By Caroline Boot, Clever Buying
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.
Responsible procurement is founded on sustainable principles
A new era of responsible procurement is gaining momentum worldwide. 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. Analysis the scope of sustainable procurement shows theres no one size fits all definition.
How has sustainable procurement evolved?
In the early 2000's, 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. They are now becoming more applicable in New Zealand, as impacts of the TPP trade agreement are under scrutiny.
While Australia currently has slightly less onerous political requirements, the practicalities of balancing local economic and social impacts of procurement decisions against pressure to buy cheap from external suppliers is a struggle for everyone engaged in responsible procurement. 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 versus leveraging cheaper imports) to balancing opportunities for SMEs against larger companies, quota systems for minorities, training and community group involvement.
Implementation is about more than policy and strategy.
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?
A model for sustainable procurement at the coal face
We found that developing a model to meet all of those needs was not only possible, but also empowering. A solution could be developed that would roll out sustainability principles via a structured process comprising challenging questions. These were used to shape the decisions, priority outcomes, and ultimately the processes, weights and questions that ultimately work to select the preferred provider in a competitive market. As a broad outline, here is how the process works: 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.
This story is an excerpt. The original was published in the Nov/Dec 2016 edition of inspire magazine, titled 'Procurement for sustainable outcomes'.
Read the full version here.