafted a number of recommendations to the Ministry with a view to be utilised in future when procuring goods and services.
As part of the follow-up procedure, the Ministry provided a report to the NCP. The report showed a significant increase in focus on due diligence. The Ministry had made substantial efforts to strengthen their work on responsibility in order to comply with the MNE Guidelines. The initiatives included the incorporation of risk-based due diligence processes into procurement processes, including the establishment of standard procedures for managing actual or potential adverse impacts. It also set up a CSR Governance Board. The Ministry of Defence are now currently informing other public authorities about their work on due diligence and RBC, thereby securing focus on the topic. As a result, the visibility of the Danish NCP and, more importantly, focus on RBC for the public authorities has expanded.
Source: (Danish National Contact Point, 2019[24])
Monitoring frameworks rarely include subcontractors or the rest of the supply chain. Of those countries that conduct monitoring, the majority do not monitor subcontractors or supply chains – with the exception of integrity objectives (Figure 2.9).
2.3.3. Sub-national uptake of RBC objectives in public procurement
Countries have limited knowledge of the RBC-related activities in public procurement at a sub-national level, which is a gap given the large share of public procurement conducted at sub-national level (63%). The OECD’s 2017 report Public Procurement for Innovation. Good Practices and Strategies identified the definition of targets at national, sub-national and regional levels as a good practice for securing strong political commitments (OECD, 2017[25]). Studies show that there are several initiatives on sustainable public procurement on sub-national levels. In 2019, the OECD conducted a review of the public procurement system in Germany. The review looked at approaches the German states (Länder) use to pursue strategic objectives through public procurement. It found that the majority of German states have a broad suite of instruments in place to support complementary policy objectives (OECD, 2019[18]). A second example rests on a number of sub-national authorities in Belgium (Flanders) and the Netherlands. The TruStone Initiative is a multi-stakeholder initiative between government, NGOs, trade unions and individual companies to ensure public authorities source natural stone responsibly.10
The survey which was distributed to national level procurement policy makers also asked respondents about their knowledge of any sub-national level initiatives which supported the uptake of RBC objectives in public procurement. Almost all respondents to the survey answered that they had no visibility on the procurement activities of their sub-national governments. In addition, respondents stated that they did not have the means to obtain information about RBC objectives in public procurement at any level below the national level. Many procurement systems are decentralised. This means that often, contracting authorities procure according to their own, individual objectives. Many sub-national governments have regulations to clarify which sustainability aspects (or RBC objectives) should be taken into consideration. However, these sub-national requirements are not monitored by the national level procurement function.
The 2019 Germany public procurement review found that laws and strategies are the most common instruments to pursue strategic public procurement at sub-national level in Germany, i.e. among German states (Länder). In most cases, these laws and strategies also contain mandatory requirements for the pursuit of sustainable public procurement policy objectives, which include many RBC objectives. In most states, capacity-building initiatives and monitoring support high-level strategic and regulatory frameworks. Evidence presented in the 2019 Germany public procurement review suggests that few states are advanced in gathering data for monitoring purposes (OECD, 2019[18]).
Countries are progressively strengthening their policy environments to incorporate RBC in public procurement. A majority of countries promote some aspects of RBC in public procurement through regulations and strategic frameworks. Environmental objectives are covered by some sort of framework in all countries. Objectives related to integrity and persons with disabilities are also well supported. Objectives associated with other social dimensions of RBC such as human rights, minorities, gender, disabled people or long-term unemployed, are not covered to the same extent. Overall, comprehensive and coherent frameworks addressing RBC objectives are rare.
While public procurement policy makers increasingly require consideration of RBC objectives when selecting main contractors, RBC expectations rarely extend to suppliers beyond subcontractors. Regulatory or strategic frameworks do not cover the entire supply chain for the majority of objectives. Integrity and labour rights are the two objectives where frameworks set requirements for the supply chain most often.
Overall, monitoring and reporting of the uptake of RBC related frameworks remains limited and is not consistent. In over half of the countries, it is not mandatory to monitor whether subcontractors or the rest of the supply chain comply with RBC objectives set by frameworks. At best, countries conduct partial monitoring. Countries draw on diverse tools, methodologies and stakeholders to enhance monitoring, but often efforts remain limited. Almost all respondents answered that they had no visibility on the procurement activities of their sub-national governments.
International commitments or obligations are the strongest driver in the development of regulatory and strategic frameworks, followed by government aims to achieve greater policy coherence internally.
Public procurement systems face capacity constraints, hindering implementation of RBC objectives in public procurement. The heightened expectations on public procurement practitioners to 1) incorporate RBC objectives into tenders, 2) manage sustainability risks and 3) consult diverse stakeholders increases the need for specific skills and resources that are not currently being met. Training and guidance cover mainly environmental objectives, followed by labour rights considerations.
References
[24] Danish National Contact Point (2019), , https://businessconduct.dk/file/675984/Follow-up-statement-18-12-2019.pdf.
[6] European Commission (2020), What is GPP, https://ec.europa.eu/environment/gpp/what_en.htm.
[3] European Commission (2011), Buying social - a guide to taking account of social considerations in public procurement, https://doi.org/doi:10.2767/18977.
[5] International Learning Lab on Public Procurement and Human Rights (2016), Public Procurement and Human Rights: A Survey of Twenty Jurisdictions.
[4] Martin-Ortega, O. (2018), “Public Procurement as a Tool for the Protection and Promotion of Human Rights: A Study of Collaboration, Due Diligence and Leverage in the Electronics Industry”, Business and Human Rights Journal, Vol. 3:1/3, pp. pp75-95, https://doi.org/10.1017/bhj.2017.35.
[11] Ministry of Finance of the Republic of Latvia (2019), “Overview of Public Procurement in Latvia”, http://www.vvc.gov.lv/advantagecms/LV/tulkojumi/meklet_dokumentus.html?qu.
[14] Ministry of the Environment of Japan (2019), “Basic Policy on Promoting Green Procurement”, http://www.env.go.jp/policy/hozen/green/g-law/archive/bp/h31bp_en.pdf.
[22] Ministry of the Environment of the Republic of Estonia (n.d.), “Green public procurement”, https://www.envir.ee/et/keskkonnahoidlikud-riigihanked.
[7] New Zealand Government Procurement and Property (2019), “Broader Outcomes”, https://www.procurement.govt.nz/broader-outcomes/.
[19] Norwegian Digitalisation Agency (2020), The High Risk List, https://www.anskaffelser.no/public-procurement/socially-responsible-public-procurement/information-about-high-risk-products.
[2] OECD (2019), Government at a Glance 2019, OECD Publishing, https://doi.org/10.1787/8ccf5c38-en.
[23] OECD (2019), Productivity in Public Procurement. A Case Study of Finland: Measuring the Efficiency and Effectiveness of Public Procurement, https://www.oecd.org/gov/public-procurement/publications/productivity-public-procurement.pdf.
[18] OECD (2019), Public Procurement in Germany: Strategic Dimensions for Well-being and Growth, OECD Publishing, https://doi.org/10.1787/1db30826-en.
[9] OECD (2019), Reforming Public Procurement: Progress in Implementing the 2015 OECD Recommendation, OECD Publishing, Paris, https://dx.doi.org/10.1787/1de41738-en.
[25] OECD (2017), Public Procurement for Innovation: Good Practices and Strategies, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264265820-en.
[1] OECD (2015), Going Green: Best Practices for Sustainable Procurement, https://www.oecd.org/gov/public-procurement/publications/Going_Green_Best_Practices_for_Sustainable_Procurement.pdf.
[8] OECD (2015), Policy Shaping and Policy Making: The Governance of Inclusive Growth, OECD Publishing, https://www.oecd.org/governance/ministerial/the-governance-of-inclusive-growth.pdf.
[17] PIANOo (n.d.), PIANOo, https://www.pianoo.nl/sites/default/files/documents/documents/sharingexpertiseonpublicprocurementoktober2009.pdf.
[12] Public Procurement Authority of Hungary (2019), “Sustainable activity of the Public Procurement Authority of Hungary”, https://ec.europa.eu/environment/gpp/pdf/GPP_Hungarian_PP_Authority_activities.pdf.
[10] Public Procurement Office (2004), “Act of Public Procurement Law (Poland)”, http://www.uzp.gov.pl/cmsws/page/?F;370.
[16] Public Works and Government Services Canada (2018), “Ethical procurement certification”, https://buyandsell.gc.ca/policy-and-guidelines/standard-acquisition-clauses-and-conditions-manual/5/A/A3006T/1.
[13] Segerstedt, A. and T. Olofsson (2010), “Supply chains in the construction industry”, Supply chain management: an international journal.
[15] Swiss Confederation (2019), “Federal Public Procurement Law”, https://www.admin.ch/opc/fr/federal-gazette/2019/4329.pdf.
[20] The Norwegian Digitalisation Agency (2020), “The High Risk List”, https://www.anskaffelser.no/public-procurement/socially-responsible-public-procurement/information-about-high-risk-products.
[21] The US State Department (2020), “The Responsible Sourcing Tool”, https://www.responsiblesourcingtool.org/visualizerisk.
← 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 section 1 for detail).
← 2. A total of 28 survey responses were received from policy makers – Australia, Belgium, Canada, Costa Rica, Czech Republic, Denmark, Estonia, Finland, France, Germany, Hungary, Israel, Italy, Japan, Korea, Latvia, Lithuania, Mexico, Netherlands, New Zealand, Norway, Poland, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, and Ukraine.
← 3. https://legalinstruments.oecd.org/en/instruments/OECD-LEGAL-0451
← 4. Modern Slavery Act (2015) https://www.legislation.gov.uk/ukpga/2015/30/contents/enacted
← 5. Federal Acquisition Regulation (2001), Title 48, Art. 1, Subpart 22.15: Prohibition of Acquisition of Products Produced by Forced or Indentured Child Labour.
← 6. Public procurement law, https://lovdata.no/lov/2016-06-17-73/§5)
← 7. National Contact Points for Responsible Business Conduct (NCPs) sit within national government entities, and promote the MNE Guidelines and related OECD due diligence guidance. NCPs also handle cases as a non-judicial grievance mechanism. NCPs provide a mediation and conciliation platform to help resolve cases relating to non-observance of the MNE Guidelines. Currently, 49 governments have an NCP.
← 8. http://www.konkurrensverket.se/globalassets/english/publications-and-decisions/swedish-public-procurement-act.pdf
← 9. https://www.iob-evaluatie.nl/publicaties/evaluaties/2019/09/01/433-–-iob-–-evaluation-of-the-dutch-governments-policy-on-international-responsible-business-conduct-2012-2018-–-mind-the-governance-gap-map-the-chain
← 10. https://www.imvoconvenanten.nl/en/trustone/