BP increases monitoring of high-risk suppliers

22 March 2012

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22 March 2012 | Naouel Zenaidi

BP is strengthening its monitoring of suppliers involved in high-risk activities in a bid to raise the safety and quality standards to which they work.

The oil giant said it had launched a review of its contractor management practices following the 2010 Gulf of Mexico oil spill. The change in approach, which applies to exploration and production contractors, was explained in the firm’s Sustainability Report 2011, published yesterday.

In addition to existing monitoring processes such as internal audits, third-party verification and executive visits, BP said it would soon introduce safety performance indicators into contracts across 70 categories for suppliers performing high-risk activities.

“While our approach is to work collaboratively with suppliers in a way that offsets the need for intervention, we have taken decisive action when we have knowledge that contractors have fallen short of our requirements,” the company said in the report.

Measures taken by BP range from engaging with suppliers on ways to achieve better performance to withdrawing work from those failing to improve, removing them from bid lists and excluding them from tender processes.

BP also highlighted its intention to forge “deeper, longer relationships” with a small number of suppliers in order to better manage performance and reduce risk in its supply chain. The company has established contracts governance boards, who last year reviewed over $40 billion (£25.3 billion) worth of exploration and production contracts, and said it is currently developing an approved vendors list, as well as using responsibility schedules and contract briefs to improve clarity around contractual obligations.

The company’s plans also include reducing agency staff in critical procurement and supply chain management roles, with the aim of bringing expertise that will boost capacity and capability across the company.

At the start of March, BP agreed a $7.8 billion (£4.9 billion) settlement with representatives of individuals and businesses affected by the Deepwater Horizon accident and oil spill to resolve legal claims against the company. The company has agreed settlements with four contractors regarding the spill, but legal action involving Halliburton and Transocean remains ongoing.


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