HM Treasury and the Department of the Environment,
Transport and the Regions have issued the following
to provide guidance to Government departments, including
their Executive Agencies and NDPBs, on considering
environmental issues in purchasing. It provides potential
suppliers with a better understanding of how environmental
issues are to be dealt with in Government Procurement.
Part I - Environmental
Issues in Purchasing
- A Policy Statement
Procurement
policy <Top>
All public procurement of goods and services, including
works, is to be based on value for money (VFM), having
due regard to propriety and regularity. VFM in procurement
is defined as "the optimum combination of whole-life
cost and quality (or fitness for purpose) to meet
the customer's requirement". The policy is set
out in guidelines which are available on the Treasury
website:
http://www.hm-treasury.gov.uk/guid.html
The emphasis on whole-life costs means that departments
are required to take account of all aspects of cost,
including running and disposal costs, as well as the
initial purchase price. The reference to "quality
to meet the customer's requirement" enables departments
to specify what they need to meet their own operational
and policy objectives while contributing to the Government's
objectives on environmental matters. Departments must,
of course, satisfy themselves that specifications
are justifiable in terms of need,
cost effectiveness and affordability.
Environmental
policy <Top>
The 1990 White Paper This Common Inheritance
committed each department to have a strategy in place
for greening their operations. This should be adapted,
to meet each department's circumstances, from the
Government's model framework for greening operations
which was approved by Green Ministers in May 1998,
a copy of which is on DETR's website:
http://www.environment.detr.gov.uk/greening/gghome.htm
Among the model's key aims are:
· conserving energy, water, wood, paper and
other resources, particularly those which are scarce
or non-renewable
- while still providing a safe and comfortable working
environment;
· reducing waste through re-use and recycling
and by using refurbished and recycled products and
materials where such alternatives are available;
· monitoring discharges and emissions to air,
land and water to assess what action is necessary
to reduce pollution or the risk of pollution;
· phasing out ozone-depleting substances and
minimising the release of greenhouse gases, volatile
organic compounds, vehicle emissions and other substances
damaging to health and the environment;
· encouraging manufacturers, suppliers and contractors
through specifications to develop environmentally
preferable goods and services at competitive prices;
· ensuring that any products derived from wildlife
such as timber, plants and leather goods are from
sustainable sources, and complying with EC and international
trading rules such as CITES (the Convention in International
Trade in Endangered Species);
· working with contractors to improve environmental
performance where this is relevant to the contract
and to the achievement of value for money; and
· meeting all relevant current and foreseen
statutory regulations and official codes of practice
and specifying contractors to do the same when working
on departmental premises.
Environmentally
sensitive procurement <Top>
Drawing up specifications based on these criteria
can contribute significantly to the achievement of
Government targets for reducing the environmental
impact of its activities. Although the aim must be
to achieve value for money, not to further other policy
aims, it should not be overlooked that legitimate
requirements laid down by Government purchasers can
have an influence in assisting the development and
use of goods and services which are less harmful to
the environment.
The
EC Procurement Rules <Top>
Departments and other contracting authorities are
required to comply with the EC Procurement Directives
and the UK Regulations which implement them. These
apply to most contracts whose estimated value equals
or exceeds specified thresholds.
They are also required to comply with the Treaty
of Rome (for example, on the free movement of goods
and services and non-discrimination on grounds of
nationality).
The main ways in which these rules affect environmental
considerations within the procurement process are:
(a) specifications - contracting authorities are
free under the rules to specify their requirements
in green terms. For example, departments may specify
that a product should be made out of materials which
are or could be recycled or that particular materials,
such as ozone-depleting substances, should not be
used in the product. This is subject to the general
rule that specifications must be drawn up in a manner
which does not discriminate against products or providers
from other Member States and which is, where applicable,
consistent with the provisions in the Directives on
technical specifications and the use of standards;
(b) selection of tenderers - the Regulations set
out detailed criteria for the selection of tenderers
based on evidence of their personal position, their
economic and financial standing, their technical capacity
and, for services, also their ability. The nature
of the evidence that may be requested with regard
to technical capacity is exhaustive, so evidence on
other factors may not be taken into account. In particular,
questions about providers' general policies (e.g.
on environmental issues) are not permitted. Purchasers
are allowed to reject candidates who have been convicted
of a criminal offence or who have committed an act
of grave misconduct in the course of their business
where they consider rejection to be justified. This
may include infringement of environmental legislation/regulations.
However care should be taken to ensure that decisions
to reject providers are proportionate to the offence
and that the provider is given an opportunity to describe
any steps they might have taken to prevent recurrence.
Care should also be taken to ensure that providers
are treated equally;
(c) award of contract - only two criteria are permitted
- either various criteria including whole-life costs
for determining which offer is "the most economically
advantageous" to the purchaser (i.e. best value
for money) or "lowest price" alone; and
(d) contract conditions - as a matter of
Community law, purchasers can attach conditions to
the award of contracts provided these conditions are
compatible with the Treaty of Rome. In brief, this
means that the conditions must be equally capable
of being met by providers in all Member States. However,
the UK's domestic policy of not using procurement
to achieve other policy ends limits the extent to
which departments may have recourse to "contract
compliance" - as the imposition of contractual
conditions is commonly known. An example of an acceptable
contract condition might be "while working on
the department's premises the contractor will comply
as far as possible with the department's
green strategy".
Specifying
Requirements <Top>
The procurement process will normally start with
the definition of the business need by the end-user.
From this, a user requirement or specification will
be drawn up. In preparing the specification the end-user
should decide the extent to which it should cover
environmental requirements.
These should take account of:
a. the Government's environmental policies and the
department's own strategy for greening its operations;
b. the resources available to the department;
c. the requirement to achieve value for money (see
below); and
d. the EC Procurement Directives and the Treaty as
appropriate.
Procuring
Goods and Services <Top>
The departmental purchaser's role is to respond to
the end-user's needs in the normal way. The purchaser
will need:
a. to be fully aware of the department's environmental
strategy;
b. to be able to challenge a specification to ensure
that full account is taken of the purchaser's knowledge
of the market and professional skills and experience;
c. to ensure that where the EC procurement directives
apply, they are followed appropriately - e.g. in framing
the specification, in selecting tenders and in awarding
contracts; and
d. to ensure that the requirements of the Treaty
of Rome are complied with.
Accountability
<Top>
The Accounting Officer is accountable to Parliament
through the Public Accounts Committee for the department's
decisions on purchasing and the expenditure arising
from them, and will need to be able to demonstrate
that value for money has been obtained. The Minister
in charge of each department is also accountable to
Parliament for the department's strategy for greening
government operations including taking account of
environmental factors in purchasing. (In practice,
the department's Green Minister, where
different, will normally answer on these matters.)
Value
for Money <Top>
Examples of the factors which need to be considered
in assessing
whole-life costs include:
· running costs, such as the energy or water
consumed by the product over its lifetime;
· indirect costs, e.g. less energy-efficient
IT equipment will produce more heat causing the plant
in air-conditioned buildings to work harder to remove
it, so adding to the electricity bill;
· administrative costs, e.g. the use of a more
expensive product which is less harmful to the environment
may reduce the time spent by staff in complying with
the Control of Substances Hazardous to Health (COSHH)
Regulations;
· investing to save revenue costs ("spend
to save" measures)
e.g. specifying higher levels of insulation where
the extra expenditure can be recouped from lower energy
costs;
· not generally insisting on new items when
refurbished parts or products could be used;
· recyclability, e.g. purchasers can create
markets for their own waste such as paper, toner cartridges,
etc, by buying products containing recycled materials;
furthermore, a recycled product, e.g. a refurbished
toner cartridge, may cost less than a new one. Purchasers
should, however, look to waste reduction and re-use
as well as recycling (see below);
· the cost of disposal arrangements, e.g. it
may be worth paying a premium to a supplier giving
an undertaking to remove a product
or a hazardous substance at the end of its useful
life.
Departments should also consider risk factors, for
example:
· Management (under Section 4 of the Environment
Protection Act 1990) e.g. by choosing benign rather
than hazardous materials; and
· the risk of investing in redundant plant and
equipment as increasingly stringent environmental
standards are imposed through EU and UK legislation,
allied to increasingly vigilant enforcement.
Buying green may often cost less, taking proper account
of factors such as these. However, cases may arise
where the specification of a particular environmental
requirement results in higher costs which will not
be offset by savings over the longer term. Departments
are accountable for their expenditure and, therefore,
will need to determine whether the extra cost is justified.
The justification may be that Ministers have decided
collectively as a matter of policy that the Government
should not buy a particular substance or material
on the grounds that it is harmful to the environment.
Otherwise, it will be for the purchasing department
to judge whether the premium is justified after taking
into account the department's own policy statement
on greening operations. In formulating such requirements
it will, of course, be necessary to strike a proper
balance between the costs of the requirement to the
taxpayer and the environmental benefits. However,
that is a matter of prudent financial management generally
rather than specifically one of procurement policy.
At the tender evaluation stage the costs and benefits
of the competing bids should be evaluated in the normal
way to establish which of the bids meeting the specification
offers the best value for money. The contract should
be awarded accordingly.
Departments should not seek to use their purchasing
power as a means of pursuing wider environmental ends
(i.e. those outside the scope of the contract). For
example, while a department is free to specify paper
made out of recycled materials, it should not limit
its field of selection to providers who only supply
recycled paper. The unwarranted rejection of suppliers
capable of meeting the specification could lead to
both a loss of value for money and a breach of the
EC rules.
The award of contracts should not be made subject
to criteria or conditions of an environmental nature
which are not directly relevant to the product or
service which is being procured. However, departments
will need to ensure that they discharge their statutory
obligations, for example under the
"Duty of Care "(see below).
Other Issues
Substantiating
environmental claims <Top>
Purchasers should be wary of unsubstantiated claims
and environmental marks which have no formal recognition.
Some typical phrases are:
· "environmentally friendly" - meaningless
if unexplained;
· "comes from managed forests" - virtually
all forests used for
paper-making are managed, but some are managed in
ways that are strongly criticised by environmentalists;
and
· "kinder to wildlife" - again, meaningless
if unexplained.
Further guidance on these issues is given in the
Government's Green Claims Code.
Environmental
management schemes <Top>
Formal standards for environmental management systems
are now in place which assure purchasers that suppliers
are operating to control their environmental impacts.
Companies can obtain certification for their environmental
management systems under ISO 14001 or the Eco-Management
and Audit Scheme (EMAS). More information on both
schemes but particularly on ISO 14001 is given in
DETR's guide to Implementing Environmental Management
Systems in Government.
EMAS and ISO 14001 are voluntary schemes promoted
by the Government. However, it is not the Government's
policy to require its suppliers to comply with them
as a condition of selection to tender or award of
contract as such a condition could lead to higher
prices by restricting those eligible to compete for
orders and contracts and could conflict with the EC
rules on selecting providers. It is, however, permissible
to ask suppliers to provide evidence that they are
able to operate an environmental management scheme
where it is relevant to the contract, e.g. for the
provision of a facilities management service in an
organisation accredited to or seeking accreditation
to ISO 14001.
Part
II - DETR Procurement and the Environmental Agenda
<Top>
The following introduces revised procedures which
all those involved in a procurement (i.e. those in
the originating Business Unit as well as the procurement
staff) must follow to achieve the aims and objectives
of the Department's greening operations policy statement.
A copy can be found at the Department of the Environment,
Transport and the Regions (DETR)
website: http://www.environment.detr.gov.uk/greening/policy99/index.htm
Background
<Top>
The environmental agenda is becoming increasingly
important. DETR's Green Minister, currently Beverley
Hughes, is accountable for our actions to the Environmental
Audit Committee - a select committee set up by Parliament
to scrutinise the Government's environmental performance.
More information on the role of Green Ministers is
given on DETR's
website: http://www.environment.detr.gov.uk/greening/minister
/grmin.htm
DETR is leading the drive within Government to green
government operations, policies and programmes. Good
progress has been made
- particularly in procurement. The procurement framework
and the need to achieve greening government objectives
are compatible. For example, reduced greenhouse gas
emissions, waste minimisation and water conservation
can be achieved by specifying:
· Energy-efficient IT equipment which helps
to reduce CO2 emissions;
· Presence detectors for controlling lighting
in offices;
· Environmentally preferable refrigerants to
reduce ozone depletion and global warming;
· Recycled paper to reduce the impact on landfill;
· Low-flush toilets for conserving water; and
· Packaging to be reduced or returned.
The Government's procurement policy is based on value
for money, which is defined as "the optimum combination
of whole-life cost and quality (or fitness for purpose)
to meet the user's requirement".
DETR and Treasury have agreed and issued a joint
note on Environmental Issues in Purchasing
(http://www.hm-treasury.gov.uk/docs/1999/envte2.html)
which addresses how environmental issues can be taken
into account consistent with public procurement policy
and the regulatory framework.
DETR's Sustainable Development Unit (SDU) and the
Purchasing Policy and Advice Division (PPAD) have
issued guidance to help buyers "buy green",
including a Green Guide for Buyers. These are
on the green procurement pages of DETR's website
(http://www.environment.detr.gov.uk/greening/greenpro/greenpro.htm).
PPAD has produced other useful tools including:
· a standard contract condition;
· a model statement in the Invitation to Tender
letter; and
· a requirement to comply with the Green
Claims Code in the Instructions for Tenderers.
A survey conducted by PPAD showed that, where green
issues were clearly identified, action was properly
taken within the tender process to both maximise positive
environmental impacts and minimise adverse environmental
impacts. However, where the issues were not so clear,
green implications did not seem to have been addressed
to any significant extent.
So whilst we have a good overall policy there is
potential for improvement in its practical delivery.
As the lead department in this area we should ensure
that environmental issues are considered in all buying
decisions, not just the obvious ones.
There are similar issues with the environmental impacts
of policies and programmes. These include consideration
of whether natural resources will be consumed, waste
or pollution produced or an adverse contribution towards
climate change made. The booklet Policy Appraisal
and the Environment explains these issues nd
can be found on the DETR website (http://www.environment.detr.gov.uk/appraisal/index.htm).
Lifecycle
assessment and ecolabelling
<Top>
Few organisations can afford to conduct detailed
lifecycle (or whole-life) assessments on all their
products because of the technical expertise and resources
required to produce meaningful results. This is where
the EC ecolabelling scheme can help. It provides rigorous
standards for certain product groups which are based
on a full analysis of lifecycle impacts and agreed
at European level. However, the scheme is voluntary
and therefore it does not follow that ecolabelled
products necessarily perform better in environmental
terms than non-ecolabelled products. Accordingly,
invitations to tender and contract documents should
not require products to carry the label or any other
non-mandatory label. However, the ecolabel criteria
may be used to identify environmentally preferable
products and to improve the specification for products
and services.
Energy
labelling schemes <Top>
Purchasers who wish to identify products in the most
energy efficient categories should use the European
Union's mandatory energy labelling scheme.
Waste
minimisation strategy
<Top>
The aim of the strategy, set out in the Government's
consultation paper Less Waste More Value, is
to reduce the amount of waste produced. Failing that,
value should be recovered from the waste and only
if that is not an efficient solution should the waste
be disposed of by means which minimise risk to the
environment and to human health.
The options for waste management are ranked by merit
of their relative benefits:
a. reduce;
b. reuse;
c. recover (i.e. recycling, composting and energy
recovery); and
d. dispose.
Purchasers should focus their attention on the top
of the hierarchy when making their purchasing decisions.
For example, which products are likely to cause the
least waste? Which can be re-used? Or, which can be
recycled? Making the right decision - taking into
account VFM - can help departments meet their targets
for reducing waste.
Duty
of care - waste disposal
<Top>
Departments are reminded of their responsibilities
under Section 34 of
Part II of the Environmental Protection Act 1990,
which places a Duty of Care on anyone who produces
or holds controlled waste.
Producer
responsibility initiative for packaging waste <Top>
Purchasers should buy recycled products in support
of this initiative wherever they provide VFM. The
initiative is designed to put an increased share of
responsibility on suppliers to make productive use
of the materials in their products (and the packaging
around them) once they have served their original
purpose. The aim is to reduce packaging, and create
markets for recycled materials by making greater use
of them in packaging and products.
Receipt
from sales <Top>
Departments may enter into contracts with companies
which re-use or recycle waste, provided they follow
Government rules on the treatment of receipts.
Further
guidance <Top>
Further information may be obtained from the following
websites:
DETR, for the model framework for greening government
operations: http://www.environment.detr.gov.uk/greening
HM Treasury for general procurement policy and practice
guidance:
http://www.hm-treasury.gov.uk/guid.html
Enquiries should be addressed to:
Mike Davis, PPU, HM Treasury, tel: 0171 (GTN) 270
1551 (fax 1653),
email: mike.davis@hm-treasury.gov.uk
or
Mike Acheson, DETR, tel: 0171 (GTN) 3533 3067 (fax
3059),
email: mike_acheson@detr.gov.uk
The thresholds are reviewed at least every two years
and are notified to departments separately.
Business
Case and the Invitation to Tender <Top>
The procurement officer must "think green -
buy green". But responsibility for putting into
practice the department's corporate policies for greening
its operations also rests with the user. Departmental
policy must therefore inform the business case for
each procurement. The procurement officer should work
with the user to develop the business case before
the requirement is finalised.
The business case must address green issues and identify
whether there is scope to improve the environmental
impact of the proposed contract. The key principles
are "reduce, reuse, recycle and rethink"
including thinking about whole-life costs. More details
can be found in the Green Guide for Buyers.
The early consideration of green issues with its
emphasis on whole-life costs may result in a different
requirement providing better value for money. Whether
it does or not, the optional model clause in the Invitation
to Tender letter, asking tenderers to identify environmental
impacts and how they propose to minimise them, should
now always be used. This will allow a wider consideration
of the issues during the evaluation of tenders and
may result in new ideas. The invitation should also
state the general award criteria, which should include
environmental issues as shown below. Highlighting
this requirement as part of the contract award criteria
should also help to raise awareness and indicate the
department's commitment and may lead to better solutions
as tenderers will now be specifically asked
to address green issues.
Contract
Award Criteria <Top>
The appropriate contract award criterion for almost
all public procurement, and certainly where there
is any environmental impact involved, will be the
"most economically advantageous tender to the
contracting authority". This consists of two
main elements: qualitative issues and whole-life costs.
All tenders, should, of course, be considered on a
consistent basis against the stated criteria. The
qualitative issues should include specific reference
to relevant environmental issues in any advertisement
(i.e. the Contract Notice for an EC tender) and the
Invitation to Tender.
Relative merits of environmental benefit, over and
above any minimum mandatory requirements, do have
to be carefully considered and justified. Whether
this will result in any "green premia" for
a better environmental solution, after any whole-life
costs have been considered, is a matter of judgement
in each case. Care must be taken that any potential
wider environmental benefit that is included, i.e.
that is not of direct benefit to the department, does
not potentially discriminate against firms, for example
distance to travel to deliver goods is not allowed.
Evaluation also needs to take into account whole-life
costs which can bring longer-term savings, where these
fall to the department, as shown below. The end of
the evaluation should produce a value for money solution,
having considered both the qualitative
aspects, including environmental ones, and whole-life
costs.
Costs
including Whole-life Costs <Top>
Wider costs (e.g. costs of traffic congestion to
the economy or long-term pollution on local communities)
outside of those that the department directly pays
for, must not be considered at the evaluation stage
as part of the financial analysis. However, these
wider aspects can be considered at the specification
stage.
This means that, for example:
· the cost to the country of acquiring new landfill
sites, caused by our waste paper, cannot be factored
into the cost analysis of our stationery contract.
But the landfill problem can be addressed by specifying
that we will only buy recycled paper, so reducing
the amount of waste that has no value; and
· the cost to the NHS of treating pollution-related
illnesses also cannot be directly taken into account
in the evaluation but can be addressed by specifying
more efficient and cleaner vehicles which are also
likely to cost less over the longer term.
But relative environmental aspects, as part of the
non-financial qualitative assessment, can be taken
into account as explained above.
Whole-life costing provides the means of determining
if it is cost -effective to invest in a more expensive
product initially to reduce costs in the long run.
The important elements for buyers (with examples)
are:
· Direct running costs - resources used over
the lifetime of the product or service;
· Indirect costs - loading on cooling plant
arising from energy-inefficient equipment;
· Administration costs - COSHH overheads from
buying hazardous products requiring additional controls
and special handling and disposal;
· Spending to save - investing in higher levels
of insulation to save heating and reduce bills;
· Recyclability - creating markets for our own
waste by buying recycled products; and
· Cost of disposal - paying a premium at the
outset to reduce waste,
i.e. by choosing a product which is more durable,
reusable, recyclable, includes disposal costs or is
free of hazardous materials requiring its disposal
in a special way.
More information on whole-life costs can be found
in the Resource Management Guidance Procurement,
starting at paragraph 4321, at: http://infonet/rmg/document.asp?docName=rmg-procurement-04-04
Some cases will be straightforward but it is expected
that in a number of areas, green issues will not be
so clear. Nevertheless, at the very least, the department
will now be able to demonstrate that consideration
was given to environmental impacts even if the conclusion
was that there were none. This must
be clear to readers of the contract file.
EC
Developments <Top>
The EC Commission is currently considering environmental
issues and procurement. Most issues in this Guidance
align with the Commission's thinking. However, two
aspects do not. These are the extent to which production
processes (and management systems) can be taken into
account and the extent to which environmental quality
aspects in the award criteria, where they relate to
environmental issues but are not directly measurable,
can go further than matters directly affecting the
contracting authority. The department has made a response
to this and will continue to liaise with the Office
of Government Commerce. However, until such time as
the Commission makes a final recommendation,
departmental policy will remain as set out in this
Guidance.
Further
Advice <Top>
The green procurement page of DETR's website provides
a range of advice on how to take account of environmental
issues in procurement and has links to other useful
sites in the UK and worldwide. This includes the Environment
Agency's Spotlight on Business Environmental Performance
which lists companies fined for environmental offences.
This can be found at:
http://www.environment-agency.gov.uk/envinfo/spotlight/index.htm
Firms found guilty of environmental offences can
be rejected from the list of candidates who apply
to be invited to tender, but care must be taken to
ensure that this decision is proportionate to the
offence and that the provider is given an opportunity
to describe any steps they might have taken to prevent
recurrence.
There is also a great deal of information of interest
to purchasing officers on other pages of the Department's
greening government website. The address or URL is:
http://www.environment.detr.gov.uk/greening/gghome.htm
Advice on this Guidance, or on specific cases, should
be addressed in the first instance to Andy De Lord
in PPAD in Ashdown House Victoria (GTN: 3533 3069,
outside number: 020 7944 3069), who will consult with
SDU and the WED Greening DETR team, and others, as
appropriate, with particularly difficult cases possibly
being put to the departmental Green Minister.
