Procurement for Sustainable Outcomes: The best international models (a brief summary)

A world-wide paradigm shift is happening in procurement. The post-GFC focus on the cheapest and often short-term, poor quality solutions is shifting to true value for money and sustainability.

In the past, sustainable procurement has been interpreted by many in simple terms. Requiring proposals on double-sided, preferably recycled paper was sufficient to tick the sustainability compliance box.

Pressure on public works budgets further encouraged this simplified approach. Only with false economies, bankrupt suppliers, and numerous contract disputes, came the realisation that best value might not equate to the cheapest solutions.

A new era of responsible procurement is gaining momentum world-wide. It recognises that delivering long-term benefits to our communities requires insight and careful planning. Sustainable decisions involve analysing the procurement environment, the supplier market and risks, and opportunities for long-term value.

At Clever Buying, we analysed the multitude of definitions available to develop a manageable description of sustainable procurement. We then reviewed how the principles are applied internationally, drawing on 15 years of research. The outcome is a workable, easily implemented model for sustainable public procurement.

Definitions ranged from primarily environmental considerations, to wide-ranging descriptions covering direct and indirect social, environmental and economic impacts of both project and procurement methods. Analysing the scope of sustainable procurement shows there’s no ‘one size fits all’ definition.

In the early 2000s, application of sustainable procurement was frequently limited to ‘green’ procurement – a cursory check of tenderers’ environmental management policies.

Definitions addressing the challenges in balancing regional trade agreements against local or national economic and social outcomes emerged, particularly in the EU and UK – now becoming more applicable in New Zealand, as impacts of the TPP trade agreement are under scrutiny.

The spotlight on social outcomes and impacts of procurement has also intensified globally recently. Increasingly, RFx documents are designed to encourage longer-term community social benefits. This ranges from employment impacts (buying local vs. leveraging cheaper imports); balancing opportunities for SMEs against larger companies; quota systems for minorities; training; and community group involvement.

Our review showed most national and international public procurement agencies and governments have policy statements for sustainable procurement. However, policy depth varied, with little practicality to the everyday activities of procurement staff.

In developing procurement plans and RFT documents day-to-day, procurers need a process of assessing sustainability interlinked to the project’s critical success factors. So how can sustainable procurement be embedded into planning and implementing procurement practice?

Once unsuitable suppliers have been eliminated, then suitable suppliers should be differentiated based on their risk management and value add. In that context, sustainability can be considered in-depth – including medium and long-term social, economic and environmental risks and/or opportunities available through the project.

The challenge is then to transform those relevant sustainability assessments into tangible weighted questions, whose evaluation is appropriately captured in the procurement decision.

This is where most public procurement sustainability documentation does not follow through to actual tendering decisions. Guides and policy documents are published but not translated into workable tools.

Sustainability criteria, targeted questions and meaningful weightings in RFTs are rare and inconsistent. Compressed timeframes promote the practice of recycling existing documentation to evaluate sustainability.

We found the most effective tools for achieving sustainable procurement are planning templates that include prompts for procurers to consider the social, environmental and economic impacts of the project, both short-term and over the asset life.

To be effective, these templates need to be working tools. They need spaces for the procurement planning team to respond to the questions; to explain their rationale and to justify their relative importance in the procurement decision through weightings that are explicitly communicated and applied.

They also need to be benchmarked with clear scoring criteria. The process of developing those criteria then leads to RFT questions that are aligned to those criteria.

Tools of this nature deliver clarity, and give all parties confidence that the best supplier has been selected. Explicit and well-justified alignment with project critical success factors makes them robust under scrutiny.

How does a procurer achieve buy-in to include wider sustainability criteria within specific decision-making? Too often, there’s a trade-off between sustainable outcomes and immediate costs.

Sustainable solutions are generally more time consuming and expensive. Unless sustainable methods are valued above pricing in the RFT evaluation, suppliers will naturally opt for low-cost solutions at the expense of sustainability.

Similarly, public sector decision makers have difficulty justifying sustainable solutions – as meaningful sustainable procurement requires an environment where short-term financial considerations are marginalised.

Achieving long-term value when there’s pressure on today’s expenditure isn’t easy. Sustainable procurement requires more than policy and guideline documents – it needs commitment to translate high-level goals into real-life practical procurement tools.

This not only delivers the best solutions over the asset life and for communities, but also saves money for procurers and suppliers through more effective relationships, reduced contract disputes, and confidence in the integrity and effectiveness of the procurement process.

Caroline Boot, Clever Buying Ltd

This is a summary of a paper written for the IPWEA 2016 Melbourne conference.

For more information and discussion on best practice procurement, see www.cleverbuying.com