New Standards in Public Procurement
During May and June of 2021 two procurement policy notes and a procurement policy statement were issued which represent a significant change of emphasis in public procurement. Together they could transform the government’s ability to bring forward a just transition to a low-carbon economy. But will they really have the desired effect?
The National Procurement Policy Statement issued in May 2021, and given additional signposting by PPN 05/21, states that contracting authorities should have regard to national strategic priorities for public procurement by considering three national priority outcomes alongside any additional local priorities in their procurement activities:
- creating new businesses, new jobs and new skills,
- tackling climate change and reducing waste, and
- improving supplier diversity, innovation and resilience.
To some extent, this procurement directive overlaps with the New Social Value Model introduced in PPN 06/20 last September, which introduced a minimum 10% weighting for Social Value and narrowed its scope to focus on 5 key policy themes and 8 policy outcomes. A key difference is that the National Procurement Policy Statement applies to all contracting authorities, whereas the New Social Value Model applies only to central government procurement.
The stated aim of the NPPS is to leverage the approximately £290 billion spent by public sector procurement every year to support the delivery of public sector policy priorities including generating economic growth, helping communities recover from the Covid-19 pandemic, and supporting the transition to net zero carbon. Contracting authorities are advised to review their policies and processes to ensure that they are aligned with these goals, as well as ensure they have the skills and capacity to deliver them.
The National Procurement Policy stops short of compelling purchasers to embed the three national priority outcomes into their procurements, but the government has stated its intention to bring forward legislation to make this requirement mandatory when Parliamentary time allows. Additionally it intends to require contracting authorities to publish procurement pipelines and to benchmark their procurement capability, with target dates of April 2022 for authorities with an annual spend exceeding £200m and 12 months later for those spending in excess of £100m.
The government’s decarbonization commitment was further boosted by the issue of PPN 06/21 in June 2021 which requires all tenderers for central government contracts worth more than £5M per annum to have published a Carbon Reduction Plan (CRP) that commits to, and outlines the actions put in place to support the delivery of, a goal of net zero emissions for their UK operations by 2050 at the latest. CRPs must include scope 1, 2 and a defined group of scope 3 emissions, be signed by a senior leader, published on the company’s website and be in place by September 30th 2021. Subsequently it must be updated at least annually.
Similarly to the Modern Slavery Statement, the CRP is something of a blunt instrument – its very existence is sufficient to secure the right to bid, regardless of its level of ambition or, indeed, its credibility. But it does, at least, compel potential bidders to analyse and report the carbon emissions of both their own operations and, to some extent, their supply chain. Like the Modern Slavery Statement it is also targeted at larger businesses since few SMEs would be equipped to bid for a contract above the £5M per annum threshold.
These new policy interventions challenge public procurement to take the lead in accelerating the decarbonization of the UK economy through the use of its purchasing power, and that’s to be commended. But PPN 06/21’s minimum requirement of a net zero commitment by 2050 is not sufficient to bring about the rapid transition that’s needed to avoid breaching the 1.5 degree limit that the G7 leaders committed to in May, nor is it aligned to the government’s own legally binding target of 78% reduction in GHG emissions by 2035. Neither does the National Procurement Policy Statement set any targets in relation to the priority outcome of tackling climate change and reducing waste. Almost mid-way through 2021, and less than 5 months from the start of COP26, the government has still not set any new Greening Government Commitments for the period that was supposed to run from 2020-25 with the result that public bodies that are effectively without targets.
However PPN 06/21 in particular has already begun to influence potential bidders to prepare Carbon Reduction Plans in preparation for 30th September 2021, and Acclaro is already supporting a number of clients to prepare net zero roadmaps and action plans that will underpin their CRPs.