Sustainable Procurement Presentation to National Railways Academy July
Sustainable Procurement Presentation to National Railways Academy July 2019
OBJECTIVE OF THE PRESENTATION Ø To elucidate the principles of sustainable procurement and their application Ø To appraise on the application of sustainable procurement under Bank financed Projects
CORE PRINCIPLES OF PUBLIC PROCUREMENT Ø Maximizing economy and efficiency in procurement Ø Promoting competition among suppliers and contractors Ø Providing fair, equal and equitable treatment of suppliers and contractors Ø Promote integrity of, and fairness and public confidence in the procurement process Ø Achieving transparency in procedures relating to procurement
SECONDARY PRINCIPLES OF PUBLIC PROCUREMENT Ø Ensure government purchase is sustainable and exercise government economic power to promote sustainability policies Ø Promote social policies which may include promotion of disadvantaged groups or minorities Ø Contribute to industrial development of disadvantaged regions or groups Ø Sustain small business development Ø Protection of infant or specific type of industry
KEY STAGES IN PROCUREMENT
WHAT IS SUSTAINABLE PROCUREMENT Ø Secondary or sometimes called horizontal objective of public procurement Ø Process which incorporates sustainability considerations throughout procurement process (Not just economics focused) Ø Traditionally objective of procurement is to ensure that the buyer receives goods, services or works the best possible price, when aspects such as quality, quantity, time, and location are compared
WHAT IS SUSTAINABLE PROCUREMENT Ø Procurement is considered sustainable when organizations broadens this framework by meeting their needs for goods, services and works in a way that achieves value for money and promotes positive outcomes not only for the organization itself but for the economy, environment, and society
SUSTAINABLE PROCUREMENT Social Environmental Economic Sustainble Procurement System Three Pillars of Sustainability
EXAMPLES IN THE THREE PILLARS Economic • • • Environmental • • • Social • • • Total cost of ownership and life cycle costing Value for money Poverty reduction Emerging markets Development of SMEs Pollution and waste management Protection of ecosystems Co 2 Reduction Alternative energies Water management Environmental resource management Fair pay and labour law protection Fair trade Health and safety Gender equality Affirmative action for disadvantaged
BENEFITS OF SUSTAINABLE PROCUREMENT Ø Reduce total operating costs by procuring more efficient and sustainable goods or works Ø Take into account social responsibility and sustainability issues in response to increasing stakeholder expectations Ø Improves and promotes organizational culture, values and ethics Ø Improves performance in terms of social responsibility and sustainability impact of organization or project Ø Provides holistic risk management taking into account economic, social and environmental issues
SUCCESS FACTORS IN IMPLEMENTATION OF SP Ø Legislative /regulatory environment to support sustainable procurement Ø Leadership within organization to promote sustainable procurement Ø Availability of goods, suppliers and contractors to conform to sustainable procurement requirements (Competition) Ø Cost of the goods that conform to sustainable requirements and cost of verification to conform to requirements
SCHEMES AND TOOLS FOR IMPLEMENTATION OF SP Scheme Reservation Preferencing Method Actions associated with methods Set aside Allow only enterprises that have prescribed characteristics to compete for contract e. g. % reserved for women enterprises Qualification criteria Exclude firms that cannot meet specific requirement or norm of the policy objective – use of vetted supplier lists Contract Obligation Make a policy objective a contractual condition e. g. 20% of the works shall be subcontracted to retired soldier companies Offering Back Offer tenders that satisfy criteria relating to policy objective opportunity to execute contract if tenderer is prepared to match price and quality of best tenderer Preference at shortlisting stage Limit number of suppliers to be invited based on qualification and weight given to policy objective e. g. World Bank regional spread in consultants Award Criteria Give weighting to policy objective ( e. g. 80% price and 20% to policy objective or monetize policy objective and add to price e. g. use of life cycle costs
SCHEMES AND TOOLS FOR IMPLEMENTATION OF SP Scheme Indirect Supply Side Method Actions associated with method Product/service specification State requirement in product or service eg use ecolabels Design specification or contract conditions to suit particular group Design specifications to suit particular group eg cloth material should be hand woven without use of electricity General assistance Provide support for targeted group to compete for business without giving favorable conditions or preferences – for example helping them prepare tender documents or linking them with possible joint venture partners
SUSTAINABLE PROCUREMENT UNDER BANK FINANCED PROJECTS Ø Procurement under Bank financed Projects is governed by Guidelines for Projects with Concept Notes approved before July 1, 2016 Ø Projects with Concept Notes after July 1, 2016 are governed by Regulations Ø Key policy requirements to implement SP under the Guidelines is the Domestic Preference and application of Environmental Social Health and Safety (ESHS) requirements for works contracts Ø Regulations has expended the application of sustainable requirements
CORE PRINCIPLES UNDER BANK FINANCED PROJECTS
POLICY AND APPLICATION SUSTAINABLE PROCUREMENT Ø Value for Money: The Principle of value for money means the effective, efficient, and economic use of resources. This requires an evaluation of relevant costs and benefits along with an assessment of risks. It may also include non-price attributes and/or life cycle costs. Price alone may not necessarily represent value for money. Ø Sustainable procurement: has been included as an optional policy at choice of Borrower provided Borrower has sustainable policy to achieve Value for Money objective Ø Borrowers are required to prepare Project Procurement Strategy to define how value for money or sustainable procurement will be implemented
PPSD AND SUSTAINABLE PROCUREMENT Ø PPSD is an analytical tool used to strategize procurement activities Ø It identifies procurement needs, market to fulfill procurement needs, fit for purpose market approach to obtain requirements, how value for money will be achieved and sustainable procurement aspects to be considered Ø Output from a PPSD is procurement plan which defines market approach (international vs national), selection approach (RFB, RFP etc. ) and evaluation approach etc. Ø Evaluation approach has been expanded beyond Least Evaluated Complaint Bid(L 1) to include Most Advantageous Bid/Proposal (MAB) Ø MAB considers price and other factors such as sustainability requirements
RECENT DEVELOPMENT TO STRENGTHEN SP CONSIDERATIONS Ø Bank has always required inclusion of Environmental Social and Health Safety (ESHS) in works contracts. Ø However experiences in 2016 -2018 in road projects raised concerns: Ø Sexual misconduct of contracted workers Ø Failure to establish accessible and effective grievance mechanism Ø Gender based and sexual violence Ø Low wages paid to contracted labourers Ø Disruption of water supply and drainage by road works Ø Deaths on roads works especially in flooded borrow pits
KEY ACTIONS TAKEN BY THE BANK Ø Prepared a modern Environmental Social Framework (ESF) to guide implementation of ES during Project implementation Ø ESF applies 10 standards with explicit objectives Ø ESF assess broad set of environmental and social risks and apply them throughout project implementation Ø Enhanced application of ESHS during procurement process and contract implementation
ENVIRONMENTAL AND SOCIAL FRAMEWORK
ESHS CONSIDERATION DURING PROCUREMENT PLANNING AND CONTRACTOR SELECTION Ø Consider ESHS needs when analyzing potential markets Ø Include ESHS information that bidders should submit with bid and develop evaluation methodology Ø Qualification criteria for contractors include past performance in conforming to ESHS requirements Ø May require contractors to have certification for high risk social or environment projects
ESHS CONSIDERATION DURING PROCUREMENT PLANNING AND CONTRACTOR SELECTION Ø Selection process may include preferences to certain groups depending on nature of project and region where implemented Ø Introduces concept of abnormally low bid. Bidders may be requested to justify their rates to pay fair wages to their contracted labourers
ESHS CONSIDERATION DURING CONTRACT IMPLEMENTATION Ø Contractor is required to submit ESHS performance security. Performance security may be split into 7% general performance and 3 % specifically related to ESHS aspects (Depends on contract) Ø Puts a minimum age to be hired at 14 years Ø Where possible , require as part of contract, provision to procure only from suppliers that are environmentally and socially certified (ISO, ILO standards or ecolabels) Ø Contract provision include withholding an amount for failure to conform to ESHS standards Ø Require regular reporting on ESHS performance
THANK YOU FOR YOUR ATTENTION
- Slides: 24