Sustainable Procurement Guide
Earlier this year the Sustainable Procurement Guide for local government was released by Local Government NSW. This Guide was developed in partnership with the NSW government and aims to drive sustainable procurement practices through the local government sector. With local councils spending over $10 billion annually, there is also opportunity to create change across the wider economy.
In this article we explore the meaning of sustainable procurement, how this ties in with the new guiding principles for local government under the Local Government Act 1993 and what local councils should be doing to implement the Sustainable Procurement Guide.
What is sustainable procurement?
In a nutshell, sustainable procurement takes into consideration the economic, environmental, social and governance impacts of any purchase. This is also known as the quadruple bottom line which is the essence of sustainable procurement. This means taking into account the whole cost of the purchase, not just the initial upfront cost.
A critical element of sustainable procurement is understanding the supply chain. This includes thinking about the raw materials, transportation and manufacturing process when making a purchase. This can be complex particularly where there are multiple processes and companies leading to the ultimate purchase.
Where possible, the quadruple bottom line impacts should be translated into financial costs. This can be done through whole-of–life costing or life cycle assessment. If this is not possible, these impacts should still be considered as part of the assessment of value for money. Thought should also be given to:
/ Whether the purchase will create a ‘circular economy’ (where the product is reused, reprocessed or recycled rather than sent to landfill)
/ The interests of the local community
/ The wider social impacts of a purchasing decision.
What is whole-of-life costing and life cycle assessment?
In short, whole-of-life costing and life cycle assessment are both methods to look at the quadruple bottom line impacts to determine if a purchase is sustainable. However, there are some subtle differences between these methods:
/ Whole-of-life costing includes all expenses across the life cycle of a purchase such as the initial purchase, maintenance, operating and disposal costs. This gives a picture of the cost of the asset across its life cycle and can reveal hidden costs which make the purchase unsustainable. In simple terms, the cheapest may not always be the most sustainable.
/ Life cycle assessment is similar to whole-of-life costing in that it considers the complete life cycle of a product. However, it is governed by international standards (ISO 14040/44) and usually involves assessment by an external and qualified consultant.
When does the Sustainable Procurement Guide apply?
The Sustainable Procurement Guide is intended to apply to all procurement decisions that a local council makes no matter how large or small. This includes tenders which are subject to a strict legislative process under the Local Government Act 1993, standard purchases from a contract supplier and one-off purchases from petty-cash.
Regardless of the value of the purchase, the Guide suggests the following steps should be undertaken to make a sustainable purchase:
/ Understand the need and market
/ Develop a plan and prepare a specification
/ Assess responses and select supplier
/ Review and identify improvement
The higher the value of the purchase, the more detailed some of these steps will be. For large purchases, there will also be a need to incorporate sustainability criteria into the contract and manage these through the contract duration.
Does the Sustainable Procurement Guide have legislative force?
Importantly, the Sustainable Procurement Guide does not have legislative force under section 23A of the Local Government Act 1993. However, the Tendering Guidelines for NSW Local Government do have legislative force. These Guidelines require local councils to think about value for money across the whole-of-life of a product of service during the tender process. Where appropriate, the evaluation criteria in tender documents should also include whole-of-life costs.
The principles of sustainable procurement are also reflected in the new guiding principles for local government under section 8A of the Local Government Act 1993. For example, when making decisions local councils must:
/ recognise diverse local community needs and interests
/ consider social justice principles
/ consider the long term and cumulative effects of actions on future generations
/ consider the principles of ecologically sustainable development.
/ make decisions in a transparent and accountable way
These factors reflect the social, environmental, economic and governance impacts which make up the quadruple bottom line.
What do local councils need to do now?
All local councils should already have in place a procurement or purchasing policy which guide procurement decisions. Some local councils may have already adopted a sustainable purchasing policy or specific sustainable policies such as a sustainable events management policy. Either way, there are a number of things local councils can do now to incorporate sustainable principles into procurement decisions.
First, as an initial step local councils should review their existing policies against the Sustainable Procurement Guide and update these policies to reflect the principles of sustainable procurement. From this review some local councils may identify the need to adopt a stand-alone sustainable procurement policy.
Second, local councils need to embed the principles of sustainable procurement into purchasing documentation. This includes making sure the specifications and evaluation criteria are clear, verifiable, specific and allow for fair competition regardless of the size of the supplier.
Third, local councils need to be wary of ‘eco-wash’ when asking for and assessing information about sustainable practices.
FInally, local councils may also wish to sign up to the Sustainable Choices program which is administered by Local Government Procurement.
If you have any questions about sustainable procurement, please get in contact with Emma or Steve:
Director – Legal, Governance and Mediation
T 0421 180 881
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Disclaimer: This publication is provided in good faith and is for general information purposes only. This publication does not constitute legal advice or other professonial advice, and must not be relied upon. You should seek legal or other professional advice in relation to matters arising out of the publication having regard to your circumstances and needs. No warranty or representation regarding the reliability, quality or accuracy of any information in this publication is given by Locale Consulting or the authors of the publication.