Achieving Net Zero has never been more prominent across the public sector, with many local authorities having declared climate emergencies and with numerous public sector bodies seeking to ensure that sustainability targets and initiatives are delivered through their contract portfolios.
For the housing sector in particular, the issue of energy efficiency housing is at the forefront of many housing providers' minds (both in the retrofit of existing housing stock, and in the design and construction of new build units).
Against that background, Trowers & Hamlins are proud to be working alongside the Chancery Lane Project to promote the incorporation of "green" contract clauses to ensure that contracts are fit for purpose and delivering on Net Zero objectives.
For public contracts, if contracting authorities are to achieve Net Zero by 2050 (as set out in the Government's "Net Zero Strategy: Build Back Greener"), then it is imperative that public contracts procured now set out clear and measurable outcomes to deliver on this strategy. So, what can contracting authorities do as part of their procurement activity to help achieve this goal?
Pre-market engagement and prior planning
A key stage in the successful procurement of public contracts is prior planning to ensure that a contracting authority is procuring the "right" solution for its requirements.
Contracting authorities are encouraged to spend time at the outset scoping their requirements in order to ensure that the tendered solutions secure the outcomes needed for the duration of the relevant contract. This includes the delivery of Net Zero initiatives and outcomes, and contracting authorities should have these in mind when setting their specification and service requirements.
A key tool in scoping appropriate green requirements is the effective use of pre-market engagement (both with service users/residents and with potential bidders). By engaging on a regular basis, contracting authorities will be able to identify specific requirements for their public contracts. In the context of Net Zero initiatives, regular engagement is key to ensuring that the requirements adapt to this constantly evolving area.
Not only will this prior planning help shape a specification, but it can also be useful in giving a contracting authority an indication of likely costs for the delivery of certain outcomes/initiatives (which can help with budgetary decisions), as well as the availability of certain products / services in the current market.
Supplier Due Diligence
Following on from an effective pre-market engagement strategy, contracting authorities need to establish supplier approaches to climate-related risks, and how well a potential supplier aligns with the contracting authority's climate strategy and targets. The Chancery Lane Project has produced "Raphael's Procurement DDQ" – a Climate Change Due Diligence Questionnaire for suppliers (the DDQ), for this purpose.
The DDQ is an invaluable fact-finding tool for contracting authorities to better understand the approach that their supply chains take to climate change related issues and is a particularly useful way for a contracting authority to identify and record their Scope 3 Emissions.
If a contracting authority is minded to include the DDQ as part of its procurement process, it will need to carefully consider what status it will give the DDQ under the procurement documents, and how it will use the information that it receives from potential suppliers (for example, whether it is being used for information only, or if it forms part of the evaluation – either of SQ Responses in a two-stage procurement, or as an evaluation criteria under a single stage procurement).
The DDQ guidance note does not contain detailed instruction as to how a contracting authority might build this into the procurement process, so this requires additional thought in order to ensure that it delivers a meaningful outcome.
PPN 06/21: Taking account of Carbon Reduction Plans in the procurement of major government contracts
Alongside using the DDQ, contracting authorities may also consider implementing the recommendations of PPN 06/21 and evaluating Carbon Reduction Plans as part of the selection stage in a two-stage procurement.
PPN 06/21 came into effect for Central Government Departments, their Executive Agencies, and Non-Departmental Public Bodies on 30 September 2021. The provisions of PPN 06/21 apply to the procurement of goods, services and/or works by those in-scope contracting authorities with a value exceeding £5m per annum (excluding VAT).
Broadly speaking, PPN 06/21 introduces a new requirement within the selection stage of the procurement process for in-scope contracts, and in assessing the technical and professional ability of interested parties, in-scope contracting authorities must include a requirement for bidders to provide a Carbon Reduction Plan, confirming the bidder's commitment to achieving Net Zero by 2050 in the UK. The Carbon Reduction Plan must also set out what environmental management measures the bidder has in place and which will be used during the performance of the contract.
Whilst this is compulsory for the central government contracting authorities identified above, it is open to the wider public sector to adopt this approach in their procurement activity to ensure that they have a measurable selection criterion relating to their potential suppliers' carbon reduction plans.
Contracting authorities may want to consider whether the approach to evaluating Carbon Reduction Plans under PPN 06/21 could be adopted in the use of the DDQ, and whether there are identifiable minimum requirements under the DDQ that could be evaluated on an objective basis.
It is clear that the first steps of any procurement are key to ensuring a supply chain which reflects a contracting authority's "green" objectives. The DDQ and PPN 06/21, coupled with an effective pre-market engagement strategy, are useful tools in ensuring that contracting authorities engage suppliers who are able and willing to deliver sustainable and "green" outcomes through public contracts.
Next in the series, we look at the rise in climate change disputes and The Chancery Lane Project's green litigation and arbitration protocols and provide practical tips on their application.
