Supply chain management: A proposed Code of Conduct Tony Wilson Centre for Economic and Social

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Presentation transcript:

Supply chain management: A proposed Code of Conduct Tony Wilson Centre for Economic and Social

“We recommend further work on developing Codes of Conduct, standards and processes for supply chain management – to ensure that smaller, specialist organisations are able to engage in supply chains on merit” Feasibility Study Recommendation 22

Why do we need to do anything..? In a perfect market, much of this would look after itself: Lead contractors would work with best suppliers Best performers would rise to top Providers would identify innovation, new practices, opportunities But not a perfect market!!! Asymmetries of information Capability needs – at all levels Market is changing We act like people rather than economists Result: Good providers can lose out – in bad deals or no deal Smaller providers in particular can be disadvantaged

So how do we do it? “Hard” requirements: Like Code of Conduct; Invitation to Tender “Soft” guidance: e.g. how standards are set in quality management/ inspection; how case studies are used and shared (including from sector itself) Support for supply chains: On negotiating; managing contracts, finance, and performance; sharing and learning

A Code – getting the balance right Tight: But lead contractor needs to be able to choose most effective partners... And make changes on basis of performance While too much prescription can drive odd behaviour Loose: Risk that good providers lose out Don’t have right information; Can’t negotiate effectively; Don’t get right support to access finance, learn, improve

Not many examples to build on... Great Britain: Fairly loose Code of Conduct A Merlin Standard (which is slightly different...) Work Programme findings: perhaps not as bad as some of the headlines Northern Ireland: Some sound principles in voluntary sector Concordat And more so in its predecessor Compact: around supporting sector through good practice; and committing to improve capability and capacity (particularly on financial mgt) But not much else!

An outline Code for Steps to Success Values Fully comply with the Northern Ireland Concordat with the voluntary sector; Act with integrity; Demonstrate respect and fairness for partners (actual and potential), in particular in contractual terms and funding arrangements; Ensure transparency, non-discrimination, equal treatment and accountability in relationships; Ensure prompt responses to issues and challenges that are raised by partners; Encourage the sharing of good practice; Promote equality and diversity in their own workforce and their supply chain; Promote a culture of continuous improvement and learning; and Be committed to achieving the best possible outcomes for clients.

Standards of behaviour – pre-award (1) Sub-contracting opportunities should be advertised as openly and widely as possible. Application processes to become a sub-contractor should use the Standard Expression of Interest form as a first stage unless there are compelling reasons not to do so. Application processes to become a sub-contractor should always be open and fair, as simple as possible, consistent, and in proportion to the size of contract. Lead contractors should set out how their application processes meet these standards. Potential lead contractors shall not insist that potential sub- contractors negotiate only with them and not their competitors. Potential lead contractors shall not “poach” staff from potential sub- contractors during or after sub-contracting negotiations. Feedback to unsuccessful potential sub-contractors should be transparent and timely. Lead contractors should always agree with sub-contractors the terms of their delivery – including financial arrangements – in advance of any bid being submitted.

Standards of behaviour – pre-award (2) Lead contractors and sub-contractors should normally agree between them how key risks will be shared – including around volumes of referrals, delivery costs and performance. Lead contractors should normally offer contracts to sub-contractors that run for the length of the contract with the Department (subject to achieving performance expectations). Funding from lead contractors to sub-contractors should be fair to all parties and reflect relative abilities to bear particular risks. In particular, funding for sub-contractors should be on the basis that at an acceptable level of performance they can fully recover costs. Lead contractors should normally pass on less financial risk to sub-contractors than they themselves bear. Where this is not the case, this should be spelt out in bids. Lead contractors should ensure that sub-contractors that are less able to access finance to fund outcome-based contracts have access to appropriate support to access finance and manage risks. Where lead contractors charge a management or service fee, they shall publish [the level of the fee and] the services that are provided in return for that fee.

Standards of behaviour – post-award (1) Lead contractors will live up to any commitments they make to delivery providers at the time of contract award. Monitoring requirements and management information should not be overly bureaucratic and should be consistent, proportionate, clearly specified and agreed at the start of the contract. Neither lead contractors nor sub-contractors will engage in restrictive practices such as colluding on price. Lead contractors will ensure that there is support in place for small sub-contractors to improve performance, manage financial risk, mitigate delivery risks, access finance, and where appropriate expand. Lead contractors should ensure that decisions on referrals of customers, including on the level and type of support needed, are in line with agreements made and fully transparent. Timing of payments between lead contractors and sub-contractors should be consistent and agreed with both parties. Except in exceptional circumstances, where lead contractors are passing on a share of service our outcome payments this should always be done within thirty days of receipt of payment from the Department

Standards of behaviour – post-award (2) Lead contractors should consider making payments in advance of expenditure (where appropriate and necessary) in order to achieve better value for money. There will be open lines of communication between lead contractors and sub-contractors to ensure any issues are resolved as soon as they arise as far as is practicable. Effective dispute resolution and complaints procedures should be in place and kept under review. Contracts between lead contractors and sub-contractors will allow a sufficient termination period, which will be agreed at the outset. Lead contractors should never seek to obstruct or prevent delivery providers from presenting reasonable strategic or operational grievances to the Department.

DEL will undertake to: Uphold these standards as a good commissioner; Monitor and enforce the Code of Conduct consistently and fairly; Allow a sufficient period of time for organisations to fully develop their tender proposals, including development of partnership and consortia arrangements; Support lead contractors in implementing Steps to Success, from contract award through to live running; Actively promote awareness of and adherence to the use of the Code of Conduct; provide a grievance route for sub-contractors who believe that the Code of Conduct is not being adhered to; and Ensure that delivery providers can have a ‘voice’ direct to the Department, to share insights and promote continuous improvement.

That’s all fine on paper Enforcement and compliance is key First in ITT – building this in to assessment, and expecting all to exceed requirements Then in delivery Do we need Merlin? Or the features of Merlin: Self assessment Independent inspection Input/ oversight from industry (incl VCSE) Quasi-independent arbitration and complaints process

For discussion Does the Code get the balance right? Where should it be stronger or weaker? How would you want this reflected in the ITT? And in delivery Can the current inspection regime rise to the challenge? How get the right input from industry, stakeholders? And/ or do we need a “Merlin NI”? But first a real life example!

Supply chain management: A proposed Code of Conduct Tony Wilson Centre for Economic and Social