Our entities purchase a significant amount of goods, works and services every year and interact with a large number of suppliers and contractors from various sectors of economy. At the same time, AfriCorp Petroleum is a supplier of products for a wide range of wholesale and retail consumers from various countries. The Company manages its supply chain business by implementing the best global practices with due consideration of economic trends and with respect to reasonable expectations of partners, contractors and customers.
The Group entities annually procure vast amounts of goods, works, and services, engaging in economic relations with numerous businesses. AfriCorp Petroleum’s procurement helps keep and increase the number of jobs available in various economic sectors. At the same time AfriCorp Petroleum operates as a supplier to a wide range of customers across various African countries and industries.Â
PROCUREMENT MANAGEMENT PHILOSOPHY
In engaging contractors to perform works/services, the Company relies on a comprehensive approach of securing that contractors perform works/services in a proper and timely fashion in full compliance with the applicable statutory or other requirements.
There is a system in place designed to select and deal with contractors engaged to perform different types of works or services, as well as inventory suppliers (collectively – the suppliers). The Company introduced a business process entitled “Management of Goods, Works, Services, and Assets Procurement Practices”, built a procurement management structure, worked out procedures to identify environmental, public, and other risks pertaining to procurement, formulated requirements for each business relations stage, i.e. from contractor participation in bidding or other processes to full satisfaction of contractual obligations.
The Group has adopted a category-based approach to managing procurement of inventory and services. The whole range of procured goods, works, and services is broken down into categories based on the amount / total cost of such procurement and value that they bring to the Company. There are four lists, while each of them has its own terms of supplier engagement applicable to it. At the same time, compliance audits are conducted for all suppliers, regardless of the list of goods, works, or services that they supply.
The Company advocates for good business practices amongst its suppliers, including health and safety, environment, climate protection, human rights, and prevention of corruption. This is set out in the Sustainable Development Policy of the AfriCorp Petroleum Group in so far as it relates to building a responsible supply chain.
SELECTING SUPPLIERS OF GOODS, WORKS AND SERVICES
The procurement effort across the Group is governed by the local regulations and applicable laws. The Company is continuously working to improve its regulatory framework based on the law of Nigeria and the countries of its presence, as well as the existing best practices. Procurement of goods, works, and services normally takes place through open competitive bidding for the contract tendered. Suppliers are selected in accordance with local regulations that are applicable within the AfriCorp Petroleum Group entities.
The details of biddings, terms, and procedures thereof, as well as any other matters pertaining thereto are published on the corporate website of the AfriCorp Petroleum.
The selection of suppliers for high-priority and major projects is the most specific due to the crucial nature of the goods, works, and services that they supply. The Company develops dedicated procurement strategies for each specific category of goods, works, and services. At the selection stage bidders may be bound by more stringent requirements, e.g. mandatory completion of technical audits, performance of pilot and laboratory tests at the qualification stage, or while working on joint projects. Such suppliers shall pass preliminary qualification to establish their compliance with the Company’s requirements.
Suppliers have the right to engage subcontractors to fulfill their duties, making sure to coordinate their activities and control the quality of the works or services being performed. At that the suppliers shall provide the Company with the details of such third-party entities that they engage, and seek and obtain approvals of the technology, devices, equipment, and other items. Whenever the HSE systems of the supplier entities should be checked for compliance with the corporate requirements, similar checks shall be conducted for subcontractor entities.
In order to manage its counterparty selection risks, the Company has introduced business processes designed to run checks on bidders, and monitor compliance of suppliers with the corporate criteria and requirements.
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Due Diligence Checks
In accordance with the due diligence principle, the Company has launched its Counterparty Integrity Monitoring System designed to mitigate exposure to tax, business, or reputational risks while entering into contracts for procurement of goods, works, and services, and during performance of such contracts. The system is used to run checks on bidders and monitor the integrity of counterparties. There is a counterparty integrity index model in place comprised of 62 risk indicators.
The primary responsibilities of running checks are vested in the corporate security, tax, and legal departments. The internal audit department runs (optionally) due diligence checks on bidders proposed as winning bidders.
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Anti-Corruption Compliance
As per local regulations, no bidder is permitted to participate in a bidding that is directly or indirectly offering, has given, or consented to give a AfriCorp Petroleum or AfriCorp entity employee any remuneration in whatever form.
Both bidders and suppliers that have been found in breach of such requirement, are categorized as rogue suppliers of goods, works, and services. Whether to categorize a bidder as such or ban such bidder from taking part in the bidding is decided by the collegiate procurement body of AfriCorp Petroleum.Â
Any contracts for works or services that the Company makes shall incorporate provisions to the effect of compliance with the applicable anti-corruption laws and Anti-Corruption Policy of the company.
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Health and Safety Requirements
The Company has a procedure in place to assess the state of the Health, Safety, and Environment Management System (hereinafter referred to as “HSE”) across entities seeking to take part in the bidding, as outlined in the corporate standard. The Company shall leverage the procedure when the subject-matter of the bidding requires such assessment. The procedure includes:
- assessment of whether and to what extent the bidder’s Management Systems comply with:
- lSOÂ 45001 and ISO 14001,
- local regulations;
- checking that the bidders have the necessary licenses, the workforce are duly qualified, and in possession of personal protective equipment, technical capabilities, technologies, and other aspects.
In conducting such checks one shall pay attention to the following: any accidents resulting in injuries or fatalities, trends in the number of emergencies, fires, or incidents over the last three years; confirmation of personnel training and assessment of their knowledge in HSE matters. As part of the bidding process, bidders shall also disclose information on their social and welfare activities, specifically observance of the working hours of their employees, availability of housing and social services to their workforce.
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Communicating the Company’s Standpoint on Observance of Human Rights and Business Integrity Standards
In entering into contractual arrangements AfriCorp Petroleum is required at all times to advise suppliers of the corporate requirements and business integrity standards, including respect for human rights, and demand that they comply with such requirements. Contractors are encouraged to review the Code of Business Conduct and Human Rights Policy of the AfriCorp Petroleum Group, outlining the Company stance on such matters.
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Dealing with Bidders during the Supplier Selection Process
All and any dealings with bidders take place through an automated bidding system and regular updates of stakeholder entities on the procurement activities planned by the AfriCorp Petroleum Group. To maintain an atmosphere of confidence, the counterparties are able to:
- contact the Company, also by filing complaints as regards bidding outcomes;
- use business ethics and anti-corruption “tip lines”;
- ask questions through the automated bidding system;
- be involved in specialized activities.
Any bidding-related submissions are handled by the Internal Audit Department.
DEALING SUPPLIERS DURING THE PERFORMANCE OF CONTRACTUAL OBLIGATIONS
The bid winner is awarded a contract for provision of works/services, whereby and also under the applicable law the parties shall engage in further relations. Other things being equal, in selecting a supplier the Company shall give preference to domestic manufacturers.
Whenever the subject-matter of the bidding requires communication on HSE matters, in awarding a contract to the supplier the company shall set mandatory HSE requirements. A supplier is categorized as key, if the nature and scope of its operations have or may have a substantial impact on the safety of sites run by the AfriCorp Petroleum Group entities, health of the workforce, or impact the environment in the work area. Jointly with its key suppliers the Company shall prepare and approve the HSE Communication Plan, which inter alia provides for:
- leadership safety visits, checks of HSE management and knowledge assessment systems;
- HSE meetings and Safety Days;
- attendance monitoring of training exercises by suppliers, as provided by emergency containment and elimination programs for hazardous production facilities of the customer.
The supplier representatives shall attend Safety Days, have the capability to master cutting-edge operating techniques and present in-house best practices.
As per their contracts, the suppliers undertake to enforce provisions of the applicable laws, as well as corporate standards referred to in the 21st Century Health, Safety, and Environment Policy of AfriCorp Petroleum and its corporate standards, while expressing their consent by affixing their signatures.
The following requirements constitute an integral part of the contract and are at all times binding upon the suppliers:
- Ensure the supplier personnel attend orientation/induction on-the-job briefing prior to performing works/services at the sites of the AfriCorp Petroleum Group entities, are in possession of personal protective equipment that takes account of the nature of the works being performed, and confirm their first aid skills;
- Promptly advise the owner of works/services of all and any incidents occurring during their performance;
- Ban on unauthorized waste accumulation and placement; sewage (liquid waste) and chemicals discharges; atmospheric emissions of pollutants; contamination of soils with chemicals during works conducted at the sites of the AfriCorp Petroleum Group entities.
The contracts shall incorporate provisions whereby parties get a penalty (fine) for default on or wrongful performance of their HSE obligations.
Any breach by a supplier of the statutory or other HSE requirements constitutes a valid ground for modification or termination of contractual relations with a respective contractor.
AUTHORIZING SUPPLIER ENGAGEMENT
The company monitors the activities of suppliers for compliance with industrial safety, health and environmental requirements at all stages of work or service provision.
List of documents
In order to be authorized to perform works/service at the Company’s sites, the supplier shall submit a package of documents in support of its completion of training, successful passing of an HSE test, and work permits for respective professions and types of work, as well as documentary evidence of its personnel passing medical checkups and absence of counter-indications for respective work. The supplier shall, upon the customer’s request, submit documents for all its employees (including subcontractor personnel) commissioned to perform the works/services.
Mandatory induction training
All and any supplier personnel permitted to access the premises of AfriCorp Petroleum Group entity, shall undergo induction training designed to make sure that they know and understand the Company’s requirements.
- 21st Century Health, Safety, and Environment Policy of the AfriCorp Petroleum Group, and its focal points and sections.
- Internal policies and procedures of the AfriCorp Petroleum Group entities.
- Procedure for authorizing access to and rules of conduct in the premises of the AfriCorp Petroleum Group entities.
- General safety regulations and standards, including the Key Safety Regulations.
- Specific nature of the technology or devices used by AfriCorp Petroleum Group entity.
- Characteristics of the key hazardous or harmful production factors exposure to which is possible in the premises of a AfriCorp Petroleum Group entity;
- Indicator flora and fauna species monitored by the customer under the Biodiversity Preservation Program/Biodiversity Action Plan, and do’s and don’ts when encountering such species and ways to record these (if any);
- HSE risks and material environmental aspects of a AfriCorp Petroleum Group entity;
- Working conditions, on-the-job injury rate, occupational illness rate across a AfriCorp Petroleum Group entity;
- List of HSE breaches previously occurring in the course of the performance of works/services by contractors on the sites of a AfriCorp Petroleum Group entity, and responsibility for such HSE breaches.
Induction briefings for the supplier personnel shall be conducted in accordance with a pre-approved program and recorded in the induction training log. Every induction briefing shall be followed by a recitation.
Toolbox Talks
In getting authorized to access the Company’s premises, the supplier personnel that have completed mandatory induction briefings, shall, regardless of their qualification and length of service, attend a toolbox talk the purpose of which is to get them to know and understand the nature of the works performed, all and any risks pertaining thereto, safe methods and techniques of their performance, possible escape routes in case of emergency.
OBLIGATIONS DURING PERFORMANCE OF WORKS/SERVICES
AfriCorp Petroleum shall continuously engage both in-house and third-party supervisors acting as fully legitimate Company’s representatives to continuously enforce on its suppliers the requirements of design documents, and work programs. For this purpose it shall conduct inspections that are part of the in-process monitoring, including field trips to inspect work sites. It has developed check lists to more thoroughly and properly conduct such inspections, i.e. from document workflow to work quality and safety.
Broader approaches to assessing performance of suppliers of goods, works, and services are being adopted. The method uses company assessments that rely on a wide variety of factors, such as whether the contractual obligations are performed in a proper and timely fashion, whether there are (any/no) reported injuries, whether production programs have been fulfilled, whether following an assessment the supplier was found to operate in line with the sustainable development concept, etc. The data of such assessments can be used in working out measures to improve supplier performance
The contractors’ compliance with the applicable HSE requirements in the performance of works/services at the sites of the AfriCorp Petroleum Group entities is monitored through issuance of compliance notices and enforcement thereof.
The outcomes of suppliers’ HSE compliance audits, and those of implementing the HSE Communication Plan in regard to the key contractors are subject to regular reviews.
A representative of the AfriCorp Petroleum Group entity’s head tasked with enforcing HSE requirements shall, jointly with the heads of the suppliers:
- review the outcomes of contractors’ HSE compliance audits;
- review HSE related areas of concern and ways to address them as well as further HSE communication plans;
- hear reports by the heads of contractors that allowed HSE accidents to occur during the performance of works at the sites of the AfriCorp Petroleum entities, and review what should be done to prevent them and enforce HSE requirements on the suppliers;
- address the issue of terminating agreements with contractors committing HSE breaches that may lead to accidents, incidents, fires, injuries, or environmental violations.
Fulfillment of the contractual HSE obligations by contractors (subcontractors) is taken into consideration while evaluating the key performance indicator “Securing Required Health, Safety and Environment Levels by Heads of the AfriCorp Petroleum Group Entities”.
