The Only Way is Ethics

The Only Way is Ethics

Posted by Ian Burdon in Global Sourcing, P2P Europe, Procurement Process, Public Sector Procurement 07 Nov 2013

On 8 October 2013 the Aswad Composite Mills factory, in Gazipur, outside Dhaka in Bangladesh burnt down. Seven workers were killed and a further fifty were injured in the fire. As newspaper reports state, the fire came soon after eleven hundred workers had been killed in a blaze at the Rana Plaza factory, a tragedy which led to more than ninety High Street retailers reaching an accord to ensure fire and safety inspections at their suppliers’ premises. The Aswad Composite Mills were not amongst those to be inspected because they were not perceived to be in the direct supply chain of the Western retailers.

I thought of these tragedies when reading the draft Directive on public procurement regarding use of “life cycle costs” in assessment procedures. I am aware of the possibility of bathos in that sentence – I was reflecting on the very real human cost of supply chain decisions the further one looks back through the tiers.

Purchasing Insight logoThe draft Directive is clear that “life-cycle costing includes all costs over the life-cycle of works, supplies or services” (Explanatory notes para. 40). This can include (para 41)“social and environmental” considerations at any stage in the lifecycle from extraction of raw materials onwards. This has to be specific to the subject of the tender – bidders should not be assessed on whether they have general policies in place (which will avoid some of the mini essays we have been asked to write of late by some authorities). Para 41(b) states that life-cycle costing assessments can be focused on the protection of the health of staff in the production process.

It remains to be seen how this will play out in practice. It seems plain that bidders are going to have to have a very clear picture of their extended supply chains to be able to respond to the potential assessment criteria. At first blush it looks as though these requirements will be more rigorous in the public than the voluntary “accords” in the private sector. For example one can imagine suppliers of electronic devices having to be able to show evidence of social and environmental conditions from all stages leading to the production of the device, something which has caused problems in recent times for a number companies sourcing materials and production from certain Chinese facilities. .

Equally it means that buyers will have to be in a position to know when to require this kind of assessment, understand how to set the proper requirements, and gain expertise in assessing the answers they receive.

For the avoidance of doubt, I think the draft Directive is setting a good example of ethical procurement and it is foreseeable that one outcome is a welcome focus on the deep supply chain. Equally, I think it is also foreseeable that there will be a lucrative new income stream for m’learned friends as decisions are made and challenged on extended “life-cycle cost” grounds.

Ian Burdon can be found on twitter @IanBurdon

Post a comment