The Government’s recent Policy Note on Procurement of Steel for major projects highlights that the Public Contract Regulations (PCRs 2015) which came into force in February allow Public Procurement on the basis of environmental and social criteria, in addition to economic criteria.
The Policy Note specifically mentions “Where relevant and proportionate, in-scope organisations should take full advantage of these new flexibilities when letting major contracts such as construction, or infrastructure. Environmental criteria could include the carbon footprint of construction materials.“
This is an expansion of the text in the PCRs 2015 which states the criteria could include, for example,
“quality, including technical merit, aesthetic and functional characteristics, accessibility, design for all users, social, environmental and innovative characteristics and trading and its conditions“, and that “Award criteria shall be considered to be linked to the subject-matter of the public contract where they relate to the works, supplies or services to be provided under that contract in any respect and at any stage of their life cycle, including factors involved in—
(a) the specific process of production, provision or trading of those works, supplies or services, or
(b) a specific process for another stage of their life cycle, even where those factors do not form part of their material substance.”
Although it has not been common in the UK, in the Netherlands, the Carbon Footprint of all publicly funding infrastructure tenders has been used in Green Public Procurement for several years, with the Government providing a tool, DuboCalc, to undertake the assessments, which are then used to discount the tendered construction cost. For more details, see the European Commission’s Case Study.
PCRs 2015 also states that Contracts shall be awarded on the basis of criteria to the most economically advantageous tender, which can be “identified on the basis of the price or cost, using a cost-effectiveness approach, such as life-cycle costing in accordance with regulation 68, and may include the best price-quality ratio, which shall be assessed on the basis of criteria, such as qualitative, environmental and/or social aspects, linked to the subject-matter of the public contract in question.”
Specifically, with regard to life-cycle costing, Regulation 68 allows the inclusion into the life-cycle costing of “(1)(b) costs imputed to environmental externalities linked to the product, service or works during its life cycle, provided their monetary value can be determined and verified. (2) The costs mentioned in paragraph (1)(b) may include the cost of emissions of greenhouse gases and of other pollutant emissions and other climate change mitigation costs.”
Trucost NCA, which is integrated into GaBi, is a way of measuring these externalities by converting the LCIA impacts associated with a product to the cost using the principles of Natural Capital Accounting (NCA) – the cost reflects the damage each environmental impact causes and the consequential costs borne by society. In the Netherlands, again, the Government, and hence tools like BREEAM NL, use a shadow pricing approach based on costs of mitigation to convert environmental impacts to economic costs.
It will be interesting to see how public procurement in the UK takes up these opportunities to incorporate environmental aspects into procurement decisions.