How Can Procurement Drive the Global Green Recovery?

As soon as the COVID-19 pandemic began, we saw an urgent need to deliver essential services to citizens across the globe. Because of this, greater attention was paid to public procurement processes and policies, largely to ensure they remained flexible and adaptive in a time of crisis.

Now, public procurement is more crucial than ever, as most of the COVID-19 recovery spending that has been announced will be channelled through this process.

Knowing it can help deliver the ambitious recovery plans governments are putting into place, how can we ensure public procurement drives innovation, inclusivity, and sustainability? And can we take this opportunity to rebrand it as a strategic—not just administrative—government function?

Public procurement must buy innovative sustainability solutions

Representing on average 12–15% of GDP, public procurement processes need to move beyond consideration of the lowest price and start factoring in the total costs of ownership or life-cycle costs and the positive benefits and spillovers.  

The potential of sustainable public procurement combined with the enormous amounts of public money ready to be deployed has put governments in a position where they can and must lead by example to deliver value for money for citizens by creating jobs, addressing inequality, providing for a healthy environment, and improving overall well-being.

But How?

Recent meetings at the United Nations Economic Commission for Europe on innovation and public procurement for sustainability and at the Organisation for Economic Co-operation and Development Leading Practitioners on Public Procurement Working Party have highlighted that, in order to unlock public procurement’s strategic potential and position it as a driver for innovation and sustainability, we need to do two things.

1. Address the culture of risk aversion

Governments must provide an environment for public procurers to engage positively and constructively with risks that are an inevitable part of every procurement process. Those risks are perceived to be larger when agencies are asked to procure innovative and sustainable solutions and think more strategically about long-term goals.

Here’s what can be done to reduce uncertainty and manage risk:

• Create a strong legal and policy framework that encourages the use of procurement for strategic purposes, such as innovation and sustainability. In most jurisdictions, the regulatory space exists but is not utilized for lack of time, resources, or political will. Using the legal frameworks to their full potential, supported by political leadership, is an important ingredient for strategic public procurement.
   
• Develop specific processes for the procurement of innovation that can be used in addition to standard procurement processes (open procedures, procedures with negotiation). The European Union (EU) Public Procurement Directive (2014) includes Pre-Commercial Procurement, procurement of innovation, and innovation partnerships as processes that can be used to buy innovative solutions where they do not yet exist or for which government is the first buyer. The Draft Law of Public Procurement (2019) of Costa Rica includes the possibility of undertaking a Pre-Commercial Procurement process, and Colombia has also developed processes to procure innovation. These processes help to create a market for new solutions and have positive spillover effects into the economy. A new study found that, currently, only 9% of all public procurement is innovation procurement; a healthy digital economy would need to see that number up to 20%.
   
• Establish competency centres that can work with public procurers on the procurement of innovation and risk management, as well as determining sustainability performance indicators and tender evaluation methods. For good examples and guidance on the institutional set-up of competence centres, see the European Network of Competence Centers for Innovation Procurement.
   
• Get to know the market, consult and have dialogues with suppliers in an open and transparent manner with due regard to the principles of transparency, integrity, and open competition. Ensuring that procurers interact with the market on a regular basis can help to build trust and a common understanding between procurers and market parties. Plenty of mechanisms exist to do so—from desk research to market fairs, dialogues, and consultations.  
   
• Equip procurement agencies with the infrastructure and skills to monitor the performance of their procurements. The work of a public procurer does not end when a contract is awarded. Especially when you are buying innovation, it is crucial to monitoring the performance and to be able to correct when a solution does not perform as agreed. Data collection on performance is key. Investment in digital infrastructure and e-procurement systems for this purpose can help.
   
• Professionalize public procurement and build the capacities of public buyers to enable them to negotiate with the market, understand public procurement as a cross-disciplinary profession, and implement “best value” procurement as a standard for good procurement (contrary to “lowest price”).

The potential of sustainable public procurement combined with the enormous amounts of public money ready to be deployed put governments in a position where they can and must lead by example.

2. Ensure that innovation is directed at sustainability

It is essential that sustainability objectives guide the direction of innovation that public procurement strategies should pursue. Procurers should not buy innovation for the sake of buying “new” solutions but for the purpose of them helping to achieve strategic sustainability objectives that are clearly spelled out and against which performance can be measured.

Here’s what can be done:

• The legal and policy frameworks must connect innovation, sustainability, and public procurement. This effort is already well advanced: the EU Green Deal is guiding countries’ recovery strategies, making a reference to the need for innovation and procurement as a tool to help deliver. Ireland’s Green Public Procurement Action Plan encourages the use of all forms of innovation procurement to bring greener solutions to the market.
   
• Scale up the use of innovation procurement processes, traditionally more used in information and communication technology (ICT) and healthcare, but now increasingly being used to achieve climate and environmental objectives. For example, the following joint procurement by six European cities is using a Pre-Commercial Procurement process for the development of artificial intelligence solutions for mobility and energy challenges with an aim to meet climate commitments.
   
• Include clear and measurable criteria on sustainability performance. Without these, procurement may support innovation but not result in low or zero-carbon performance or energy- and material-efficient products and services, etc. The use of performance-based criteria rather than technical criteria also needs to be encouraged. The Western Cape Province in South Africa has made significant advances on performance-based procurement in recent years.
   
• Use existing tools that incentivize the market to innovate and go sustainable. One example is the CO2 performance ladder, a carbon management tool that public procurers can readily use in a public tender to incentivize suppliers to manage and improve carbon dioxide emissions in their production process and supply chain. The tool is also having a positive impact on the shift toward a more circular economy.  
   
• Pay specific attention to the role of small and medium-sized enterprises (SMEs). This is especially crucial today, where a lot of SMEs have been hit hard by the pandemic. A great deal of innovation comes from start-ups and SMEs, and they are essential for job creation along with a sustainable economy. Ensuring their access to the procurement market and building their capacity to engage with procurers is therefore of particular importance to rebuild our economies.

These actions can help public procurement to shine and be the strategic government instrument that we need it to be if we are to build a sustainable and resilient society.