Sustainable Procurement in Public Sector

Executive Summary

Sustainable procurement is a process whereby organizations meet their needs for goods, services, works and utilities in a way that achieves value for money on a whole life basis in terms of generating benefits not only to the organization, but also to society and the economy, whilst minimizing damage to the environment.

In order to successfully implement the new sustainable procurement policy across city’s all branches, Manager of Supply Management for the city of West Coast is facing three major issues: stretched out departmental and operational budgets; lack of cross functional and integrated approach from different departments; lack of proper knowledge and expertise in sustainable procurement practices. The concept advances sustainable purchasing from a reaction to outside forces or top-down pressures, to a supply methodology congruent with an overall business strategy while meeting the societal, economic and organizational goals.

Based on a detailed research and analysis, we have come to a conclusion that even though by implementing the new SPP policy will result in an additional 10% COGS to the city, it has been analyzed that by adopting sustainable business and procurement practices, the cost will break even in the long run and ultimately result in a sustainable organization. It is recommended that in order for Manager of Supply Management to effectively and cost efficiently delivers the new policy, a cross functional project team from different departments of city is required to develop and review the new SPP policy and align it with the current procurement policy of West Coast city.

Project team will be responsible for the development, assessment and implementation of the new SPP policy within a specific time range and budget. They will also be responsible to develop the training material such as new practices and evaluation criteria and train the entire purchasing staff of city of West Coast, along with promoting awareness, monitoring and controlling the new Sustainable procurement process.

Key Issues Identified

Strategic Issues

Lack of Sustainable Procurement Expertise

Manager of the Supply Management’s team was aware of many issues with respect to sustainability in business and supply management, but had very little working knowledge.

Limited Departmental and Operational Budgets

In order to develop and draft the new policy on sustainable and ethical public procurement, Supply Management is concerned with the incremental operational and administrative costs.

Competitive vs. Sustainable Bidding

Due to the new SPP policy in effect, procurement for public goods and services will have to be evaluated based on sustainability of the product and product whole life costing considering the environmental and societal impacts, as opposed to based on pricing, quality and TCO.

Tactical Issues

Incremental Staffing Costs

Supply Management lacked staffing resources with expertise in the area of sustainability. Hiring additional resources with knowledge in sustainability would require incremental staffing costs.

Increased Material/Product costs

Purchase of products and services that were developed and manufactured in a sustainable environment is not cheap, and ultimately increases the material/product costs.

Lack of shared Expertise in Sustainability & Purchasing

Purchasing and procurement practices are not commonly shared among different departments of city administration such as Supply management and ultimately create a challenge for Supply management to be able to look at the current process and incorporate the new sustainable procurement practices.

Lack of consolidated view of Purchasing/ No unifying Purchasing

There is lack of consolidated view of purchasing spend because it is spread across too many different departments. To get the most out of the purchasing function, public institutions should gain a consolidated view of purchasing spend.

 Environmental and Root Cause Analysis:

Based on the issues identified above, presented below is the PESTLE analysis to determine Root causes of each issue:

• POLITICAL FACTORS

• City councilor anxiousness to get the new policy adopted
• Media reporting the issue as being contentious for the city staff and elected officials
• Deputy Manager’s concern of the new policy being least of priorities
• General Manager of the Park Board’s concern of FT products vs. concession sales in Park
• City Engineer opposing the policy as being time consuming & increase in city’s COGS.

• ECONOMIC FACTORS

• Additional 10% increase in city’s cost of goods and services
• Overhead cost for managing sustainability staff and additional supply management staff
• Stretched departmental and operational budgets.
• Initial Sustainability training and implementation cost
• Lack of whole life costing for products and services.

• SOCIAL FACTORS

• New policy might affect the current vendor base and local businesses
• Favoring Fair Trade vs. Free Trade
• Local Vendors might not be able to qualify for sustainable procurement initiatives
• Organizational support could be a challenge

• TECHNOLOGICAL FACTORS

• Lack of sustainability knowledge requires staff training and therefore help of technological resources
• Expensive Technology implementation and ongoing support would be major expense
• Software/hardware infrastructural requirements will take long time to get implemented and will require additional technological changes to the current purchasing systems.

• LEGAL FACTORS

• New Contract Negotiation, Formation and management, Policy and procedures formations will require expensive and time consuming legal expertise
• Sustainable, Fair, Open and Transparent process will need dedicated legal support
• Sustainability development act, policy and procedures review will result in legal fees

• ENVIRONMENTAL FACTORS

• Purchasing of products with Eco-labels
• Environment laws and therefore purchasing of environmentally sustained products can be a challenge
• Environmental policy will need to be reviewed and adjusted according to the new policy
• Environmental aspects over the life cycle of products.

Alternatives/Options

Based on the analysis performed above, below are the alternatives or options that will help the Manager of Supply Management to effectively develop and execute the new Sustainable and Ethical procurement policy: