Costing the Future

1. Securing Value for Money Through Sustainable Procurement Costing the Future

2. 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

3. 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 Policy Overview

4. 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

5. 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

6. 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

7. Solutions

8. 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

9. 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

10. 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

11. 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.

12. Commissioning Outcomes • Shift from procuring outputs to commissioning outcomes • Identify the need, not the solution, and procure accordingly • MEAT

13. 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.”

14. 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.

15. 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

16. 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

17. 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

18. 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.

19. Sustainable Procurement Principles • Sustainability has to be central to procurement • Sustainability has to be considered early • Celebrate success