PURCHASING

In 2009, Veidekke purchased goods and services for a total of BNOK 10.9. Purchases of BNOK 7.7 were made in Norway, BNOK 2.1 in Sweden and BNOK 1.3 in Denmark. We are, in other words, a significant purchaser of goods and services and putting us in an excellent position to influence our suppliers in more areas than price. At present, we require all our suppliers to follow our safety and environmental rules, and to make sure that any subcontractors they use do the same. As of today, however, we have no special criteria for ethical trade in our procurement policy, but this is something we will consider in the near future.

Long-term cooperation with subcontractors

Contrary to a number of other players in our industry, we make it our policy to prioritise long-term cooperation with our sub-contractors. This makes it easier for us to work more closely with individual suppliers, and to exchange experiences in the field of corporate social responsibility. We also find that long-term relationships give us a better opportunity to constructively influence the whole value chain, and it is our goal to develop alongside our preferred suppliers. This means, for example, that we wish to involve our suppliers in our corporate improvement processes. We believe that this is the best strategy in the long run and a key factor in ensuring good profitability over time.

80-20 strategy

Both Veidekke and the local communities in which we operate, benefit from a well-functioning, stable construction market. However, our industry has traditionally been vulnerable to economic cycles. Many companies have found it difficult to price projects correctly, because building costs rise steeply during the building process and eat up the calculated margins. This has resulted in poor profits for many companies, even in boom periods. To avoid this, in cooperation with analysts, we perform market and raw material analyses in order to improve our understanding of market drivers in our supplier market. The objective of these analyses is to find an optimal balance between long-term and short-term contracts that may help prevent prices from rising too steeply, thus contributing towards a better functioning market where inflation is both moderate and predictable. Veidekke's current policy is to purchase 80 per cent of goods and services from defined lead suppliers, while leaving 20 per cent open to other suppliers. In this way we keep in touch with the market, ensuring good knowledge of price changes.