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Healthier procurement: report summary

HSJ Awards finalist

HSJ Awards 2015 finalist logo 16x9The 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

Download the report

 

Read our feature

Is this ethical trade?
 
Enter

Is this ethical trade?

KickerThis is a kicker.

Abu works 11 hours a day, six days a week, in a small roadside workshop in Sialkot, Pakistan. He is seven years old.

 

He is paid 4,000 rupees a month, about 25, to make surgical instruments on a grinding wheel. He doesn't go to school because his family cannot afford to send him. Abu's father also works in the workshop, as does his 10\-year\-old brother. When his uncle died unexpectedly, leaving a large family debt that must be paid, Abu's father could see no other option but to send his two eldest sons to work.

 

Despite child labour being criminalised by national law, an estimated 3.6 million children under the age of 14 work in Pakistan, mostly in exploitative and hazardous workplaces. Although standards have been introduced to ensure that these manufacturers do not supply NHS hospitals in the UK, child labour still occurs in small, unregulated workshops. In this region of Pakistan, surgical instrument manufacturing is an established industry, producing more than 150 million surgical instruments a year, with a global market value of over 200 million.

 

In the regulated factories of Sialkot, there are an estimated 50,000 manual workers in the surgical instrument industry, with a typical labourer earning 1.40 a day \- that's for a 12 hour work day, often seven days a week. This isn't ethical trade, but what is being done to tackle it?

 

How to buy ethically

Over 3,000 miles away from the heat and noise of the factories in Sialkot, those same instruments are used every day in medical procedures in the UK.

There is little awareness of the working conditions of the people who make surgical instruments

Operating theatres consume the most medical supplies within a hospital, accounting for a third of all hospital supply costs. But when it comes to the procurement of these supplies into the NHS, value for money is a key concern, with little awareness of the working conditions of the people who make them \- up until recently. Ethical trade is a top\-down approach that refers to the steps that buyers, such as hospitals, take to improve the conditions of those involved in the supply of goods and services. The focus is on continuous improvement over time. While campaigns for fair and ethical trade of coffee, chocolate and clothing are established in the public consciousness, the same scrutiny is not applied to commodities used in the UK healthcare sector. Outsourcing the manufacture of surgical instruments to low to middle income countries can help boost local economies, but the pressure to produce materials at the lowest cost can put vulnerable workers at risk of labour rights abuses.

 

In 2007, the BMA Medical Fair and Ethical Trade Group visited factories in Sialkot, revealing some of the unethical working conditions in the manufacture of medical goods routinely used in UK hospitals. This led to the publication of [Ethical Procurement for Health Workbook](http://www.bma.org.uk/working\-for\-change/international\-affairs/fair\-medical\-trade/tools\-and\-resources), a guidance and training resource for procurement staff, produced with the Ethical Trading Initiative and in partnership with the UK Department of Health.

Ethical trade aims to make international business work better for poor and disadvantaged people

This workbook is unique in that it is relevant to all healthcare procurement systems, and accessible anywhere in the world. It highlights that ethical trade aims to make international business work better for poor and disadvantaged people and encompasses many rights such as working hours, health and safety and wages.

 

A model that works

Ethical trade is a model that asks purchasers to systematically assess the risk of labour rights abuses in the goods they procure, and to push for improvement where necessary. This includes working with companies throughout the supply chain to help workers exercise fundamental rights such as the right to safe and decent working conditions.

> Ethical purchasing doesn't have to mean more expensive nor does it mean compromising on quality

The BMA has worked closely with NHS providers since 2007 to support them in introducing social criteria. This includes securing a commitment from NHS Supply Chain, the largest procurement hub for goods for NHS England, and Guys and St Thomas NHS Foundation Trust.

 

NHS Supply Chain procures around 2bn worth of goods a year, which is about 40 per cent of the total NHS spend on goods in England. More recently, NHS Supply Chain has introduced criteria on ethical purchasing within its surgical instruments framework agreements, to address labour standards management, and leverage its buying power and supplier relationships to be a force for change.

 

This system, called the [LSAS \(Labour Standards Assurance System\)](https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=4&cad=rja&uact=8&ved=0ahUKEwi0rv3HztTLAhVo\_nIKHZAQBAYQFgguMAM&url=https%3A%2F%2Fwww.supplychain.nhs.uk%2Fproduct\-news%2Fcontract\-launch\-briefs%2F2014%2Fseptember%2Fsurgical\-instruments\-2012%2F~%2Fmedia%2FFiles%2FCLB%2Fadditional\_docs%2FSupplier%2520Matrix%2520LSAS%2520Surgical%2520Instruments%2520updated%252030%252003%252015%2520\(2\).ashx&usg=AFQjCNG9maaN8\_WgjCuUCsgciYVdLyckcQ&bvm=bv.117218890,d.bGQ), places the responsibility on suppliers to demonstrate they have effective systems in place to manage labour standards across their supply chain. It means successful suppliers are required to undergo a third party audit, at their own expense, and demonstrate incremental progress in achieving milestones. At a deeper level, it also places the onus on UK companies that source their goods globally, to be responsible about their procurement processes. NHS Supply Chain is currently developing an LSAS assurance flag that will indicate supplier achievement in this area.

 

Instruments used to heal people have a potentially detrimental impact on the health of people who manufacture them and that is not OK, says Alexandra Hammond, associate director of Sustainability at Essentia, Guy's and St Thomas' NHS Foundation Trust. We wanted to do something about the problem; not just acknowledge it and walk away. Our trust appreciates the importance of taking a stance others can take a lead from.

 

Other trusts often want to know which suppliers to avoid. But its complicated. Even if the conditions are not safe, to break off with a supplier can leave workers in a worse condition. Many of the suppliers are supporting local economies, whether they are doing things the right way or not. To say get rid of them especially at scale, can be a careless move. We didn't want to pull the rug out from anyone without understanding the wider implications. Ms Hammond explains that when work is put out to tender by Guy's and St Thomas' NHS Foundation Trust, they include their ethical procurement code of conduct.

 

Change you can see

In October 2014, seven years after its initial visit, the BMA returned to Pakistan to see if working conditions and the level of labour rights had improved following the inclusion of social criteria in procurement contracts in the UK.

> The management listens to us. We do not have to fight with them

The four factories visited gave an overall impression of having provided employees with clean working environments and making working conditions and labour rights a priority. The workers interviewed also seemed satisfied with their jobs. At Sahil Surgical one worker, Ali Rashid, said: I have friends working at other factories, this one is special. Ours is better. Haqi Abbas, another labourer, said: The management listens to us. We do not have to fight with them.

 

In one of the factories visited, senior management had introduced measures to provide medical treatment when needed, started contributing to pension funds, as well as social security plans for their employees. They were also offering financial support to cover the cost of weddings and home renovations.

Three of the four factories paid the tuition fees of employees' children

Other improvements across the range of factories included the offer of seasonal food grains at a fixed price throughout the year, subsidised residential housing for six employees through a lottery system, and free lunches.

 

The road ahead

Huge improvements have been made, however much remains to be done to improve working conditions in the healthcare goods industry as a whole. Dedicated resource is required at a strategic level to develop this further, but each and every trust can take action by adopting the code of conduct and talking about these issues with their supply chain, says Ms Hammond. In England, there are 165 hospital trusts with a spend of over 4.6bn a year on the procurement of medical supplies and other types of consumable goods, purchased from thousands of supplier companies.

> Each trust can take action by adopting the code of conduct and talking about these issues with their supply chain

Hospital trusts in England have the freedom to decide what medical goods they buy and how they go about doing so, with minimal intervention or direction from central government. However a more centralised approach could lead to coordinated purchasing decisions, which could result in more ethical purchasing. It's clear then that the healthcare sector, with its huge purchasing power, has the capability to improve conditions for workers around the world.

 

However, bringing long\-term change to a global industry worth millions is a huge challenge, requiring sustained effort from a number of bodies.

The BMA's long\-term vision is to ensure the NHS is purchasing all medical supplies ethically

In September 2015, the UN Sustainable Development Goals were announced, highlighting public procurement as one of many key drivers for sustainable development, and providing a clear opportunity for health professionals worldwide to bring about change. The BMA's long\-term vision is to ensure the NHS is purchasing all medical supplies ethically. Our imperative is to continue to work with NHS providers, end users, and suppliers to ensure that sustainable gains are achieved throughout the industry.

 

**What can I do?**

See how the BMA can support you to [take action]( http://www.bma.org.uk/working\-for\-change/international\-affairs/fair\-medical\-trade/take\-action) at your trust to implement ethical trade for medical goods. We've also released a [new report on the manufacturing of medical gloves](http://www.bma.org.uk/ingoodhands). Read our findings and recommendations. Get involved with [NHS Sustainability Day](http://www.nhssustainabilityday.co.uk/) on Thursday 24 March, follow [#dayforaction](https://twitter.com/dayforaction) to learn more about what's happening to make the NHS more sustainable. **Credits** **Writer, digital producer:** Emma Lindsey **Sub\-editors:** Jackie Mehlmann\-Wicks, Arthy Santhakumar, Kelly Spring **Senior digital producer:** Karen Lobban **Senior designer:** Tim Grant **Photographs and videos:** Vilhelm Stokstad/Kontinent, i\-stock Many thanks to NHS Supply Chain and Alexandra Hammond at Guy's and St Thomas' NHS Foundation Trust for their time and contributions.

 

 

The Lovie Awards
Recipient of a Gold Lovie Award for Best Writing - Editorial

 

Findings

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

Challenges

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.

 

Solutions

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.

 

Recommendations

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.

 

UK government

  • 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.