Set sustainability criteria
Set sustainability criteria

Set sustainability criteria

Setting sustainability criteria

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In this section, we provide guidance on different options for introducing sustainability criteria in a procurement process, and what they each mean for suppliers.

Implementing Open SPP ultimately means purchasing goods, services and works in the most sustainable way, that is, minimizing negative externalities, such as CO2 emissions, and maximizing positive social and economic impact. Apart from clearly defining what the real needs are, and avoiding unnecessary purchases, this also means selecting the most sustainable option once the tender is published. To do this, public authorities have to introduce sustainability criteria in the procurement process, and openly communicate how suppliers will be evaluated against it.

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Clear use and justification of sustainability criteria. One of the key elements of Open SPP is disclosing how and why sustainability criteria have been introduced in a procurement process. As explained in this section, when introducing sustainability criteria, you must transparently disclose on the tender opportunity:

  • How the criteria are related to the subject-matter of the contract.
  • How suppliers will be evaluated against the criteria.
  • How the use of the criteria complies with the existing policy and regulatory frameworks.

What you should consider before introducing the criteria

Before deciding what sustainability criteria will be introduced in the procurement process, and how, there are certain factors that you should consider.

Step 1: What is the subject matter of the contract?

The subject matter of the contract refers to the product, service or work that you want to procure. When defining your subject matter, you should ensure that it aligns with:

  • The needs that have been identified.
  • Fairness and non-discrimination in procurement. Remember that some of the common key principles of procurement regulation are related to fairness and non-discrimination. This is something that should be embedded into your procurement, and will inform the different steps you take, including defining your subject matter.

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Defining a fair and non-discriminatory subject matter means ensuring that no reference is made, for example, to products with specific certifications, or specific types of suppliers. An example of a discriminatory subject matter would be: “Tender for Energy Star certified laptops”, as it restricts participation by requiring compliance with a specific ecolabel. To ensure equal treatment, the subject matter should instead be: “Tender for energy efficient laptops”.

The definition of your subject matter is an essential step when implementing SPP. As we introduced in this section, the policy and regulatory frameworks in most countries allow the consideration of sustainability criteria as long as they are relevant to the subject matter of the contract concerned.  This means that the criteria must relate to the works, goods or services to be provided, and not on the characteristics of the individual suppliers. For example, if you are procuring a laptop, you can’t include within the specifications that the supplier must be a local company, as this does not relate to the goods that you are procuring.

As we explain in the previous section, the best way to promote local suppliers is by engaging with the market during the planning stage of your procurement and designing your specifications based on local market capability. There might also be some cases where a target related to local suppliers has been set, or certain contracts have been reserved for local suppliers or smaller businesses. In this case, the supplier’s location would be included as part of the criteria. However, this does not apply to most procurements, so you should always ensure that the sustainability criteria included is relevant to the subject matter (or specific pre-agreed policies like good tax conduct or past performance) to avoid unfair competition.

To this effect, some public authorities decide to explicitly include reference to sustainability in the subject matter. This would be the case in the example of “Tender for energy efficient laptops”, or in this tender from the University of Malta for which the subject matter was “Internal finishing works, using environmentally friendly construction materials and products”.

Step 2: What does my enabling environment allow me to do?

When considering how to introduce sustainability criteria in a procurement process, it is essential to assess what your regulatory and policy framework allows you to do. Can award criteria include any weighting based on sustainability considerations? Can only price be considered? Does it depend on the value of the contract? See how to interpret the enabling environment in this section.

Step 3: Have any standardized sustainability criteria been created?

As we have previously introduced in this toolkit, public procurers do not need to create sustainability criteria from scratch. Identifying sustainability criteria, and ecolabels can serve as guidance. It is also important to check whether public authorities have given recommendations as to what criteria should be included when purchasing specific procurement categories.

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Remember that when you ask that suppliers comply with the requirements of a specific ecolabel, you should clearly communicate that compliance can be demonstrated through means of verification other than the ecolabel’s official certificate (e.g. through laboratory reports or technical documentation) to support equivalence and promote fair competition. See the Monitor implementation section for more information regarding means of verification.

Step 4: What is the capability of my market?

As explained in the section on engaging with the market, information regarding market capability will inform which sustainability criteria can be made essential (i.e. included as technical specifications) or optional (i.e. included as award criteria).

Decide how the sustainability criteria will be introduced

It is difficult to advise on the best way to introduce sustainability criteria in a procurement process, as the method used will largely depend on market capability, and what is allowed within the enabling framework. Below are included some of the ways you can consider for introducing sustainability criteria in a procurement process:

Selection criteria

Selection criteria focus on evaluating potential supplier’s ability to perform the contract for which they are tendering. When assessing this, public authorities can take into account specific experience, for example, they might ask suppliers if they have an Environmental Management System, or if they have a supplier Code of Conduct in place.

This information is often gathered through questionnaires, and this system is often used in two tender stage procurement approaches to select suppliers during the first stage. Authorities should clearly communicate which of this information will be used to evaluate suppliers, and how it relates to the subject-matter of the contract.

Essential requirements (or technical specifications)

Technical specifications constitute the minimum compliance against which suppliers will be evaluated. Unlike selection criteria, these need to relate to the specific characteristics of the service, works, or product that will be purchased, not the characteristics of the supplier.

Introducing sustainability criteria as technical specifications is the most effective way to ensure that the criteria will be met by suppliers. However, public authorities should ensure that technical specifications included can be met by a majority of suppliers, to ensure that they receive enough offers, and not compromise the selection of a solution which represents the best value for money.

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Remember when your enabling environment only allows to award contracts based on price, introducing sustainability criteria as essential requirements is one of the key ways of implementing SPP. See the section on Establish an enabling environment for more information.

Award criteria

At the award stage, the public authority will normally evaluate the quality of the different offers made by suppliers, and compare costs. Whereas technical specifications should include minimum sustainability criteria, introducing sustainability criteria at the award stage is a way to promote suppliers who present more sustainable offers. Sustainability criteria can be considered within the weighting allocated to quality, or, depending on the enabling environment, it might be possible to allocate a percentage of the available marks to sustainability criteria.

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As previously introduced, some enabling frameworks will only allow you to consider price as award criteria. In these cases, you can consider using Life-Cycle Costing (LCC) calculations.

Once the sustainability criteria have been set, public authorities should openly disclose how compliance against it will be verified and monitored, and clearly translate sustainability requirements into contract obligations.

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Case study

The Netherlands implements a system called the CO2 Performance Ladder in order to consider CO2 emissions when awarding public procurement contracts. The Performance Ladder is an instrument that organizations can use to reduce their carbon emissions, both within the business, and in specific projects. There are 5 levels on the Ladder depending on the scope of the organization’s effort to reduce CO2 emissions.

Organizations can obtain a certificate with their level on the Ladder, which they can use to receive an award advantage for their registration on tenders. In this way, contractors can benefit from a reduction of the submission price by proving and developing their efforts to reduce CO2 emissions.

As can be seen in the example on the following table, although supplier C had a higher entry price, the application of the discount associated with their level on the CO2 ladder (level 4) results in them being awarded the contract. By taking this approach to accounting for carbon emissions in procurement processes, sustainable suppliers can be selected even if the contract is awarded solely based on price.

COMPANY
ENTRY PRICE
LEVEL ON THE LADDER
DISCOUNT / AWARD ADVANTAGE
PRICE AFTER APPLYING ADVANTAGE
AWARD THE CONTRACT
A
€ 9.7 million
none
0%
€ 9.7 million
NO
B
€ 10 million
3
4%
€ 9.6 million
NO
C
€ 10.3 million
4
7%
€ 9.58 million
YES: € 10.3 million

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Case study

In 2014, Chile conducted a research study to evaluate how many public contracts were businesses owned by men, versus contracts awarded to businesses owned by women. This study showed that only 36% of public contracts were awarded to women, and that these represented 26% of total value.

Based on this study they established a series of measures to promote gender equality through public procurement. This included provisions for including award criteria to assess suppliers in terms of gender inclusion.

As an example, they propose giving this factor a weighing of 15% in the evaluation, and suggest different ways of evaluation. These include giving full points to companies which are led by women, or companies which demonstrate gender parity in its hiring, showing that the % of women hired with respect to the total number of workers in the same company is higher than 50%.