Kieran McGaughey examines the Government's Net Zero Strategy and the inclusion of environmental factors in local authority procurements.
Climate change is certainly the hot topic of the hour (pardon the pun). The government this week launched its new Net Zero Strategy: Build Back Greener. This policy paper sets out the government’s policies and proposals towards decarbonisation and the target of net zero by 2050. The timing of this is no coincidence perhaps, given the UK is hosting the 2021 United Nations Climate Change Conference at the end of this month (in case you thought COP26 was a new police drama…)
The above matters however chiefly relate to how central governments will deal with climate change - both at home and abroad. But where does this all leave little old local authorities? In this article I take a look at the current legal position for local authority procurement processes, and what the future might hold.
What does the Net Zero Strategy say about procurement?
The government’s new policy paper is all of 368 pages long, which would suggest going green is a serious policy objective of theirs (and will thus need to become one too for the businesses bidding for their contracts). Whilst you will forgive me for not having read all of those pages, I have considered the contents of the procurement section – “Delivering net zero through public procurement”. Paras 43 to 51 of Chapter 4iv set out the government’s intention in this regard, and recap what it has done to date. It sets out the government’s “high ambitions” and that it is “determined to leverage public procurement to help achieve net zero.” The paper also seeks to send a “clear signal to the market” that “data on carbon impact, and immediate ambition to reduce it, will be increasingly important in how we choose to do business with you.” This commitment to procurement’s important role in the fight against climate change is also confirmed elsewhere in the paper. For example, one key commitment specifically highlighted is “new measures to reduce emissions from Government’s £292 billion procurement spending – and ensure suppliers have plans for achieving net zero on major qualifying public contracts”. It is also confirmed elsewhere the desire “to leverage public procurement as a tool that drives greener and more resilient outcomes across public services”.
The paper highlights the strategic importance of net zero at project design stage, which is sensible advice (for any procuring body, central government or local). Whilst not covered in the paper, I think pre-market engagement offers another early stage opportunity to explore further the possibilities around including environmental factors in a forthcoming procurement. As ever, it is important to understand what is realistic and achievable. Proportionality is a key legal principle of procurement law. Whilst it may be proportionate and realistic to expect a carbon reduction plan on a £10m government contract, having such a requirement on a £250k Council contract attracting local SME bidders is less likely to yield such positive results. The paper does note that the government has been working with “suppliers and industry bodies to raise awareness of how environmental considerations can be brought into the commercial process”. This is to be welcomed, and training (on both buyer and supplier side) will be crucial as we enter a phase of legal reforms.
The Net Zero Strategy also references the three distinct new policies the government has implemented over the past year, namely:
- The National Procurement Policy Statement (NPPS)
- The PPN on taking account of carbon reduction plans in the procurement of major government contracts
- The Social Value Model
From a local authority perspective however, it is worth noting that the latter two don’t apply to us - we are not “in scope” organisations. For example, the legal obligation on local authorities remains simply to “consider” social value (rather than the need to explicitly evaluate it under the Social Value Model).
The government states that the current Green Paper reforms of UK procurement law “will enable us to use flexibilities provided by our departure from the EU to give even greater consideration to environmental factors in our decision making”. It's worth noting in this context however that there is, already, considerable flexibility for contracting authorities to include environmental criteria in the procurement process. Who says so? The government itself as it happens, in its Crown Commercial Services guidance: The Public Contracts Regulations 2015: Guidance on social and environmental aspects (available here).
Whilst the net zero agenda is certainly gathering pace, public procurement law has long been used as vehicle to facilitate and pursue public policy goals. Indeed, the above guidance which accompanied the previous reforms noted that:
“One of the objectives of the new directives is to allow contracting authorities to make better use of public procurement in support of common societal goals. These goals include the protection of the environment, energy efficiency, combating climate change….”
Those Directives (now enshrined in UK domestic law) clarified that councils and other contracting authorities may consider incorporating social, ethical and environmental aspects into our procurements. This includes specifications, contract conditions and award criteria. The 2015 reforms also included specific rules on excluding suppliers who had violated certain environmental laws.
Removal of link to subject matter of contract?
One area of law which may see some change however is the current requirement for award criteria in this area to relate to the subject matter of the contract. The Net Zero Strategy references the proposal “to break the subject matter of contract link so that a company’s wider environmental proposals for the project can be factored into procurement decisions”. This was an idea first floated in the Green Paper back in December last year. The fact it is still being mentioned now, almost a year later, suggests that this an idea which remains firmly on the table. Personally then I would be surprised if this didn’t form part of the government’s Green Paper response (promised to arrive in the coming weeks). Is this actually a good idea however? Time will tell (if it happens). In our LLG Green Paper Response we proposed retaining the current rules, noting that:
“Any change is likely to only favour larger bidders, which goes against the recognised policy benefits of promoting SME inclusion in public procurement. For example, in respect of environmental factors, a large national company (enjoying economies of scale) is much more likely to have a recognised corporate social responsibility (CSR) team etc. Where any exceptions are permitted (although note our concerns as above), these should also allow for local priorities as well as national ones.”
As it stands, it is worth noting that the current requirement (in Regulation 67(5)) is drafted in quite broad terms. This provides that:
“Award criteria shall be considered to be linked to the subject-matter of the public contract where they relate to the works, supplies or services to be provided under that contract in any respect and at any stage of their life cycle, including factors involved in—
(a) the specific process of production, provision or trading of those works, supplies or services, or
(b) a specific process for another stage of their life cycle,
even where those factors do not form part of their material substance.”
The wording “any respect” and “any stage” gives local authorities (and other buyers) some leeway to take a wider view here. The CCS guidance gives the following examples:
“requesting confirmation that the production of an item did not include toxic materials, or services were and are performed using energy efficient machines, resource efficiency and waste minimization.”
Regardless of whether this particular proposal sees the light of day, what is clear from the above is that there is already considerable discretion for local authorities to pursue their environmental goals via the procurement process. Whilst the carbon reduction plans PPN and Social Value Model don’t strictly apply to local authorities, there is certainly scope to take on board any helpful content arising from those documents. And, to consider whether to apply (or adapt) them to our own processes where it would relevant and proportionate to do so. Likewise there is scope to incorporate any other helpful ideas on how to tackle the climate change emergency that many councils have declared.
So… go green with confidence. And you can start today.