Route 3 - Develop Strategy - Profiling the Commodity/Service - Sustainable Procurement
The Sustainable Procurement Duty outlined in the Procurement Reform (Scotland) Act 2014 requires that an Organisation must think about how they can improve the Social, Environmental and Economic wellbeing of the area in which they operate, with a particular focus on reducing inequality. Statutory Guidance has been published on Sustainable Procurement Duty.
There is scope to create a positive impact on our environment in every Procurement Exercise that is undertaken, and you must fully explore the possibilities with the User Intelligence Group as an integral part of commodity/service profiling and strategy development rather than an optional area of interest.
To support this, the Scottish Government Procurement Policy Team has developed a number of tools that have been adopted for use via the Public Procurement Reform Programme (PPRP) that you can use when developing your commodity/service strategies:
- The Sustainability Test (used at category/commodity/service level to identify potential scope of benefits)
- Life Cycle Impact Mapping
As a matter of good practice, your Organisation should have completed the Sustainable Public Procurement Prioritisation Tool to prioritise Sustainable Procurement aims at a category level prior to your commencing work on the commodity/service strategy.
The key to successful Sustainable Procurement is to regard its importance as equal to the other areas of commodity/service profiling such as quality, technical specifications and commercial objectives. There are always different options available to you when examining how to achieve this balance and while many of these will be commodity/service specific, the primary considerations that must be noted as part of the Sustainable Procurement Duty when Profiling the Commodity/Service are listed below:
- Identify the opportunities to improve the economic, social and environmental wellbeing of the area in which your organisation operates
- Facilitate the involvement of small and medium enterprises, third sector and supported businesses
- Promote innovation
Economic, Social and Environmental Wellbeing
- Availability of suitable and high quality jobs
- Measures to encourage local small businesses
- Efficient and effective transport links
- Lifelong learning
- Training and skills development
- The provision of infrastructure and new information and communication technologies
- The promotion of good quality and affordable housing
- Safe communities
- The encouragement of the voluntary sector
- Looking after the needs of children and young people
- Looking after the most vulnerable
- Access to the arts, leisure or education
- Promotion of good physical, social and mental health
- Developing and promoting policies that have a positive impact on health outcomes
- Addressing health inequalities
- Availability of clean air, clean water and clean streets
- The quality of the built environment
- The removal of objects considered hazardous to health
- Removal of disfiguring or offensive graffiti
- Protecting communities against the threat of climate change
- Freedom from a high risk of flooding
- Improving and promoting biodiversity and accessibility to nature
Involving Supported Businesses, SMEs and Third Sector Suppliers
Suppliers whose main aim is the social and professional integration of disabled or disadvantaged persons, where at least 30% of their employees are disabled or disadvantaged workers are classed as Supported Businesses. It is possible for your Organisation to “reserve” the right to participate in a competition to supported businesses where it is assessed as appropriate.
Third Sector suppliers include community / voluntary groups, charities, social enterprises, co-operatives and individual volunteers.
In order to meet their obligations under the Sustainable Procurement Duty, your Organisation is required to consider how, in conducting the procurement process, it can facilitate the involvement of Small and Medium Enterprises (SMEs) and Third Sector Bodies and Supported Businesses in all procurement exercises and there are some specific actions that you must undertake.
- Developing transparent comprehensive Organisation Procurement Strategies and Annual Procurement Reports enable prospective tenderers to identify opportunities well ahead of advertisement stage and plan resources accordingly. Procurement Strategies and Annual Procurement Reports are mandatory for Organisations which estimate that the value of their regulated contracts in a year will be equal to or greater than £5,000,000.
- Advertising regulated contracts and award notices through Public Contracts Scotland (PCS) allows free and unlimited access to all sizes of potential bidders
- Increasing the use of debriefing supports the development and improvement activities of bidders
The use of Dynamic Purchasing Systems (DPS) reduces many of the participation barriers that typical Procurement Exercises are sometimes perceived as creating. Appropriately qualified suppliers can join a DPS at any time during its life period and there are multiple opportunities to gain business through the process. The entire process is electronic and it is simple and cost effective for suppliers to become party to it.
You must consider how you can promote innovation through the different aspects of your Procurement Exercise. The use of outcome specifications, identifying options to innovate through the procurement process and exercising the right to directly procure research and development to inform your requirements are some of the methods you can use to achieve this.
- Life Cycle Costing – this may be considered for use where additional environmental costs can be attributed to the products or services that you are purchasing, e.g. the cost of carbon emissions from machinery being bought and the environmental cost of disposal at end of life.
- Labels – does the product or service you seek have specific social or environmental or other characteristics that would be verified by a label such as Fairtrade? Labels must comply with the label requirements of the Public Contracts (Scotland) Regulations 2015. Please note that equivalents or other proof (e.g. technical dossiers provided by manufacturers) must also be accepted.
Life Cycle Costing
You can apply life cycle costing as part of the specification and subsequent evaluation. Life cycle costing takes into account all of the identifiable costs attributable to a product or service from its acquisition through use, maintenance and end of life (recycling / disposal). These can be direct costs like scheduled maintenance and energy used through the life of a road sweeping vehicle but also includes less apparent external environmental costs such as the cost of emissions of greenhouse gas based on the energy use of the road sweeper.
These costs can only be assessed when:
- They are based on objective criteria that don’t favour or disadvantage any potential bidders
- The assessment method is accessible to all interested parties
- The data required can be provided with reasonable effort from all interested parties, including those from other EU states and states party to international agreements by which the EU is bound such as the World Trade Organisation Government Procurement Agreement (e.g. USA).
If using a life-cycle costing approach, the Procurement Documents must state:
- The data to be provided by bidders
- The method that will be used to determine the life-cycle cost on that basis
It is important to differentiate between Whole Life Costing, Lifecycle Costing and Lifecycle Impact Mapping:
Whole Life Costing: Focuses solely on cost (£) of a product or service from cradle to grave. It takes into account acquisition, operation, ownership and disposal costs.. It does not take into consideration any environmental or social costs.
Lifecycle Costing: Life-cycle costing covers part or all of the following costs over the life cycle of a product or service:
a) costs produced by the Organisation or other users, such as:
(i) costs relating to acquisition;
(ii) costs of use, such as consumption of energy and other resources;
(iii) maintenance costs;
(iv) end of life costs, such as collection and recycling costs; and
(b) costs attributed to environmental externalities linked to the product or service during its life cycle, provided their monetary value can be determined and verified. This may include the cost of emissions of greenhouse gases and of other pollutant emissions and other climate change mitigation costs.
Lifecycle Impact Mapping: Focuses on social and environmental impact rather than cost. Life cycle impacts help the user identify and assess impacts. For example, it may help to focus attention on the disposal phase before the procurement is carried out, allowing the organisation to build end-of-life management requirements into both its performance clauses for successful contractors and its own internal management procedures.
Every product and service has a ‘life cycle’ or number of stages it goes through: from the extraction and sourcing of raw materials, such as mining to the transportation of sub-assemblies and parts, often through a global supply chain to the use of products or works and the delivery of services to the re-use, recycling, remanufacture and final disposal of materials
In the Marrakech Approach, the assessment of these risks and opportunities is broken down in to four key phases:
- Raw materials
- Manufacturing and logistics
- Disposal or end-of-life management
Please note: Life cycle impact mapping can be used alongside life cycle costing as part of the procurement process.
When you wish to purchase goods or services that have specific environmental, social or other characteristics it is possible to specify labels as a means of proof to show that the supplied goods or services correspond to the required characteristics (for example – those included in ‘fair trading’ labels). To use this approach it is necessary to meet the following criteria:
- The labels can only concern criteria that are linked to the subject matter of the contract
- They have to be based on objective and non-discriminatory criteria
- The label itself is established in an open and transparent procedure and accessible to all interested parties
- The label requirements are set by a third party over which no potential bidder has any decisive influence
Rather than apply a label on a broad “all applies” basis, if it’s more proportionate you can detail which label requirements are to be met for your process and so reduce the burden on bidders to meet them. This could expand the number of capable bidders for your process.
Equivalent labels must be accepted, and where the bidder can demonstrate that it has not been possible to obtain either the label or an equivalent through no fault of its own you must accept other appropriate means of proof (e.g. technical dossiers).
Fair Work Practices
You must also consider, before undertaking a procurement exercise, the relevance and proportionality to the contract of Fair Work practices when profiling the commodity/service. Fair Work practices can have a direct impact on the quality of service and, sometimes, of the goods supplied and works performed. You must consider the effect fair work practices will have on the quality of the services and goods to be delivered.
For a relevant contract Purchasing Officers should consider all relevant factors, which may include whether:
- There is any previous experience of poor quality practices, including pay and conditions, impacting on the quality of service to be delivered;
- There is any history of low pay or unequal pay in that sector;
- There is a risk that staff working on the contract might be subject to exploitative practices e.g. through the inappropriate use of zero hours contracts, through unnecessary distancing of the employer-worker relationship e.g. by use of any “umbrella company” and through pay and hours arrangements that deny workers stability of employment or hours of work, e.g. by failing to pay wages for travel time within the working day, such as in the care at home sector; There is evidence that working conditions are making recruitment and retention problematic;
- Contractors are seeking to cut their costs through driving down staff terms and conditions, including pay;
- Workers will be required to interact directly with the Organisation’s employees and/or members of the public and whether they will spend any time on the organisation’s premises.
If the answer to any of the above questions is “yes”, then Fair Work practices are likely to be relevant consideration for the contract in question. However this is not an exhaustive list and other factors may be relevant, depending on the specifics of an individual contract.
Your organisation is responsible for ensuring that, in the performance of the contract, suppliers comply with their obligations in the fields of environmental, social and labour law, therefore robust requirements must be built into your strategy, procurement documents and contract management processes.
You must include in each contract such conditions relating to the performance of the contract (which are linked to the subject matter of the contract) that are reasonably necessary to ensure that the supplier complies with these obligations. These conditions of contract must be indicated in the procurement documents. Further information to consider can be found in Fair Work Practices Considerations.