HSJ Awards finalist
The Medical Fair and Ethical Trade group was shortlisted for the Improving Environmental and Social Responsibility Category of the HSJ Awards 2015.
Our campaign for ethical purchasing in healthcare has led to a number of achievements, including a framework with NHS providers to address labour standards in the production of surgical instruments.
About the HSJ awards
About the report
In October 2014, the BMA, in partnership with Swedish lobbying group Swedwatch, undertook research to ascertain any improvements in working conditions and labour rights in Pakistan following the inclusion of social criteria in procurement contracts.
Background on the ethical procurement problem
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Read our feature
Recipient of a Gold Lovie Award for Best Writing - Editorial
Overall our findings are that conditions at the visited factories (supplying Sweden and England) have improved. Conditions at the sub-contractors working for exporting factories have also improved. Child labour is now strictly forbidden, wages are paid in accordance with the minimum wage, and employees are not forced to work overtime.
Challenges remain in health and safety, with workers still operating machinery without personal protective equipment. Capacity building in unionisation and collective bargaining is also needed. Management and employees state that unions are redundant because of good working relationships, but such statements fail to recognise the value of a union in giving workers a collective voice and in levelling the playing field between management and employees.
Evaluation of workshops (general vendors) outside of Swedish and English supply chains, where no social requirements are mandated, reveals little change since 2007. Employees work in cramped, poorly lit workshops with no ventilation. They are paid a piece rate, have little safety equipment, and child labour is still common practice. Much remains to be done to improve working conditions in the industry as a whole.
Supply chain of surgical instruments
A challenge emphasised by Pakistani manufacturers is the issue of pricing. In some cases prices have not increased since 2007, despite costs incurred through improving working conditions and rising energy prices.
Management at exporting factories feel that without increased remuneration, they will be unable to continue improvements in working conditions for their employees. Swedish suppliers buying from Pakistan state that they cannot increase prices and remain competitive, because procurement tenders award contracts heavily based on price.
These suppliers call for a model where efforts towards improving labour standards are evaluated together with price in the award criteria for contracts. The Swedish County councils state that social criteria are stipulated in the performance of a contract and are mandatory requirements for each supplier. They expect suppliers to include the costs for adhering to these requirements in the prices they tender.
In England NHS Supply Chain has developed a good model to ensure labour standards are respected through the product supply chain. There is, however, a lack of engagement from the UK government with no clear requirement regarding social criteria in healthcare or other public procurement. At present it is NHS Supply Chain, a corporate entity, driving these issues forward in the UK. Other public buyers in the UK should also include social criteria in their contracts.
It is critical to resolve the issue of pricing to maximise the impact of social criteria in manufacturing countries. Improvements in labour standards incur costs for manufacturers, which both suppliers and public procurers must consider.
We propose that one model to deal with the issue of pricing is for public procurement authorities to explore possibilities to integrate social criteria into award criteria, rather than only as contract performance clauses.
Recent changes to the EU directives on public procurement may enable this. This strategy should not exclude suppliers unable to demonstrate commitment to better labour standards at the time of award, but may place them at a relative competitive disadvantage.
We have used the evidence and analysis contained in this report to produce a set of recommendations for key stakeholders.
These include NHS Supply Chain, the Pakistani surgical manufacturing industry and the UK government.
NHS Supply Chain
NHS Supply Chain is the largest procurement hub for goods in England, and has awarded contracts to several UK suppliers importing instruments from factories in Pakistan.
Evaluate a model where the decisive factor in awarding contracts is not only price, but can include a suppliers’ sustainability performance
Exploit the full range of tools presented in the new EU directives with regards to setting social criteria in public contracts
Further develop the LSAS system to require all suppliers to continually report on progress and to allow audit of any approved supplier
Encourage other procurement organisations to follow the LSAS model by sharing best practice
Identify additional needs and resources to support suppliers in implementing contractual requirements with regards to labour rights.
Pakistani surgical manufacturing industry
Work towards continual improvement in working conditions for employees in the industry, especially in health and safety
Facilitate the formation of a union that can represent all surgical instrument workers, including those in subcontracted units and general vendor units
Consider an industry wide agreement on pricing, and explore how this can be enforced.
In the transposition of the EU directives, exploit the full range of tools presented in these directives with regards to setting social criteria in public contracts
Provide explicit policy to support or mandate the protection of labour rights in those procuring on behalf of the NHS or other public bodies
Provide appropriate resources to enable the adoption of such policies in practice
Act at EU-level to increase cooperation between member states in developing standards for social criteria in public procurement.