Global infrastructure businesses too trusting of suppliers

13 Jan 2015

Infrastructure companies across the globe have admitted they are awarding contracts to main suppliers without having critical information about how they do business.

Large companies across the construction, utilities, mining and oil and gas sectors said they are not obtaining vital information about suppliers, or carrying out due diligence either via desktop research or on-site audits.

Globally, almost a third of infrastructure companies are not gathering anti-bribery and corruption policies from their suppliers prior to awarding a contract. Further, one in five companies are failing to obtain main suppliers’ financial documents and 12% are not gathering health and safety data. When infrastructure companies do get information on suppliers, a similar percentage are not checking it is accurate.

The market survey was commissioned by Achilles, which manages supplier information and supply chain risks on behalf of more than 850 large companies across the globe. It was carried out by independent research company IFF – which interviewed 185 supply chain professionals not linked to Achilles from large companies in the UK, USA, Spain, Brazil and the Nordics across the construction, power and utilities, oil and gas and mining industries.

Tom Grand is the Regional Director for Achilles in the UK and Ireland which operates UVDB – a utilities pre-qualification community; FPAL – an oil and gas community and BuildingConfidence – used by 19 buying organisations to pre-qualify suppliers, manage risk and ensure supplier compliance. He said the figures showed global companies were too trusting of their suppliers.

“Infrastructure is a high risk industry and in most countries it is a legal requirement to keep workers safe on site, tackle bribery and corruption and address financial risk. Yet this survey shows many infrastructure companies do not have the most basic safeguards in place; we would urge businesses to know their suppliers.”

The UK fared better than the global average in terms of health and safety. There, one in five construction companies did not obtain main suppliers’ health and safety records before issuing a tender or contract.

Audits

The issue is compounded because infrastructure firms are failing to perform basic desktop checks – such as telephone calls or internet research, or physical audits on their suppliers’ information to check it is genuine. In total:

  • 30% fail to perform basic checks on suppliers’ financial reports;
  • 29% fail to perform basic checks on suppliers’ health and safety policies; and
  • 47% fail to perform basic checks on suppliers’ anti-bribery and corruption policies.

In addition, a large number of businesses are not carrying out on-site audits either, to check suppliers are acting in accordance with their own policies.

In total:

  • 56% failed to conduct on-site check on financial reports;
  • 36% failed to perform on-site audits on health and safety policies; and
  • 61% failed to perform audits on anti-bribery and corruption policies.

Regional difference

The UK construction sector fared better than average in terms of performing basic checks and on-site audits. In total:

‘Desktop’ checks on suppliers’ information On-site audit of supplier information
Financial reports 26% don’t perform basic checks (30% don’t globally) 43% failed to conduct an audit (56% don’t globally)
Health and safety policies 23% don’t perform basic checks (29% don’t globally) 34% failed to carry out an audit (36% don’t globally)
Anti-bribery and corruption policies 31% don’t perform basic checks (47% don’t globally) 46% failed to carry out an audit (61% failed globally

 

“Health and safety is recognised as a priority in infrastructure but the survey shows firms still have room for improvement in terms of ensuring suppliers adhere to the necessary health and safety procedures.”

“We estimate that businesses worldwide are spending US$60 billion on managing information about their suppliers – yet there are still significant gaps in their data.”

“Knowledge is power when it comes to managing and mitigating risks associated with suppliers. In our experience, it works best when businesses work together to create standards suppliers must adhere to, to be considered for work. Firms should then create a centralised, up-to-date database of all suppliers information so they can carry out due diligence proactively and protect themselves from risks.”


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Rebecca Bantoft

Global Head of Corporate Communications & Events

  • +44 (0)1235 838134
  • +44 (0)7931 374627
  • rebecca.bantoft@achilles.com

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