Man mopping a white floor

Achieve quality – use standard contracts

Good standard contracts contribute to a legitimate labour market and prevent conflicts, in the opinion of Stein Johnsen, director and lawyer with Virke Service.

"Many Norwegian municipalities are among the worst in terms of buying services. They lack procurement expertise and don’t use standard contracts. For this reason, it’s important to Virke to help make the standards and also raise awareness of them," Johnsen says. Fortunately, it’s not all bad. Several municipalities use the standard contracts and are extremely competent. The problem is that many are not.

Johnsen took part in Standards Norway’s committees that drew up standard contracts on cleaning services (NS 8431:2005), personal assistance (NS 8435:2011) and manual security services (NS 8434:2008). Both suppliers, and public and private clients negotiated the contracts. The standards were unanimously recommended by all committee members. In this way, all parties had a voice and quality was assured.

Johnsen has more than 20 years of experience as a lawyer, with labour law and contract law as specialist areas. He compares the standard contract to a life cycle from birth to death. Initially it regu-lates the contractual parties and services, thereafter their life together, such as duration, remuneration and breach. Finally, it regulates disputes and revocation.

The standard contracts promote a legitimate labour market.

The standard contracts are first and foremost general legal provisions that may form the basis for any procurement. Requirements to the service’s scope and quality must additionally be specifically agreed between the parties in separate documents for each individual assignment.

"In letters to public purchasers, the Ministry of Local Government and Modernisation has specified that the use of the aforementioned standard contracts is the rule of thumb. Nevertheless, Virke receives a lot of feedback claiming that public purchasers are those who use them least. Many look only for suppliers who have the lowest price. Additionally, they often pressure cheap suppliers on the contract’s terms," Johnsen says.

According to the standards mentioned, the contract should ordinarily have a duration of three years. Unfortunately, many public purchas-ers use shorter contract lengths, put out tenders for only smaller portions of cleaning services, and have constant competitive tenders and focus on the lowest price. The provision of services has a resource-intensive initial phase, in order to establish the right quality. It’s expensive and time-consuming for all parties to compete for tenders, while also creating uncertainty.

"None of the parties benefit by the contract being as poor as possible for the supplier. It impacts the quality of the service and the employees’ terms. Users are less satisfied, and complain about the quality. It’s a mistake to think you get a better supplier by pressuring them," Johnsen says.

Learn from the large, private enterprises
Several reports from Fafo document the suppliers’ and Virke’s extensive experience. They also show that large, private clients often are concerned with quality and the right delivery. Here, many municipal-ities could learn a thing or two.

The same amateur purchasers often don’t allow for changes to the contract in accordance with collective wage settlements, even though wages may constitute 80 per cent of the supplier’s overall costs. Sometimes public purchasers demand long payment times, inflicting liquidity problems on the supplier and creating an imbalance in the contractual relationship. This contradicts the contractual standards, that public purchasers as a rule not only know, but are obliged to use pursuant to Norwegian law.

"The standard contracts promote a legitimate labour market. The balance of power is regulated. The possibility of social dumping is reduced. Players wielding purchasing power can to a lesser extent exploit the supplier. Virke calls for good and proper dialogue between supplier and client in order for the procurement to satisfy the client’s needs and quality requirements. Suppliers have the best expertise with regard to their own products. The use of standard contracts will streamline the tender process for all stakeholders," Stein Johnsen says.

Facts

Virke, the Enterprise Federation of Norway, is trade and industry’s second largest enterprise federation. It represents more than 16,500 businesses and 220,000 workplaces, and member businesses are in industries such as trade, knowledge, technology, travel, service, health, case, education, culture and voluntary work. Virke works to improve framework conditions for its members, resolve challenges and contribute to wealth creation.

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Stein Johnsen
  

Stein Johnsen

Last updated: 2016-06-14