APPENDIX SEVEN
Memorandum submitted by the Sustainable
Development Commission
1. The Sustainable Development Commission (SDC)
is the Government's independent advisory body on sustainable development
reporting directly to the Prime Minister and the First Ministers
of the Devolved Administrations. The SDC's mission is to inspire
government, the economy and society to embrace sustainable development
as the central organising principle.
2. Through our work with public bodies—national,
regional and local—we have been made aware of a range of
challenges and opportunities for sustainable procurement. Sustainable
procurement issues touch on all virtually all aspects of our various
work programmes, for example:
— our Healthy Futures work programme
has been engaged in procurement issues in the NHS, particularly
on food and capital spending;
— through our food work programme we
sit on the Public Sector Food Procurement Implementation Group;
and
— through our "inside-track"
involvement in the development of the new UK Sustainable Development
(SD) Strategy, we have been engaged with a number of key stakeholders
in an effort to push forward the sustainable procurement agenda.
3. The SDC held a workshop on Sustainable
Public Procurement at HM Treasury on 13 December 2004. The workshop
attendees were from a range of backgrounds including OGC, HM Treasury,
Local Government and procurement practitioners. A full report
of this seminar is attached as Annex 1. The purpose of the afternoon
was to explore the challenges and opportunities for embedding
sustainable procurement practices at both national and local levels.
The workshop aimed to address the following questions:
— What are the gaps in the business
case for sustainable procurement?
— What are the key institutional barriers
to sustainable procurement?
— What capacity building would be most
useful on sustainable procurement, and for whom?
— What is the impact of efficiency
drives on LA procurement?
4. This SDC workshop at HMT, and subsequent
meetings with Defra, HMT and OGC have highlighted the key barriers
to progress on sustainable public procurement.
CLARITY
5. Sustainable development is a broad and
complex issue for procurers to understand. A strategic approach
is required, and buyers and contract specifiers need clear guidance
on what sustainable procurement entails, and what the priorities
are. To date the focus has tended to be on environmental aspects
and less attention has been paid to promoting and encouraging
the use of social clauses within service contracts, for example
to promote and advance the uptake of local skills training and
jobs within regeneration areas. We believe the OGC could be far
more directional and assertive in promoting what can be achieved
through these approaches that makes the links to the long-term
well-being of communities, and key objectives defined within Community
Strategies.
DEVOLVED DECISION-MAKING
6. There are around 35,000 points of procurement
in England, which are hugely diverse in their knowledge of and
interest in sustainability.
LEADERSHIP
7. At the SDC workshop lack of leadership
was the most frequently identified barrier to achieving sustainable
public procurement. This lack of leadership is found at all levels
of government. Keen interest at the senior management level will
encourage practitioners to procure sustainably, as they will be
delivering on the key objectives. We are hoping therefore that
there will be a serious commitment in the new UK Strategy to improving
sustainable procurement practice across the public sector and
that this will be initiated through departmental SD action plans,
applied to agencies, the central bodies, and extended to local
authorities.
EVALUATION
8. Delivery of SD principles is not part
of the evaluation process at Departmental and LA level. Value
For Money enquiries by the Audit Commission and the National Audit
Office (NAO) do not look at long-term sustainability. Evaluation
by bodies such as the NAO, Audit Commission (AC), and the Healthcare
Commission (HC), should embed sustainable procurement approaches,
especially whole life costing and creative approaches to best
value, into their performance assessment tools (such as the AC's
Comprehensive Performance Assessment or the HC's Assessment for
Improvement) and be linked with relevant indicators.
CAPITAL SPEND
VERSUS RUNNING
COST SAVINGS
9. One of the big barriers to sustainable
procurement is that capital cost is spent one year, but running
cost savings are seen for several years, depending on the product.
This makes accounting difficult as HM Treasury public sector accounting
rules preclude a Department gaining any real benefits from the
ongoing revenue savings. This is why there is a clear need for
an "Invest to Save" initiative across the public sector.
Such an initiative has already been started by the Carbon Trust
to enable major local authorities to benefit from such a scheme.
It is working very successfully and should be examined to see
how it could be replicated elsewhere.
10. If such a scheme is developed it would
enable incentives to be put in place to credit procurers with
making sustainable investments, if this was thought necessary.
EDUCATION AND
TRAINING
11. Sustainable Development is a wide and
complex issue and there is concern that there is a lack of technical
knowledge and know-how at lower levels of procurement practitioners,
which is hampering efforts to improve procurement. Although a
broad interpretation of SD is useful for politicians, procurement
practitioners are often confused about which SD policies should
be prioritised. They can also feel confused by numerous, and sometimes
contradictory, policy initiatives coming from departments.
12. To address the lack of technical knowledge
and know-how amongst procurement teams, specifiers, and buyers,
and among many other professionals within organisations who have
client commissioning roles, SD guidance should be embedded in
public sector training programmes. These should be designed also
with Local Strategic Partnerships in mind. This should facilitate
more collaborative purchasing across the public sector—for
example LAs with Primary Care Trusts—and advance opportunities
for partnering to "grow the market" and develop a mixed
economy.
OGC AND DEPARTMENTS
13. The OGC currently has no "customer
focus"—its role covers purely legal and process issues,
whilst the range of sustainability policies relevant to procurement
come directly from Departments (timber, energy efficiency, racial
equality, fair-trade, etc). This diversity of policy sources contributes
to the perception of large numbers of conflicting policies. This
problem is exacerbated by the fact there is still no centralised
advice service for all public sector professionals involved in
procurement.
14. Therefore the SDC is offering to work
with OGC to ensure that procurers know what to do and where to
obtain further advice beyond the simplified guidance. We believe
OGC's remit should be expanded to include an in-house advice service
on sustainable procurement, creating a one-stop shop for procurement
professionals. This centralised advice and particularly, technical
"know-how" service would, at the same time, make it
easier for Government to prioritise particular issues.
GOOD PRACTICE
15. Despite the problems outlined above
there are already many good examples of sustainable procurement
across the public sector, including in PFI contracts. Defra, for
example, collects good practice food procurement case studies
on its Public Sector Food Procurement Initiative web pages[3]
Good practice examples and case studies should be collated and
published on a central sustainable procurement website as a complementary
tool to the centralised advice service.
REGIONS
16. Regional government machinery should
recognise that sustainable procurement is a route to small business
development, to local enterprise creation and to skills training.
These should be part of a duty on the regional approach to SD.
17. There should be a much clearer role
for the Regional Centres of Excellence to be beacons of sustainable
procurement best practice. To this effect, each Centre should
have a duty to promote and advance sustainable procurement, supported
by an explicit 17 requirement that each Centre of Excellence should
consider sustainable procurement within their terms of reference
and that this should be evidenced within their evolving business
plans.
18. We understand that OGC have informally
assigned the North-West's Centre as the key procurement champion
for sustainable development issues to help lead and disseminate
good practice to all the other centres. We would like OGC to clarify
these plans. Ideally, each and every Centre could lead, and act
as innovative best practice models, on specific SD themes, while
at the same time embedding overall sustainability requirements
throughout their activity and advice on procurement practice.
19. It is unclear at present how LAs will
be supported in achieving sustainable procurement objectives.
To this end, Regional Centres of Excellence should have a key
role in providing support and advice to LAs to ensure Gershon
efficiency initiatives are compatible with SD (see below).
THE GERSHON
REVIEW
20. There is concern that the focus on efficiency
savings as initiated by the Gershon review is stifling decision-making
and innovation by procurement practitioners to support the principles
of SD. The Gershon efficiency drive appears to simplify buyers'
decisions, making the sustainable development agenda even less
attractive.
21. Gershon and SD are not necessarily incompatible,
although they are often perceived that way. As a result, the Gershon
efficiency drive needs to be carefully managed and monitored—with
Whole Life Costing an important element—to ensure that SD
is not the loser.
22. Concern over how Gershon is interpreted
runs to Ministerial level. It is worth noting Lord Whitty's comments
in his letter of December to LAs and LEAs inviting delegates to
the regional training workshops[4]
"I should also be grateful if you would
arrange for the message on the Gershon Efficiency Review at Appendix
B from Martin Sykes—OGC's Executive Director of the Supplier
and Government Marketplace—to be disseminated among your
authority's procurement officers. He states that efficiency does
not signal a return to mindless aggregation and lowest price as
the basis for decision-making and that buyers need to harness
public sector spending power to support delivery of sustainability
objectives.
He continues . . . "Of particular concern
is evidence that some public sector bodies are implementing the
Review by cutting the cost of their procurement without properly
weighing up the affect on other operations within their organisations
from the public sector as a whole. For example, cutting budgets
for the procurement of food and catering where this results in
the provision of less healthy and nutritious food can result in
more spending by the NHS on obesity and heart disease etc. That's
not realising long-term benefits."
23. Best practice examples must therefore
be focused on illustrating how to squeeze out costs without ignoring
SD initiatives. In this drive for rationalisation of the supply
chain to achieve greater efficiencies, many Local Authorities,
who already source from the same big suppliers for equipment and
services such as IT, could achieve greater economies of scale
through greater cooperation on some areas of procurement. Significantly,
this can easily be done without damage to the SME sector; ODPM's
NAPP project provided compelling evidence that clearly demonstrated
the high vulnerability that many of SMEs face from supply chain
rationalisation.
NATIONAL PROCUREMENT
STRATEGY (NPS) FOR
LOCAL AUTHORITIES
24. The NPS contains a whole series of milestones
to be achieved (first set by 2004). One is the expectation that
"all LAs should have embedded sustainability into their procurement
practices by 2004".
25. Our belief is that some of the more
basic milestones have not yet been achieved, such as, "every
council should publish a selling to the council guide" .
. . We recommend the need for a thorough audit of the NPS milestones.
The key milestones should be factored into Comprehensive Performance
Assessment particularly to the "Use of Resources" lines
of enquiry linked to Value for Money.
SPECIFICATION
26. There is a need for procurement specifications
to take account of the long-term SD view so that they encourage
sustainable solutions. At the same time, it is important not to
over-specify so that innovation is stifled.
E-PROCUREMENT
27. The internet provides many opportunities
for improving procurement. One suggestion is to create some sort
of public sector "e-bay" website of equipment such as
office equipment, IT, etc which would make it quicker and easier
for procurers to source second hand goods. A potential model is
"eDisposals", the website (www.edisposals.com) of the
Disposals Services Agency which seeks markets for used British
defence equipment.
28. In Wales, the Welsh Development Agency
and the Welsh Assembly Government have developed an initiative
called Sell2Wales which aims to help small and medium companies
work successfully with public sector clients. The website provides
a central point for public sector organisations to advertise tender
contracts. Businesses register online and then receive personalised
emails introducing them to opportunities that match their profile.
This is an interesting initiative, and depending on its success,
might be relevant for replication elsewhere.
29. Increases in e-procurement need to be
accompanied by effective support and development for SMEs to "e-enable"
them. Unless specific up-skilling can be provided, eg IT development
courses to improve their awareness of opportunities and accessibility
to bid for contracts, SMEs will be seriously disadvantaged by
e-procurement advancements. "E-enabling" should be a
priority at all levels of government.
Annex A
Sustainable Development Commission/HM
Treasury Workshop on Sustainable Public Procurement—a £110
billion nirvana?
WORKSHOP NOTES
CONTEXT AND
PURPOSE
This is a summary of the SDC workshop held on
Sustainable Public Procurement on 13 December 2004. Chatham House
rules applied to the discussion sessions. The workshop agenda
(Appendix A) [not printed] and the attendees list (Appendix B)
[not printed] can be found at the end of this paper.
The purpose of the afternoon was to explore
the challenges and opportunities for embedding sustainable procurement
practices at both national and local levels. The key questions
posed were:
— What are the gaps in the business
case for sustainable procurement?
— What are the key institutional barriers
to sustainable procurement?
— What capacity building would be most
useful on sustainable procurement, and for whom?
— What is the impact of efficiency
drives on LA procurement?
PRESENTATIONS
Rebecca Lawrence from the EFRA Team in HM Treasury
welcomed the participants. The opening session was chaired Professor
Tim Jackson from the Sustainable Development Commission (SDC).
Presentations were delivered on four key topics:
1. Public procurement and SD—Why does
it matter?
Professor Tim Jackson, SDC Economics Chair
Professor Tim Jackson defined sustainable procurement
as buying products and services that bring long-term benefits
for the three key areas of sustainable development (SD):
1. Economic (such as sourcing from the SME
sector and supporting local economies).
2. Social (job creation, promoting equality
and health).
3. Environmental (minimising resource usage—for
example energy and water efficiency).
With the annual spend on public procurement
up to £140 billion, the potential for market transformation
is huge if public money is channelled to better support more sustainable
products, services and solutions. Sustainable procurement has
considerable implications for the future of the UK economy, building
up innovation and knowledge to achieve global leadership in sustainability.
He noted that for this goal to become a political
reality there remain many obstacles, but that the development
of the Government's new SD Strategy gave the opportunity to explore
solutions and get cross government commitment to the issue. The
two areas that need most work are:
— Influencing and educating public
buyers so that purchasing decisions are more supportive of sustainable
development.
— Ensuring the Gershon efficiency drive
does not negatively impact on sustainable procurement initiatives.
2. OGC Buying—the constraints and challenges
Dr Clare Poulter, Deputy Chief Executive, OGCbuying.solutions
Powerpoint presentation (not attached).
3. Procurement in Practice—a Home Office
perspective
Dave Dorrington, NASS VS Contract Manager, Home
Office
Powerpoint presentation (not attached).
4. Impact of Efficiency Drives on LA Procurement
Nicol Thornton, Assistant Procurement Director,
Suffolk CC
Two years ago, Suffolk CC examined their procurement
practices taking into account sustainability issues. Problem:
1. People think that sustainable development
means environmental issues only, but the issues run much wider,
such as supporting Suffolk SMEs.
2. Gershon Review: has lead to eyes being
taken off the sustainability ball. It is too early to tell what
effect this will have. There is concern that this will be interpreted
as needing to buy things cheaper, but which may lead to greater
resource use (less efficient over the lifetime).
There are three large areas of concern:
Nicol concluded that the impact of efficiency
drives on LA sustainable procurement presents a "greyish"
picture.
BREAK-OUT
DISCUSSION
The workshop worked in five small groups, each
of which answered and reported back on one of the following three
questions:
1. What are the gaps in the business case
for sustainable procurement?
1 (a) What buzzwords/simple phrases
explain "what is the business case for sustainable procurement"?
Whole-life costing/Market leader/Quality
of life/UK Plc success—regeneration/Good Corporate Citizenship:
image, social development, community leadership/Environmentally
sound/Minimise and avoid risk/Political imperative/Challenge the
need to procure.
1 (b) What are the key gaps in the business
case?
— Lack of "carrots and sticks"
(CPA, targets, priorities).
— Perverse disincentives (cheap utilities;
"short-termism"; annual budget straightjackets; PFI—build
cheap, run expensive).
— Lack of expertise/knowledge (even
on simple things like purchase "low-waste" products).
— SD is too big—where do you
start?
— Culture of risk aversion.
— Lack of sign-up from leadership of
organisations (linked to first two bullets).
2. What are the key institutional barriers
to sustainable procurement?
2 (a) Come up with buzzwords/simple
phrases on what you think are the barriers:
— Devolved decision-making and responsibilities.
— Procurement is not integrated/owned
across organisation—and not top of agenda: regarded as "someone
else's problem".
— Lack of leadership, both organisational
and political.
— Scale and complexity—difficult
to know what the priorities are. At present, there are conflicting
messages and initiatives—policy not sufficiently clear.
— Seeking short term benefits—Whole
Life Costing not used (and there is a lack of knowledge on how
to use it).
— Lack of understanding of issues by
front line procurers/users/specifiers.
— Not sufficient encouragement for
suppliers to innovate—traditional/historic procurement process—does
not encourage thinking "outside the box".
— Incentive systems (through definitions
and measurability).
— Resource infrastructure eg recycling.
— Specifications—optimum use
procurement of process/stages.
— Failure to learn from good practice.
2 (b) What are the key barriers (answered
by two groups)?
1. Lack of accountability and ownership at
all levels, not just procurement practitioners.
2. Short-termism—objectives, goals,
targets.
3. Lack of leadership and clear policy (nationally
and locally)—lack of "thinking outside the box":
1. lack of leadership;
2. lack of definition and measurements;
3. lack of incentive systems (sticks and carrots);
and
4. lack of learning from the field.
3. What capacity-building (guidance, hand-holding,
advice, etc) would be most useful on sustainable procurement and
for whom?
3 (a) Give examples of what capacity-building
already exists:
— ENV (G)—Ministers should push
agenda at a higher level.
— Sustainable Procurement Group—'Quick
Wins'.
— Defra/OGC "Joint Note on Environmental
Issues in Purchasing".
— EC interpretative documents (and
green handbook).
— "Sustainable Development In
Government" website[5]
— OGC/HO guidance on voluntary sector—"Think
smart . . . think voluntary sector".
— Chapter 22 of Government Accounting.
— Guidance on PFI (OGC/HMT) eg "A
step-by-step guide to the PFI procurement process".
— Public Sector Food Procurement Initiative
(Defra)[6]
— Central Point of Expertise on Timber
(Defra).
— Waste Resources and Action Programme
(WRAP) guidance.
— Improvement and Development Agency
(IdeA) guidance.
— National Procurement Strategy for
Local Government (ODPM)[7]
— Carbon Trust/Energy Savings Trust
support.
— The Chartered Institute of Purchasing
and Supply.
— Haringey Borough Council—"Trade
Local".
— Groundwork—NHS Suppliers Bureau.
— Forum for the Future's "Sustainable
Procurement Tool".
— Welsh Procurement Initiative Assessment
Tool.
3 (b) What are the most useful—you
may want to add new ideas (answered by two groups)?
— Political drive and leadership.
— Crystalising SD priorities to make
it easily understood.
— Incentives and objectives.
— No more general guidance.
— Collaborating on specification for
products and services.
— Guidance for Chief Officers and Audit
Commission on interpretation.
— Good practice and pilot projects.
— Need for more interpretation—working
together, measuring nationally.
RIGHT OF
REPLY PANEL
DISCUSSION
Panel members Jill Rutter (Defra), Martin Sykes
(OGC), Jeremy Skinner (HMT) and Gordon Murray (IdeA) replied to
comments and questions from the floor. The session was chaired
by Anna Coote, SDC. The main points from the discussion are summarised
below:
Clarity
— SD is an all-embracing concept and
this leads to tensions about priorities for sustainable procurement.
Too many procurers are still unclear about what sustainable procurement
is. There is a need to be more strategic and clearly define SD
priorities for procurement.
Leadership
— During the break-out session, lack
of leadership had been the most frequently identified barrier
to achieving sustainable public procurement.
— The priorities for sustainable procurement
should be backed up by strong leadership to encourage others to
deliver them.
— Sustainable procurement can help
deliver other Government policy priorities. The UK Government
is taking a lead on climate change and could exploit this by setting
a new target for LA Chief Executives and elected members to help
deliver the target through sustainable procurement.
— NAO has just completed research into
"diversity" in public services. There had been a similar
lack of leadership and interest in central Government tackling
diversity, as now exists for SD. The key could be to create a
"civil service champions network" that includes some
Permanent Secs. The Cabinet Office and the Council of Civil Service
Unions could play a major role to empower staff at all levels
on SD.
Ownership and co-ordination
— There are over 35,000 procurement
centres, which are hugely diverse, and whose understanding ranges
from nothing to a good understanding of some SD issues. It is
rare to find one that understands all elements of SD.
— One panel member stressed the importance
of sustainable procurement being owned across the public sector,
to avoid Defra having to be the driving force.
— There should be a cross-departmental
"Invest to Save" fund. Sustainable procurement initiatives
can be more expensive in the short term or often the benefit does
not fall to the procuring department's budget. Departments would
be able to apply to the fund to pay for the extra short term costs
and pay into the fund as long-term benefits accrue (this could
equally apply to the wider public sector).
— There needs to be better central-regional
co-ordination. The Sustainable Development Unit (SDU) in Defra
and ODPM need to work with the Centres of Excellence to develop
best practice. Potentially each Centre could lead on specific
SD themes and be responsible for disseminating best practice.
— At the local level, the Association
of London Governments, which accounts for £9 billion of the
total public sector's estimated £110 billion spend, has identified
that 33 councils spend 50% of their budget on the same suppliers;
substantial savings could be made by pooling their buying needs,
but without negatively impacting on SMEs.
Gershon Efficiency Review
— The Efficiency Review provides opportunities
but it must not underestimate the complexity of the buyer marketplace.
— SD and the Efficiency Review are
not incompatible; efficiency and SD should both be welcomed.
— Measuring the success of Gershon
needs to be defined at national level, including valuing efficiency
gains in terms compatible with SD.
— It is important to ensure that pursuing
SD and Gershon does not impose prohibitive costs on SMEs by making
compliance to procurement requirements prohibitively expensive.
Capacity-building
— A public sector version of "e-bay",
for office equipment, IT etc could be helpful.
— The processes for procuring effectively,
such as the OGC Gateway Review Process and effective Local Government
scrutiny, are good but are not yet well used.
Guidance
— A key issue for Local Authorities
is the need for technical guidance. IDeA don't currently provide
technical support but think there is a great need for it.
— Making procurement requirements overly
detailed can reduce the scope for innovation, but specifying minimum
standards to be achieved gives clear guidance, above which companies
can improve their products and services.
— The Green Alliance's study on PFI—PFI:
Meeting the sustainability challenge—has been successful
in raising the issues.
Comprehensive performance assessment (CPA)
— CPA 2005: there is scope to look
at the "use of resources" assessment questions to see
how sustainability could be woven through the achievement.
— A CPA performance indicator would
be a serious motivator for Las to deliver on this agenda.
— There are practical examples of how
encourage LAs to buy sustainably eg the Carbon Trust LA finance
incentive loan fund for energy efficiency measures. This could
be developed into a bigger scheme.
— Also at the local level, there is
a need for sustainability gains to reward those who identify solutions
eg if whole LSPs can become procurement entities, the potential
savings could be captured and divided up. Innovative procurers
could be rewarded through sustainable procurement performance-related
pay.
11 February 2005
3 http://www.defra.gov.uk/farm/sustain/procurement/casestudies/index.htm. Back
4
http://www.defra.gov.uk/farm/sustain/procurement/pdf/lwhitty-laletter.pdf. Back
5
http://www.sustainable-development.gov.uk/sdig/improving/. Back
6
http://www.defra.gov.uk/farm/sustain/procurement/index.htm. Back
7
http://www.odpm.gov.uk/stellent/groups/odpm_localgov/documents/divisionhomepage/029685.hcsp. Back
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