Sustainable Public Procurement, good “strategic” practice?

Mieke Pieters

Strategic Procurement Expert

City of Ghent

Ghent: a leading consumer

Context

Ghent: ± 250.000 inhabitants

> 5.000 employees

Spend volume over 500 Mio €

Procurement Department is in charge of SPP

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SPP Principles

• Leading by example

• Purchasing power as a leverage for sustainability

• Making procurement a strategic partner

• Cost-efficient use of public money

• Raise the maturity standard of the procurement organisation

SPP: a business case

Government spending could save the world –

so what‘s holding it back?

The guardian 25th of June 2014

IN TIMES OF CRISIS NO EXTRA BUDGET + COST SAVINGS

IS IT POSSIBLE TO INCREASE SUSTAINABLE POLICY

DELIVERABLES?

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BE SMART: USE THE PURCHASE POWER OF YOUR ORGANISATION !

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Procurement, a strategic partner?

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Strategic & Sustainable Procurement?

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Procurement is strategic when procurement goals are linked

to the strategic goals of the organization. Thus, procurement

becomes a means to realise strategic goals.

Strategic & Sustainable Procurement?

Procurement is called sustainable when it integrates

requirements, specifications and criteria that are compatible and

in favour of the protection of the environment, of social

progress and in support of economic development, namely by

seeking resource efficiency, improving the quality of products

and services and ultimately optimizing costs. (definition UN)

Trends in procurement

1. Procurement as a strategic function

2. Smart sustainable procurement

3. Cost-efficient procurement

4. Professionalization of Procurement

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Criteria

SPP in times of crisis

Sustainable procurement will no longer be a priority

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• Back to the core business

• Doing more with less

• No extra money for sustainability policy

FINANCIAL GAINS OF SUSTAINABLE PROCUREMENT?

1.CONSOLIDATION

2.TCO / LCC COSTING

3.REASSESS THE PROCUREMENT NEED

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CONSILIDATION

• Decentralized, fragmented or centralized ?

• Consolidation = economies of scale = IMPACT on the markets

• Ex. Office supplies:

• From > 10.000 articles to < 45O “sustainable” articles => TCO – 40%

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LOOKING BEYOND PRICE

• Price still plays an important role in public procurement decisions

TCO or LCC can lead to important cost savings during the lifecycle of a product/service or construction project

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TCO = The total cost of owning

and operating an asset over its

expected period of use, i.e.,

lifecycle cost.

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TCO illustration

• Many buyers will focus on achieving a

competitive purchase price and will

overlook opportunities to improve other

cost elements

• For some commodities, purchase price

is not the largest cost element

• Therefore, it is important to consider all

cost elements, including (but not limited

to):

Internal procurement, contract

management and billing/invoicing

processes

Internal management of the

commodity

Operational costs (cost of use,

spare parts, maintenance, etc.)

Disposal costs

NOTES

TOTAL COST OF OPERATIONS (TCO) ELEMENTS (Conceptual Example)

0

20

40

60

80

100

Example A -Refrigerator

Acquisition Process Costs

Purchase Price

End of Life Costs

Lifecycle Costs

Acquisition Process Costs

Purchase Price

End of Life Costs

Lifecycle Costs

Example B -Laptop Computer

REASSESS THE NEED

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What do we really need to buy?

• No procurement = the most cost-

efficient & sustainable choice

• Analyse the need of the internal

customer

• Is this a procurement need?

• Functional needs?

• Strategic choices ?

Rethinking the City Fleet ?

• 100 green cars

• 50 green vans

• 34 hybrid busses

• 120 bicycles

CO² FF TCO

0-Point

Target +5 -20% -25% -20%

Target +10 -50% -50% -30%

Change management

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