Gareth, thank you for joining us today. Could you tell us what role you see the Government Commercial Function playing in helping to deliver the country’s net zero ambitions?
There are broadly two ways that commercial can help power the move towards net zero. The first is by working to ensure the right requirements are built into individual contracts and the second is by creating overarching rules and guidelines that sit across contract.
I’ll begin by talking a little about individual contracts. This is something that has already been happening for a while across government, where individual departments put specific requirements within contracts that are aligned to climate and environmental goals. For example, in a major construction contract you may mandate a more environmentally friendly form of concrete.
Where the biggest change has been most recently though is the second point around what sits across contracts. In August this year we published Procurement Policy Note 06/21, which lays down guidelines for taking into account a bidder’s net zero plans when awarding contracts. The most important part of this is that for any contract that is over £5 million in value, bidders must now have a net zero plan in place to be eligible to be awarded the contract.
This is a massive change, but it’s been done using a methodology that is proven to work. Several years ago we did something very similar in relation to prompt payment of suppliers by implementing guidelines that meant bidders had to demonstrate they paid 95% of all supply chain invoices within 60 days. This had a real impact – in the construction industry alone it’s believed this measure improved payment times by 25%.
Could you give us some insights into how the policies to promote net zero were developed?
A lot of deep thinking went into them over a long period of time. Many of the things we are doing are not easy and we have to carefully consider the impacts of the decisions we are looking to make. I’d also say it’s been an evolutionary process.
To give an example of what I mean, there has been a long debate about how we can ensure that the ‘most economically advantageous’ tender (MEAT) is not just deemed that on price alone but is judged more on quality. You do this by being very specific in the quality requirements and government has been getting better at this. How we can use this in relation to net zero was a big part of the conversation.
In line with this we’ve also introduced new rules that enable departments to use social value criteria in award decisions, alongside quality and price. We’re now seeing ITTs being awarded that have included these criteria, which is immensely rewarding as it’s something we put a lot of effort and thought into.
There has also been a lot of work and discussions about how to mitigate any unintended consequences. Yes, we want to promote net zero but it was also crucial we didn’t disadvantage SMEs. For example, by setting £5 million as the contract value where companies must have a net zero strategy we believe we are striking a balance in promoting net zero without placing an undue burden on the smallest of companies.
What are some of the challenges you face going forward in implementing policies to encourage net zero?
I see three key challenges moving forward – cost, consistency and competencies.
I’ll start with cost. We can’t shy away from the scale of the challenge. A transition to net zero has serious costs attached to it for government, for business and for consumers. But the cost of not acting is far bigger. We hope that government can be a catalyst for driving down costs but it’s also important that any costs are distributed in an even way.
The second part is consistency. One of the biggest risks of introducing social value metrics is that each department or organisation set slightly different requirements. This could drive up the cost of bidding or put companies off bidding altogether. So it’s crucial we ensure there is broad consistency in terms of the social value metrics being used.
The final challenge is competencies. We are asking people to do things in a new way, so it’s essential that we provide them with the skills to do that. So far, we’ve delivered training to over 3,000 colleagues in these new areas and we will continue to ensure we are keeping people across best practice.
Can you tell us a little bit about some of the other areas you’re working on that you’re most excited about?
During the pandemic we have had the opportunity to develop a much closer working relationship with the NHS. This both enabled us to deliver in a more efficient way as the pandemic progressed and led to the development of single commercial standards. The process showed that we can get more done if we work together.
There is more we can do in this area, and indeed in the environmental space, by working more closely with local government. Ultimately this is about as many public sector organisations as possible working together to generate meaningful demand that can encourage commitment to innovation and change in the market.
In terms of pioneering the net zero agenda, it strikes us that you and your colleagues are doing some incredibly meaningful work. What difference does that make day-to-day?
It’s a really enthusing agenda we’re working on. I want to emphasise that people in government are certainly incredibly passionate about the contribution they are making to prevent climate change, but they are also equally passionate about other important issues such as ending modern slavery and ensuring small businesses are paid in a timely way. If you’re looking to help deliver change on some of the biggest issues, there is arguably no better area to work in than commercial.
As Gareth provides in-depth insights into the challenges the ambitious net zero emission targets present, but also the optimism he has for achieving sustainable, value added procurement within government. The question to ask now, how will both private and public sector organisations adapt to the governments new net zero criteria? Proxima offers a solution through their 'Building Back Better' strategy, which helps organisations implement effective procurement procedures, putting them on a path towards net zero sustainability.
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