HM Insights

Sustainable procurement: the duty on contracting authorities to ‘do the right thing’

With such a huge focus on climate change and the upcoming COP26, and the growing importance of the Environmental, Social and Governance (ESG) agenda, focus on sustainability generally has been amplified in all sectors and areas of society. 

Sustainability within supply chains, and in particular, those supply chains that involve public funds and public bodies, has arguably never been under the spotlight so much.

Here, Jill Fryer and Marc Penman consider the sustainable procurement duty placed on public bodies in relation to public procurement, and how the duty operates in practice.       

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The obligations: reputation, trust … and the law

There are many reasons why “contracting authorities” (which includes most public bodies and some third sector organisations such as Registered Social Landlords, arm’s length organisations associated with local authorities and other third sector organisations) would want to consider sustainability, including the building of reputation and trust. 

It is, however, also a legal obligation for some, under Section 9 of the Procurement Reform (Scotland) Act 2014 (the “2014 Act”), which obliges “contracting authorities” who are conducting a “regulated procurement” (essentially one worth £50,000 or more for goods or services of £2 million for works) to consider how the procurement can improve the economic, social, and environmental wellbeing of that particular authority’s area; facilitate the involvement of small and medium enterprises, third sector bodies and supported businesses; and promote innovation. 

The Section 9 duty also provides that the contracting authority must consider “only matters that are relevant to what is proposed to be procured” and consider the extent to which it is proportionate in the circumstances to take those matters into account (in line with case law of the Court of Justice of the European Union, which remains part of UK law until amended).  What this means in practice is often a difficult decision, and the sustainable procurement duty means different things to different contracting authorities and can vary between different procurement procedures.

Sustainable procurement in practice

Specification – public procurement rules are about ensuring a correct procedure is followed.  Contracting authorities may have very little discretion about “how” they procuring but they do have discretion over “what” they are procuring (as long as this is defined in a non-discriminatory way). The specification is therefore very important, particularly in encouraging innovation, and should always be an “output-based” document, rather than being too prescriptive about methods. This encourages SMEs, third sector bodies and innovation.

Selection criteria – some contracting authorities unwisely adopt a blanket approach for every procurement procedure, without considering the selection criteria each time in the context of the particular contract to be awarded. In light of the requirement to encourage innovation and facilitate the involvement of SMEs, supported businesses etc, reduced levels of financial standing (such as turnover requirements and insurance levels) may be appropriate, while obviously protecting the contracting authority’s commercial position – to be considered in each individual procurement.

Award criteria – these are obviously contract-specific but the emphasis should be on whole life-cycle costing with appropriate consideration given to other sustainability issues, including fair work practices and environmental considerations.  All award criteria must be related to, and proportionate to, the contract to be awarded but contracting authorities do have some discretion here.

Contract – appropriate provisions should be included in relation to maintaining and, where appropriate, improving upon performance, including in relation to sustainability obligations (this could take the form of KPIs or service levels, with service credits payable in the event targets are not met).  The contractual terms are often overlooked with the focus being on the procurement process itself.   But they are fundamentally important as, at the end of the day, that is how the contracting authority achieves its commercial and organisational goals.

Get in touch – we’re here to help

If you have any questions about the sustainable procurement duty, or any questions in general in relation to public procurement, please get in touch with one of our team.