Missed Opportunity for Stronger Public Procurement Legislation in Sweden

December 15, 2016 •

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By Théo Jaekel
Senior Specialist: Human Rights and Supply Chain, Vinge Law Firm

On 30 November the Swedish Parliament adopted new legislation implementing the 2014 EU Directives on public procurement, but rejected proposed provisions that would have established mandatory social criteria in line with Swedish collective bargaining agreements, and ILO Core Conventions.

During the preceding political debates a clear dividing line could be seen between left and right wing parties on the issue of mandatory social requirements.

Under the Government’s proposals public authorities would have been obliged to include social criteria requiring suppliers to adhere to minimum standards with regards to wages, working hours, and vacation time in line with the prevailing collective bargaining agreement in the relevant industry in Sweden.  The provisions would not have demanded that suppliers were a party to a collective bargaining agreement, but rather that they should adhere to the standards set by collective bargaining agreements. Nevertheless, the proposal met with strong resistance from the opposition.

Amidst this heated debate, other proposals, such as those that required suppliers to meet ILO Core Conventions, were overshadowed. A proposed obligation on public authorities to include social criteria according to which suppliers would need to demonstrate that goods and services under public contracts, and not manufactured in Sweden, were produced in adherence with ILO Core Conventions was also rejected.

This is despite the fact that many public authorities in Sweden are already incorporating social criteria in their procurement of certain categories of goods and services.  The government’s legislative proposal would have strengthened the basis for this practice by establishing clear requirements on how to define social criteria and concerning the stage of the procurement process at which they should be included, while also supporting greater consistency across the public sector, and therefore reducing uncertainty for potential suppliers who currently may need to adapt to different sets of social criteria.

Today another crucial challenge is a lack of monitoring. Currently most Swedish authorities who use social criteria do not follow up with their suppliers to verify whether the social criteria are actually met in practices, usually due to lack of resources and capacity.

During political debates, the main argument raised against mandatory social criteria was that small and medium sized enterprises (SMEs) would be excluded from public tenders due to added complexity and lack of organizational capacity to deal with social sustainability issues.

This argument however lacks weight.  Social criteria may be introduced into public contracts through the mechanism of requirements on suppliers to demonstrate effective due diligence procedures in line with the UN Guiding Principles on Business and Human Rights. The concept of human rights due diligence is inherently flexible and adaptable to the size of the company, and factors such as the industry in question and severity of material risks. The requirements of due diligence – and hence of social criteria – therefore vary in scale and scope between large multinational companies and smaller companies, and accordingly would not result in the exclusion of SMEs from public tenders in practice.

In addition it can be argued that excluding economic actors that cannot demonstrate respect for human rights should not be a controversial issue for public authorities.

Clear requirements in Sweden’s new public procurement legislation could have created a level playing field for all suppliers, as well as generating much-needed incentives for those public authorities already relying on social clauses to allocate the necessary resources to ensure effective follow-up.  Instead, the approach taken by the Parliament has failed to address the weaknesses of existing arrangements and maintains an unhelpful status quo.

This puts the ball back in the court of individual public authorities who now need to demonstrate their commitment to meeting their human rights responsibilities in spite of a legislation that has set the bar too low.

Théo Jaekel, Senior Specialist: Human Rights and Supply Chain, Vinge Law Firm