Telstra's purchasing terms have been prepared to share risk between the vendor and Telstra so that the party best able to manage a particular risk has the obligation to be responsible for and to manage that risk. As a result, this risk apportionment is generally not negotiable by Telstra. There are many areas in which Telstra considers that it may be exposed to major risks.
Main areas of risk include:
Telstra considers legal risks solely within the control of the vendor to be best managed by and made the responsibility of the vendor.
These risks include:
- product and service failure risks or delays within the control of the vendor
- intellectual property liability to third parties within the control of the vendor
- disclosure of Telstra confidential information.
Telstra accepts that for some vendors, accepting liability for the losses Telstra may suffer from some risks which a vendor would normally be expected to bear may make a vendor insolvent.
To accommodate this issue, Telstra has included in its contracts the ability for vendors to limit their liability in certain circumstances but at the same time requires its vendors to take out suitable insurance cover.
Generally, Telstra will consider provisions limiting a vendor's liability. In some cases the limit may be based on a multiple of the contract value, except for liability for intellectual property infringement, death or injury, property damage and breach of confidentiality, which is to remain unlimited.
The required insurance generally includes cover for statutory liabilities (such as worker's compensation), public and product liability, professional indemnity for both advice and provision of services, including financial loss, and construction works insurance (where relevant).
Quality Assurance of products and/or services
Quality Assurance (QA) is important to Telstra.
Quality Assurance will require a vendor, at a minimum, to ensure that all products and services supplied to Telstra comply with:
- the terms of the contract
- all relevant Australian standards, codes, regulations and specifications including, without limitation, any applicable standards or regulations issued by the Australian Communications Authority or Australian Communications Industry Forum
- the requirements of its own quality management system
- the requirements of any quality assurance plan of the vendor (which has been approved by Telstra).
Telstra's requirements for QA depend on the risk impact on Telstra of the purchase. As a result, the QA requirements differ depending on whether the purchase is high, medium or low risk overall for Telstra. The specific requirements for each purchase are set out in the documentation provided by Telstra.
Performance of contractual obligations
Telstra requires performance against agreed specifications. Warranty periods for products typically extend for 12 months or more commencing from installation or delivery and further replacement warranties for design defects extend for the whole life of the project or product (in many cases 15 years or more). Telstra also often requires a performance guarantee for products used in our network where some payment is withheld until a product is shown to be reliable without failure for a specified period.
Telstra also requires vendors to adhere to agreed Key Performance Indicators (KPIs). If a vendor fails to meet these KPIs, specific remedies, including liquidated damages, become available to Telstra.
Telstra often requires vendors to commit to a program of continuous improvement of the product and/or services supplied. This may include agreeing to a written program of continuous improvement at the beginning of a supply contract.
Regular reviews of overall performance of vendors will be conducted during the term of supply contracts to assess product performance, KPI satisfaction and continuous improvement of performance against contract requirements. The outcome of a performance review may result in the early termination or extension of the term of a contract.
Intellectual Property (IP) rights
Vendors must provide Telstra with all the IP rights it needs to use and extract value from the supplied product or service. In some cases, Telstra may also wish to restrict the vendor's use of certain IP rights relating to the products and/or services. The nature of these restrictions will depend on:
- what IP rights Telstra is requesting to be generated by a vendor
- whether the price being paid for such IP rights are the full cost or a discounted cost to Telstra
- the strategic importance to Telstra of the IP rights
- if Telstra is purchasing a "first to market" opportunity from the vendor.
Where Telstra has agreed to pay for customisation or generation of special IP rights for use specifically by Telstra, Telstra will generally prefer that it acquire ownership of such specific IP rights.
Another option is for Telstra to obtain from the vendor a perpetual, irrevocable licence to use and rights to sublicense the IP rights. The terms of the license will differ depending on the product or service concerned.
Telstra's preference is to purchase products and services that do not require much customisation or generation of special IP rights for use specifically by Telstra. Therefore, we prefer products and services that are based on open systems and which are offered to Telstra as a worldwide product rather than a special product for Telstra alone or a proprietary one that does not integrate well with other products or services.
Risks from delays in delivery
Many of Telstra's purchases will impact upon Telstra's supply to its own customers. Therefore, delay in delivery of products and/or services to Telstra could cause delay in Telstra's provision of services to its own customers. Customers could sustain losses as a result of this and look to Telstra for compensation or payment. These losses can be substantial.
Where such losses occur, Telstra often seeks to recover part or all of the loss from the vendor through payment of liquidated damages (LDs).
LDs are occasionally capped at a fixed amount at the request of the vendor. However, such a request is not viewed favourably as Telstra's customer losses are frequently not able to be capped.
Foreign Exchange (FX)
Telstra will pay for goods and/or services sourced outside Australia or with a significant non-Australian input in either the originating foreign currency or Australian dollars and will negotiate its preferred alternative with the vendor before the contract is signed.
Buying into a better environment
Telecommunication services are a natural ally of the environment because they can provide energy and resource efficient options to help people communicate - whether across town or across the globe - from telephone and Internet to audio, video and online conferencing.
However in order to provide these beneficial options, Telstra uses resources. Specifically, Telstra is a major user of a range of products and services, including:
- network equipment and construction materials, such as pits, pipe and cable
- energy and fuel
- stationery, especially paper
- paper for telephone directories.
Through its environment policies, Telstra is committed to reducing the environmental impacts associated with the products and services it purchases.
Green Purchasing Policy
Telstra has launched a Green Purchasing Policy that applies to all purchasing across Telstra, from initial sourcing activities through to ongoing management of vendor contracts.
The Policy outlines Telstra's objectives and responsibilities that aim to ensure purchasing processes minimise negative environmental impacts and maximise environmental benefits. Telstra's objectives include:
- considering environmental issues in the purchasing of all products and services
- purchasing environmentally preferable products and services
- contracting with vendors that demonstrate responsible environmental performance
- establishing a purchasing framework that encourages vendors to improve their environmental performance and/or the environmental performance of their product or service
- supporting Telstra's commitments under voluntary initiatives and agreements.
Achievement of Telstra's environment policies will require collaboration between Telstra and its vendors to minimise the environmental impacts associated with the products and services they supply.
Environment requirements under contract
As a minimum, Telstra requires vendors to comply with all applicable environmental legislation and Telstra's Environment Policy. Depending on the environmental issues associated with products or services being supplied, the contract will include appropriate clauses covering vendors':
- Environment Policy
- Environmental Management System, which needs to have regard to the requirements of relevant legislation and the international standard ISO 14001
- assessment of environmental impacts and aspects of the product or service
- programs to promote environmental benefits, such as resource (energy, water and consumables) reduction and emissions and waste minimisation initiatives.
For further information on Telstra's environmental program refer to Corporate Responsibility - Environment.
Minimising environmental impacts of packaging
Packaging consumes resources such as steel, aluminium, timber, glass, paper, cardboard and plastic. To reduce the environmental impacts associated with packaging Telstra became a signatory to the National Packaging Covenant (NPC). The NPC is a voluntary program established through a partnership between Government and industry.
Telstra has developed Packaging Guidelines, based on the hierarchy of avoid, reduce, reuse and recycle, to support both the Green Purchasing Policy and Telstra's commitment to the NPC.
Telstra encourages all vendors to join the NPC and utilise the Guidelines to reduce the environmental impacts associated with their products. Telstra will be looking to all vendors to demonstrate where they avoid, reduce, or otherwise modify packaging to minimise environmental impacts.
The Packaging Guidelines (PDF, 157KB) are available for download.
Occupational Health and Safety (OH&S) requirements for products, plant and/or services
Vendors must comply with any laws, codes of practice, Australian standards and any Telstra OH&S policies/standards as notified by Telstra to vendors.
Vendors are also required to perform specific tasks necessary to manage OH&S risks.
These may include:
- provision and updating of Material Safety Data Sheets
- provision and updating of Plant Safety Data Sheets
- conducting and providing risk assessments
- for services, providing any OH&S plans and or safe systems of work.
Telstra Health and Safety Policy (PDF, 155KB)