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New greener rules for companies bidding for major government contracts came into force on 30th September 2021.
There is a lot to consider in the new regulations, the highlights of which include:
- All companies bidding for government contracts worth more than £5million a year must commit to achieving Net Zero emissions by 2050
- The UK is the first country in the world to put such a measure in place, underlining the government’s leadership in the fight to tackle climate change
- New requirements were announced ahead of the recent COP26 in Glasgow, leading the way for other countries to follow suit
The implementation of the regulations will help deliver the manifesto promises made by this government to achieve their Sustainable Development Goals (SDGs) to reach net zero carbon emissions by 2050. Critically, the requirements will apply to any companies bidding for government contracts worth more than £5million a year, not just those who are successful.
In the past year, the UK Cabinet Office has published a series of policies that use public procurement as a tool to improve social value and sustainability. The interplay of these policies becomes more complex with each additional publication. We have been following the updates as they are released, seeking to demystify the regulatory landscape for both buyers and bidders.
To illustrate this interplay, in September 2020, the UK Government published Procurement Policy Note PPN 06/20 (‘Taking Account of Social Value in the Award of Central Government Contracts’). This PPN outlined the requirement for central government contracts to include Social Value in their award criteria, where related and proportionate. The PPN introduced five themes, eight outcomes and twenty-four specific criteria against which departments should evaluate tender responses, as applicable, setting out the means by which procurement teams should “account for” rather than just “consider” social value during the tendering process.
Subsequently, in December 2020, the Government Commercial Function published the Social Value Model v1.1 which expands further on PPN 06/20. To pick up on one of the Model’s themes relating to bidders: Theme 3 – ‘Fighting Climate Change’ – puts the responsibility on bidders to seek effective stewardship of the environment by requesting method statements in response to specific criteria – ‘Additional environmental benefits’ and ‘Influence environmental protection and improvement’. It focuses on delivering environmental benefits in the contract performance and working towards net zero.
PPN 06/21 (‘Taking account of Carbon Reduction Plans in the procurement of major government contracts’) was published in June 2021 and appears to introduce an overlapping requirement by also mandating the use of PASS/FAIL criteria for carbon emissions reduction plans. The plans must show commitment to (not just ‘working towards’) net-zero carbon by 2050 in contracts to which PPN 06/21 is relevant.
So, on the face of it, PPN06/21 seems to ‘trump’ PPN06/20 – a FAIL in the evaluation of a carbon emissions reduction plan under PPN06/21 would mean that the supplier is out of the competition at the Compliance stage of the evaluation process. Most ITTs/ ITNs state that if the bidder fails at Compliance, the Authority will not read the Technical/Quality responses because there would be no point in doing so. However, the PPN 06/20 Social Value questions are usually part of the Quality Evaluation, which takes place after the Compliance Evaluation, and would only include compliant bids. However, if the bidder is thrown out at the Compliance stage, it means that the Authority may not even read the Social Value answers (PPN 06/20), however beneficial the proposals could be for the target communities.
The PPN updates are steadily building the requirements placed on bidders. For example, the new rules articulated in PPN 06/21 go beyond the carbon emissions self-reporting by large companies that is covered by the Streamlined Energy and Carbon Reporting regulations published in 2018. This meant that organisations had to demonstrate a carbon reduction plan that set out where their emissions come from and the environmental management measures that they have in place. However, PPN06/21 now requires additional reporting of emissions as a result of business travel, employee commuting, transportation, distribution and waste. These emissions represent a significant proportion of an organisation’s carbon footprint – understanding, reporting and reducing these emissions will play a substantial role in decarbonising the government’s supply chain, and the UK economy as a whole.
These new rules will drive forward the government’s green agenda while also striking a balance to avoid overly burdening and potentially excluding small and medium sized enterprises (SMEs) from bidding for government work.
The UK is the first country in the world to put in place new greener rules for companies bidding for major government contracts, underlining the UK government’s leadership in the fight to tackle climate change. Indeed, central government departments are now publishing their own policies – for example in its strategic publication “Climate Change and Sustainability Strategic Approach” the Ministry of Defence sets out its responsibilities and commitment to addressing climate change on the basis that it ultimately threatens world peace. As well as playing their part in reducing carbon emissions, the MOD is looking at the way they protect, operate and fight in order to mitigate their wider impact on the environment.
Together, these policies provide a firmer direction on how the UK government intends to achieve its SDGs by using public procurement and introducing changes to the evaluation of tenders. These new requirements were intentionally introduced ahead of the Glasgow COP26, and officials from many countries have since adopted a new global agreement. The agreement – although not legally binding – will set the global agenda on climate change for the next decade. It aims to reduce the worst impacts of climate change – some leaders and campaigners say it does not go far enough and this may lead to further changes to procurement evaluation in due course.
The team at Commerce Decisions is here to help our clients understand and apply this evolving legislation and policy to their complex, strategic and high-risk projects, whether they are buyers tendering a requirement or bidders competing to supply it.
For more information, visit the UK Gov website:
