Guidelines of Procurement Policies

April 24, 1990

Keidanren

As Japan's economic influence has increased and globalization of its economic activities progressed, so have the operations of Japan's business enterprises become more and more internationalized, resulting in a rapid expansion of its influence. We strongly believe that, as a responsible member of international community, the Japanese business community should seek harmonious development and find an appropriate place in global society. It is to be hoped that business activities of the Japanese companies maintain the nature of openness and transparency to the outside world not only internationally but also in the domestic field. We stress that it is the urgent duty of the Japanese business community to demonstrate at home and overseas that Japan's corporate activities are based upon fair and impartial practices.

For its part, Keidanren (the Federation of Economic Organizations) urges that the following "Guidelines of procurement policies" will be respectfully observed by individual Japanese companies with a strong sense of being member of the international community. It is recommended that individual companies' basic principles, regulations or guidelines regarding procurement policies are in accordance with the guidelines listed below.

  1. Principles of Conduct for Procurement Practices

    2. Basic Philosophy of Procurement Policies

    1. Procurement policies should aim to select and procure in an economically rational manner the best possible goods and services available.

    2. Suppliers world-wide should be eligible to participate in procurement transactions on open, fair and transparent principles with easy-to-understand, simple procedures.

    3. Procurement transactions have an important role in the corporate contribution to society world-wide. For example, corporate purchasing practices should consider the effective preservation of natural resources and protection of the environment.

  2. Responsibilities of Procurement Team

    1. Work units or a team within a company whose primary responsibility is to handle procurement activities (hereafter referred to as "procurement team" which can include an engineering sector etc.) should in principle make their procurement decisions independently from other units. A procurement team should be clearly distinguished from other divisions including sales division. Procurement transactions carried out directly by other divisions in the company other than the procurement team should be in accordance with the principles set forth herein.

    2. Specifics regarding the offices responsible for procurement activities (organizations, names, location, telephone numbers, names of the individuals in charge, and so on) should be made available to interested outside parties.

    3. The procurement team should make clear to interested outside parties the overall picture of the company's procurement activities describing the general manner in which purchasing is handled, the company's basic procurement principles, procedures for screening and selecting new suppliers, and procedures for deciding procurement (collectively referred to hereafter as the "procurement system"). Consideration may be made as to the preparation of written materials in foreign languages.

    4. The procurement team should offer fair and impartial opportunities to bid to all potentially qualified suppliers.

    5. The procurement team should reply sincerely to offers from all potentially qualified suppliers.

  3. Principles on Procurement Transactions

    1. Procedures for screening the qualifications of possible new suppliers should be based on clear criteria available to the supplier such as business results, reliability, technological and technical capabilities and so on.

    2. The supplier for each business transaction should be determined in accordance with procurement policies, and rational economic criteria, such as the character of the goods or services in question (specifications, quality, performance, etc.),the conditions for supplying (delivery date, price, etc.), or the reliability and technical development capacity of the supplier.

    3. Procurement transactions should be carried out with due respect to the letter and the spirit of all laws applicable to them.

    4. Procurement transactions should in principle be based on written contracts.

    5. The procurement team should have principal authority to negotiate changes in purchasing contracts.

    6. The specifics of procurement transactions, such as the period the contract shall be in effect (depending on the type of activity involved) should be known so as to provide new opportunities for potential suppliers. With regards to continuous or repetitive transactions, contracts should be reevaluated periodically.

    7. In principle, procurement transactions should not be made with a view to marketing or otherwise promoting a company's own products or services.

    8. In-company control of information concerning specifications, quantity and transaction conditions for products to be procured should be strictly controlled and made available to potential suppliers on a fair and timely basis.

    9. Regarding information of potentially qualified suppliers, only relevant information required for the procurement should be obtained as stipulated in the contracts. Any knowledge acquired about these outside parties through business operations should be strictly controlled within the company and should not be revealed outside and treated with the utmost secrecy.

    10. In the event of bidding or competitive estimates, or in similar circumstances, potential suppliers who are not selected, should if they so desire, be apprised of the reasons they were not selected.

    11. In cases where there is bidding or competitive estimates, conditions of the contract should not be changed nor the price negotiated so as to favor a certain bidder.

    12. In cases where there exists no intention to place the order, a request such as to produce estimates should not be made to potential suppliers.

  4. Ethical Principles

    1. Individuals assigned to the administrative and procurement team (hereafter referred to as "individuals responsible for procurement") should not establish or maintain a relationship of self-interest with any suppliers or possible suppliers.

    2. Individuals responsible for administration and procurement should not accept remuneration or any other form of personal gain from suppliers or potential suppliers. Also, they should not accept services or presents which appear to exceed the limits normally accepted in society for such expressions of gratitude.

    3. Individuals responsible for administration and procurement should not compel suppliers or potential suppliers to provide them money or any other form of personal gain.

  5. Observance of Policies for Purchasing

    1. In regards to the proper implementation of the policies relating to purchasing, in-company inspections/auditing should be carried out at least once annually.

    2. All managers and individuals performing duties related to procurement should be fully apprised of the policies and bear responsibility for their observance.

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