Oslo Leading project
Goods Procurement Framework

5 Mar 2014

Context

Common framework agreements for monitoring ethical standards in goods procurement

The City of Oslo’s Agency for Improvement and Development has taken the initiative to introduce framework agreements to monitor ethical contract requirements in the goods procurement supply chain, with an aim to simplify and improve contract monitoring. The framework agreements are also open to other public procurers, and more than 60 public entities, national and local, have joined framework agreements. Assistance to follow up of contracts can now be purchased through a framework agreement on contract supervision of ethical standards in supply chains, which the City of Oslo has signed with the Norwegian Veritas, MiSA, Deloitte and KPMG. All four firms have extensive international experience in auditing and certification services. Framework agreements may be used to obtain audit assistance at all stages of contract implementation, including contractor meetings and controls by contractors headquartered in Norway and inspections of manufacturing premises by suppliers and subcontractors abroad (also on other continents).

The framework agreements have been established through a project the City of Oslo has had with the Agency for Public Management and eGovernment (DIFI). The City of Oslo has been responsible for the practical implementation of the procurement and DIFI has assisted with its expertise and its network. The project received financial support from the Ministry of Children, Equality and Social Inclusion. All public procurers have been invited to partake in the framework agreement the City of Oslo has initiated. The City of Oslo believes that the procurement /joint framework agreement sends a clear signal to the supplier market that public entities are conscious of their ethical responsibilities.

An important aspect of the joint framework agreements is that reports from the various audits are shared on the City of Oslo’s Procurement Portal. Common framework agreements where participants share their own reports with other participants, reduces the cost of monitoring suppliers significantly compared to if each procurer carries out their own audit. Suppliers save resources by reaching more clients with the same information. Common framework agreements also make it easier for procurers to confer amongst themselves when they require measures to strengthen contract monitoring related to ethical standards in their supply chains.

Issues and Challenges

  • Maintaining ethical standards of sub contractors and suppliers



Objectives

  • Establishment of a Framework Agreement to monitor ethical contract requirements in the goods procurement supply chain, with an aim to simplify and improve contract monitoring

  • A comprehensive audit of the supplier of the City of Oslo’s joint-purchase agreement for work-wear and footwear to ascertain if it meets the City of Oslo’s ethical contract requirements.

  • Revision of joint-purchase agreement for the delivery of work-wear and footwear


Partners

Private Sector


Government


Actions

The framework agreements have been established through a project the City of Oslo has had with the Agency for Public Management and eGovernment (DIFI). The City of Oslo has been responsible for the practical implementation of the procurement and DIFI has assisted with its expertise and its network. The project received financial support from the Ministry of Children, Equality and Social Inclusion. All public procurers have been invited to partake in the framework agreement the City of Oslo has initiated. The City of Oslo believes that the procurement /joint framework agreement sends a clear signal to the supplier market that public entities are conscious of their ethical responsibilities.

Revision of joint-purchase agreement for the delivery of work-wear and footwear

The production of work-wear and footwear is considered to be a high risk case for violations of ILO core conventions and national legislation relating to labour rights and health, safety and environmental regulations. On this basis, the Agency for Improvement and Development decided to conduct a comprehensive audit of the supplier of the City of Oslo’s joint-purchase agreement for work-wear and footwear to ascertain if it meets the City of Oslo’s ethical contract requirements. KPMG was awarded the audit.

In March 2014 a meeting was held at the suppliers headquartered in Norway. It was revealed that the supplier did not have sufficient control over ethical standards amongst its subcontractors. KPMG pointed out that the supplier did not appear to have sufficient understanding and competence when it came to management of risk associated with ethical standards in the supply chain. In the aftermath of the first audit, in early summer of 2014, an on-site (factory) audit was conducted with one of its subcontractors in China. The audit revealed among other issues that an emergency exit was blocked, that national legislative requirements concerning maximum overtime was violated, and that the subcontractor emitted waste water to the water treatment plant polluted beyond the national Chinese standard. It was pointed out that the subcontractor should improve its production planning and its system controlling working hours.

Contract discrepancies by the City of Oslo’s suppliers are considered to be serious, and deviations associated respectively with inadequate overview of supply chains and working hours of subcontractors is considered to be a material breach of contract. On this basis contract termination notices were sent to the supplier. According to the contract terms, the supplier is given a deadline for response before any contracts are terminated. The contractor has now submitted documentation regarding rectification, and the City of Oslo’s Agency for Improvement and Development is currently considering whether the correction has been carried out satisfactorily.



Future plans and actions

The City of Oslo is planning an audit of another joint-purchase area – medical tools and equipment. The Audit assignment will be announced shortly.


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