*Sustainable public procurement in a nutshell
di Fabio Massoli
by
Generally speaking, public procurement is the process through which public bodies buy works, goods, or services from a third supplier. Public bodies are schools, hospitals, local governments, prisons, etc. and what they buy can be for instance the food for meals at school, the cleaning service and cleaning products, buses for public transport, and so on. Within the European Union, public procurement amounts to approximately 15% of the EU gross domestic product (GDP).
The genesis – The first statutory recognition of Public Procurement from the EU can be rooted back in the ‘70s, a period in which the Community also dealt with the elimination of tariff and non-tariff barriers, among which public procurement (PP). The 70s Procurement Directives were able to promote savings and price convergence, albeit respecting the core economic principles of the EC, namely transparency, non-discrimination, objectivity and open competition, but also free movement of goods and services, right of establishment and the prohibition of discrimination. Over the years the Directives have been amended several times and new, innovative conceptions of Public Procurement have been provided by scholars. Kunzlik talked for the first time about strategic procurement, i.e., a new conceptualization that conceives PP as an occasion for achieving secondary objectives. But which secondary objectives? Here comes the core of this article. Public procurement has enormous potential for achieving environmental and social sustainability, driving the market offer of sustainable products, to promote Research&Development (R&D) and innovation.
Definitions – According to the objectives it pursues PP has been named in different ways: Green Public Procurement (GPP) Social Public Procurement (SPP) or Socially Responsible Public Procurement (SRPP) and Public Procurement of Innovative Solutions (PPI), Circular Public Procurement (CPP). The way public procurement is able to pursue secondary purposes stands in the contract design and in this regard the latest Public Procurement Directives[1](2014) – in particular, Directive 24/2014 – represent a decent result. Let’s think about public procurement as a series of sequential activities:
Source: www.spendmatters.com
Along this cycle, public bodies have several occasions for including within the contract environmental or social criteria that the goods, service, or work they want to buy must fulfill.
Analysis of the EU legislation on public procurement – Let’s now take a brief look at how contracts can lever sustainability.
While drafting the contract, for example, the public body could require in the technical specifications (Art. 42), that hospital staff uniforms must be made with recycled and organic textile, labeled with any fair-trade certification. In the case of the provision of the catering service within a university, the public body, e.g. universities, could require, within the contract performance clauses (Art. 70) of the contract, that the weekly menus include only products or recipes from the Mediterranean diet or that the staff ensure a congruent use of the canteen premises (turning off lights in the absence of people, correctly dispose of garbage, etc.). Other relevant provisions of Directive 24/2014 regarding preliminary market consultations (art. 40) “with a view to preparing the procurement and informing economic operators of their procurement plans and requirements”. The importance of this article lies in giving advance notice to third parties who intend to participate in the tender that can allow them to best adapt to the requirements. The contracting authority may want the products supplied to bear a specific label (art. 43) or to meet the criteria determined by this label, without having it. The bidder may need time to adapt the products it produces to the labeling criteria.
Another important aspect established by the directives and not immediately apparent is the scope of the mandatory principle of non-discrimination, equality and avoidance of distortion of competition (Art. 18). These principles are the basis not only of European substantive law but also of procedural law, included in the discipline of procurement. The enormous scope of the principles has an impact on the prohibition of favoring candidates on the basis of nationality or proximity, for example. In a contract for the supply of food products, for example, it is forbidden to select an agricultural company simply because it comes from the same territory in which the supply should be made. Although it may seem contradictory, one of the main purposes of the European Union is to promote the free movement of goods, preventing protectionist practices by member states. Although this implies the impossibility to select a product on the basis of a territorial criterion – let’s think about our beloved Km0 products that have a low impact on the environment also because the means of transport cover shorter distances – the directives still offer other opportunities to pursue environmental sustainability. In this regard, the Directive 24/2014 seeks to protect small and medium-sized enterprises through article 46, which allows contracting authorities to award the contract in the form of separate lots, so that if the scope of the contract, in terms of goods to be supplied, for example, is large, small manufacturers or suppliers are still taken into account. The article is in fact intended to ensure that firms producing on a small scale are not automatically excluded, but rather a several small enterprises are involved in the procurement process at the same time. The Directive 2014/24 also provides for mandatory exclusion criteria (Art. 57), for example, if the prospective supplier has been accused of corruption, child labor, or human trafficking, financing of terrorist activities. It is not required, but only permitted to exclude participants from the procurement process if they have violated environmental, social and labor obligations (Art. 18) – but the burden of proof is up to the contracting authority.
In addition, according to which principle do contracting authorities generally award contracts? As a rule, following the screening of all bids and their consistency with what was requested in the tender, the authorities award the contract on the basis of the lowest price. However, it is worth mentioning a consistent change made in the EU Procurement Directives (already in the 2004 amendment[2]). The reference to the evaluation not only of the lowest price offer, but also of quality and life-cycle costing (LCC) of that offer (Art. 67/68). LCC refers to costs relating to the acquisition, the use (e.g. consumption of energy), maintenance costs, end of life costs, such as collection and recycling costs of the products and importantly “costs imputed to environmental externalities linked to the product, service or works during its life cycle”. Last, but not least, the great work carried out by the EU Commission and the experts has been that of drawing up Green (but not yet social) Criteria that can be easily incorporated into contracts by public authorities. The criteria have been drawn up for numerous categories of products and services such as construction, ICT services, canteen services, cleaning products, street lighting, road surfaces, etc. However, according to procurement experts, the directives have some gaps that in fact demonstrate the weak grip of Sustainable Public Procurement.
Limits of the SPP – One of the main weaknesses is that the GPP criteria are not compulsory. Although some member states, among which Italy, have made GPP criteria compulsory for certain categories of products[3], its uptake is still very low, especially considering the ambitious commitment recently undertaken with the EU Green Deal. In December 2020, the EU Commission has stressed its intention to make (part of) GPP criteria mandatory for all member states. Another loophole consists in the lack of training of public bodies about contract design and GPP criteria, in conjunction with lack of engagement with environmental issues. Some studies demonstrate that administrations are more likely to make public procurement greener if they personally want to fight climate change[4]. Another limitation of the directives, as highlighted by Abby Semple[5], is the need for selection criteria, technical specifications, labels and award criteria to be linked to the subject matter of the contracts. In a few words this means that when contracting authorities evaluate different bids, their evaluation must concern just what is considered the subject matter of their contract. Let’s imagine that the City of Oslo would like to purchase renewable energy for the whole city. During the evaluation of the different offers (bids), the City administration may not opt for the company which, beyond the requested amount of renewable energy and their equal price, produces the highest amount of renewable energy as a company, for instance. Public bodies may not, then, interrogate the corporate socio-environmental responsibility, so for example choosing the ‘greenest’ company among those who were competing. Also, if a contracting authority is willing to award the contract to the tenderer which has a lower carbon footprint i.e. in the transport of the products to be supplied, a strict interpretation of the link to the subject matter of the contract may not be efficient. Indeed, the contracting authority may award the contract to a supplier located close to the point of consumption, while the tenderer may need to stock other customers that can be located very far[6].
So, what if the GPP criteria become mandatory? What if the link-to-the-subject-matter will be eliminated? I leave to you the cue.
For more and detailed information please visit https://ec.europa.eu/environment/gpp/index_en.htm
[1] Directive 2004/18/EC – the ‘classical public sector directive’ – and Directive 2004/17/EC – the ‘utilities directive’
[2] Directive 2014/24/EU on public procurement, and Directive 2014/25/EU on procurement by entities operating in the water, energy, transport and postal services sectors
[3] https://ec.europa.eu/environment/gpp/eu_gpp_criteria_en.htm
[4] Grandia J., Implementing sustainable public procurement: An organisational change perspective. (Erasmus University Rotterdam, 2015)
[5] Semple, A. “The Link to the Subject-Matter: A Glass Ceiling for Sustainable Public Contracts?”. In Sjåfjell, B., & Wiesbrock, A. (2016). Sustainable public procurement under EU law: new perspectives on the state as stakeholder. Cambridge University Press.
[6] Ibid