Incorporating Social Criteria in Incorporating Social Criteria in Public ProcurementPublic Procurement

Terje TessemTerje TessemILO Senior Investment Policy AdviserILO Senior Investment Policy Adviser

atatUNDESA Expert MeetingUNDESA Expert Meeting

ononSustainable Public ProcurementSustainable Public Procurement

Copenhagen, 2 Copenhagen, 2 –– 3 December 20023 December 2002

ILO and Labour StandardsILO and Labour StandardsThe tripartite ILOThe tripartite ILOOnly UN agency with such representation in its Only UN agency with such representation in its Governing BodyGoverning BodyConventions and RecommendationsConventions and RecommendationsRatifications and national lawRatifications and national lawAnnual reports on monitoring of applicationAnnual reports on monitoring of applicationCorrective measures to be takenCorrective measures to be taken(Green)(Green)22 ProcurementProcurementStrong on procurement and management Strong on procurement and management ––ILO/ITC for World BankILO/ITC for World Bank

Convention 94 Convention 94 –– Labour Clauses Labour Clauses (Public Contracts) Convention, 1949(Public Contracts) Convention, 1949“Public Contracts should not have less good “Public Contracts should not have less good provisions than the generally prevailing provisions than the generally prevailing conditions of work”conditions of work”

Ratified by 59 countriesRatified by 59 countriesWe would claim applied in basic terms much more widelyWe would claim applied in basic terms much more widelyApplies to contracts which fulfil the following conditions:Applies to contracts which fulfil the following conditions:(a) that at least one of the parties to the contract is a public(a) that at least one of the parties to the contract is a public authority; authority; (b) that the execution of the contract involves(b) that the execution of the contract involves

(i) the expenditure of funds by a public authority; and (i) the expenditure of funds by a public authority; and (ii) the employment of workers by the other party to the contrac(ii) the employment of workers by the other party to the contract; t;

(c) that the contract is a contract for(c) that the contract is a contract for(i) the construction, alteration, repair or demolition of public(i) the construction, alteration, repair or demolition of public works; works; (ii) the manufacture, assembly, handling or shipment of material(ii) the manufacture, assembly, handling or shipment of materials, supplies or equipment; or s, supplies or equipment; or (iii) the performance or supply of services; and (iii) the performance or supply of services; and

(d) that the contract is awarded by a central authority of a Mem(d) that the contract is awarded by a central authority of a Member of the International ber of the International Labour Organisation for which the Convention is in forceLabour Organisation for which the Convention is in force

Convention 94 Convention 94 –– RatificationRatificationNorth Africa/ North Africa/

Middle EastMiddle EastAlgeriaAlgeriaDjiboutiDjiboutiEgyptEgyptIsraelIsraelIraqIraqMoroccoMoroccoSyrian Arab Rep.Syrian Arab Rep.YemenYemen

EuropeEuropeAustriaAustriaBelgiumBelgiumBulgariaBulgariaCyprusCyprusDenmarkDenmarkFinlandFinlandFranceFranceItalyItalyNetherlandsNetherlandsNorwayNorwaySpainSpainTurkeyTurkeyUK UK –– In/outIn/out

North AmericaNorth AmericaNone!!!None!!!

Latin AmericaLatin AmericaAntigua and BarbudaAntigua and BarbudaBahamasBahamasBarbadosBarbadosBelizeBelizeBrazilBrazilCosta RicaCosta RicaCubaCubaDominicaDominicaGrenadaGrenadaGuatemalaGuatemalaGuyanaGuyanaJamaicaJamaicaPanamaPanamaSaint LuciaSaint LuciaSaint Vincent and the Saint Vincent and the GrenadinesGrenadinesSurinameSurinameUruguayUruguay

AfricaAfricaBurundiBurundiCameroonCameroonC. African Rep.C. African Rep.Democratic Democratic Rep. CongoRep. CongoGhanaGhanaGuineaGuineaKenyaKenyaMauritaniaMauritaniaMauritiusMauritiusNigeriaNigeriaRwandaRwandaSierra LeoneSierra LeoneSomaliaSomaliaSwazilandSwazilandTanzaniaTanzaniaUgandaUganda

AsiaAsiaMalaysia Malaysia SabahSabahMalaysia Malaysia SarawakSarawakPhilippinesPhilippinesSingaporeSingaporeSolomon IslandsSolomon Islands

Employers Employers –– The Global CompactThe Global Compact

Embed universal values of human rights, labour and the Embed universal values of human rights, labour and the environment in corporate strategies and practicesenvironment in corporate strategies and practicesPrivate sector to make a worthwhile contributionPrivate sector to make a worthwhile contributionInternational Labour Standards, Management and International Labour Standards, Management and Enterprise Performance (ILO subEnterprise Performance (ILO sub--programme):programme):

Training of managers on labour principlesTraining of managers on labour principlesAdvocacy with Employers’ OrganisationsAdvocacy with Employers’ OrganisationsBusiness and Social Initiatives DatabaseBusiness and Social Initiatives DatabaseLearning ForumLearning Forum

Small and medium enterprise programme focus on Small and medium enterprise programme focus on Quality Jobs!Quality Jobs!More Employers activities coming up?More Employers activities coming up?

Workers Workers –– Workers EducationWorkers Education

Workers’ activities Workers’ activities secure their jobs secure their jobs ––decent jobsdecent jobsSerious on workers’ Serious on workers’ educationeducationIncrease numbers of Increase numbers of jobs jobs –– also innovative also innovative on new jobson new jobsInvestments in new Investments in new programmes for their programmes for their workersworkers

The role of infrastructureThe role of infrastructure

20% of total investment of 20% of total investment of developing countriesdeveloping countries4040--60% of public investment 60% of public investment Some US$200 billion a year Some US$200 billion a year invested in new infrastructure invested in new infrastructure in developing countries in developing countries (World Bank estimates) (World Bank estimates) Such investments in Such investments in infrastructure represent an infrastructure represent an enormous and largely enormous and largely untapped potential for job untapped potential for job creationcreation

What could be done?What could be done?Productive infrastructure: Productive infrastructure:

access: roads, paths, access: roads, paths, tracks, bridgestracks, bridgesrural: land development, rural: land development, irrigation schemes, wells, irrigation schemes, wells, minor damsminor dams

Social infrastructure:Social infrastructure:construction and construction and rehabilitation of schools, rehabilitation of schools, health centreshealth centreswater supply schemeswater supply schemes

Protection of the resource Protection of the resource base:base:

afforestationafforestation, soil and , soil and water conservation, water conservation, environmentenvironment

Jobs: 3Jobs: 3--5 times more 5 times more local economic local economic developmentdevelopmentForexForex: typically 50% : typically 50% savingssavingsCosts: typically 20% Costs: typically 20% cheapercheaper

EU/WB combined annual EU/WB combined annual infrastructure developinfrastructure develop--mentment investments in Subinvestments in Sub--Saharan Africa could Saharan Africa could produce 1 million jobs produce 1 million jobs more than nowmore than now

Why is it not happening? Why is it not happening? Procurement only?Procurement only?

Strategic use of PIP and contract systemStrategic use of PIP and contract systemSimultaneously address:Simultaneously address:

job creationjob creationdecent working conditionsdecent working conditions

Not only technical/financial tool to achieve physical outputs foNot only technical/financial tool to achieve physical outputs for r improved economic activity, living and working environmentimproved economic activity, living and working environment

Comprehensive policy tool toComprehensive policy tool toinitiate local level planning to identify/prioritise needs and iinitiate local level planning to identify/prioritise needs and investments nvestments (IRAP) aimed at improving access to(IRAP) aimed at improving access toa) productive resourcesa) productive resourcesb) basic social servicesb) basic social servicesc) protect natural productive resource basec) protect natural productive resource base

organise and structure decentralisation (incl. local contractingorganise and structure decentralisation (incl. local contracting and and payment systems)payment systems)direct public resources towards employmentdirect public resources towards employment--intensive and poverty intensive and poverty targeting investmentstargeting investmentsmobilise local resources and participationmobilise local resources and participationsupport to the private sector, capacitysupport to the private sector, capacity--building, HRDbuilding, HRD

LocalGovernment

RegionalGovernment

Community BasedOrganisations

NGOs

Private finance

Community Contracting

Technical support

CentralGovernment

Community Community ContractingContractingDarDar eses SalaamSalaam

Employment andEmployment andSustainable DevelopmentSustainable Development

The approach succeeds in linking:The approach succeeds in linking:employment promotion and private sector development, employment promotion and private sector development, withwithwealth creation and social equity, andwealth creation and social equity, andsocial progress and application of labour standardssocial progress and application of labour standards

The basic principles of policy implementation stress an The basic principles of policy implementation stress an enabling and regulatory role for government, along with enabling and regulatory role for government, along with private initiative and executionprivate initiative and execution

Policy DevelopmentPolicy Development

The cost of cutting corners (social, technical, economical, The cost of cutting corners (social, technical, economical, political)political)A (new?) real policy instrument A (new?) real policy instrument –– targeted procurementtargeted procurementPerformance based Performance based –– not method based specifications not method based specifications Cost of concessions (direct and indirect)Cost of concessions (direct and indirect)Life cycle costing Life cycle costing –– financial and economic costs/benefits financial and economic costs/benefits (shadow pricing)(shadow pricing)Sustainable procurement must include environmental and Sustainable procurement must include environmental and social issues social issues –– focussing also on benefits beyond the focussing also on benefits beyond the shareholders’ interestshareholders’ interestMinistries of Planning and Finance crucial in this process Ministries of Planning and Finance crucial in this process ––highest level of investment scrutinyhighest level of investment scrutinyDirectives for procurement backing for purchasersDirectives for procurement backing for purchasers

Construction and building industriesConstruction and building industries

Construction industry Construction industry –– civil works civil works –– major major multinationals taking the lion sharemultinationals taking the lion shareLittle access for Little access for SMEsSMEs, fronting prevalent, fronting prevalentConstruction industry Construction industry –– buildings buildings –– largely largely subcontracted to laboursubcontracted to labour--only contractorsonly contractorsLabour regulations neither impiemented nor Labour regulations neither impiemented nor properly monitoredproperly monitoredMajor safety probiems in industry Major safety probiems in industry –– estimated estimated some 55,000 deaths annuallysome 55,000 deaths annually

Private Sector and Labour Private Sector and Labour StandardsStandards

RisksRisksAbuse and worker exploitation endangering large Abuse and worker exploitation endangering large scale applicationscale applicationLabour regulations nonLabour regulations non--existing or irrelevantexisting or irrelevantSocial partners unaware or not interestedSocial partners unaware or not interested

NeededNeededSafeguard basic labour standardsSafeguard basic labour standardsDevelop and apply relevant labour regulationsDevelop and apply relevant labour regulationsMake strategic use of the tendering and contract Make strategic use of the tendering and contract system to promote improved conditions of worksystem to promote improved conditions of workInvolve social partners in joint definition of labour Involve social partners in joint definition of labour standards and working conditionsstandards and working conditions

Public sector requirementsPublic sector requirementsSetting up of contract systems and proceduresSetting up of contract systems and procedures

Active involvement of tender boards and Active involvement of tender boards and committeescommitteestransparent tendering, rapid payment, at central transparent tendering, rapid payment, at central and decentralised levelsand decentralised levels

Training of line agency staff for new role in: Training of line agency staff for new role in: preparation and supervision of contractspreparation and supervision of contractspartnership with Ministry of Labourpartnership with Ministry of Labourpartnership with partnership with SMEsSMEs

Modification of labour legModification of labour legislationislationDiscussion/negotiationDiscussion/negotiationprocedures betweenprocedures betweensocial partnerssocial partners

Good labour polices and practicesElimination of forced labour

Elimination of child labour – IPEC

Equal opportunities and non discrimination

The right to organize for workers and employersAgreed working hoursMinimum wage and wages paid on timeBasic provisions for safety and health (incl. HIV)Workers’ compensation for work accidentsSocial security regimes to be appliedDeliberate casualisation to be avoided and equality of treatment for casual labourers ensured

Some recent initiativesSome recent initiativesIFBWW and CICA IFBWW and CICA –– the framework agreements the framework agreements including multinational enterprises (including multinational enterprises (HochtiefHochtief, , SkanskaSkanska) and the World Bank (Chad)) and the World Bank (Chad)DFID and Social Aspects of ConstructionDFID and Social Aspects of ConstructionTargeted Procurement in South AfricaTargeted Procurement in South AfricaFIDIC now looking at Responsible Investments FIDIC now looking at Responsible Investments (construction)(construction)Private financing/purchase:Private financing/purchase:

Rating companies in SRIRating companies in SRIIncluding Environmental and Social concernsIncluding Environmental and Social concernsUsing Sustainable Development terminologyUsing Sustainable Development terminologyNo mention of possible positive criteria, for instance, No mention of possible positive criteria, for instance, employmentemployment

FLA FLA –– Fair Labour Association (Nike, Adidas, etc.)Fair Labour Association (Nike, Adidas, etc.)

Socially Responsible InvestmentsSocially Responsible Investmentsin Constructionin ConstructionObjective of the ILO initiative:Objective of the ILO initiative:i)i) Optimising employment opportunities in constructionOptimising employment opportunities in construction

ii)ii) Ensuring implementation of key labour standards Ensuring implementation of key labour standards emphasising application and monitoringemphasising application and monitoringPlatform for discussion and process developmentPlatform for discussion and process developmentGlobal contracting environment, but matrix of different Global contracting environment, but matrix of different economic categories and construction contract typeseconomic categories and construction contract typesFocussing on defining the process towards:Focussing on defining the process towards:

Better appreciation of employment concerns in constructionBetter appreciation of employment concerns in constructionImproved understanding of the role of labour standards and theirImproved understanding of the role of labour standards and theirapplication in the construction industryapplication in the construction industry

Endorsed international guidelines?Endorsed international guidelines?

Socially Responsible Investments Socially Responsible Investments in Constructionin ConstructionStrategy:Strategy:

Identify and organise participation: DFID, CICA, IFBWW, Identify and organise participation: DFID, CICA, IFBWW, IFI (WB, Regional Banks), FIDIC, Govt., etc.IFI (WB, Regional Banks), FIDIC, Govt., etc.Collect and summarise state of the art infoCollect and summarise state of the art infoCommission studies of best practices, if needed and Commission studies of best practices, if needed and agreedagreedOutline international guidelinesOutline international guidelinesPromote and test in selected environmentsPromote and test in selected environmentsInternational guidelines (FIDIC, World Bank) with an aim International guidelines (FIDIC, World Bank) with an aim to national applicationto national applicationAlso use CPAR of the World Bank?Also use CPAR of the World Bank?

Final commentsFinal comments

Social dialogue important for future application Social dialogue important for future application ––social issues can be met by awareness, social issues can be met by awareness, information, training information, training Both a strength and a weaknessBoth a strength and a weakness

ownership and buying in to change againstownership and buying in to change againstvery time consuming (ILO conventions many years to very time consuming (ILO conventions many years to develop) and possibly watered down solutionsdevelop) and possibly watered down solutions

ISO?ISO?