Sustainability as important as price in government procurement frameworks

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Good government procurement isn’t simply about getting the cheapest deal. All levels of government have guidance highlighting the need for ethical behaviour in handling scarce taxpayer funds.

In fact, all governments have established a range of criteria to ensure procurement decisions reflect community standards and expectations regarding probity, ethics and the economic, social and environmental costs of transactions.

There is ample guidance on what conduct procurement officers must avoid when dealing with potential suppliers during a tender. 

One state government website, Buying for Victoria, touts its sustainability credentials when contemplating government procurement. It says sustainable procurement practices could involve maximising recyclable or recoverable content, minimising waste and emissions, conserving energy or water, minimising the degradation or destruction of the environment and ensuring the provision of non-toxic solutions.

The procurement website refers to two government departments – the Department of Treasury and Finance and the Department of Environment, Land, Water and Planning – using carbon credits to offset their travel. It says those carbon credits are funding the reforestation project at Lavers Hill.

“This project was established in partnership with the Victorian government’s travel provider, CTM, and specialist supplier, The South Pole Group,” the government says. “These providers supply an end-to-end solution to the Department of Treasury and Finance and the Department of Environment, Land, Water and Planning, including tracking of emissions, automatic addition of the offset cost to all travel itineraries and the purchase of carbon credits.”

The Department of Treasury and Finance is trying to ensure people choose video conferencing or teleconferencing over air travel to lower the cost of the travel bill and cut back the department’s contribution to carbon emissions.

Agreed social procurement objectives 

These sustainability initiatives are a part of a broader social procurement framework that addresses how government procurement can help achieve social objectives in Victoria. A feature of this framework is that suppliers need to ensure their enterprise meets agreed social procurement objectives.

A guide to contract management and reporting sets out the obligations a supplier must meet. The social procurement program requires suppliers to employ First Nations peoples, people with disabilities and disadvantaged Victorian residents and buy from social benefit suppliers.

A supplier must agree to a set of objectives and targets in a social procurement commitment response form and report to the relevant department. Contract managers must track a supplier’s progress in meeting the agreed commitments. Contractors supplying goods or services are told they might have their records examined to ensure what they have said in their report back to the department was accurate.

There is also a warning about the use of social procurement commitment data in supplier reports and how this might impact their business in the future. “The contractor is advised that the statistical information related to social procurement commitments that form part of the contract may be reported to the Department of Treasury and Finance and considered in the assessment or review of the contractor’s eligibility to tender for future Victorian government contracts,” the guide says.

Testing the notion of value in procurement

The Department of Finance provides similar guidance regarding sustainability issues in procurement for federal government departments. Public servants should, according to the principles set down by Finance, consider sustainable practices when buying goods and services.

Value for the taxpayer dollar is a driving principle, but the notion of “value” isn’t defined solely as being the cheapest offer available. “In conducting a procurement, officials must take into account all relevant costs and benefits over the entire life of the procurement,” the guidance says. “Environmental sustainability of the proposed goods and services and climate change impacts should be considered as part of this total cost assessment.”

Finance provides a pithy checklist that offers suggestions for incorporating sustainability in procurement practices. These include considering climate change impacts in procurement, asking for suppliers to consider sustainable solutions and innovation in tenders, and how sustainability goals can be measured and improved during the life of a procurement contract.

Triple and quadruple bottom lines

Local government initiatives for the management of sustainability are widespread. 

The Local Government Association of South Australia (LGASA) encourages members to develop a laser-like focus on making procurement processes line up with community standards. It refers to the ‘triple bottom line’ approach: taking into account economic, environmental and social factors. 

“Traditionally, economic cost has been the key consideration in procurement, but this is evolving towards a ‘triple bottom line’ approach as procurement practices increase in sophistication,” the LGASA says. “With annual expenditure of nearly $1 billion on goods, services and works, the local government sector in South Australia has a key role in delivering sustainability outcomes and objectives.”

Frameworks for sustainability and social procurement can have the same ultimate objective, even if they’re dressed up in different words and pictures.

The NSW government takes a framework for sustainable procurement one step further by applying a ‘quadruple bottom line’ approach to sustainable procurement, adding good governance.

“Sustainable procurement takes into account the total cost – economic, environmental and social within a wider framework of good governance,” says the NSW guide for sustainable local government procurement. “[This] is at the heart of sustainable procurement.”