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Careful consideration should be given to environmental issues during
the procurement process. This Guidance is intended to show how this
is possible, and how it can be most effectively achieved. In particular,
it aims to explain clearly the scope to take such issues into account
within the framework of the Government’s procurement policy
and the EC procurement rules.
Whole-life costing
Introduction
The consideration of the whole-life costs of goods, works or services
is a key part of a sustainable procurement strategy, as well as
a key component in achieving value for money.
Whole-life costing is an analysis of the full cost to a contracting
authority of meeting a requirement and can be divided into three
broad categories:
- Acquisition costs.
- Operating costs.
- Disposal costs.
Whole-life costs can be considered at various stages of the procurement
process – at the initial stage of identifying a need and developing
a business case; when producing specifications; and when awarding
a contract (to achieve value for money).
As discussed earlier, even when a more environmentally sound option
is not the option that has the lowest whole-life cost it may still
be specified by the department if it is in line with its overall
objectives, and meets the tests of need, affordability and cost-effectiveness.
Eco-labels
Many eco-label schemes provide standards for certain product groups
based on analysis of their life-cycle impacts. This can remove the
need for an authority to carry out its own assessment, and can help
improve the specification of environmentally preferable products
and services. See above for information on using eco-labels in specifications,
which makes clear the need to accept equivalent evidence.
Some examples of whole-life costs:
Acquisition costs
For example:
- Initial purchase price.
- Installation costs.
- Transport costs.
Operating costs
For example:
- Energy/water consumption.
- Annual licence fees.
- Maintenance costs.
- Indirect costs, eg less energy-efficient IT equipment will produce
more heat, which will put greater pressure on the air-conditioning
system, increasing costs in this area.
- Staff costs.
- Training costs.
- Insurance premiums.
- Environmental taxes.
Disposal costs
For example:
- Site clean-up costs.
- Refuse collection costs.
- Recycling – recyclable products may have lower disposal
costs, they may be collected for free or a fee may be paid for
each item.
Further information
- CUP 35 on Life Cycle Costing.
See: www.ogc.gov.uk/sdtoolkit/reference/ogc_library/proc
urement/cup35.pdf
- OGC guidance is also available on whole-life costs and construction
procurement.
See: www.ogc.gov.uk/sdtoolkit/reference/achieving/guide7.html
Social issues in procurement
Introduction
In general, the scope to take social issues into account during
the procurement process is more limited than that for environmental
issues because, by virtue of their nature, they are less likely
to be clearly related to the subject of the contract. And, frequently,
there will be other, more efficient and effective, means of achieving
social outcomes than through their consideration in the procurement
process. However, there will be cases where social issues can legitimately
be taken into account. Services contracts, for example, are much
more likely to have a social aspect than supply contracts. This
section aims to outline briefly where these opportunities are most
likely to arise.
The earlier sections...
The explanation of the EC rules and the Government’s procurement
policy that have been given in the previous sections are just as
relevant to the consideration of social issues as they are to environmental
issues. The same questions need to be asked at the various stages
of the procurement process to decide whether such consideration
is appropriate.
Opportunities for consideration of social issues
The following bullet points describe the circumstances in which
the consideration of social issues during the procurement process
is most likely to be appropriate:
- Where the authority has obligations of a social nature, for
example under the Race Relations Amendment Act, in relation to
a particular function the performance of which it is contracting
out, it can legitimately pass these on to the contractor. For
example, an obligation on a public authority running a prison
to monitor the ethnicity of its prisoners may need to be passed
on to the contractor as a contract condition.
- As with environmental issues, it is often best to take social
issues into account early on in the procurement process, for example
ensuring that an IT system is accessible to disabled users or
that a caterer will provide meals suitable for special religious
or other diets.
- If a candidate has breached social or employment legislation,
or has been guilty of grave professional misconduct in the course
of their business, then they can be excluded from tendering for
a contract. This could apply, for example, to a conviction for
use of illegal labour. See the section on exclusions from participation
above for further details.
- Where a contractor is to work either on the authority’s
own premises or construction site, or where the contractor’s
staff will be interacting with the authority’s staff, there
may be codes of practice, for example, which it will be necessary
to apply to all staff in order to ensure that the organisation
or site operates safely and effectively. Where this is the case,
adherence of staff employed on the contract to such a code of
practice can be a legitimate condition of contract.
- Where the contract requires particular skills or expertise
of a social nature, this can be reflected in the specifications,
or in selection criteria. For example, it is quite legitimate
to require specific language skills or other relevant expertise
from staff to meet the needs of the community they serve.
- Working with suppliers post-award, on a voluntary basis, provides
further opportunity to manage the social impact of the procurement.
As discussed in relation to environmental issues, contracting authorities
should not ask about tenderers’ general policies where this
goes beyond what is relevant to the particular contract to include,
for example, the company’s workforce as a whole (rather than
just those workers that would be involved in the contract). Nor
would it be permissible, for example, to include a requirement to
employ a certain percentage of local people, or to include, in the
award criteria, elements that do not provide a benefit to the contracting
authority.
As with all public expenditure, any cost premium incurred through
the inclusion of requirements of a social nature must be critically
tested for need, affordability and cost-effectiveness to ensure
that they can be justified in public expenditure terms.
The Treasury Green Book, Appraisal and Evaluation in Central Government,
is a useful resource, and describes how the economic, financial,
social and environmental assessments of a policy, programme or project
should be combined.
See:
www.ogc.gov.uk/SDToolkit/reference/ogc_library/related/Green_Book_03.pdf
Glossary of terms
Candidates
Used to refer to companies at the selection stage who have expressed
an interest in a contract, but have not yet been invited to tender.
EC
The European Community (formerly the European Economic Community).
This is the part of the EU under which public procurement legislation
is enacted, hence EC Directives.
Directive
Type of European legislation that is binding on Member States as
to the result to be achieved but leaves the method of implementation
to national governments. Directives must accordingly be transposed
into national law. The Procurement Directives are implemented in
the UK by Regulations (Statutory Instruments) under Section 2(2)
of the European Communities Act 1972.
EC Rules
Used to refer to the Public Procurement Directives, the EC Treaty
and relevant case law together.
EC Treaty
Refers to the consolidated version of the Treaty establishing the
European Community, following the Treaty of Amsterdam. A key objective
of the Treaty was the creation of a free internal market, requiring
elimination of barriers to trade and free movement of labour, capital
and business. Essential parts of the Treaty, from the point of view
of public procurement, include articles on non-discrimination on
the grounds of nationality, the freedom to provide services and
freedom of establishment.
EU
European Union – established in 1992 with the Treaty on European
Union (Maastricht Treaty).
It created a three-pillar structure:
- First Pillar: the European Communities (European Community [formerly
the European Economic Community], European Coal and Steel Community,
European Atomic Energy Community);
- Second Pillar: intergovernmental arrangements for cooperation
on foreign and security policy; and
- Third Pillar: intergovernmental arrangements for police and
judicial cooperation in criminal matters.
GPA
Government Procurement Agreement, agreed under the auspices of
the World Trade Organization (WTO). Following the EC Rules will
ensure compliance with the GPA, where it applies, and GPA suppliers
have the same rights as EC suppliers. A list of current signatories
to the GPA can be found in the Public Procurement State of Play
document, available at www.ogc.gov.uk (click on Procurement Policy
and EC Rules).
OJEU
Official Journal of the European Union, formerly Official Journal
of the European Communities (OJEC).
Proposed new Consolidated EC Public Procurement Directive
Proposals that update, clarify and simplify the current EC Public
Procurement Directives and consolidate the existing separate Directives
for works, supplies and services contracts in the public sector
into one single Directive are being negotiated.
Thresholds
The EC Public Procurement Directives apply to contracts above certain
thresholds. For up-to-date information on the values of the thresholds,
see the Public Procurement State of Play document, available at
http://www.ogc.gov.uk (click on Procurement Policy and EC Rules).
UK Regulations
Implement the EC Directives and are a form of secondary legislation.
The Public Procurement Regulations are made by way of Statutory
Instruments, under Section 2(2) of the European Communities Act
1972.
Value for money
Optimum combination of whole-life cost and quality to meet the
user’s requirement.
Whole-life cost
The full cost to an organisation of a solution to a requirement
over the full period that the requirement will exist. Whole-life
costs will take into account running costs such as energy usage,
maintenance requirements and staff training needs and disposal costs
such as recycling, as well as the initial purchase price. The lifespan
of the product will also need to be considered.
Further information
Some useful online sources of information:
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