Sustainable Public Procurement, a solution in times of crisis?

Transcription

1 Sustainable Public Procurement, a solution in times of crisis? Sustainable Cities & Towns Geneva, 17th of April 2013 Mieke Pieters Strategic Procurement Expert City of Ghent

2 SPP: a business case

3 IN TIMESOF CRISIS NO EXTRA BUDGET + COST SAVINGS IS ITPOSSIBLETO INCREASESUSTAINABLE POLICY DELIVERABLES? 3

4 BE SMART: USE THE PURCHASE POWER OF YOURORGANISATION! 4

5 MARKET POWER OF SPP With such significant market power, public authorities are not only able to achieve substantial environmental, social and financial improvements but are also able to excercice considerable influence in shifting the whole market towards the supply of more sustainable products and services 5

6 Strategic & sustainable procurement

7 Trends in procurement 1. Procurement as a strategic function 2. Smart sustainable procurement 3. Cost-efficient procurement 4. Professionalization of Procurement Criteria 7

8 Strategic & Sustainable Procurement? 8

9 Strategic & Sustainable Procurement? Procurement is strategic when procurement goals are linked to the strategic goals of the organization. Thus, procurement becomes a means to realise strategic goals. 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) 9

10 Benefits of strategic SPP

11 SPP in times of crisis Back to the core business Doing more with less No extra money for sustainability policy Sustainable procurement will no longer be a priority 11

12 Strategic SPP: the benefits Reduce costs Buy smart Optimize efficiency Buy sustainable TCO/LCC Reduce consumption Innovation Leadership Economiesof scale Needs assessment Process Strategy Smart specifications Tools Stakeholders Procurement experts KPI 12

13 PROCUREMENT, A STRATEGIC PARTNER 13

14 Procurement, a strategic partner 14

15 1.QUICK WINS MAKE A BUSINESS CASE 2.TCO / LCC COSTING 3.REASSESS THE PROCUREMENT NEED FINANCIAL GAINS OF SUSTAINABLE PROCUREMENT? 15

16 QUICK WINS Create a business case: The savings resulting from energyefficient lighting, The impact of reducing packaging by 20%, The cost benefit impact of greening the city fleet resulting in a 35% reduction in fuel consumption The impact of reducing paper-use by 30% 16

17 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 TCO = The total cost of owning and operating an asset over its expected period of use, i.e., lifecycle cost. 17

18 TCO illustration TOTAL COST OF OPERATIONS (TCO) ELEMENTS (Conceptual Example) End of Life Costs Lifecycle Costs Acquisition Process Costs Purchase Price Example A - Refrigerator End of Life Costs Lifecycle Costs Acquisition Process Costs Purchase Price Example B - Laptop Computer 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 Page 18

19 TCO PRINTER For a common piece of office equipment - a network printer there are multiple TCO components that should be considered when conducting an acquisition. What percentage of the total cost do each of these components make up? TCO Element NETWORK PRINTER COST COMPONENTS Description Estimated % of TCO Purchase Price & Acquisition Process Costs - Device Lifecycle Costs -Operations and Maintenance Costs Lifecycle Costs-Consumables Hardware includes the actual price paid for the product Operations and Maintenance costs include maintenance, repair, help desk, asset management, upgrades, licensing, etc. Consumables (e.g. paper, ink, toner, cartridge) are a significant part of the office imaging cost 5%* 50%* 45%* Page 19

20 UNIT PRICE PROCUEMENT NETWORK PRINTER COST COMPONENTS Device A Device B Device C Device Printer medium size Printer medium size Printer medium size Volume Unit Price/Device Cost Source: Censeo analysis , $ Based on the data above, Device C would be the best value Page 20

21 BEST VALUE ACQUISITION WITH TCO/LCC NETWORK PRINTER COST COMPONENTS Device A Device B Device C Device Printer medium size Printer medium size Printer medium size Usage* 4,000 pg/month 4,000 pg/month 4,000 pg/month Volume Product Support 4-Yr Extended Warranty 4-Yr Onsite Warranty 4 Yrs Onsite Product Support Purchase Price Device 1, (34% of total cost) (28% of total cost) (19% of total cost) Acquisition Process Costs Lifecycle Costs End of Life Costs Procurement (5% of total cost) (5% of total cost) (4% of total cost) Est. 4-Yr Consumables Cost 4-Yr Product Support Cost 1, (47% of total cost) 1, (46% of total cost) 2, (72% of total cost) (13% of total cost) (19% of total cost) (4% of total cost) Disposal (2% of total cost) (2% of total cost) (1% of total cost) 2, Total 4-Yr Estimated TCO 3, $2, , * Usage estimates are based on avg # users per device (8), typical # of pages per user (500) resulting in the estimated total # of monthly pages (4,000). Projected Consumables Costs assume utilization of high-yield cartridges where available. Source: Censeo analysis A complete analysis of TCO indicates that Device B truly is the best value Page solution 21

22 Life cycle costing 22

23 REASSESS THE NEED 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? 23

24 Example: City Fleet 500 cars 80 vans 34 busses 55 bicycles

25 Strategic goals related to transport? The city of Ghent promotes sustainable means of tranport and will lead by example by greening the city fleet Procurement becomes the strategic partner to realize goals such as: 1. Reduce CO² emission 2. Decrease dependance on fossil fuels 3. Realise TCO savings

26 Agreen City Fleet 500 green cars 80 green vans 34 green busses 55 bicycles

27 Rethinking the City Fleet? 100 green cars 0-Point 50 green vans CO² FF TCO Target hybrid -20% busses-25% -20% Target bicycles -50% -50% -30%

28 Rethinking the needs CO² FF TCO 0-Point??? Target +5-20% -25% -20% Target % -50% -30% + & = TO BE MOBILITY MIX

29 Case City of Ghent Masterproject strategic & sustainable procurmeent

30 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 30

31 Masterproject S²P² 2020 Key Objective: in 2020 Ghent is a strategic driven procurement organization based on the principles of total life cycle cost-efficiency and sustainable supply chain management 3 Major Milestones I. Develop a Sustainable Procurement Strategy II. Organizational SPP Blueprint II. Organizational SPP Roll Out S²P²: Strategic Sustainable Public Procurement 31

32 The making of a procurement strategy 1. Analyse the mission and strategy on organisation level 2. Identify key experts and stakeholders 3. Workshops within 4 domains: Social Ecological Economic Generic 4. Identify the strategic priorities for procurement 5. Validate the sustainable procurement strategy 32

33 I. Procurement Strategy Ghent 2020 The procurement strategy Ghent 2020 applies to - ALL public partners of the City of Ghent - ALL public works, products and services - ALL suppliers and their subcontractors 33

34 PROCUREMENT STRATEGY GENT 2020 MAIN STRATEGIC PROCUREMENT GOALS: 1. Integration of disadvantaged groups in the labour market 2. Rational use of energy and independence of non-renewable energy 3. Minimizing the environmental footprint throughout the entire lifecycle 4. Integrating fair trade principles and respecting international labour standards 5. Encouraging sustainable entrepreneurship ánd HR-policies 6. Encouraging the use of suppliers from social economy 7. Fostering local economic growth 8. Promoting sustainable innovations GENERIC PROCUREMENT GOALS: 1. Ensuring transparency, efficiency and effectiveness in the use of public funding for procurement purposes 2. Continuous improvement towards a dynamic and first-class procurement organisation

35 Identify priority product groups 35

36 II. Organizational SPP blueprint GOAL To develop a blueprint for a strategic driven procurement organization Key Challenges : 1.PROCESS: entirely rethink the procurement process as part of a sustainable supply chain. 2.TOOLS: develop tools in order to support the different steps in the procurement process 3.PEOPLE: invest in the core competences of all actors involved in the procurement function 4. MEASURE: develop KPI s and measure the achieved results 5.ORGANISATION: rethink the organization in function of SPP and shared services 36

37 III. Organizational roll out GOAL- To roll out the sustainable procurement strategy, process, training programs, measurement systems, etc through the entire organization. 37

38 Challenges

39 Challenges 1. Develop a sustainable procurement strategy 2. Develop a strategic driven procurement process 3. Rethink the procurement needs 4. Start with category management and set priorities according to strategic impact 5. Use TCO & LCC costing models 6. Start with smart SPP pilots 7. Engage your customers & suppliers 8. Measure the impact: SPP dashboard / KPI s 9. Professionalize the procurement function 10. train the procurement professionals 39

40 Questions?

41 Mieke Pieters Strategic Procurement Expert