Costing the FutureSecuring Value

for Money

Through

Sustainable

Procurement

Origins

• Westminster Sustainable Business Forum– Not-for-profit, cross party, membership

organisation

• Members complained of a problem in public sector procurement

• Barbara Morton and David Kidney MP

• Construction focused but broadly applicable

Policy Overview

• The UK “to be recognised as amongst the leaders in sustainable procurement across EU member states by 2009”

Securing the Future 2005• Sustainable Procurement

Task Force: Procuring the Future, 2006

• Insufficient response

What is sustainable procurement ?

“Sustainable Procurement is a process whereby organisations meet their needs for goods, services, works and utilities in a way that achieves value for money on a whole life basis in terms of generating benefits not only to the organisation, but also to society and the economy, whilst minimising damage to the environment.”Procuring the Future, 2006

Report Findings

• Some cases of best practise

• Inertia in public sector procurement

• Sustainability not happening in construction

• No meaningful whole-life costing in public sector procurement

• The over-emphasis of environmental sustainability

Barriers

• Intertwined• Capability

– Information overload: Unrationalised information– Lack of guidance: Green Book etc, Transforming Government

Procurement – Perception of EU legislation as a barrier to sustainable

procurement• Affordability

– Cap ex / Op ex divide• Budget Silos: Benefits falling outside remit of spender• Incentives

– CSR 07: Cashable Savings now• Additional funding for sustainability was inaccessible

Solutions

Whole-Life Costing

• Informs and incentivises good procurement– Allows procurers to assess the value and cost

of sustainable procurement– Allows procurers to make realistic decisions at

the beginning of a project, rather than have to act on an ad hoc basis as the project goes on

– Provides a model in which financial value can be ascribed to sustainability benefits

Barriers to Whole-Life Costing

• Terminology – There is still dispute over the exact definition of terms

such as Whole-Life Cost, Whole-Life Value, Life-Cycle Cost and Net Present Value

• Confidence in life-time costs– Does a whole-life cost include business and

decommissioning costs– Discounting

• Post-occupancy evaluation• Lack of incentive• NEED STANDARDISATION AND TRAINING

Whole-Life Costing Standard

• BS ISO 15686-5 Buildings & Constructed Assets• Created in conjunction with Faithful & Gould,

Balfour Beatty, Chartered Institute of Building, Royal Institution of Chartered Surveyors

• Product of ISO: 10 years & 24 countries• Life-cycle costing includes construction,

maintenance, operation and occupancy • Whole-life cost also includes this plus business

cost, income from sale of land, and other externalities such as social benefits

Whole-Life Costing

• BSI Standard is only a beginning• Need to present information in a way that

informs choice• Will provide for the accumulation of data• Will provide a model that can then begin to

incorporate more sustainability factors– Carbon pricing– Factor in money saved in welfare etc– Metrics for social wellbeing.

Commissioning Outcomes

• Shift from procuring outputs to commissioning outcomes

• Identify the need, not the solution, and procure accordingly

• MEAT

EU Procurement Law

• Consolidated Directive: Recital 1-• “This Directive is based on Court of Justice case-law, in

particular case-law on award criteria, which clarifies the possibilities for the contracting authorities to meet the needs of the public concerned, including in the environmental and/or social area, provided that such criteria are linked to the subject-matter of the contract, do not confer an unrestricted freedom of choice on the contracting authority, are expressly mentioned and comply with the fundamental principles mentioned in recital 2.”

Commissioning Outcomes

• Example: Commission a housing-based regeneration scheme as opposed to procuring a housing repairs contract

• Encourages innovation• Commensurable with EU Recital 1 for criteria for

differentiating bids: “provided that such criteria are linked to the subject matter of the contracts”

• You can narrow what you procure but you can’t broaden it.

Leadership

• Leadership will cascade sustainability through organisation– Strategic approach to procurement– Mainstreams sustainability– Mitigates capability issues by addressing risk

aversion and awareness

• Procurers have to get leaders onboard

Client-Contractor Relationship

• Avoid adversarial relationships – partnerships• Work together to overcome unforeseen

problems• Send clear and consistent message

– Forward Commitment Procurement• Let the market know what you want• DIUS Competition• Prison Mattress

• Use contract conditions wisely and coherently• Collaboration can increase market influence

Overview

• Local Government well placed to be responsive

• Local Authorities must collaborate

• You cannot predict what success will look like

• Targets must be measures focused

Barriers to Solution

• Treasury have not engaged with the issue

• OGC can only implement the 2007 Sustainable Procurement Action Plan

• The issue is one of sustainability and a successful solution must address it’s three components, economic, environment and social.

Sustainable Procurement Principles

• Sustainability has to be central to procurement

• Sustainability has to be considered early

• Celebrate success