Voting in the global marketplace

Sustainable public procurement is about governments using their large spending power to send a signal to markets that they are interested in buying more sustainable products, services, and infrastructure. And the beauty is that this ‘signal’ provides an incentive to suppliers in the private sector to invest in greater resource and material efficiency, or stronger provisions for human rights protection, or the implementation of other environmental and social safeguards
 
The world has watched the unfolding of the recent elections in India with anticipation. The coverage of the world’s largest voting base heading to the polls over the course of recent weeks has been exciting both inside and outside of the country. The right to vote is of course the fundamental building block of a political democracy, but as this momentous event has now come and gone for another five years, it is timely to consider other avenues through which citizens can individually and collectively “vote” for the world they want to live in on a more regular basis.

Purchasing decisions are one such avenue. Each time we buy goods and services we send a signal to local and global marketplaces about our priorities and the standards we accept to live by – or indeed that we accept that others live by. Of course, purchasing decisions can also reflect constrained circumstances (like poverty) or constrained options (like trade restrictions). The fact is, however, that as the middle class grows in many emerging economies around the world, like in India, and consumer choices expand exponentially, the power of individuals to influence global supply chains is significant.

Beyond the individual consumer, however, are larger purchasing groups such as governments themselves. Governments buy a huge range of goods, services and infrastructure – everything from ink cartridges, to cafeteria food, to multi-lane highways and power plants! Moreover they have an electoral mandate to do so, and are buying and buying and buying all the time as a part of their ongoing operations and provisioning of public goods and services. So if individual consumer choices hold potential to make an impact in global supply chains – say by buying fair trade products, or local produce, or reused clothing – then imagine the potential impact of governments purchasing more sustainably!

In comes the case for sustainable public procurement – or “SPP” if you can retain yet another acronym. SPP is about the laws, policies and practices that integrate economic, social, and environmental risks into public procurement (i.e. government purchasing) processes and decisions. It is about governments using their large spend power to send a signal to markets that they are interested in buying more sustainable products, services, and infrastructure. And the beauty is that this ‘signal’ provides an incentive to suppliers in the private sector to invest in, produce and deliver new and innovative ways of doing things. This can result in greater resource and material efficiency, or stronger provisions for human rights protection, or the implementation of other environmental and social safeguards.

That’s the other thing about SPP – it can be tailored to reflect a government’s development priorities. In South Africa, for instance, public procurement is used as a tool for affirmative action by strictly requiring that suppliers to the government conform to Black Economic Empowerment goals. In Brazil, public procurement has been targeted to support domestic suppliers through ‘local content’ provisions.  Many countries have set-asides or quotas to ensure the ability of small businesses to access, respond to and be awarded public tenders. SPP can also be used to increase green jobs, develop skills, and improve green industrial competitiveness across a number of sectors.

Procurement in most countries is strictly governed by laws and regulations on fair competition between suppliers, and rightly so, in order to prevent fraud, corruption and protectionism. But the grounds upon which bids are assessed – the ‘great equalizer’—has for too long been exclusively lowest cost at the time of purchase – i.e. the cheapest bid today is the winning bid. But is the cheapest option actually the least expensive for the tax payer over 2, 5, 10 years?

Take the example of a photocopy machine. What good is it to pay only 8,000 INR for a photocopy machine if it will break down in a year’s time and need several months of repairs and maintenance before finally being sent to the trash and replaced with another new, cheap machine? The economic argument – let alone the environmental implications of this type of “cradle to grave” purchasing and disposal—speaks for itself. We need to start considering the value of the service or product being bought over its entire lifecycle, and not only on the day of its purchase.

But this requires at least one key element: the willingness and ability of governments to make purchasing decisions with longer-term thinking. The costs of sustainability are quickly recuperated, as is being shown around the world, but as long as governments function on annual budgets they are missing out on important economic, environmental and social gains.
The public procurement space is moving very quickly in Europe at the moment. A recent (2014) reform to the EU-wide Procurement Directives will contribute to the implementation of the ‘Europe 2020 Strategy’ for a greener, more innovative and inclusive economy. The Directives introduce the concept of “life-cycle costing” to encourage public authorities to consider the full life-cycle of products in their purchasing decisions. There is also new scope for public authorities to use criteria such as the inclusion of vulnerable and disadvantaged people or the use of non-toxic substances in the awarding of public tenders.

In India there is no public procurement law, per se, but procurement is governed through policies and financial rules. In 2012 the Government of India introduced a Draft Public Procurement Bill, which opens the discussion on life-cycle costing. The Draft Bill states that “evaluation criteria shall relate to the subject matter of procurement and may include - (a) the price; (b) the cost of operating, maintaining and repairing goods or works…, the characteristics of the subject matter of procurement, such as the functional characteristics of goods or works and the environmental characteristics of the subject matter…”. If and when enacted, this could indeed provide legitimacy to procurers’ decisions to integrate environmental and social concerns in public buying.

Ultimately SPP is about governments using their purchasing power to provide leadership for sustainable development – placing their “vote” on the local and global marketplaces for a greener, more inclusive future. In a supply and demand driven world, SPP provides governments with a powerful demand-side instrument to use their purchasing power to trigger markets for more sustainable goods and services and to drive green growth. In India, as elsewhere, both the individual and the collective have ample opportunity to cast their ballots between now and the next general election.

Laura Turley is Project Officer, International Institute for Sustainable Development (IISD). She advises governments on sustainable public procurement policies and practices, and is particularly interested in sustainable futures for the water and transport sectors 

 
 

Subscribe to Daily Newsletter :

SUPPORT US

We are a voice to you; you have been a support to us. Together we build journalism that is independent, credible and fearless. You can further help us by making a donation. This will mean a lot for our ability to bring you news, perspectives and analysis from the ground so that we can make change together.