It is a couple of years since the UK government announced that for major central government contracts, firms bidding would have to produce a carbon net zero plan and data showing current emissions. Now the UK NHS (National Health Service) has followed the lead and mimicked the same policy.
As the guidance document says,
“In April 2023, NHS organisations will require all suppliers of new contracts for goods, services, and/or works with an anticipated contract value above £5 million per year (excluding VAT) to publish a carbon reduction plan (CRP) for their emissions from the sources included in scope 1 and 2 of the Greenhouse Gas (GHG) Protocol, and a defined subset of scope 3 emissions, aligning with the government’s procurement policy note (PPN) 06/21: Taking account of CRPs in the procurement of major government contracts”
This applies to commissioning and purchasing of goods, works and services (including healthcare services) by all NHS organisations and organisations acting on their behalf – in particular, the aggregated and consolidated buying organisations such as NHS Supply Chain, SBS and others. The requirement for a CRP is in addition to the minimum 10% weighting that must be given when evaluating tenders, which was introduced in April 2022.
Suppliers must commit to net zero by 2050 (or earlier) for their UK operations, and provide information on current emissions for the sources included in scope 1 and 2 of the GHG Protocol, and a defined subset of scope 3 emissions. The five relevant GHG Protocol scope 3 categories are: upstream transportation and distribution, waste generated in operations, business travel, employee commuting and downstream transportation and distribution.
The £5 million contract size does mean many tenders won’t be caught by the rules, and that includes framework contracts where individual call-offs are below £5 million – although that is an issue, because when frameworks are put in place, we often don’t know how large the call-offs are going to be. So should buyers apply this just in case?
In any case, if bidders don’t comply, they will be kicked out of the competitive process on a pass / fail basis. But there does not appear to be a route for buyers to work with prospective suppliers to improve their plans – other than telling them to go away and try again next time. Indeed, that is one of the weaknesses in this process. Whilst of course (as the author of “Procurement with Purpose” I have to applaud any initiative that makes firms think hard about their CRPs, the cynic (or maybe realist) in me has a few concerns.
That lack of potential dialogue is one, and linked to that, is the NHS – or indeed central government – doing anything in terms of collecting and spreading good practice to bidders? Widening out that issue, what is government and the NHS going to actually do with all this information firms are submitting?
The second concern is whether procurement folk are capable and resourced enough to recognise a credible, realistic or even honest CRP (including the data provided). There is no real quality assessment of the CRP, or verification of data. Would an overworked junior procurement manager in Barsetshire Trust really know if the 15 CRPs submitted for a particular tender are all worthy of a “pass mark”? Will there be any verification of the current data provided by the bidders? Could a bidder just use the same CRP for the next five years without updating? And given that central government has been running with this process for a couple of years, how many suppliers have actually been “failed” so far? How will the NHS know if this policy has “succeeded”?
Finally, we have to recognise that there is a trade-off here in terms of barriers to entry and the transactional cost for firms working with the NHS. Whilst this does only apply for larger contracts, so not many really small firms will be troubled by it, this does all add to the cost and hassle of bidding. I suspect those costs do have a habit of coming back to the taxpayer in some way.
Inevitably, even if only at the margins, some firms will also be discouraged from bidding. And as many people have pointed out over the years, we need more competition in government procurement, not less, both to drive value and to guard against corruption.